Starlink & Other Non-GEOs: Shifting Paradigm for Fixed VSATs?

09 February 2022 | Research

Article

Non-GEO players are accelerating their go-to-market strategies to penetrate different segments of the Satellite Communication markets, especially in the high volume, highly lucrative fixed VSAT segment. Starlink has already acquired 145,000+ broadband access subscribers globally under the beta plan and now has announced the service roll out plan for enterprise customers. OneWeb is also progressing to deploy its services across applications by partnering with downstream players. Other major players such as Telesat, Kuiper and O3b mPower are moving ahead with their satellite realization and launch plans. How will these developments impact incumbents like Viasat, Hughes, SES and others? What will be the impact on the industry landscape in terms of market capture and other performance indicators? In our latest market study, NSR’s VSAT & Broadband Satellite Markets, 20th Edition report we investigate key industry questions by looking at the bias or balance between upcoming Non-GEO programs versus incumbent GEO players.

Mixed Trends Navigating the Total Opportunity

The Fixed VSAT market covers a wide range of applications such as Retail/Hospitality, Banking, Social Inclusion, Energy, Government/Military, and Consumer Broadband, and hence a mixed bag of trends governs the overall market parameters. COVID-19 has also played an important role in changing the demand dynamics across applications.

The Retail/Hospitality segment witnessed the maximum drop in demand during 2020 and into 2021. However, in late 2021, demand has ramped up for upgrades and new installations in Asia. Moreover, investments into transition to cloud applications is driving demand and revenue growth.

Banking has been relatively stable and growing consistently in the emerging regions and incremental rise in capacity demand at Greenfield sites.

Social Inclusion is ramping up at a rapid pace with government-mandated programs across regions leading to investment trends on the rise with the COVID-19 impact.

Government/Military is saturated in terms of in-service unit growth. However, capacity demand acceleration with the infusion of Non-GEO capacity is expected to lead to higher bandwidth provisioning overall by the end of the forecast period.

Energy is witnessing churn due to competition from terrestrial networks or due to site closures induced by COVID-19. The segment is expected to witness greater utilization of value-added applications such as Edge computing, SD WAN, Cloud etc., targeting to improve operational efficiencies – in turn resisting revenue drop in the long term.

Consumer Broadband, undoubtedly, is the largest and fastest growing segment in the Fixed VSAT market. HTS capacity supply, capacity pricing and equipment pricing are expected to be key to sustainable success.

Considering the varied range of industry variables, NSR estimates Service revenue in the Fixed VSAT market to grow from $6.3 Billion in 2020 to $23.5 Billion by 2030 at a CAGR level of 14.1%. The Consumer Broadband segment will contribute a large chunk or 87% of net growth in revenues. On the equipment side, NSR forecasts a cumulative revenue opportunity of $18.0 Billion during the 2020-2030 timeframe with a 35% contribution from the traditional enterprise segments. Clearly, a massive overall opportunity exists in the Fixed VSAT market. The question is – How are Non-GEO players positioned to capture this demand across applications?

The Non-GEO Play

Non-GEO players are progressing at a mixed pace and strategy. In analyzing Non-GEO trends to forecast the growth quantum in the near, mid and long term, below are some Non-GEO initiatives, trends and recent accomplishments by stakeholders:

Starlink

Close to 1,900 operational satellites by February 2022.

Acquired 145,000 beta Consumer Broadband users across 25 countries for Starlink satellite services. The terminal is priced at $499 and service at $99 per month. Recently shipped 100,000 terminals and plans to achieve 500,000 subscribers in the next 12 months.

Rolled out premium satellite services for Enterprise Customers at $2,500 equipment price and monthly services at $500. Unlike Consumer Broadband terminal, the premium terminal will be able to connect from any location. It also enables enterprises to order any number of terminals and manage locations under a single account. Advertised bandwidth is 150 Mbps to 500 Mbps and latency of 20 ms – 40 ms.

Partnered with Microsoft Azure for cloud platform.

Beginning to penetrate smaller markets like the Philippines via partnership route.

OneWeb

390+ operational satellites. Planned fleet size: 648

The company is progressing in its service deployment plan through downstream partnerships and acquisitions:

- Partners with Rock Networks to serve Canadian Armed Forces and other Government of Canada installations, in Canada’s Arctic Region utilizing Rock Networks hardware and services.
- Acquired TrustComm to further propel into U.S. Government opportunities, looking particularly at northern latitudes.
- Signed Broadband MoU with Northwestel for connectivity in Northern Canada. The plan is to deliver connectivity services to remote mines, businesses, and governments.
- Partnered with Galazy Broadband as distribution partner to Improve Connectivity across Canada and Arctic Region. The partnership will focus on expanding bandwidth for a variety of industries such as Mining, Oil and Gas, Utilities, Construction, and Community Aggregation.
- Signed distribution partner agreement with Alaska Communications to expand the company’s connectivity solutions across Alaska.
- Signed MoU with AT&T to create a framework enabling the operator to sell broadband services to businesses outside the area of its fiber network.
- Partnered with BT for rural broadband plan in UK.
- Partnered with the Kazakhstan government to digitize the country’s economy by providing high-speed internet connectivity.
- Collaborated with Hughes to deliver satellite broadband connections across India.

The other major players such as Telesat, Kuiper and O3b mPower are relatively in early stages; however, NSR expects these players (in addition to Starlink & OneWeb) to likewise play a significant role in mid and long term. The Telesat Lightspeed constellation is delayed due to supply chain constraints, but on the positive side, the company has signed a $600 million agreement with the Canadian Government. NSR expects Kuiper service roll out to be around 2024-2025, and the constellation is expected to massively benefit from inhouse AWS infrastructure. O3b mPower (2nd Gen) is expected to start launching satellites in Q1 2022 – the asset is expected to benefit from SES’s distribution channel and existing customer base. So, the next key question is with these upcoming players – how much demand is expected to be addressed by Non-GEO players?

In Enterprise VSAT applications, NSR forecasts Non-GEOs to address 426 Gbps growing at a CAGR level of 60.5% from a lower base value of 4 Gbps in 2020, whereas the GEO-HTS camp is estimated to service 498 Gbps by 2030. Clearly, close competition between the two orbits will take place, but it is worth noting that GEOs have a relatively long head start while NGEOs are just entering the market. The growth in both GEO-HTS and Non-GEO HTS is attributed to increasing demand at existing sites, migrations from FSS to HTS and price reductions triggering demand elasticity dynamics. Capacity pricing for most applications and regions are likely to reach $100-$200/Mbps/Month. FSS capacity demand is projected to consistently decline resulting in overall reduction of 378 TPEs during the assessment period. Regions such as NAM and EU will witness major decline as sites are upgraded to higher bandwidth HTS connections. On the Consumer Broadband side, one-third of the total capacity demand is projected to be addressed by Non-GEO players, aggregating to 4.6 Tbps by 2030. Bandwidth allocation, regulatory approval, availability, reliability, and pricing are going to be the major growth factors but do come with large challenges as well. NSR expects capacity pricing for the segment to reach close to $50/Mbps/Month. FSS capacity utilization for Consumer Broadband applications is projected to become non-existent post 2026 where demand is absorbed and scaled by the HTS.

Bottom Line

Non-GEOs have arrived. Key players are progressing in their plans but are still not at the stage of deploying commercial services. The key value propositions are greater bandwidth allocation per site, low latency, and lower prices per Mbps. NSR understands that these players have yet-to-prove their business models and need to address challenges such as regulatory approvals, terminal pricing for Consumer Broadband markets, and many other technical and market-based elements. Multiple strategies are being deployed now such as Starlink taking the retail route, whereas OneWeb is building service deployment strategies through partnerships. Considering all these variables, NSR expects the market for Non-GEO to grow organically in the near and mid-terms. Also, the delays in programs due to supply chain challenges will be a key restricting factor in the near term. But in the long term, i.e. close to 2030, as these constellations are scaled with more launches and massive bandwidth is infused in the market impacting pricing thereby aligning with end-user demands – the service penetration will also be scaled proportionately. The top three growth applications for Non-GEOs are Energy, Government/Military and Consumer Broadband.

Overall, NSR does not predict a complete paradigm shift in the cumulative fixed VSAT market but does position Non-GEOs at an astoundingly growing competitive level, acquiring a sizable market share over a relatively short period of time. GEO players with increased investments in HTS platforms will continue to be on a growth track and continue to have a dominant market share in the Fixed VSAT market, but these will be eroded by NGEOs. It should be noted that the overall revenue pie is growing at high levels such that there is a lot of room for both GEOs and NGEOs to operate.

The prognosis of course assumes that at least two NGEO players survive and thrive in the short, mid and long term.

Author

Vivek Prasad

Senior Analyst, expert in space and satellite