The Satellite Industry in Transition
by Elisabeth Tweedie
Paris, France, October 1, 2012--Compared to the ebullience of the last few years the mood was relatively subdued in Paris this September at Euroconsult’s Satellite Business Week conference. Ka-Band is no longer new and at the present time the results from the broadband services already launched are too new to be pronounced outstanding successes or dismal failures. Some would argue that Electric Propulsion (EP) is new, certainly it hasn’t been used to get to an orbital location before but in spite of the fact that recent innovations mean that delivery in-orbit is now possible in 30 days it failed to generate the excitement that Ka has been doing.
Rather there was a feeling that the industry is facing change both internally and externally, but where these changes are going to lead us is less clear. Internally the changes are coming from the slowing down of orders for replacement satellites from the major operators, the emergence once again of national satellite programs, the increasing strength of the Chinese manufacturing and launch industries and technology breakthroughs that are leading to increased throughput per MHz.
Externally the changes are coming from increased demand from emerging markets, the continued push to High Definition (HD) from Standard Definition (SD) and the seemingly insatiable appetite that we all have for video, whether that video be professionally or individually produced. Bruno Fromont, VP of Corporate Strategy for Intelsat pointing out that every second 60 hours of video are uploaded to YouTube.
Richard Roithner of Euroconsult opened the conference stating that 80% of the growth in demand for FSS capacity until 2021 is going to come from the emerging markets. This was echoed by the Service Providers, Globecast, Arqiva, Encompass and RRSat all of whom stated that their growth was going to come from Africa, Asia, Latin America, the Middle East and Russia although there was no consensus as to the relative ranking of each of these regions. However this isn’t necessarily good news for the existing operators. In the following panel Intelsat warned of the likelihood of oversupply in some of the emerging markets due to the presence of new national operators, a sentiment that was echoed by Nihar Shah, Director of Strategy and Market Intelligence at SES who stated that there are five new national satellites in operation, ten in development and another 20 at the concept stage, producing the very real possibility that some markets may become more restricted or even closed for the international operators.
Euroconsult indicated that TV would remain the main revenue generator of the industry accounting for 60% of capacity usage in 2021. Barry Woolston, Commercial Director of Arqiva, however stated that in his opinion people would migrate from DTH and move to broadband. Bill Tilson, President and COO of Encompass Media, disagreed saying that this was not likely to happen until the equivalent of a good Electronic Program Guide was available for on demand viewing.
Ka-Band may not be new but it is still a closely watched and debated topic in the industry. Subscriber take-up for KaSat at around 50,000 to date has been way below Eutelsat’s expectations and is being attributed to poor distribution. Yohann Leroy, Strategy Director for Eutelsat commenting that they were now “mobilizing the ecosystem” for KaSat.
Michel de Rosen, CEO of Eutelsat however was quick to point out that KaSat was working well and customers were happy, while admitting that it was taking more time than anticipated to overcome “go to market” issues, saying that KaSat “will not revolutionize our industry.”
More surprisingly since ViaSat already had a distribution network in place for WildBlue, Mark Dankberg, CEO of ViaSat also admitted to issues with distributors for Excede as the ViaSat-1 service is known, saying that they placed more emphasis on profit than customer satisfaction and as a result ViaSat has had to change the structure of its relationship with them.
SES has taken a different approach to Ka-Band by putting Ka payloads on several satellites rather than having a dedicated satellite. Patrick Biewer, Managing Director of SES Broadband Services stating that the economics were similar in terms of Gbps per dollar invested but the risk was far less. SES’ Ka Program will have a commercial launch in November. Of course SES is not the only company taking the non-dedicated satellite approach to Ka by putting high throughput (HTS) type payloads on other satellites and Euroconsult opened the conference by predicting major over supply. According to its forecast 888Gbps will be available by 2015 but only 217Gbps will be used - a worrying scenario for the industry and consumers alike should it prove to be accurate.
There is no shortage of unserved customers in the footprints of the current and future Ka-Band systems, costs to the consumer are falling so that the differential between the satellite service and the terrestrial offering - that they can’t get anyway – is pretty small, so why the projected gap? Do all those unserved households really wish to remain that way or are we as an industry doing a poor job of marketing the service and letting the old perceptions that satellite is second class linger on?
ViaSat have certainly had some good publicity about Excede, Mark Dankberg is particularly proud of the headline “How ViaSat’s Excede makes satellite broadband not suck”, but in parts of the UK and Europe many people still don’t know about Hylas and KaSat.
Next year when, if all goes according to schedule there will be another Ka-Band System – a very different one – when the first eight O3b satellites are placed into a Medium Earth Orbit. O3b, in which SES is a major shareholder is already set to revolutionize the cruise industry having signed up Royal Caribbean and will be providing up to 350Mbps per ship; a far cry from the 4Mbps that they are currently getting. Steve Collar the CEO also talked about the 30Mbps service which will be used by the Cook Islands and how O3b can revolutionize the seismic surveying industry which currently uses helicopters to transport data as there no existing service capable of handle the vast amounts of data that the surveys generate.
Collar characterized the satellite industry as being in an “Innovation Cycle.” He may be right, HTS are certainly innovative as is O3b being the first commercial two way MEO constellation. For Ku- and C-Band the innovation is coming from Newtec who are finding ways to pack more bits per hertz and as Serge Van Herck the CEO was keen to point out, have recently demonstrated 500Mbps over a 72MHz transponder.
In the launch industry SpaceX is the one driving innovation and cost reduction. It has a backlog of US$1 Bil. of which 70% by volume but not by value is for commercial launches. An impressive figure considering that no commercial launch has yet taken place. It is also facing issues in scaling up to handle the anticipated 20 launches a year that it intends to do and Glynne Shotwell, Sepcex’ CEO, talked about plans for a new dedicated launch site in Texas.
The Chinese are also hoping to take a share of the commercial market and are targeting 20 launches a year from their three launch sites with a particular focus on LEOs where with the new cryogenic launcher they can launch 25 tons. The same launcher can do 14 tons to a Geo Transfer Orbit.
For the MSS operators GlobalStar has been the innovator – not in technology but in its distribution system. It now has over 10,000 retail outlets in North America and according to Jay Monroe the CEO is saving one life a day with its SPOT service. This is a simplex service that delivers pre-determined messages to emergency services or specified contacts. It’s a low-end product with an ARPU of US$8-9. He also talked about the “data heroin” that we’re all becoming addicted to and how this is helping them market the more sophisticated products now that its network is nearly completely restored.
In going for a mass market distribution strategy GlobalStar has, like DirecTV and Dish, moved satellites out of the realm of the extraordinary into the realm of the ordinary for the consumer, maybe this is where the consumer broadband services need to be heading.
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Elisabeth Tweedie isAssociate Editor of the Satellite Executive Briefing. She has over 20 years experience at the cutting edge of new communication and entertainment technologies. She is the founder and President of Definitive Direction, a consultancy that focuses on researching and evaluating the long term potential for new ventures, initiating their development and identifying and developing appropriate alliances. During her 10 years at Hughes Electronics she worked on every acquisition and new business that the company considered during her time there. www.definitivedirection.com. She can be reached at: etweedie@definitivedirection.com
