Satellite Providers: The $27 Billion Opportunity
Broadband access revenue derived from satellite service providers in Europe is likely to be close on $2 billion in 2008. That is according to a major study by Pioneer Consulting into the future of the satellite industry.
Total global revenue for satellite service providers is expected to be $27 billion in 2008. This compares with a figure of $1.1 billion in 2001. For equipment suppliers, the world-wide market is expected to more than double between 2001 and 2008.
Mike Massey, principal analyst at Pioneer Consulting and author of Broadband satellite: analysis of global market opportunities and innovation challenges, told Interspace, “Satellite plays a very tertiary role in the broadband access market. I would say the Europe is more attractive to satellite operators than the North American market is. I am actually seeing that Latin America and Europe are the two best markets for broadband access over satellite.”
Massey believes Internet growth in the region is particularly strong, and there is a clear opportunity vis-a-vis the cable and DSL players. “Those (cable and DSL) networks are not being rolled out as aggressively as they are in the U.S., which lends itself to an opportunity for satellite to provide an intermediate role fulfilling broadband demand.”
The report released on Jan. 16 paints a bright picture for the satellite industry. The major barrier constraining factor is the cost of bandwidth on a per-bit basis. Massey believes satellite capacity has exceeded supply and has not followed the same trends of the terrestrial world where there have been large reductions in the price of bandwidth.
Massey believes that the costs of satellite bandwidth are cost prohibitive for network operators to launch services. Broadband access demand is exceeding supply but satellite operators are not yet able take advantage of the market opportunity.
As equipment costs come down, and cheaper capacity becomes available satellite players will more and more be able offer an alternative to terrestrial bandwidth. Massey believes the rollout of Ka-band services will have a significant impact. There are expected to be a number of Ka-band satellite system launches around 2005.
“It brings the satellite operators out from the broadcasting model. The broadcasters are the ones that set the market price for transponders. Satellite operators cannot reduce their space-time costs to sell to ISPs because it will cannibalise the revenue from the broadcasters. Something needs to be done to develop a whole new model for satellite space- time. I think Ka-Band has the opportunity to do that.”
Massey says that there will be room for very few players to succeed in Europe. “It is becoming increasingly difficult for a satellite network service providers to compete against terrestrial network operators. The only ones that can do so are the ones that own spacecraft in the sky. I think we are going to find the elimination of the middlemen. In Europe, it is probably going to come down to Eutelsat and SES Global. There is probably little room for anyone else besides those two.”
The challenges for players such as Eutelsat and SES are numerous, especially when it comes to the delivery of direct end-user services to either residences or businesses. Understanding the operational requirements will be key.
“In the U.S., a number of satellite service providers have had problems in implementing broadband services, developing poor reputations for quality customer service. For satellite operators, broadband services is a new business requiring operating much like a telco, and I believe that is going to be the biggest challenge for them,” notes Massey.