[Satellite News 08-11-11] The FSS satellite market is experiencing a steady 4.4 percent upswing in transponder demand and revenue, but a backdrop of slowing growth rates among customers and a more challenging and competitive business environment could eventually impact satellite business during the next several years, according to an Aug. 11 report from satellite analyst firm Euroconsult.

   The results of the report, “Satellite Communications & Broadcasting Markets Survey, Forecasts to 2020,” showed that FSS transponder demand helped the sector generate $10.8 billion in revenues in 2010. While Euroconsult CEO Pacôme Revillon said that his firm would maintain an overall positive outlook for the future of the satellite sector, he warned that the difficult economic environment could weigh on the market in the near-term.

   “While we have seen slowing growth rates in leased capacity, FSS operators’ revenue growth has continued to outperform the global economy, and operating margins remain high for most operators. Television broadcasting, emerging markets and high throughput satellite (HTS) capacity systems are contributing to this success,” Revillon told Satellite News. “Connectivity needs and the growth of digital TV in emerging regions, combined with the launch of new generation high throughput satellite systems should continue to drive growth. The value of satellite capacity leasing should consequently grow at 7 percent over the next 10 years.”

   Despite strong markets developing in regions such as Latin America and parts of Asia, where capacity demand for TV broadcasting consequently grew by more than 9 percent, the satellite industry’s overall global demand for capacity usage slowed for the second year in a row, growing at a rate of only 4.5 percent last year. Market analysts blame poor market performance in North America and Western Europe, and slower growth in Africa following the arrival of submarine cable connectivity throughout the region.

   According to Euroconsult, the slowdown was somewhat expected as it followed a period of high growth in the sector, and the progressive maturing of certain segments. “There will likely be challenges at both the supply and demand levels in the next three years. On the demand side, certain segments such as military communications could see slowing capacity demand if U.S. forces progressively withdraw from the Middle East and Afghanistan. On the supply side, the launch of large capacities should result in a decreasing average fill rate for the sector, which peaked at 78.5 percent last year. While the situation will probably vary significantly from one region to another, lower fill rates in certain areas could put pressure on capacity prices and operator revenues,” the analyst firm said in the report.

   Revillon noted that regional operators have recently captured a larger portion of new capacity leases compared to major international FSS operators — representing an increasing share of capacity supply. The report highlights that the four leading global operators’ share of net capacity additions decreased from approximately 70 percent in 2005-2007 to 27 percent in 2010. “Although this may partly reflect different phases in operators’ investment cycles, it also underscores many regional operators’ aggressive development strategies and investments in new satellite systems,” said Revillon.

   A major positive for FSS operators is that HTS capacity leasing is widely expected to contribute to the sector’s long-term growth through 2020, as Ka-band offerings ramp up in the next few years, passing from 77 gigabits-per-second (Gbps) in 2010 to more than 450 Gbps in 2015 based on announced satellite procurements. Revillon said he expects the global market value of capacity used for the traditional FSS market to reach approximately $14.8 billion in 2020, or $20.4 billion when including the wholesale market value of capacity used through emerging HTS systems.

   The number of HTS capacity suppliers should increase, with the operator strategies ranging from the addition of small payloads to the launch of dedicated satellites,” said Revillon. “Overall capacity used on HTS systems should be around 950 Gbps in 2020, compared to 22 Gbps in 2010. Consumer broadband access could, for example, require up to 600 Gbps by 2020 to serve over 14 million subscribers worldwide.”