Broadband Beat: Fuzzy Forecasting: Predicting the Industry’s
by Theresa Foley
Will the market for satellite broadband be worth a few billion dollars later in the decade, or four to 10 times that amount? The analysts at investment banks and consulting companies that study the market have estimates that range from about $9 billion in 2006 up to $40 billion or more around 2008.
The differences cannot be easily explained, but each of the experts seems to be approaching the question from a slightly different angle and including different data in their number crunching. From the banks, ING Barings last year estimated the market for satellite broadband to reach $17.6 billion in 2008; Bank of America projected $15 billion by 2008; and Merrill Lynch forecasted $51 billion by 2009.
Among the consulting specialists who sell their in-depth market forecasts, Analysys predict a $40-$100 billion market by 2015; Pioneer Consulting came up with $37 billion in 2008; and Frost & Sullivan estimates a $9 billion market in 2006. Other consultancies, like Telastra, Comsys and Irwin Communications also study the market but tend to focus on data points other than dollars to measure the market.
Roger Rusch’s Telastra revised its broadband satellite terminal demand estimate downward this fall. Rusch took the numbers down from his earlier assumptions and refined his models to account for the fact that not all Internet users will subscribe to services and not all who subscribe want high-speed data. Telastra predicts that of 210-390 million Internet users by 2010, there would be 70-97 million high-speed users of which satellites could serve six to nine and a half percent. The reduction in the number of broadband satellite customers was from 14.1-37.1 million in the previous estimate to 4.2-9.2 million in the revised estimate, a factor of three to four below the earlier estimate. That would translate into a demand for 113 Gbps to 247 Gbps of capacity, although more demand could be generated by private networks, government services or Internet telephony. Rusch says satellite revenues could be $85 a month per user, translating to $4.3-$9.4 billion a year.
Analysys Ltd.’s $40-$100 billion forecast for satellite broadband by 2015 is not contained in a report but is part of the private consultation Analysys does for clients like Teledesic and Intelsat. Tim Farrar, Analysys principal consultant, says the majority of the market will be Internet access for businesses. Analysis derived its figure by starting with a $2-$2.5 trillion estimate for the total telecommunications market, then assumed that 40 percent or $800 billion to $1 trillion will be broadband. Of that, satellite might capture five to 10 percent of the total, or $40-$100 billion.
Pioneer Consulting LLC, in Cambridge, MA, published two reports on the satellite broadband market in the last year before its chief analyst, Christopher Baugh, left to form his own company. The reports, titled Satellite Mediacasting: A New Model for the Internet, and Next Generation Broadband Satellite Networks, were published in March 2000 and September 1999 respectively. The mediacasting market, consisting of multimedia and Internet services, is valued at more than $14 billion in 2005, up from less than $1 billion in 2000, Pioneer found. North America will be the largest mediacasting market, growing from $120 million in 2000 to more than $5.6 billion in 2005. Asia is next, going from $160 million in 2000 to more than $3.5 billion in 2005.
For broadband, Pioneer found strong growth coming after two-way Ka-band services are introduced. The 30,000 businesses using satellite broadband services in 1999 should grow to seven million in 2008. Residential broadband subscribers will grow from 100,000 in 1999 to more than 39 million in 2008. Satellite broadband revenues will grow from $200 million in 1999 to $37 billion in 2008, with residential services accounting for $22 billion of that.
Frost & Sullivan’s 1999 revenue level for broadband matched Pioneer’s at $200 million. Beyond that Frost predicted $380 million would be earned in 2000, and $9 billion in 2006, with an 83 percent compound annual growth rate for satellite broadband capacity and revenues from 1999 to 2006. Those numbers, however, include only transponder revenues, not end user figures, according to Greg Caressi, Frost’s research manager for satellite communications. Capacity leased in 1999 was 3 Mbps, which will go to 183 Gbps in 2006. Frost believes that satellite broadband is not a consumer product, but is meant for businesses, Caressi says. Strong demand is developing for multicasting, streaming and Internet access, but terrestrial is going to serve in all those areas. “The forecast isn’t as aggressive as other people’s. It takes time to penetrate new markets,” Caressi explains.
U.K.-based consultancy Comsys says the most significant markets for satellite broadband will be Europe and Asia, driven by demand from small and medium-sized businesses. Jeremy Rose, senior analyst at Comsys, says the old adage that fiber always wins over satellite will hold true, but that satellites will continue to gain an upper hand for customers with certain problems to solve. The revenue picture for the satellite broadband service providers will be strongly affected by the number of customers that can be accommodated on each transponder, Rose says. He believes that operators may be using unrealistically high numbers like 20,000 users per transponder in their economic analysis.
Irwin Communications is preparing a report on satellite broadband for the end of March. Susan Irwin, president of Irwin Communications, said she expects demand for bandwidth to grow faster than wired services can meet, especially with Internet content distribution and media streaming coming on strong. “The opportunity for satellites grows concurrently,” she says.
Theresa Foley is Via Satellite’s Senior Contributing Editor.