One of the biggest concerns in the satellite industry today is that new HTS and MEO-HTS (i.e. O3b Networks) capacity will severely undercut existing FSS C- and Ku-band transponder demand for a gamut of broadband satellite markets. Already numerous operators are claiming severe price pressure on satellite capacity in different parts of the world and are linking this to the arrival of new HTS services. Plus more than one operator is dreading the day they will need to go head-to-head with O3b for certain services notably in the backhaul and trunking markets.
To illustrate the impact of HTS/MEO-HTS capacity leasing on the overall broadband satellite market, NSR has attempted to compare its recent forecasts in its Broadband Satellite Markets 12th Edition study for C/Ku/Ka TPE leasing to HTS/MEO-HTS leasing directly in terms of Gbps of leased capacity.
The exhibit illustrates that there will be a real net increase, about 70%, in Gbps of classic FSS C/Ku/Ka transponder leasing in the coming ten years driven by improving technology and greater capacity provisioning per provisioned site. Most of the new transponder demand growth will come for Ku-band capacity mainly in the VSAT networking market such as in government-backed rural connectivity projects or for high value, mission critical services.
However, this will be dwarfed by the more than 2,000% gain in HTS and MEO-HTS leasing in the coming ten years. Most of the HTS and MEO-HTS capacity demand growth, over 80%, will be generated by satellite broadband access services, whilst the remainder will be driven by a mix of trunking, backhaul and corporate-class VSAT services.
But, it is critical to note that MEO-HTS and HTS capacity is priced much lower per Mbps than classic FSS capacity. This lower pricing is essential to opening up new markets, such as satellite broadband access, as well as keep satellite competitive for the most price sensitive clients within the enterprise VSAT, trunking and backhaul markets.
NSR does not deny that in the short- to mid-term, there will be some significant competition between satellite operators and service providers trying to sell both classic FSS capacity as well as newer HTS and MEO-HTS capacity to end user clients. These competitive pressures will no doubt lead to the perception that classic FSS capacity, at least that used to serve various broadband satellite services, is under pressure.
Nonetheless, NSR continues to see real advantages to classic FSS capacity versus HTS or MEO-HTS for certain client sets that transcend the pure price per bit equation. FSS capacity offers advantages of larger coverage areas, typically better service quality, the ability to fully manage the network from end-to-end, and the flexibility to place hubs and gateways in any convenient geographical location. It is the clients who value these aspects of FSS capacity that will generate NSR’s forecasted growth in FSS transponders for broadband satellite services.
However, other clients will value higher the lower cost per bit of HTS and MEO-HTS capacity. And, in fact, NSR firmly maintains that the existing markets that were already under pressure from terrestrial services now stand a real chance of growing simply because classic FSS capacity is not truly price competitive for these markets. In other words, the industry was already losing the battle for these clients regardless of the price pressure the classic FSS capacity was under. On a net-net basis, NSR maintains the view that HTS and MEO-HTS capacity will not replace use of C/Ku/Ka-band transponders, but will instead compliment and greatly expand the broadband satellite markets for the industry to operate in. This is where the industry needs to focus on in order to succeed.
Information for this article was extracted from NSR's report: Broadband Satellite Markets, 12th Edition