The New Age of Satcom: Choppy Waters in a Rising Tide

Singapore, August 15, 2024--The Asia-Pacific region has long been one of the most dynamic and forward-looking regions for satcom. From the first satellite launched for an Asian country (Palapa-1 in the 1970s) to one of the first commercial high-throughput satellites in IPSTAR (2004), APAC has, in many ways, been more of a leader than a follower as it relates to satcom trends.

 

 

So it should come as no surprise that, after attending conferences in Singapore and Australia in late May and early June, your correspondent came away with new perspectives and ideas about how the satcom industry, and the space sector more broadly, is evolving. 
As with any good list, I’ve whittled 2 weeks down to 3 key takeaways: 1) selling raw bandwidth remains a tough business, especially with a capacity glut in certain markets, but operators continue to adapt. 2) sovereignty is becoming more and more the name of the game. 3) satcom is growing, and a rising tide must lift more than one boat.  

 

Raw Bandwidth Remains a Tough Business

 

During the Asia Satellite Business Week (ASBW) in Singapore and Australasia Satellite Forum (ASF) in Sydney, the topic du jour was unquestionably the impact of Starlink. Whether in maritime or village Wi-Fi, most satellite operators were clear that Starlink is impacting their business, typically by taking customers. 

 

As a result of the relentless pricing pressure and broader bandwidth commoditization, satellite operators are now, more so than ever, needing to vertically integrate. Nowhere was this clearer than at the Kacific booth during ASBW. The Singapore-based company operates a single HTS, Kacific-1, and sells bulk bandwidth into markets such as Indonesia, Philippines, and Papua New Guinea. 

 

For some time, the company has differentiated itself by getting closer to the end users: local subsidiaries in major markets and a management that takes the time to attend far-off conferences in far-off places. And for some time, this has involved developing their own equipment. But the company’s booth at ASBW showcased a pretty remarkable transformation: at the very front of the booth was a large 4G backhaul tower. 

While the company continues to primarily be a satellite operator, there is a clear shift going on: Kacific (and others) are going downstream and becoming network integrators, providing connectivity over GEO satellites, microwave, other terrestrial infrastructure, and probably one day MEOs and/or LEOs. At the end of the day, with all these new and flexible options being put into orbit, companies that have up to now owned their own satellite assets are likely to get by on a combination of owning + renting, while slightly shifting their core value proposition away from simply “operating a satellite”. 

 

Going back to the Kacific example, the company has for a few years been considering a follow-on Kacific-2 satellite. The business case for such a project is tough: 15 years of on-orbit lifetime (at least), plus a few years at the front-end for construction, and you spend a few hundred million dollars. Given that we have Terabits per second of Starlink capacity already on-orbit, alongside Terabits more expected to come from Kuiper, Telesat, and others, it begs the question: why commit to owning GEO assets? 

 

For most operators, this mindset is likely to take hold eventually in one form or another, though for others, manufacturers are giving them a lot more reasons to still own GEO assets, largely through more flexible and cost-effective satellites. Very High Throughput Satellites (VHTS, defined as a GEO satellite with several hundred Gbps of capacity or more) are revolutionizing the economics of GEO, while flexible HTS payloads are allowing satellite operators to commit to GEO assets without committing to a business plan that spans 2 decades. Some countries and operators want to maintain sovereignty and bolster their internal capabilities, and for them there is a whole new world out there in GEO. 

 

Sovereignty is the Name of the Game

 

In this paradigm of capacity glut > wider adoption of satellite >more investment into satellite > more capacity > wider adoption, one thing is clear: as satellite becomes more important, nations do not want to have all their eggs in one satcom basket. All the technology changes that have led to the above-mentioned supply glut are also giving nations better options for their own sovereign satcom capabilities.

 

To take one example, during the ASF, there was some discussion about the two SkyMuster satellites, launched in 2015 and 2016 as part of the National Broadband Network (NBN) program. From the word on the ground in Sydney, these two satellites have not been the greatest commercial success. With a price tag of some AUD$2B in total, the satellites served at their peak somewhat more than 100,000 rural subscribers, meaning that the satellites cost some AUD$20,000 per subscriber. With a total throughput between the two of them of ~160 Gbps, the CAPEX efficiency is also poor compared to modern satellites.

 

During ASF, there was discussion of “what to do when the two SkyMuster satellites inevitable reach end of life?”. Starlink has taken a big chunk of the Australian satellite broadband market, which makes the business case for replacement satellites tricky. But, compared to ~10-15 years ago, the economics of GEO satellites have improved enormously. Some quick math:

 

Two SkyMuster satellites: AU$2B price tag (approx. US$1.6B at mid-2010s exchange rate), 160 Gbps of combined capacity ≈US$10M per Gbps. For older satellites, this was a reasonable price to pay, but in the age of high throughput satellites and large constellations, it is impossible. Luckily for Australia, there are a lot of different options:

 

Replacement options in 2024 for 160 Gbps of capacity:

 

• Large GEO from any major prime: ~US$ 300-500 Mil., several hundred Gbps of capacity, e.g. ≈US$1 Mil.  per Gbps

• Small GEO from Astranis, Swissto12, etc.: <US$ 100 Mil.  paid over the lifetime of the satellite, several tens of Gbps, e.g. ≈US$5M per Gbps but payment much deferred

• Condosat/hosted payload on large GEO: ~<US$ 200 Mil. for 50-100+ Gbps, e.g. ≈US$ 2-4 Mil per Gbps

• Bulk leasing capacity from NGSO constellations: flexible leasing terms but very limited sovereignty

 

In a country like Australia which has had a mixed relationship with Big Tech (see recent actions by the ACCC against Meta, as well as a recent call to more closely examine the internet search market), no one seems to be jumping for joy at the idea of replacing SkyMuster with Starlink and only Starlink: it’s too much concentration of risk, Elon Musk is too volatile, and Australia wants to maintain its sovereignty. And lucky for them, there are now a whole lot more options to do that. 

 

Other countries that appear interested in maintaining their satcom industry sovereignty include Thailand, with the local satellite operator Thaicom making big commitments recently for two new GEO-HTS, namely Thaicom-9 (small GEO built by Astranis to be launched in H2 2024) and Thaicom-10 (large GEO to be built by Airbus, launched in ~2027, and split with Eutelsat-OneWeb). As is the case with all Thaicom satellites, the Thai Government will receive a free 400 Mbps per satellite for the orbital concessions, which Thaicom hopes will whet the appetite for major government bandwidth users. 

 

To the south and east of Thailand, Indonesia continues to discuss sovereignty, despite Starlink’s recent market entry into the country. The largest satcom market in the region by far, Indonesia already has substantial domestic GEO satcom assets, namely the Satria-1 satellite (150 Gbps GEO launched in 2023), and multiple domestic satellite operators.

 

Over the past few years, Indonesian regulators have gone back-and-forth about follow-on Satria GEO satellites. As of late 2023, the prevailing sentiment was that additional GEO satellites were too expensive, and that NGSO was going to offer more flexible options.

 

This reversed just a few months ago, with Indonesia’s telecoms regulator KOMINFO announcing plans to build a 300 Gbps Satria-2 satellite, funded entirely by foreign investment. The project seems to be in early stages, but nonetheless represents a change of direction by the Indonesian regulators towards a more sovereignty-based approach. 

 

How Many Boats Can a Rising Tide Lift?

 

Despite all the disruption, satcom is unquestionably growing: look no further than Australia, where Starlink already has a few times more subscribers than the SkyMuster satellites ever had. Not great for SkyMuster, but broadly speaking pretty good for satellite. 

Walking down the street in central Sydney the night before the conference, a Telstra billboard caught my eye (below). Wearing a funny-looking hat, we had a Tim Burton-esque figure telling us all about Telstra’s new satellite home internet packages, from space to your place. In the satcom industry of 15 years ago, this would have been unimaginable. 

 

And with that being the case, it begs the question: how many boats can this rising satcom tide lift? Looking at Novaspace figures, we expect a ~10x increase in satcom traffic in the APAC region between 2023-2032, with total demand growing from ~900 Gbps to ~3 Tbps during that period. Much of this growth will be driven by universal broadband access, defense, and other verticals that have some degree of preference for domestic, sovereign suppliers. Admittedly, an equally sizable chunk of the demand will be represented by consumer broadband, where the end user is typically looking for the lowest-price option with limited consideration for sovereignty. 

 

With pricing expected to continue its decline, the ~10x increase in demand will lead to a comparatively smaller increase in revenues, but growth is still expected to be decent, with data service revenues in particular seeing rapid growth from ~US$ 4.5 Bil.  in APAC in 2023 to nearly US$ 13 Bil. by 2032. In short, satcom data is likely to see a 10x increase in demand and a 3x increase in revenues in APAC over the next 10 years.  

Interestingly, this demand looks surprisingly familiar. During an ASBW panel, a speaker from Malaysian satellite operator Measat was describing the company’s ConnectME community Wi-Fi program. With several thousand sites in the field connecting 500,000 Malaysians, ConnectME is an impressive success story of a relatively new satellite vertical, village Wi-Fi hotspots. And yet, according to Measat, 80% of the bandwidth consumed on ConnectME sites is video content. This is a particularly promising development given the massive demand elasticity that exists with mobile video content. 

 

Conclusion

 

It’s a tired adage, but in 2024 we really do find ourselves in a new world for satcom. Many markets have shifted towards a state of capacity abundance, and the number of options available to end users is continuing to multiply, leading to a rising satcom tide.

 

And while the rising tide will be choppy, it will lead to opportunities across a wide swath of the sector. From satellite operators that can leverage their fleet experience to play on the abundance of capacity, to service providers who parlay their local knowhow to bridge the gap between space assets and remote villages, the opportunities are substantial. With its combination of massive population, relative wealth, and diverse variety of countries, perhaps no region worldwide is as primed for this growth as Asia-Pacific. 

 

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Blaine Curcio is a Contributing Editor to Satellite Executive Briefing magazine and the Founder of Orbital Gateway Consulting.  He’s an expert on the commercial space and satellite industries with a focus on the Asia-Pacific region. He is also an Affiliate Senior Consultant for Euroconsult. Since joining Euroconsult in 2018, he has contributed to a wide range of consulting missions and research reports, primarily covering the satcom sector globally, and broader space industry in China. He can be reached at: blaine@orbitalgatewayconsulting.com