Over the past few weeks, we have seen top satellite executives seemingly coming to terms with the fact that lower prices are here to stay, and that the evolution of the satellite telecom business model from FSS towards HTS—at least in terms of the best growth opportunities—is well underway. While NSR does not dispute that video will remain a beacon for steady growth and long-term contracts in developing countries, and a bastion of stability in developed ones, we have noted for some time that GEO-HTS will provide the best opportunities.

 

When looking at NSR’s Global Satellite Capacity Supply & Demand, 13^th Edition, it becomes clear that not all GEO-HTS capacity is created equal.  As some industry insiders have recently discussed, the promise of Tbps satellites worldwide should not unequivocally signal the downfall of traditional FSS—and should by no means close the door on the GEO-HTS systems of tomorrow that are being launched with a decidedly more modest payload of dozens of Gbps, rather than Tbps. Indeed, when looking at these future GEO-HTS payloads, we can in many cases divide them into C-band/Ku-band HTS payloads, such as the SES-12/14/15 system, Intelsat Epic, IPSTAR, and so on, and Ka-band HTS payloads, such as ViaSat-1/2/3, Jupiter-1/2, and Ka-Sat. As the chart below shows, clearly GEO-HTS Ka-band wins outright as it relates to capacity leased, with around 87% of the GEO-HTS market by leased Gbps by 2025.

When looking at future GEO-HTS payloads, the first point to keep in mind is that GEO-HTS Ka-band capacity will see lower prices on a per Mbps basis. This comes about due to two factors, namely 1) GEO-HTS Ka-band tends to primarily target consumer broadband, which is lower price capacity, and 2) there remain, in some regions and for some applications, doubts about the suitability of Ka-band for high-SLA type requirements, and there is in general a “new product bias” associated with Ka-band in some cases. In short, many customers are generally happy with what they have, and thus will stick with the path of least resistance, which in some cases is a slightly higher per-Mbps backward migrated C-band/Ku-band GEO-HTS service, particularly when this service ends up being cheaper than a comparable FSS service. As such, and as the chart below indicates, GEO-HTS C-band and Ku-band combined will comprise around 25% of GEO-HTS revenues by 2025, or around $1.7 billion.

Ultimately, GEO-HTS C-band and Ku-band will have a far more balanced demand profile than GEO-HTS Ka-band, with the former seeing stronger demand from applications such as Enterprise Data and to some extent Commercial Mobility and Gov/Mil. As the below chart shows, around 80% of GEO-HTS Ka-band capacity demand will come from consumer broadband access, compared to around 20% for GEO-HTS C-band/Ku-band. While NSR does expect the price advantage, as well as the sheer volume of GEO-HTS Ka-band capacity to cause some customers to migrate, we have thus far not seen this as being the case in instances that may have otherwise dictated migration. For example, Avanti Communications has been present in Africa for some time now with low-cost Ka-band HTS capacity, yet the company has not been able to capitalize on lower prices and has been brought the point of potential acquisition due to cash requirements in the UK.

Bottom Line

Moving forward, it is vital to understand that not all GEO-HTS capacity is created equal. While there may be orders of magnitude more GEO-HTS Ka-band capacity being launched in all/most regions, this will not necessarily be able to convert all customers from all applications solely due to the promise of lower bandwidth costs. While there will certainly be pressure on pricing in all frequency bands and all capacity types, NSR does not expect GEO-HTS Ka-band to be the end-all, be-all solution. Moving forward, a more nuanced picture will emerge, with GEO-HTS Ka-band being able to convert and build new markets in areas such as consumer broadband—and in many cases, Enterprise Data—but with GEO-HTS C-band and Ku-band being able to command a significant market of legacy customers migrating to lower-cost GEO-HTS, as well as new verticals ranging from backhaul to aero. In a multi-band world, NSR expects each band to present unique value propositions to unique customer bases.