Supernet Exec: Cellular Backhaul Market Under “Immense Pressure”

Ali Akhtar, Supernet’s senior manager for satcom products. Photo: Supernet.

[Via Satellite 10-05-2016] Intense competition is crippling the cellular backhaul market in Pakistan as both Mobile Network Operators (MNOs) and an abundance of satellite operators vie for business, according to Supernet’s Senior Manager for Satcom Products, Ali Akhtar. As one of the country’s biggest satellite network service providers and system integrators, Supernet has the largest market share for 2G backhaul in the country. While Akhtar said the good outweighs the bad for the market when you factor in the defense and enterprise sectors, for the cellular backhaul market, which is dominated by C-band, it is not a great story.

“The competition amongst the formerly five, now four existing MNOs has ended up with such low Average Revenues Per User (ARPUs) that they’ve started giving us terminations notices for satellite links, saying that the higher costs for satellite networks compared to terrestrial networks has made it impossible for them to run sites at a loss.” Akhtar told Via Satellite. “On top of that, the MNOs have considerably fallen behind in their payments. When you add the satellite bandwidth supply glut to the mix, they are also putting immense pressure on us to reduce prices.”

Akhtar said there is a tremendous glut of extra satellite capacity in Pakistan that is shaping the market profoundly. Along with an abundance of players, he pointed to the onset of High Throughput Satellites (HTS) as the catalyst for a price war between new spot beam capacity and traditional Fixed Satellite Service (FSS) capacity. Specifically, he said FSS operators are striving to compete with HTS by lowering their prices to match HTS on a Mbps level.

“Everyone and their grandmother with capacity over Pakistan will drop prices to arrest the spread of HTS,” he said, adding that, though this makes for challenging conditions, it is helping satellite service providers like Supernet contend against terrestrial alternatives. “Instead of singing the praises of HTS, which already has been done to great extent, I’ll simply say that it’s bringing down our cost per Mbps at a time when the terrestrial infrastructure is expanding. This is helping us to stay competitive.”

Akhtar said price is the biggest consideration for Supernet customers today. For cellular backhaul, he said the market is under “immense pressure,” resulting in lower revenues, but that as mobile networks introduce more advanced services, cellular backhaul could rebound.

“So far the cellular backhaul over satellite in Pakistan has just been for 2G. Couple that with 3G and LTE backhaul, which has yet to take off, I expect the market to make some semblance of a recovery in the coming couple of years,” he said.

Supernet has been one of the frontrunners to use HTS capacity in the Middle East. A few years ago the company brought Yahsat’s YahClick broadband service to Pakistan, marketing the first Ka-band satellite service in the country. The company also pre-booked Intelsat’s C-band spot beam over Pakistan on the EpicNG satellite IS-33e, and this year entered into an agreement with O3b for their Ka-band capacity. Akhtar said both the EpicNG C-band capacity and O3b’s Ka-band capacity are to address the cellular backhaul market, particularly 3G and LTE backhaul. O3b capacity will also go to certain geographical areas for enterprise trunking services. Along with HTS, Supernet also uses FSS capacity from Intelsat, SES, Paksat, AsiaSat, ABS and China Satcom.

Akhtar said the enterprise market — energy, banking, construction, remote education, telemedicine, etc. — has seen an increase in demand for satellite services. The number of active links for Supernet’s Ku-band service increased from about 800 last year to nearly 1,050 this year, and Ka-band links grew from around 275 last year to 375 this year, he said. Supernet is also having an increase in demand from government and defense customers, something Akhtar said he expects will have sustained demand over the next few years.

Beyond enterprise, government and cellular backhaul, Supernet is also trying to create a market for mobility applications.

“Satellite mobility services practically do not exist in Pakistan,” explained Akhtar. “There has been talk for a number of years, but that is what it has been, just talk, which for Supernet has been quite disappointing. This year saw us coming really close to doing a significant airborne mobility project but last minute budget reallocations got in the way. We are now pushing really hard to materialize it as soon as possible.”

The company is also very interested in expanding to become a regional player by providing services in neighboring countries. Akhtar said the business environment in Pakistan has kept Supernet engaged mostly domestically, but the company has provided services in Afghanistan and participated in bids there.

Supernet has invested in new ground equipment to increase services and make use of HTS capacity. Akhtar said the satellite service provider has made investments on its iDirect hub, is setting up new O3b terminals and is in the process of upgrading a “sizeable number” of customer satellite modems to support higher modulation and coding for IS-33e. Furthermore, Supernet is planning a new back-up geographically redundant hub.

Akhtar expects competition only to increase in Pakistan in the future. All satellite links, whether worth tens of dollars or thousands of dollars, will be a battle, he said. Akhtar added that it would not be surprising to see acquisitions of local companies by organizations outside of Pakistan in the coming years.

“There is limited effort to increase the market size especially with the spread of terrestrial networks pushing satellite networks to the fringes. The satellite operators fight amongst each other, bringing on competing system integrators and service providers to their camps, and the customers end up being the real winners. It’s a mess, which I suppose is a microcosm of the broader mess in the satellite world these days. The popular belief is that the consolidation will continue to take place in the next four to five years, after which a new world order will emerge. I guess we wait and see,” he said.