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Linking the Stars

How Non-Geo Satcom could disrupt the global telecom industry

The promise of beaming Internet from the outer space, connecting the unconnected with inexpensive non-geo satellite communications has been in the works for a while, but it was only in 2020 that is delivering on its promise, that will transform and disrupt the telecom sector in the coming years.The global telecommunications industryis valued at around $2 trillion, while satellite-based internet is less than $20 billion today, though growing at a fast pace of 10-15% CAGR. So, the satellite sector still needs to catch up fora lot, although it has grown from critical communications in early 2000s, from serving unserved areas in 2010s to now defining the mobility and government/military segments, and bringing efficiencies to compete in the underserved areas of the world.

The latest announcement in this space is an approval granted to SpaceX’s Starlink broadband project to beam signals to the UK. Space Exploration Technologies Corp (called “SpaceX’ in short) is a space transportation manufacturing and services company headquartered in Hawthorne, California. It was founded in 2002 by Elon Musk with the goal of reducing space transportation costs to enable the colonization of Mars.

Figure 1: Main architectural aspects of SpaceX Starlink.
Image courtesy: Northern Sky Research

Starlink has been launching internet-beaming satellites into space for over a year now, with the constellation currently numbering around 1,000 devices. The concept is to use these satellites to help deliver internet to underserved regions, particularly rural areas with difficult geography that traditional operators are loath to cover. SpaceX opening Starlink’s public beta-testing with 900+ satellites in orbit at $499 equipment price and $99 per month service cost. The offered network to the beta-testers could achieve ~100 Mbps speed and ~20 millisecond latency.

Figure 2:Global fixed VSAT market.
Image courtesy: Northern Sky Research

A series of developments in the past few months have shown the seriousness of the players in the segment. SpaceX has secured $885.5 million broadband subsidy under the U.S. Rural Digital Development Fund (RDOF). Under this funding, SpaceX will provide broadband connectivity, with ~100/20 Mbps bandwidth, to 643,000 sites/subscribers in 35 states. The Canadian government has signed a CAD$600 million agreement with Telesat for affordable broadband connectivity using LEO (low-earth-orbiting) constellation, to remote and rural areas.

OneWeb has emerged out of bankruptcy with new investments from the UK government and Bharti Global. Additional US$1 billion is invested in the company to offer broadband services using the LEO Constellation of 650 satellites. Amazon disclosed the design of its phased array antenna for the project Kuiper. The key features are maximum speeds up to 400 Mbps and antenna size close to 12-inch in diameter. The company intends to make this antenna affordable to broadband access users with the smaller size and bulk production.

According to the recently published, NSR’s (Northern Sky Research) VSAT and Broadband Satellite Markets – 19th Edition report, the Non-GEO retail revenue (service + equipment) is forecasted to aggregate to $38.6 Billion at 44.3% CAGR during 2019-2029. Major growth acceleration is expected during 2022-2029, with 11x retail revenue growth, primarily driven by the roll-out of consumer broadband services and 5G backhaul demand.

The Backhaul & Trunking and Consumer Broadband segments are forecasted to contribute 88% of the cumulative forecasted revenue. Consumer Broadband markets will witness maximum growth post 2022 with >50% CAGR, driven by the massive addressable market and government subsidies for rural connectivity. Among typical VSAT enterprise users – Retail/Hospitality, Banking and Energy segments – the Energy segment is expected to witness increased number of new installations and migration to Non-GEO services. In addition, given higher ARPUs, the segment size is forecasted to grow to $255+ million retail revenues by 2029. Comparing service and equipment revenues, service revenues with increasing bandwidth demand per site and recurring revenue – 87% of total retail revenues will be from Services. However, equipment pricing will remain key for penetration of non-GEO services, especially in price sensitive regions and applications.

The Non-GEO Satcom market is transitioning from the speculation phase to the affirmation phase given the ongoing industry developments and new contracts. 2021 & 2022 will be key as the segment progresses towards service rollouts in the larger opportunity markets such as consumer broadband. In the near term, the government subsidies will be the major driver for the service penetration as the industry is still 2-3 years away (or maybe more) from achieving an affordable and competitive commercial price point for phased array antenna, which is around $300-$500.

For example, $885.5 million broadband subsidy to SpaceX for connecting 643,000 users – approximately translates to $1,377 per site/user will be a major allowance for the service provider’s planned implementations. And similarly, for Telesat with $600 million (CAD) subsidies for the rural connectivity in Canada. It is worth noting that currently, the key developments are focused on North American region. However, NSR estimates that Non-GEO services in the Fixed VSAT & Broadband markets will gradually penetrate to other developing regions such as LAM, MEA & ASIA, either with new subsidies by governments in these regions or service providers offsetting equipment pricing in the monthly subscription packages.

The rate of service penetration in these regions will continue to remain a function of pace at which the industry achieves a competitive market pricing for Non-GEO equipment and services.

Acknowledgement:https://www.nsr.com

 

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