SatCom Frontier is very pleased to present an in-depth interview with Northern Sky Research (NSR) senior analysts Prashant Butani and Blaine Curcio. The topic is High Throughput Satellite (HTS) services – how fast the market will grow, where it will grow and the amazing applications it will empower.
Part one of our discussion appears below. We welcome your comments or questions, and would be happy to forward them to Prashant and Blaine.
What factors need to be considered when projecting the growth of HTS?
[BC]: When looking at HTS demand growth, we have a number of factors that we look at. Foremost, it’s important to look at what service offerings are being brought to the table. For example, in NAM/WEU we have seen consumer broadband options via HTS being brought to market at fairly reasonable prices, and as such we have seen some solid subscriber growth in the last couple of years.
Looking forward, it is important to look at what future products may be options for consumers in various regions and gauge the most likely response to them. Further, we need to look at the evolution of applications and the subsequent bandwidth demand. For example, five years ago, no one was talking about in-flight connectivity—it wasn’t on anyone’s radar at all.
Now, we are seeing the majority of airlines with some in-flight connectivity agreement already in place or in the works, which is going to be a boom for HTS demand in the mobility sector. The evolution of the market based on what applications consumers want is another important part of looking at growth for HTS demand. Finally, to some degree we need to look at macroeconomic and developmental factors.
Beyond all commercial applications, Gov/Mil will also be a “battleground application” between HTS & traditional FSS, generally Ku-band and to some degree X-band and Ka-band. Similarly to Commercial Mobility, Gov/Mil will be relatively low volume and high-margin, with substantially less than 10% of HTS demand accounting for nearly 20% of HTS revenues by 2023.
Given budget concerns, we also see a compelling proposition for HTS compared to Traditional FSS capacity in terms of its ability to support higher requirements at lower cost per bit for key applications, and indeed by 2023 we expect that around 17% of Gov/Mil HTS service revenues will come from UAVs/UAS. However, the Gov/Mil adoption rate of HTS is likely to continue to be slow in the near-term in light of uncertainty over how to best leverage the capacity and concerns regarding service reliability and quality.
[PB]: When looking at HTS supply growth, the biggest trend is that new announcements are bigger than expected. As a result, it is easy to overestimate HTS capacity coming online in the next five to ten years and assume excess supply in the near term.
A corollary of this is that even though not all HTS supply is created equal, most of them are competing for the same limited applications, mainly Enterprise Data and Backhaul. As a result, when projecting growth of HTS supply, one must take into account that for most operators it is a “me too” phase where everyone wants to add HTS payloads even though the market demand to fill these satellites is still unproven.
On the Government and Military side, the focus until a few years ago was on providing dedicated capacity for Military applications and as a result we saw the launch of a few hosted payloads in the Middle East and announcements like SGDC-1 in Brazil. Focus has slowly shifted towards digital divide programs and this is where projects like NBN in Australia come into play.
It is quite possible that even SGDC-1 will have a civil component dedicated to rural broadband. Equally important is the continuing trend of Pride-Sats where relatively smaller economies e.g. Nigeria, Azerbaijan, Argentina etc. continue to pursue home-grown missions in order to develop their domestic space industry. Pride-sats, however, haven’t ventured into HTS just yet largely because of the lack of video broadcasting support on HTS satellites. There is no reason why this wouldn’t change as traffic becomes largely data and video is simply a data packet.
Another factor when projecting HTS supply is the availability of launchers, which given the current climate, represents quite a challenge for the industry at large.
Who are the major players, and in what regions and customers are they targeting?
[BC]: Today, HTS options in most regions are pretty limited. Breaking it down regionally:
- Asia: Thaicom, through its IPSTAR offering, is still the only game in town for HTS in Asia. The company is targeting some rather unconventional applications, such as Backhaul, but also more expected ones as well.
- Europe: The only operator with a major HTS presence in Europe at the moment is Eutelsat with its KA-SAT satellite. Similar to Thaicom’s IPSTAR, KA-SAT has needed to adjust its business model to fit the needs of a market that Eutelsat was essentially trying to create when it was launched in 2010. Eutelsat has targeted largely consumer broadband, attempting to capitalize on a similar business model to ViaSat in North America.
- North America: ViaSat is by far the largest HTS operator in North America, with nearly 1M broadband subs on ViaSat-1. Again, similarly to KA-SAT, ViaSat is targeting consumer broadband. With the launch of ViaSat-2 in around 2016, the company will also be able to more effectively target the Commercial Mobility (i.e. in-flight connectivity & maritime) market more effectively.
- Latin America: Currently, the only HTS offering in Latin America (apart from some coverage by ViaSat over the Gulf of Mexico) is Hispasat’s Amazonas-3. It has thus far not been especially clear what specific applications are being targeted by Hispasat, though the HTS payload offers 9 high-powered spot beams over major population centers, which could allow for applications such as backhaul, other types of enterprise data, consumer broadband, and even some localized video content.
- Middle East & Africa: Avanti, ArabSat, and YahSat are currently present in this market, with a number of different applications being targeted such as Enterprise Data and Gov/Mil. ArabSat has made significant inroads in the Middle East & North Africa, whereas YahSat, through its YahClick service, has taken a large market share in Sub-Saharan Africa.
- Moving forward, NSR expects to see a number of new players enter the HTS market. Interestingly, several of these players will employ a “global” HTS model, something we have not really seen in the past.
Of note, we have operators like Intelsat and Inmarsat coming in with their EpicNG and Global Xpress, respectively, both of which will provide nearly full global coverage. These systems will not be targeting consumer broadband at all, but rather will be going almost entirely for higher-value applications such as commercial mobility, gov/mil, and enterprise data.
Moving forward, it will be interesting to see whether regional operators targeting these same applications (such as Avanti), will have a compelling enough value proposition to compete with the global players offering similar types of service.