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March 7th, 2016

An Upwards Revised Revision To Leased HTS Capacity 2015 Estimates Published By Euroconsult


[Satnews] According to Euroconsult's latest report, High Throughput Satellites: Vertical Market Analysis & Forecasts, High Throughput Satellites (HTS) have continued their proliferation since late 2014 as over 20 new systems were ordered, including an eight satellite expansion order by O3b.

In terms of HTS supply, net capacity additions in 2015 and 2016 remain relatively comparable to 2014, largely due to widespread slippage of launch schedules. Despite the lag in anticipated supply growth, demand for HTS capacity has accelerated more sharply than anticipated, leading to a significant upwards revision to leased HTS capacity estimates in 2015, largely fueled by a deepening market shift towards bulk capacity leasing and rapidly increasing data usage per end-user.

Total investments from the 25 operators who have combined to order nearly 100 HTS systems to date are estimated to be over $17 billion. Another 129 HTS systems are expected to  be launched over the next decade; of these new systems, about 78 have yet to  be officially contracted and are still open to the market. "Given this level of investment activity, global HTS capacity supply is set to more than quadruple from 680 Gbps in 2015 to nearly 3 Tbps by 2020," said Nathan de Ruiter, Principal Advisor at Euroconsult and editor of the report.

The vast majority of today's HTS capacity supply is in Ka-band, a dynamic expected to persist despite the recently observed acceleration of Ku-band HTS system orders from operators such as SES, Telesat and Intelsat. The lower capacity costs and higher data rates afforded by HTS systems are expected to foster growth in HTS demand across all major market verticals and geographic regions. As a result, total leased HTS capacity is projected to expand at a CAGR of 22% from 2015 to 2024. Ka-band HTS is projected to remain the dominant frequency ban in all vertical markets in terms of leased HTS capacity. Nonetheless, leased Ku-band HTS capacity is poised to take-off from 2016, largely driven by professional user markets which often have high requirements on reliability and availability.

In terms of market value, HTS capacity lease revenues are forecast to jump from $1.1 billion in 2015 to ~$4.9 billion by 2024, generating over $26 billion in aggregate revenues over the period. These revenue estimates represent a downward revision compared to the previous edition of the report, reflecting the confluence of factors combining to drive capacity prices lower including growing supply, bulk contracts and an increasingly commodotized market for telecom network services. "The impact of long term bulk leases and aggressive pricing strategies of new entrants has caused the average HTS capacity price to drop by more than 50 percent between 2012 and 2015," continued Mr. de Ruiter. "The marked improvement in CAPEX efficiency ($ per Gbps) for OneWeb's (LEO) and ViaSat's (GEO) constellations as compared to current HTS systems is also likely to enable further downward pressure on effective capacity pricing in the longer-term."

The following trends have been found for major market verticals:

  • Consumer broadband services in North America will remain the single largest user of HTS capacity through 2024 although its share of total leased HTS traffic is expected to halve as demand in other vertical markets and geographic regions flourishes rapidly
  • Cellular backhaul & trunking, currently the second largest HTS application thanks in large part to the success of MEO-HTS operator O3b, is projected to grow at a CAGR of 30% over the coming decade, with demand primarily originating from emerging regions
  • Civil government & enterprise networks should grow at a similar pace, driven by government connectivity initiatives
  • Rapid adoption of HTS-enabled broadband solutions in mobility markets (aero and maritime) is expected to drive demand in the segment over the coming decade

 

Given the staggered rollout of supply and new services, regional differences are expected to become more pronounced. North America should remain heavily dominated by two operators (ViaSat, HNS) who control the consumer broadband market, while Latin America will be very competitive, notably in Brazil, with seven new entrants within the next three years. Middle East & Africa will also be fragmented with at least 12 active HTS operators by 2019. Lastly, Asia Pacific is projected to remain the largest region in terms of Ku-band HTS capacity supply and leased Ku-band HTS capacity given the high levels of precipitation across large portions of Asia.