Northern Sky Research

Will O3B Drive Ships to Higher Bandwidth?

Jun 25th, 2012 by Claude Rousseau   More from this Analyst | Profile

The fact that Royal Caribbean Cruises Ltd. contracted O3b Networks to provide one of its largest ships, the Oasis of the Seas, with hundreds of megabits per second of two-way communications supports NSR’s core finding: maritime bandwidth demand is here to stay, and high-throughput satellites have strong potential in maritime markets.

NSR reported in its recent Mobile Satellite Services, 2nd Edition report that the HTS maritime market will likely target the region where the Oasis of the Seas is sailing where a lot of high-end users are found not only on cruise ships, but also on oil and gas platforms and tankers.  These currently use primarily broadband C-band capacity for their bandwidth-hungry applications with ARPU levels hovering around the $8,000 level per ship but with low take-up on cruise ships even if demand is there.  Is the O3b contract a first of many to follow?

A week after announcing its maritime service offering 350 Mbps to the ship, O3b Networks admitted that it was targeting about 30 to 40 large cruise ships worldwide.  Given the coverage of O3b Networks with a constellation of 8 satellites, this is indeed correct as these potential customers will likely be restricted to the Caribbean, the southern Mediterranean, the Suez Canal, parts of the Indian Ocean and South East Asia.

Large cruise ships (over 100,000 GT and minimum 3,000 passengers) today number about 50 and with another 10 to 15 more new builds expected in the next 5 years, the potential market could be slightly larger.  But of those in operation today, about a third belong to RCCL which just signed a contract to equip 34 ships with Ku-band systems from Harris CapRock.  So maybe O3b’s market is actually saturated.    But down the road, the big operator with more large vessels to target is Carnival Corporation, which currently uses MTN for C- and Ku-band connectivity.  Carnival should be looking at all options for its future connectivity needs of which O3b and, for that matter, other HTS operators, could be tapped.  

To compare the service, if we take the case of RCCL and assume it will take 350 Mbps in the coverage area, NSR estimates that the O3b annual bill could be as high (or as low, depending on where one sits) as $5 million per ship, which is much higher than current cruise ship spending.  But for 350 Mbps, if we assume that the ship is fully loaded (crew plus passengers) with about 8,000 people sailing every week and roughly one-third use the connectivity services, the price per user per month comes down to approximately $40; not a very high number when looking at overall passenger spending on a ship and in comparison with today’s C-band and Ku-band ships…but the O3b offer does has far more bandwidth than ever before for online connectivity at sea.

Going forward, it is not service that could potentially halt customers from taking the O3b offer.  As NSR has consistently reiterated, it is the equipment price hurdle, which is still very high for a large portion of the market.  With two 2.2 meter antennas and a third one for back-up, NSR assumes that the retrofit cost per ship could be at least $750,000 and upwards of $1 million before customers turn on the switch. 

Bottom Line

O3b Network is carving a nice piece of the niche cruise ship business and will help demonstrate that HTS capacity for specific high-end customers is coming to selected markets.  However, these customers will also look at equipment prices before signing on and sailing out.