The Mobile Satellite Services (MSS) market may be best remembered more for its spectacular failures than any successes, but memories of those failures have not prevented the MSS market from evolving and remaining a viable market going forward, albeit a niche one.

In fact, new independent research from international market research and consulting firm Northern Sky Research suggests that the MSS market will grow particularly in the broadband high-speed data delivery arena. The company predicts in its report, “Next-Generation Mobile Satellite Services,” that based on the consumption of high-speed data, and not narrowband voice, there will be a sustainable and viable business proposition over time, growing from an estimated $63.9 million in revenues for 2003 to an expected $1.3 billion by 2010 and yielding cumulative revenues of $3.7 billion throughout an eight-year period.

“We are looking at next generation opportunities,” Northern Sky Research CEO Christopher Baugh told Satellite News. “We did not take a look at telephony, mobile telephony and low data rate solutions. We are looking at mostly broadband and IP (Internet protocol).”

And that market, while stagnant for a number of years, is only now starting to take off. “We certainly feel now through technological advances and through some inroads made primarily through military and government markets that the [MSS] market is poised for growth,” Baugh said.

The revenue numbers are back loaded, according to Baugh, “because they are predicated on price elasticity and based on current prices and commercial space,” demand is limited. Baugh noted that solutions do exist but right now they come with a high price tag and the production volume is so low that these solutions aren’t gaining any market penetration.

“It’s just a case of getting prices down, getting solutions up getting BGAN [Inmarsat’s broadband global area network] successfully launched and transitioning from the regional BGAN launch that [Inmarsat has] now with the soft launch they have done over existing assets.” He added that growth will come in the industry as other companies see Inmarsat “successfully selling a broadband mobile service” and look to capture a piece of that market for themselves.

Government/Military Driving Growth

According to the report, “Demand in terms of equipment installation is expected to be dominated by the government/military sector followed by the commercial shipping industry. These two sectors are expected to comprise the majority of the market accounting for a combined 69 percent of all in-service units by 2010.”

“We feel very strongly about the government/military side, especially in the Middle East, which is now leading in terms of regional growth,” Baugh said. “If you look at the satellite market, there aren’t many markets where the Middle East and North Africa lead in terms of all global markets.”

Baugh added the key purchases being made by government/military procurers are for advanced mobile solutions for high data rate broadband connectivity to enable back-and-forth video conferencing and back-and-forth secure communications. The government/military “price elasticity of demand is very high so they can actually procure quite a bit because price really isn’t an issue for them.”

And with the government/military buying more equipment, the commercial sector will ultimately benefit.

“The positive that we see coming from [growing government/military procurement is the] spillover eventually going into the commercial space through production efficiencies and just efficiencies in volume,” Baugh said. “We see that advancement in the technology becoming applicable in the commercial space at relatively decent price points.”

Those lower price points will come from a variety of sources, Baugh added. In particular, the launch of the Inmarsat’s L-band BGAN, as well as greater use of C- and Ku-band capacity will help push prices down. “We see some interesting things happening both with C- and Ku-band where there will be decent growth, [as well as in the] L-band, which is primarily where the market is headed.

A Resellers Market

With the growth of this market, Northern Sky Research has a few expectations. For one, growth in this market won’t result in a wave of new satellite constellations, outside of the BGAN satellites being launched by Inmarsat, to take advantage of this niche opportunity. Also, resellers in this space, particularly those resellers of Inmarsat should benefit as this niche market grows.

But the launch of the BGAN satellites could be a boon for those already selling Inmarsat services, Baugh noted.

“Inmarsat is well poised [along with] some others to succeed,” Baugh said. “Some of the players like Xantic, Stratos and Telenor that sell mobile services for Inmarsat are certainly poised to succeed.” He noted that these companies have built a solid business for many years reselling the narrowband and telephony services of the legacy Inmarsat system and could all succeed in selling broadband or selling next-generation IP-enabled solutions.

Thomas Surface, director of media and public relations at Telenor, told Satellite News that the company expects the transition to offering BGAN services from its current offering of legacy Inmarsat services to be a smooth one. In fact, the company has been named one of Inmarsat’s launch distribution partners, allowing it to offer services immediately when the BGAN network comes online.

The market for the C- and Ku-band side of the business “is not a huge market,” Baugh added. “This is not a market where an operator would basically develop a separate unit like they have done with government and military. [Companies] would not establish a mobile unit to sell [mobile services].” Rather, Baugh said that there will be “a hodge-podge of satellite operators” offering services through their resellers selling existing C- and Ku-band capacity where available. But “it’s not a massive market where you would devote an entire satellite anytime soon.”

Flying The Friendly Skies

One area of growth identified by Northern Sky Research outside of the military/government sector is the airline industry.

According to the report, “Next to the government/military sector, the commercial airline sector is expected to be a close second, accounting for 29 percent of overall revenues within the forecast period.”

“Based on the transponder lease contracts that are out right now for Connexion by Boeing and Tenzing and others, it’s a significant market,” Baugh said. “The pace is quickening with Tenzing modifying its business case [to emphasize] broadband.”

Baugh said the airline market “certainly is viable” over the long term. “There is still some economic modeling issues that aren’t solved in terms of revenue streams.” Some of those issues are related to the high up-front cost of retrofitting and getting everything up and running, leaving airlines to not count on a near-term return on investment. But that has not stopped this market from moving forward.

“From the [satellite] operator perspective, if you look at some of the orders that have been placed, it is multiple transponder lease contracts,” Baugh noted. “Given today’s fairly stagnant bus-iness outside of North America and Europe, this is significant.”

The only thing holding this segment back is getting those first few success stories under its belt. “We need to get over that first hump of the first few deployments to make this commercially viable.”

The report further notes that the cruise ship industry will account for 11 percent of the overall wholesale revenues within the forecast period and is “quite lucrative since cruise ship companies allocate dedicated bandwidth per ship.” The report adds that the cruise ship sector leases a relatively high number of C-band transponders to serve its customers.

For more information or to order this report, please visit Northern Sky Research on the Web at http://www.northernskyresearch.com.

(Christopher Baugh, Northern Sky Research, 407/352-5295; Thomas Surface, Telenor, 301/838-7805 )