FSS and MSS: Blurring the Lines
At SATELLITE 2012, one of the most frequently discussed subtexts to more familiar topics was the blurring of the lines between fixed and mobile satellite service (FSS and MSS). In fact, Via Satellite’s Satellite Executive of the Year, Matt Desch, CEO of MSS operator Iridium Communications, specifically identified this trend as one of the key changes in the MSS market, citing his competitor, Inmarsat’s billion dollar expenditure to attempt to compete head-to-head in the FSS sector (Via Satellite, March 1, 2012). The trend is of recent origin. Traditionally, the FSS and MSS sectors operated in different markets and provided fundamentally different services to different customers. FSS operators relied on higher frequency C-, Ku-, and most recently, Ka-band frequencies connecting to directional antennas for the transmission of video broadcast to terrestrial cable and broadcast television networks and telecommunications. MSS operators used lower frequency L- and S-band frequencies connecting to non-directional earth station antennas for maritime and other transport-related services and mobile telecommunications. The MSS non-directional antennas made sharing adjacent bandwidth among in-orbit satellite constellations difficult. FSS originated as point-to-point service, and evolved into point-to-multipoint broadcasting.
Several forces are breaking down the Rubicon. The first is the growing demand for broadband connectivity, particularly to mobile, smaller, less expensive earth stations. The second is the evolution of very small aperture terminals (VSATs) that meet those mobility, size and expense criteria and which increasingly facilitate the transmission of both FSS and MSS uplinks/downlinks to mobile earth stations. The use of “blanket license” schemes to authorize large numbers of VSATs also facilitates the extension of service. Finally, while each sector weathered the “great recession” relatively well, as the global economy emerges, each is seeking greener pastures. The FSS sector provides steady growth, but is a mature and saturated market dominated by a few highly consolidated global players and a number of regional ones. The MSS worldwide market is smaller than that of FSS, but has been associated with new services, high growth business plans, and, about 15 years ago, a series of bankruptcies based upon ambitious business plans that were not executed. There is some prospect of a repeat of that cycle: several operators face an existential crisis as the ancillary terrestrial component (ATC) projects continue to struggle. In those circumstances, neither sector can ignore the potential coming demand for mobile broadband connectivity if economics and technology indicate that their in-orbit fleets can serve that demand. As usual in the satellite sector, the question being asked is “can we build it?” not “will they come?”
Some of the battleground is already clear. Inmarsat intends to introduce its Global Xpress next-generation network by the end of 2013, offering in-flight airplane broadband connectivity at up to 50 Mb per second, more than 100 times faster than existing airline broadband service, a space in which FSS operators Intelsat and Telesat plan to compete. Each is betting on the appetite for business travelers for broadband service in flight, currently a very small and unproven market, but potentially an explosive one of 5,000 to 20,000 aircraft. Inmarsat’s airline launch customers include Emirates Airlines, Etihad Airways and Qantas Airways, airlines specializing in long-haul flights for business travelers between capital markets centers. However, the richest lode to mine will be in shorter haul flights in North America and Europe. The advantages to in-flight broadband connectivity seem obvious. As yet undetermined is how they will fare compared to the current and (by some) cherished “wheels up” haven from connectedness that airline flights provide.
In another example of the FSS and MSS lines blurring, Hughes Network Systems is preparing to offer broadband connectivity to fixed maritime VSAT platforms and oil and gas drilling off-shore platforms. The demands of traditional and alternative energy exploitation are naturals for satellite service because of the lack of terrestrial service in many areas of energy exploration.
The development of areas of overlap between FSS and MSS promises to unlock new areas of competition and perhaps disrupt market positions that have grown fairly comfortable in the 10 years since the wave of FSS consolidation. It remains to be seen whether the markets will provide sustainable demand for these services, but the attempt to meet that demand will re-energize the sector.
Owen D. Kurtin is a practicing attorney in New York City and a founder and principal of private investment firm The Vinland Group LLC. He may be reached at firstname.lastname@example.org.