Next
generation satellite systems continue to disrupt
satellite capacity pricing landscape
February
12, 2024
Euroconsult,
the leading global consulting firm specializing in
satellite-enabled markets, has released the latest
edition of its FSS Capacity Pricing Trends report
which unveils continued shifts in the capacity
pricing landscape.
Satellite
capacity pricing is experiencing rapid declines in
an increasingly disruptive market, supported by rise
of next-generation geostationary (GEO) and
non-geostationary orbit (NGSO) high-throughput
satellite (HTS) systems. Massive influx of supply in
the market has ultimately contributed to a
commoditization effect on connectivity, due to which
the industry is witnessing a shift towards managed
service offerings with attractive $/GB economics,
primarily driven by Starlink.
Over the
past five years, global average capacity pricing in
video and data markets has dropped by approximately
-16% (-3% CAGR) and -77%, (-26% CAGR) respectively.
This decline is more pronounced in data markets due
to abundant supply from NGSO (primarily Starlink)
and HTS systems, while video markets have seen a
lesser decline, largely due to stagnated regular
supply and market stickiness to long-term contracted
prices.
The report
also notes that the decreasing cost base of capacity
(indicating efficiency of capex invested in
satellite manufacturing considering sellable
capacity and expected lifetime), initiated with the
advent of Starlink, is expected to stabilize over
the next 2-3 years leading to a potentially slower
capacity price erosion compared to previous years.
The dynamics
outlined in the report signal continued changes for
the industry, potentially marking a structural shift
away from the traditional wholesale capacity leasing
towards managed service packages supplemented by
value-added services. This shift is triggering a
re-alignment of operational strategies among
industry stakeholders. Operators are moving towards
vertical integration by providing managed capacity
plans to service providers and/or directly to end
users. Service providers are increasingly opting for
these pre-made packages from satellite operators to
reduce capacity management complexities and focus
more on providing value-added services (Cyber
security, Cloud connectivity, Telematics & IoT
solutions etc.)
“Starlink's
pocket-friendly pricing and higher availability of
service plans have triggered a structural shift in
the industry away from wholesale capacity leasing to
more managed solutions setting a wave of strategy
re-alignment across players. Operators are choosing
to directly serve end customers with managed service
plans giving them greater control of capacity prices
while service providers are moving away from
capacity management, focusing on value add-ons. ”,
said Senior Consultant Grace Khanuja
Owing to the
shift in industry dynamics, the price per GB has
witnessed a converging trend across key geographies
over the past 3-4 years. The pre-2021 period was
marked by median prices ranging greater than $2 to
$5 per GB per month given the limited available
capacity of legacy satellite systems that
constrained monthly GB allowances. Rise in available
capacity supply with the launch of Starlink across
markets coupled with new service plans from
incumbent satellite players (such as Viasat, Hughes
in the Americas and Eutelsat Konnect in Europe) has
abruptly lowered the price range to $0.2 to $1.5 per
GB per month in 2023 given the disproportionate
increase in GB allowances vs service plan costs.
|