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HTS: Ready for the Next Stage of Evolution

Satellite operators looking to capitalize on data markets are evolving in parallel with customer needs. As new business models emerge, some satellite operators are going down the value chain and ditching the wholesale approach.

What do X-rays, the pacemaker, penicillin and potato chips have in common? How about two things? First, these inventions were all accidental. Second, unintended they may have been, we simply can’t live without any of them — yes, potato chips, too! Whether the need for these items were known beforehand or not, one thing certain is that once in use they changed our lives forever.

Fast-forward to today, our dependence is still firmly intact. Is this not the same as our demand for data? Before we knew what it really meant in this digital era, we didn’t need it. But now, so long as we’re awake, we believe we need it all the time, no matter where, no matter what.

Will this demand for data wane anytime soon? Unlikely. It’s exploding, and according to networking, IT and communications experts, long will this boom live. The Cisco Visual Network Index expects monthly global mobile data traffic to reach 49 exabytes by 2021, compared to 7.2 exabytes at the end of 2016. Rather than calculating this massive amount — an exabyte is a unit of information equal to one quintillion (1018) or, strictly, 260 bytes — it is more practical to consider satellite’s role in providing this data. How does High-Throughput Satellite (HTS) capacity impact this seemingly insatiable demand and data-driven markets? Does this data demand surge justify huge investments in new satellites as the industry looks to tap growth opportunities away from broadcast?

According to Intelsat, the need and demand for satellite is there; however, serving this market requires deftness. “Nearly 4 billion people remain unconnected, and satellite is often the only way to bring connectivity to remote areas where many of these people live. There are also forecasts of 20 billion devices and 50 billion machines that will require broadband connectivity in the future. We believe the differentiated satellite technology we’re bringing to market along with advancements on the ground will enable us to help connect the unconnected populations around the globe, as well as capitalize on the projected $2.8 billion in new revenue coming in the next five years from market segments such as enterprise, Internet of Things, (IoT), cellular backhaul, aeronautical, maritime and government,” says Jean-Philippe Gillet, Intelsat’s vice president and general manager of broadband.

“With consumers requiring always-on connectivity to communicate and stay informed, whether at home, at work, on a ship or aboard a plane, and companies increasingly relying on this connectivity to run their operations efficiently and expand their businesses, the demand is there without a doubt. The challenge is to provide the right combination of bandwidth and services to capture this demand,” says Gillet.

Architecture, Flexibility and the Value Chain

Satellite operators must work on providing higher performing services, with enhanced economic models and simplified access, or they will miss the opportunity to get a larger share of the overall evolving telecommunications landscape, says Gillet. With nearly 4 billion people and countless devices requiring broadband connectivity, satellite operators need to develop new business models to provide the unprecedented scalability and flexibility needed to manage the complex challenges driven by this booming demand for connectivity. Simply delivering bandwidth does not end the challenge for network operators, which will also need network Service Level Agreements (SLAs), service support and the ability to differentiate in a competitive market.

“The satellite industry needs to provide these to stay ahead of customers’ emerging demands and capitalize on new growth opportunities. As enterprises move more of their services to the cloud, they need reliable access to cloud-based applications and wide area networks to connect branch offices to data centers and applications over large geographic distances. By enhancing satellite’s ability to cover vast areas with the bandwidth improvements delivered by HTS platforms, network operators will enable their enterprise customers to quickly spin up additional connectivity on demand, providing the ability for quick expansion,” says Gillet.

While HTS capacity gives satellite a competitive edge needed to enter and serve this booming data market, not all HTS systems are created equal, adds Diederik Kelder, chief strategy officer at LeoSat. In the last couple of years, there has been a flurry of new initiatives in the satellite industry to address the growing demand for data connectivity, notes Kelder, and this is not only in the Geosynchronous Earth Orbit (GEO) arc but also in Middle Earth Orbit (MEO), High Earth Orbit (HEO) and Low Earth Orbit (LEO). Virtually all of these solutions use system architectures which require a tight integration between space segment and ground infrastructure, he says.

“These new architectures require satellite operators to descend down the value chain and, with that, to adopt new business models,” says Kelder, adding that two schools of thought have developed over the last couple of years regarding the business models of the future for satellite operators.

“You either stick to the traditional wholesale model, in which the satellite operator is an infrastructure developer, wholesaling capacity to service integrators, or you go down the value chain towards the end user. In some cases, the need to go down the value chain is driven by system architecture, in other cases, in which you can choose your business model, it very much depends on your investors and how you want to provide the best service for your customer. You can either go down the value chain through acquisition, or enable service delivery through integrators who are best at serving specific verticals,” says Kelder.

From a satellite perspective, the business models around broadband can be expected to dramatically change over the next few years, says Kelder.

“The systems that are built for broadband access through gateways will go down the value chain more and more, and with that, they will adapt their business models,” says Kelder. “This is a big change for a market that used to be a wholesale infrastructure market. Getting that right is the challenge.”

The Manufacturing Perspective

Adapting the business model to suit the end user of course means that understanding what the end user wants is tantamount. As the trend in differentiation in capacity driven by increasing competition continues, capacity is becoming increasingly more customized for particular applications and markets. While this suits the needs of the customer and increases efficiency in terms of spectrum use and cost per Mbps, it also means that satellite operators have less flexibility to use capacity for other applications during the lifetime of the satellite. The challenge in getting this differentiation right is to accurately understand the target market, its required solutions and to make sure your infrastructure matches.

So what do customers want? According to Mark Spiwak, president of Boeing Satellite Systems International, end users are demanding more — more data, more streaming content and more information.

“As part of this, some of the requirements we are seeing are requests for greater flexibility and adaptability in satellite design — and that includes HTS capabilities,” says Spiwak. “Satellite operators are evolving their needs based on the evolving needs of their customers. These requirements for greater flexibility and low-cost high throughput capabilities are trends we see staying if not increasing.”

Boeing is taking steps from a technology and manufacturing perspective to future-proof its satellites, says Spiwak.

“In other words, regardless of what the business models of the future may look like, Boeing’s digital payload technology has the flexibility to adapt to change and continue to meet the needs of our customers,” says Spiwak. “Boeing continues to evolve our digital payload technology as a solution to any business model – including ones that may change over time. We are currently developing our seventh-generation digital payload design, which offers twice the capacity of previous designs.”

One area that the digital HTS payload is impacting, notes Spiwak, is satellite cellular backhaul, a market that would have been difficult to handle without a digital processor, he says.

Backhaul and New Markets

Backhaul presents growth opportunities, says Lluc Palerm-Serra, senior analyst at Northern Sky Research (NSR), adding that this is especially likely in the transition to broadband where 3G and 4G coverage become ubiquitous. Even in developed economies, 4G coverage is still deficient, he says, and while customers are rapidly moving to broadband, coverage is a key barrier. Both 2G and 3G need to be phased out to reallocate spectrum to 5G, but this won't be possible before 4G is ever-present.

“Backhaul is one of the verticals showing the highest levels of elasticity. Lower pricing is generating massive levels of demand for broadband expansion. Demand is growing everywhere, even in developed countries,” says Palerm-Serra, noting consumer broadband as another growth market for satellite.

“After several years of stagnation due to lack of available capacity, growth in North America should reactivate. Europe has been lagging behind, especially due to the underdeveloped retail channels. However, consolidation is creating stronger players in the United Kingdom and Spain and, together with the new joint venture between ViaSat and Eutelsat, should accelerate market uptake. Emerging economies have tremendous opportunities if challenges like affordability, awareness or digital skills are solved,” says Palerm-Serra.

In addition to backhaul and consumer broadband, fresh business models have opened up new markets including mobility and are expanding into new geographical areas, while traditional enterprise Very Small Aperture Terminal (VSAT) markets are more mature and operators are trying to attract new customers, says Palerm-Serra.

“Each vertical requires a different approach. Consumer broadband requires a big effort to stimulate demand. Despite the high purchasing power, Europe has been a slow market because of underdeveloped retail channels. Other geographies present a mix of challenges like awareness, digital skills or purchasing power. Mobility is definitely a growth market for satcom but this does not mean it is a vertical free of challenges. Ground and space segments need to work in perfect conjunction. Operators not only need to think of providing coverage to the busiest routes, but in designing the ground segment to serve the mobility markets,” concludes Palerm-Serra.

[pull quote] “You either stick to the traditional wholesale model, in which the satellite operator is an infrastructure developer, wholesaling capacity to service integrators, or you go down the value chain towards the end user” Diederik Kelder, LeoSat

[pull quote] “the differentiated satellite technology we’re bringing to market along with advancements on the ground will enable us to help connect the unconnected” Jean-Philippe Gillet, Intelsat

What’s in Store for Satellite?

As the data compulsion continues to take the world by storm, the satellite industry is increasingly looking at data-driven strategies in a bid to find new business models and propel fresh growth. Broadcast will likely remain a staple; however, new and powerful satellites will be turned towards the broadband-focused markets that have emerged. According to the Cisco Visual Network Index, monthly global mobile data traffic is expected to reach 49 exabytes by 2021, compared to 7.2 exabytes at the end of 2016, meaning that this surge in data demand is not expected to slow anytime soon. But just how big a slice of this data pie can satellite get?

“Market research forecasts a double-digit annual growth for the next seven to 10 years. This roughly leads to a $10 billion capacity market in 2025. With the total Fixed Satellite Services (FSS) revenue in 2016 being $10.6 billion, it is interesting to see that by 2025 the satellite data market is expected to surpass the total 2016 FSS market,” says Diederik Kelder, chief strategy officer at LeoSat.

Next question: what is in this data pie? Is it just access to broadband? For LeoSat, the data market is more than connecting consumer and businesses to the terrestrial cloud — the shift into high volume, global applications which include an increasing number of cloud-based applications is a trend. The company sees an increased need for secure corporate networks which can be used by governments and businesses.

Adding to this, Intelsat’s vice president and general manager of broadband Jean-Philippe Gillet points to mobility users in addition to growth in IoT.

“Maritime increasingly relies on broadband connectivity, while airline and cruise ship passengers expect the same connectivity on board that they have at home. Access to connectivity anytime, anywhere gives airlines and cruise ships trying to attract new customers a competitive advantage, while ship operators have identified it as an employee retention factor. New IoT applications, powered by connectivity, will provide operators and airlines a wealth of new tools, such as enabling predictive maintenance and fuel savings,” says Gillet.

The key ingredient is flexibility, says Mark Spiwak, president of Boeing Satellite Systems International. Outside of connected transportation, ranging from aviation and maritime to the car, satellite can make an impact on broadband-type markets through the use of digital or flexible technology that can adapt as business models change. This helps mitigate the risk involved in investing in new HTS GEO satellites.

“Growing markets enabled by the affordability provided by flexible digital satellites include ad hoc networks for very affordable short-term leases for pop-up cellular networks, think a concert or summer campground, more affordable and secure short-term leases for broadcast networks at sporting events, for example, and markets such as secure e-banking,” says Spiwak. VS