Latin America: Top Region for New Satellite Capacity

Mexico City, Mexico. Photo: Kasper Christensen (Flickr)

[Via Satellite 05-15-2015] Latin America is and will continue to be the top region for the addition of new satellite capacity until 2017, according to the latest research from Euroconsult. While the firm pegs the Calculated Annual Growth Rate (CAGR) for satellite capacity usage globally at roughly 5 percent over the past five years, Latin America stood out. This region, along with South East Asia and the Middle East and Africa, achieved annual growth rates surpassing 8 percent. Looking to the future, Euroconsult forecasts total leased capacity in Latin America will grow at a 10 percent CAGR over the next decade, with a massive increase in capacity coming online.

“Latin America will be the number one region in terms of capacity additions over 2014 to 2017. Total regular supply will increase with around 400 TPEs [36MHz Transponder Equivalents] over the period, which corresponds to 25 percent of total net additions in global supply,” Nathan de Ruiter, senior consultant at Euroconsult and editor of the “Satellite Communications & Broadcasting in Latin America” report, told Via Satellite.

This surge in capacity is even more evident with the addition of multiple High Throughput Satellites (HTS). While Hispasat led the charge with the Amazonas 3 payload in 2013, Euroconsult projects Latin America will soon become the second-largest region in terms of HTS capacity supply, trailing only North America. De Ruiter noted that global players such as Eutelsat, Intelsat, and Inmarsat; regional players Star One and Hispasat; and new entrants such as Visiona, Yahsat, and O3b Networks are all planning HTS payloads for the region in coming years.

“It is still early to decipher the impact of large Ka-band HTS supply additions in the region as a significant part is already pre-committed,” he explained. “Clearly, the market will be highly contested, with no fewer than eight operators respectively providing at least 7 percent (or ~ 20 Gbps) of the region’s overall Ka-band HTS supply by 2018. The vast majority of Ka-band HTS capacity will target just two national markets — Brazil and Mexico and only Inmarsat provides full coverage of the region.”

Brazil and Mexico are Latin America’s two top markets for satellite capacity, according to Euroconsult. Both contain the majority of the regional population, with Brazil accounting for 202 million as of 2014 and Mexico standing at 123.8 million, according to the United Nations Population Fund. Euroconsult projects these two countries will account for greater than half of the total capacity demand by 2024. The major growth drivers have some nuances between them, but are largely similar, de Ruiter said.

“In the video segment, growth in capacity demand will be mainly driven by satellite pay-TV channel additions and the increasing availability of HD content (38 percent of channels in HD by 2024 compared to 15 percent in 2014). Low-cost services have driven the satellite pay-TV market in Mexico, while growing [Direct-to-Home] DTH competition has largely favored subscription growth in Brazil,” he said, adding that low-cost HTS capacity should have a particularly salient impact in the telecom sector. “Cellular backhaul and trunking currently has a stronger foothold in Brazil, while Mexico is the leader in rural connectivity projects (e.g. Mexico Conectado).”

With this influx of new capacity, oversupply is also a very serious concern. Euroconsult expects regular capacity fill rates to drop from 80 percent in 2014 to 70 percent in 2017, with Ku-band experiencing a drop in utilization levels from 86 percent in 2010 to 64 percent by 2017.

“We expect that it will take some years before Ku-band fill rates return to 80 percent, especially in Brazil and the Andean region. One important trend is the increasing use and growing impact of large-capacity commitments to support customer projects. Capacity leases are increasingly linked to field trials and/or to the rollout of new initiatives (universal access projects, DTH platforms, consumer broadband services). For example, DirecTV Latin America will lease full payloads aboard Intelsat 30 and Intelsat 31, while Claro HDTV will use new capacity on Star One C 4. For both segments, it will likely take several years until the capacity commitments will be fully utilized,” de Ruiter said.

New services should absorb satellite capacity over time, such as 4K broadcasting and the potentially economically feasible backhauling of 3G and 4G data over HTS satellites. Euroconsult projects that the first commercial 4K channels will kick off during the 2016 summer Olympics in Brazil, with the number of channels climbing to 120 by 2024. HTS, de Ruiter said, should have a greater impact by facilitating new service applications rather than just capturing traffic flowing over traditional satellites.