Last year in Paris the mood was very upbeat with collective sighs of relief that compared to the rest of the world the satellite industry had escaped the recession comparatively unscathed. This year, while still very positive, the mood was more balanced with a recognition that at least for the manufacturers the peak order rates for commercial geostationary satellites (GEOs) of the last few years are not going to be repeated as the major operators have now largely completed their replacement cycles.
A topic of key interest to them—and to the launch companies—was what size these satellites are expected to be, the only consensus there, was that demand was likely to be spread. ThalesAlenia presented a chart indicating that in the 2013-15 time period, extra large satellites were likely to account for 35% of the market, large for 25% and medium and small for 20% each. For the FSS operators the news was also good – but not as good as in 2008 when combined revenues were up 10.5% on the previous year. In 2009 revenues increased to over $10 billion, a 4.4% increase from 2008, however given the current economic climate this is hardly cause for anxiety!
According to Euroconsult fill rates reached a new high of 77% in 2009 and exceeded 80% in all regions except North America and Asia. In the salons and halls of the Westin Hotel the talk focussed on other things – Ka-Band and Maritime and Inmarsat in particular as the recent order for three Ka-Band satellites from Boeing combined these two topics. It seemed that everyone had an opinion as to why Inmarsat had done this and to the wisdom or otherwise of the move. In my opinion James Murray from Morgan Stanley summed it up very neatly when he pointed out that when the world is your market expansion can only come from other products!
Andrew Sukawaty CEO of Inmarsat was very clear that this move had been made after discussions with customers and investors and was very much a “demand pull” and not a “technology push” with demand for broadband growing faster than the demand for low data rate services. Euroconsult showed a chart projecting total maritime satellite capacity revenues alone would be approximately US$ 580 million from VSAT 2020. Inmarsat are projecting that five years after launch (i.e 2019) the annual revenue from Global Express, as the Ka-Band System is known, would be US$ 500 million, this however includes aeronautical and land as well. The service will provide 50 Mbps to 50cm antennas and 10Mbps to 20 cm antennas. As we all know Ka-Band suffers from signal degradation in areas of heavy rainfall – which happen to include some of the major shipping areas.
Inmarsat’s answer to this however was to point out that the system would be integrated with their existing L-Band architecture so providing a unique hybrid system with built in “back-up” (albeit at a lower data rate) when needed. Ka-Band is however particularly suitable for aeronautical applications. A “significant” portion of the capacity of Global Express has been pre-sold to Boeing, who presumably will be looking to resell this to some of its government customers.
Ka-Band however is definitely the “flavour of the month” of the conference. Euroconsult showed a chart indicating that by 2013 excluding O3b there would be 60 commercial satellites with Ka-Band payloads on board. Of the dedicated Ka satellites the two European ones - Hylas 1 from Avanti and KaSat from Eutelsat – are due to be launched by the end of this year. ViaSat1 and Jupiter (the latter from Hughes) for North America are due to be launched in 2011 and 2012 respectively. David Williams CEO of Avanti indicated that they had follow on satellites, Hylas 2 for the Middle East and Africa to be launched in 2012 and Hylas 3 for “the Americas”. An interesting proposition, but one would have to assume that Avanti is not planning on trying to outpace two well established operators in North America both of whom– if all goes according to plan—will be operating High Throughput Satellites by the time Hylas 3 launches. It would therefore seem safe to assume that Hylas 3 is destined to cover all or parts of Central and South America. SES however remains more cautious about the potential for a dedicated Ka-Band satellite in Europe. SES CEO Romain Bausch used the recent case in Germany - where four telecoms operators received a total of 80Mhz of spectrum with the proviso that they first provide broadband in areas where there was no terrestrial service – to illustrate why a dedicated satellite for Europe was a risky business. With a bent pipe satellite a decision such as that could render capacity focussed on those areas virtually useless, so potentially destroying the business case. Having said that SES is an investor in O3b and Ciel and all 4 of the satellites currently being constructed for SES have Ka-Band payloads so there is obviously no inherent prejudice against the frequency.
The financial markets may still be tight but the satellite industry has found an alternative source of funding: ECA or Export Credit Agencies which provided $3 billion in loan guarantees in 2009 and a further $2.1 billion so far this year. Coface (France) started the trend when it provided loan guarantees for the second Globalstar constellation early in 2009, but since then Export-Import Bank (USA), the Chinese government and Export Development Canada have all joined in and beneficiaries include Iridium, Avanti and SES. However although much of the talk and interest was focused on Ka-Band and Inmarsat, for the foreseeable future video and TV broadcasting still remain the main growth driver for commercial satcoms. Globally in 2009 27,000 TV channels were broadcast by satellite – 3,000 more than in 2008. Euroconsult reported that emerging markets accounted for 82% of the net increase in 2009 and 56% of the capacity used. SES forecast that by 2017 North America would actually show a negative CAGR of 0.5% with the highest growth rates coming from Eastern Europe, Russia and the CIS and Latin America (4.7%, 5% and 5.2% respectively). Overall however Asia remained the largest market accounting for 28.5% of total C- and Ku-Band transponders in 2017.
Satellite Pay TV subscribers increased by 16% to 132 million worldwide and so far this year 11 new DTH platforms have been launched bringing the total to 113. This compares to 9 new platforms in 2009. HD has been and continues to be a major growth driver. Excluding DirecTV and Dish there are now approximately 1,000 HD channels worldwide with channels outside North America increasing by 80% to 560 last year.
Unlike the NAB Convention in April of this year, where one could be forgiven for thinking that 2D TV, whether HD or SD, was about to go the way of Black and White TV and future programming would all be in 3D the sentiment at Satellite Business Week was more cautious and in my opinion more realistic, with only a very small portion of the almost 40,000 TV channels forecast by Euroconsult for 2019 being 3D. Among the operators Eutelsat alone was still bullish quoting George Jeffrey, Former President, Europe National Geographic Channels: “I really believe in 3D – it’s a game changer. I think it’s a genuinely, gob smacking, wow moment and you don’t get that many in life so here’s one coming up!”
Time will tell if he is correct!
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Elisabeth Tweedie is Contributing Editor for Satellite Markets and Research . She has over 20 years experience at the cutting edge of new communication and entertainment technologies. During her 10 years at Hughes Electronics she worked on every acquisition and new business that the company considered during her time there. She can be reached at: etweedie@definitivedirection.com
