May 14, 2018
A number of articles by industry analysts have commented recently that satellite capacity prices are coming down. This can be ascribed to new HTS (High Throughput Satellites) that have increased capacity, as well as promises of new capacity in the form of NGSO (Non-Geosynchronous Orbit) satellites being prepared for deployment.
Satellite operators are not happy with the ongoing price degradation, as it makes it difficult to grow revenues. Some are suggesting, however that if prices continue to fall, pent-up demand may surge, causing some to contemplate whether a “trigger point” is in the forecast. For cellular backhaul and IP trunking applications, hitting the right price-point for satellite services, could lead to faster growth. In addition to backhaul for cellular mobile networks, lower satellite capacity pricing should revive IP Trunking, leading to the build out of wireless IP networks to underserved markets. BusinessCom is seeing an increase in demand for WISP (Wireless ISP) networks in underserved regions, and as satellite prices come down, those projects become more feasible.
Video has been a mainstay for satellite service, but data services are continuing to grow, and the greatest opportunities are centered on mobile backhaul. MNOs (Mobile Network Operator) are being pushed to deliver services deeper and deeper into rural communities where fiber or microwave access does not exist. Typically this market has been difficult to justify given the absence of fiber and microwave, and the cost of satellite – but this may be changing…
Part of the challenge will be informing MNOs and IP Trunking operators about the possibilities for satellite backhaul, as many lack awareness of satellite capabilities, or harbor negative perceptions about satellite service. The satellite industry has to help terrestrial operators do the math, helping them to realize the possibilities for affordable satellite backhaul in cellular and IP trunking networks.
Falling satellite prices may prove timely for long-hyped 5G services that are finally becoming reality. As has been discussed here, there is the throughput, performance and speed of 5G that satellite needs to support, but real success will require fusing ground-based 5G networks to satellite services in order to deliver seamless services across both platforms. Satellite will need to provide more than simple connectivity; it will need to be integrated to 5G. With lower satellite capacity prices, the motivation to use satellite for backhaul in previously unattractive locations should expand.
While video continues to be the satellite industry’s “cash cow,” that may be changing. Video is no longer the sole purview of content providers on private networks. Over the Top (OTT) services, in which video is delivered over IP networks, is doing very well, and starting to challenge legacy video TV providers. Satellite video operators have responded by adding Video on Demand (VoD) services, and their initial results are encouraging. Not long ago, most BusinessCom clients wanted to surf the web, send and receive emails, and transfer files. Today many quote requests specifically mention wanting to stream movies, so video will continue to ride on top of data services, and grow in importance. There are still many untapped markets that falling satellite prices could help to open.
Margins vs Volumes
Given the dynamics in the satellite industry right now, continued reduction in satellite costs, while concerning and generally unwelcome from a revenue perspective, could spark a renewed burst of growth, as new markets may open that leverage satellite backhaul and trunking that was previously too expensive. Falling prices, have long been resisted by the industry, but in this case, they could pave the way for a resurgence of growth, acting as a trigger point as falling prices spark expansion into undeveloped markets. Never a dull moment in the satellite industry these days!