An Epic Change: How New Satellites Could Change the Demand for Satellite Based Services
In my last column, I discussed how the cost of providing satellite broadband had fallen to the point where it was thinkable for Dish Network to deploy it broadly to enable greater interactivity for their video offerings. Soon after, I got an unrelated question from a financial industry client of whether there was enough demand for satellite services to fill Intelsat’s new EpicNG high throughput satellites.
As I see it, the premise behind this question was that there was some portion of the communications market that would naturally fail to satellite providers and that once this demand was met, additional capacity would be wasted, or at least, less valuable. It occurred to me that both the new broadband and Intelsat’s EpicNG satellites led to the same point: relative desirability of satellite based communications changes over time as markets and technology also shift.
Some markets, such as video distribution, are so closely aligned with the strengths of satellite communications (point- to-many-point, very high reliability) that it is hard to imagine them abandoning satellite technology. Many others involve complex tradeoffs between various technology’s strengths and weaknesses. As a result, the demand for satellite services is not fixed; it is a balance between the cost of providing service, the quantity of bandwidth available, and the cost of alternative technologies (which might include other satellite based options). All of these factors are subject to change according to the available satellite technology. Even the apparently limited slice of spectrum that goes with a particular orbital slot is expandable many times over by the use of increasingly clever frequency reuse schemes.
High throughput satellites are an example of such change. Thus far, we have only seen the effects of the new generation of satellite technology we call high throughput on the broadband industry. In that corner of the satellite world, the effects have been striking. Not only has satellite broadband finally begun to live up to its initial hype as a genuine competitor to terrestrial offerings, but it has been able to muscle in on other satellite markets as well. Both satellite newsgathering and now broadband to aircraft have seen traditional satellite offerings challenged by Ka-band offerings based on the latest generation of high throughput broadband satellites.
We will now see similar changes in the more conventional satellite markets served by Intelsat and other FSS operators. Although Intelsat’s Epic satellites will only have half the capacity of broadband Ka-band satellites, those high throughput satellites have more than ten times the capacity of their predecessors. If Epic satellites have only five times the capacity of the satellites they replace, they will still allow Intelsat to serve currently untapped markets. Basically, every generation of satellites costs about the same amount but capacity increases at a rapid rate. ViaSat-1 is said to have cost around $400 million to build and launch. WildBlue-1 cost roughly the same. According to ViaSat, WildBlue-1 has a capacity of 10 Gbps while ViaSat-1 is capable of 140 Gbps. Both are Loral FS-1300 satellites and the difference in capacity reflects improvements in the state of the art in the period between their construction.
The whole direction of the question that started this column was wrong. It is the cycle of getting more and more for the same price that allows the satellite industry to compete with terrestrial communications developments. In some cases, satellite technology loses (transcontinental calls are no long made via satellite) but in others, the satellite market share expands (broadband, DTH video).
Overall demand for communications is constantly growing. As satellite capacity increases it grows cheaper, as per bit cost declines, new markets open. Even if the satellite industry’s share of total bits of communications declines as a percentage of the totals, it increases as an absolute number. Barring a truly revolutionary terrestrial communications technology, improvements in satellite capacity will increase and expand, not glut, the market for satcom services. What is less clear is which satellite applications will thrive. Will Dish Network move to a video on demand service over a satellite broadband network, replacing broadcast satellites with broadband satellites? Maybe not, but if it does happen it will be the result of the same forces that made satellite video broadcasting successful in the first place.
Max Engel is an experienced satellite industry and telecom industry analyst and founder of The North Star Consultancy. He can be reached at [email protected].