The recent celebrations to mark the 50th anniversary of Russian cosmonaut Yuri Gagarin’s pioneering space flight roughly coincided with the decommissioning of NASA’s fleet of space shuttles, 30 years after their debut. These twin landmarks served between them to underline, in a slightly sad way, that space technology is no longer a thrilling novelty commanding our hushed respect but something familiar and well trodden, with one foot in the history books and only half an eye to the future.
Many have predicted that the world of satellite communications is ultimately destined for obsolescence, a once leading-edge technology that will be reduced over time to an ever shortening list of niche applications, superseded as an essential communication medium by ubiquitous fibre and the spread of cellular networks.
This has not proved the case. Satellite services boom like never before, vital for both the delivery of high definition TV content that needs more bandwidth in the last mile than cable networks alone can supply, and as a lifeline of support to mobile telephony operators trying to meet phenomenal demand in the world’s emerging economies, and unable to rely on enough fibre backbone capacity there for backhaul needs.
Multinational enterprises wanting to connect all their far flung global points of presence on one high bandwidth grid and governments investing to close digital divides between urban haves and rural have-nots are also spending heavily on satellite connectivity. The satellite sector is not surviving passively, or gamely fighting its corner. It is progressively evolving, both technically and commercially.
Changing dynamics
“Satellite has seen some innovative hardware and airtime deployments, with voice and data packages now available that mirror the pricing for their GSM equivalents but are available for a far wider area,” says Chris D’Aguiar, VP of sales and marketing at satellite operator Inmarsat. “You can have data services for around 50 cents a minute from anywhere to anywhere. Our Global Xpress network offers a 50Mbps capability with a global footprint. Satellite terminals are now smaller and lighter, offering ADSL-like capabilities for a range of new users as well as for traditional applications, like maritime.”
The changing dynamics of the satellite market, allied to refinements in satellite transmitting and receiving hardware, are behind, as D’Aguiar intimates, the emergence of satellite as a kind of third force in the roll-out of broadband networks, supplementary to wired and cellular broadband.
According to analyst firm Northern Sky Research (NSR), satellite broadband access services are now the leading revenue generator within the wider satellite industry. The company forecasts that revenues from such services will grow almost 15% annually over the next 10 years, and expects the satellite broadband market to generate $9 billion in revenues by 2020, driven primarily by satellite broadband internet access for consumers and VSAT networking to enterprises.
“Satellite broadband access services alone will be a $5.1 billion industry by 2020,” says NSR senior analyst Patrick French. “This is a four-fold revenue increase compared to 2010 and illustrates why so many companies are making major plays into this arena.”
The chief challenge that satellite broadband still faces, he believes, is a general public perception of satellite being a ‘last resort’ service, regarding it as an expensive alternative when other options are not available. French believes the satellite industry must work harder at presenting its broadband product as comparing favourably to wired broadband, particularly in unserved or underserved markets.
He says one industry response to this challenge has been a move to High Throughput Satellites (HTS), with a number of new generation HTS launches set to enter commercial service in 2011. The more narrowband-oriented VSAT networking market is also experiencing good growth, says French. He anticipates a peak in VSAT deployments over the next two years, with some 750,000 new VSAT sites likely to come online over the next 10 years.
A time for reinvention
The rise of satellite as a force in wider broadband deployment has led to many satellite operators and vendors reinventing themselves to take advantage of new opportunities. Susan Irwin, president of analyst firm Euroconsult US, has been tracking some important changes in how satellite companies go to market.
“We’ve seen some existing players evolve into different types of service provider,” she says. “ViaSat and Hughes have both moved on from being manufacturers and integrators of VSAT technology to being satellite broadband operators. They are capitalising on the very high throughput of the Ka band to fill in the gaps left by terrestrial broadband.”
There are many instances identified by Irwin where satellite broadband is competing directly with terrestrial broadband, not simply providing an adjunct in hard-to-reach locations, particularly in rural areas, emerging markets and island economies: “We’re seeing this in Africa, Asia and South America, and places that aren’t penetrated by fibre,” she says.
It’s in these places where the mobile and satellite operators synergise most effectively, she believes: “Cellular services are in many respects complemented by satellite,” says Irwin. “The mobile market is growing everywhere, but in emerging markets there’s often no backbone network to connect to, so satellite is providing cellular backhaul. I see continued growth here.”
In addition to older satellite players learning new tricks, says Irwin, the industry has also seen the emergence of completely new types of satellite service provider, like Google-backed O3b with its promise to connect the world’s digitally dispossessed ‘other three billion’ with cut-price fibre-class connectivity: “The O3b network has now been funded, and its largest minority shareholder is SES which means it now has the market expertise that it needs to launch – which will probably happen in 2013,” she says.
Satellite has also been making itself useful as a back up in the instance of other types of connectivity failing due to natural disaster, says Irwin: “That’s three functions – a broadband gap filler, a backhaul mechanism and a disaster recovery back-up.”
Satellite’s role may be changing, but Irwin believes its chief value will always be its point-to-multipoint capability: “TV will remain a healthy market for it for this reason,” she predicts. “It will of course take a backseat where there’s plenty of fibre, or perhaps WiMAX. That will diminish its relevance. But overall it’s a healthy market attracting new investment.”
An insatiable demand?
Rob Bednarek, CEO of SES WORLD SKIES, warns carriers not to see the lowering price point of satellite services as a challenge to their wireline investments. “It’s a mistake to see satellite as intrinsically in competition with telecoms,” he says. “It’s very complementary. We’re good at very fast response to changing market conditions, in so-called developing markets for example. The capacity is there in the sky with no extra deployment, just a need to install something on the ground. If you’re looking at, say, Africa, you don’t need to guess which specific PoPs you’ll need in 10 years. At the moment there’s insatiable demand for satellite capacity, though less so in markets like the US.”
Such is the additional capacity demand from these new markets that SES is planning a number of additional satellites, says Bednarek: “Of course a lot of our new capacity will be replacement capacity, as satellites only have a certain life. In general I see the marriage between fibre and satellite continuing, satellite serving point-to-multipoint needs and fibre for high bandwidth point-to-point.”
Emerging markets like Africa and Asia may be satellite’s new sweet spot, but interesting moves are also afoot in the mature US communications market. Wholesale-only LTE network operator LightSquared has effectively created a new business model to address the US broadband market – a hybrid of cellular and satellite services that have the potential to reach every US citizen. The start-up has just secured a $585 million loan to build out its network, and struck a deal with Inmarsat under which the two will share spectrum in the US.
“The terrestrial part of our network will cover 92% of the US population,” explains Frank Boulben, LightSquared’s EVP and CMO. “We launched our geostationary satellite last November, with its large reflector enabling connectivity with dual-mode LTE and satellite devices. It’s the first service of its kind. It’s a wholesale-only model, and we won’t be investing in a brand. Customers will be wireless and mobile operators, perhaps with no 4G spectrum of their own, wireline and cable operators wanting to resell wireless services, device manufacturers and others.”
Satellite is essential to the LightSquared business model since the US has a generally low population density, says Boulben: “Rural US accounts for much of the country,” he explains. “Our customers will get coverage anywhere, in the Grand Canyon or on any highway, places where there’s no cell coverage. We’ll launch by the end of 2011, with all the main cities covered by Q1 2012. We’ll be nationwide by the end of 2013. We have no non-US plans at this stage, but we are seeing copycat operations spring up in Europe.”
Satellite operator Avanti has a foot in both developed and developing camps. Its HYLAS 1 satellite, launched in November 2010, is designed to reach Europe’s rural broadband-free outposts, while a second satellite, HYLAS 2, is set for launch in 2012 and destined to serve Africa.
Avanti CEO David Williams says both satellites will utilise the increasingly popular Ka band: “Ka delivers high capacity at a low cost,” he says. “It fundamentally changes the economics of using satellite in data communications and it is solving a new set of problems for a new set of customers.”
Williams expects mobile operators to make up a large proportion of his customer base: “In large parts of the world satellite is used for backhaul because terrestrial cable laying is too costly or difficult,” he explains. “Ka band does that job better and faster. Also in more developed markets, satellite can provide a resilient back-up solution for increasingly complex networks, especially in some of the new Wifi deployments. Finally carriers are using satellite to serve customers at the edge of their networks – it is the perfect off-net solution where a large enterprise customer demands ubiquity.”
Emerging markets, he says, offer a breathless rate of growth in data communications and he believes that in many cases satellite is the only way to deliver major network components quickly: “In more mature markets, plugging in large amounts of capacity to a network very fast and flexibly also has an advantage where demand often outstrips supply.”
Mankind may have forsaken moon walks and fallen short of a manned Mars landing, but space is still a worthwhile frontier to the commercially astute, if not the romantically adventurous.
