Northern Sky Research

Australia’s Changing VSAT Landscape

Jun 10th, 2013 by Jose Del Rosario   More from this Analyst | Profile

SpeedCast completed the buyout of Australian Satellite Communications (ASC) in December 2012 followed shortly by the announced purchase of Pactel International in April 2013. The acquisition of both entities strengthens and consolidates SpeedCast’s position in Australia’s key vertical markets, specifically the potentially lucrative mining and Oil & Gas sectors.

SpeedCast’s acquisitions and market position has instantly changed Australia’s competitive landscape due to its enhanced size as well as the customers and contracts it has gained from the mergers. By so doing, it can achieve higher margins on one hand but also achieve the added benefit of efficiencies on the other where competing service providers will have to refine their offerings to level the playing field or remain at par.  In terms of space segment leasing, for instance, SpaceCast’s consolidated entity can lease transponder capacity at potentially lower negotiated prices and thus offer lower service fees to its customers.  To address this, competitors will have to reconfigure their own prices in order to match if not better SpeedCast’s service fees.  Whichever direction SpeedCast eventually chooses to leverage the mergers, whether to improve its margins, lower service costs to the end user or fine tune an offering that combines both, its competitive posture will highly impact Australia’s VSAT market.

SpeedCast’s move comes two years before NBN Co., a Government Business Enterprise, is set to launch two next-generation Ka-band satellites to provide access to areas outside fiber and fixed wireless footprints. The satellites, which are planned to launch in 2015, are designed to provide high speed broadband coverage to around 3% of premises including outback areas and Australia’s external territories such as Norfolk Island, Christmas Island, Macquarie Island and the Cocos Islands.

NBN Co. is seen mainly as a consumer-grade offering and although business premises can and will avail of the service, the primary targets of enterprise-class VSATs in the promising mining and Oil & Gas sectors with high SLA requirements on traditional C-band and Ku-band capacity, will likely be unaffected in terms of user requirements. Basically, the argument is that enterprise-class VSATs have different market targets and end user requirements that cannot be served by NBN Co.

Consider the following, however:

  • NBN Co. is bound to have excess capacity based on the 3% premises target and geographic coverage it is slated to serve;
  • NBN Co. is bound to serve business premises in remote and underserved locations, precisely where the mining and Oil & Gas industries reside;
  • As such, excess capacity will have to look for customers to serve, and in Australia, it will be in the key growth segments of mining and Oil & Gas in order to gain healthy ROI.

Two things can happen:

  1. NBN Co. will be a competitive platform to current C-band and Ku-band offerings where SLAs will be adjusted to match the reliability and availability of current offerings;
  2. NBN Co. will complement current C-band and Ku-band offerings where it can serve welfare application requirements such as Internet access to the mining and Oil & Gas sectors.

SpeedCast CEO Pierre-Jean Beylier indicated that the latter is likely to take place where service providers obtain capacity from NBN Co. then turn around and market those services to the end client.  Indeed, he said “we see NBN Co. as an opportunity going forward where we can bundle Internet access to our core enterprise offering.” The rationale for NBN Co. not competing head-on with current C-band and Ku-band capacity is that the “jury is still out on Ka-band for enterprise.  We have customers today who do not want to use Ka-band because of reliability issues,” according to Beylier.

Bottom Line

In NSR’s view, NBN Co. will likely be a complementary solution in the early part of its market cycle.  Over time, with improvement and innovation as well as the established track record of Ka-band, it will not be surprising to see NBN Co. compete head-on with C-band and Ku-band VSAT offerings.

In the long term, Australia’s VSAT landscape will include improved Ka-band services, lower capacity prices and likely fewer players serving the market. Consolidation and perhaps service providers dropping out of the competitive landscape will likely take place given that growth in the mining and Oil & Gas verticals will begin to mature and decline.

Information for this article was extracted from NSR's report Broadband Satellite Markets, 11th Edition.