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HTS in Africa: Where will They Make the Difference?

HTS holds a great deal of promise for Africa, and operators, both new and emerging, are planning to seize the opportunity to provide capacity to a market with seemingly unending demand. But is it really that straightforward?

Africa is seen as the land of opportunity. With the majority of its population still struggling to get connected, and due to its sheer size, the continent is held up as a key region for growth. World Population Review states that Africa is home to 1.2 billion people, with this figure expected to double over the next 25 to 30 years. It is the second largest, second most populous continent on Earth, yet it has the lowest Internet penetration rate at just 28.6 percent, according to Internet World Statistics. The popularity of mobile devices across the region is well documented, and today the majority of Africans access the Internet on a mobile device.

The need for connectivity is higher than ever before, driven forward by a range of applications. Enter the High Throughput Satellite (HTS) operators with spacecraft in Low, Medium and/or Geostationary Earth Orbits (LEO, MEO and GEO). All have the throughput required to deliver much-needed data services to the region and the business models that they believe will succeed. However, there are a lot of them — and they all want to make it big in Africa.

African village landscape.

There are some key questions that must be addressed when talking about HTS in Africa because, on the surface, it looks like it could be the answer to the long-running problem of how to connect the unconnected. But Africa is a huge continent comprised of 54 distinct countries, all at different stages of development and all with different needs and nuances. HTS is not going to be a simple one-size-fits-all solution, and operators entering the market have to be sensitive to this fact.

Satellite companies need to look at where the demand is coming from. Who needs the data-centric services that HTS delivers so well? How will the approach to business models have to change? Is there a place for LEO, MEO and GEO working in harmony? With so many projects and so much capacity promised for the region, is there not a risk of oversupply?

African Demand for HTS: the Origins

The satellite operators that are in the process of delivering, or are seriously looking at an HTS offering, are only too aware of the pent-up demand that currently exists for a variety of applications in the African market. Enterprise is set to account for a good portion of African HTS demand. The access to cost-effective data is going to be significant for businesses in the region; Africa is a continent alive with entrepreneurs. Therefore, access to data connectivity is more important than ever so that existing and start-up businesses — small, medium and large — can participate in the global marketplace.

But it’s not just African enterprise that is set to benefit from HTS connectivity. Let’s go back to the mobile phone phenomenon that is sweeping the continent. Mobile phone ownership has skyrocketed with text messaging, sending pictures and watching videos being the most popular activities. This popularity means that Mobile Network Operators (MNOs) are constantly challenged when trying to extend their reach to remote and rural areas, of which there are a great deal in Africa. There are huge numbers of potential customers that cannot be reached through terrestrial connectivity means. By using HTS for backhaul, MNOs can tap into this pent-up demand and deliver services further afield, cost effectively.

LEO satellite operator LeoSat, active since 2013, burst onto the scene publicly in 2015 promising a high-speed, low-latency and highly-secure data network designed with business users in mind. The company is set to begin operations in 2019, and will target the Business-to-Business (B2B) market, paying specific attention to the enterprise and telecom segments.

“In both verticals demand for connectivity is stepping up in terms of throughput as well as latency”, explains Ronald van der Breggen, CCO of LeoSat. “Enterprises need direct, fast and reliable international connectivity. Telcos need high-throughput backhaul connectivity to upgrade to next generation networks. In both verticals demand is pretty much existent across the continent.”

Artist rendition of LeoSat satellites, courtesy of Thales Alenia Space.

For long-established satellite and Very Small Aperture Terminal (VSAT) network operator Hughes, there is complete agreement that the enterprise market is set to be significant for HTS, more so than the individual household, which is something that is much more evident in developed markets such as the United States. “We believe there is very good demand in Africa, but we also believe that the delivery of these services will be via ‘community VSATs’ that will support services to many individuals rather than just a few,” says Ramesh Ramaswamy, VP of international sales and marketing at Hughes.

Other market sectors are poised to drive HTS demand, including governments that are setting their own Universal Service Obligations (USOs) to provide communications access to local amenities, such as hospitals and schools. Ramaswamy notes that these public buildings will become community hubs, affording connectivity for local communities, out-of-hours.

On top of these key markets, there will be many opportunities for HTS operators in the mobility market (aero, maritime and land). Intelsat’s Brian Jakins, regional vice president of sales for Africa, also recognizes that there are additional opportunities for emerging applications. “We also see significant growth in demand for [Internet of Things] IoT and [Machine-to-Machine] M2M applications across the region”, he says.

Oversupply and Falling Prices

Though satellite operators are extremely optimistic about future demand in Africa, the reality is quite starkly different. Even before new satellites and constellations of satellites launch, Africa is already dealing with a glut of capacity. In the short term at least, this is a very real problem and it is driving down prices and profit. Satellite operators have flooded the region with capacity in a bid to gain market share. Combine this with the increased rollout of fiber, and the situation is set continue for some time to come. C- and Ku-band prices have already tumbled in the region, as the popularity of Ka-band grows to meet data-centric requirements. Though significant growth is projected, the effect of oversupply is being felt. According to NSR’s “Satellite Capacity Pricing Index,” capacity pricing has fallen by 2 to 3 percent every year since 2010. Things are set to worsen as HTS assert themselves in the market, affecting the remainder of the sector.

For satellite operators, finding balance in their capacity is a tricky tightrope walk. How much is too much, and will they miss a trick if they fail to loft enough capacity to meet the projected demand?

But do operators actually have a choice? The satellite business is long-term. Operators have to dust off their crystal balls every time they start to develop a new satellite program because they have to think in terms of the satellite’s lifespan. “The market as a whole sees Africa not as a three, four or five year opportunity but somewhere along the lines of 10 to 15 years. It is going to take us this long to get to the penetration levels that we see in the likes of developed continents” says Jakins.

This is a long-term and developing situation in Africa and Intelsat firmly believes that it is arriving with HTS in the region at the right time. “I think that we will be growing with the region,” Jakins adds.

O3b Network’s VP for Africa, Carole Kamaitha, believes that oversupply is not a concern for the company and that the demand just keeps coming. “Of the customers we have today, there is not one that has not upgraded their capacity” she says. “We see really positive feedback from the market saying ‘give us more and give us affordable pricing, or give us more for the same price,’ and I think that is the message everywhere. Oversupply is still a bit of a far cry and we are not there yet.”

Go-to-market strategies in Africa will be different to those employed in other regions of the world for a variety of reasons. Like Asia, the continent is fragmented in terms of stages of development. Africa is a complex market and different countries have different needs, expectations, levels of disposable income, and very different experiences of connectivity. Many have no experience of connectivity at all. A carefully thought-out business model, fair pricing, and managed service delivery are all key factors for operators.

GEO, MEO and LEO — Together in Harmony?

Operators in all orbits are quite firm in their belief that GEO, MEO and LEO are complementary and that instead of working against each other, they can most definitely work together, combining their sweet points to deliver the very highest quality and most cost effective service for different applications. Some operators, such as Intelsat, are looking at the combination of two orbits to deliver the most comprehensive set of services possible. Though Intelsat’s fleet is in GEO, the company also has a large interest in LEO operator OneWeb that is set to launch its first satellites in 2018. The recent launch of the Intelsat 33e satellite, part of the new EpicNG constellation, will provide HTS capacity for the African region.

Intelsat 33e preparing for launch, courtesy of ESA-CNES-Arianespace.

“Intelsat is sticking to the investment on the GEO side but we are investing in OneWeb which will launch fairly soon,” Jakins explains. “We are looking at a combination of LEO and GEO in terms of the interoperability of these satellites, creating one network.”

Hughes, also involved with OneWeb in the development and manufacture of its ground systems, is an advocate of the synergy between the different systems, which can work alone or together.

Fundamentally, all constellations offer differentiators in terms of capacity, latency, security and footprints. “We feel strongly that, while a lot of capacity will come onboard and prices may be influenced by that somewhat, enough satellite capacity will remain uniquely tailored for certain applications, allowing for a healthy market that will collectively add enough bandwidth to support the overall growth requirement of data communication in Africa” says van der Breggen.

And Regulatory Hurdles?

Regulation and policy has for a long time been a sticking point for satellite operators doing business in Africa, but it seems that there is real motivation and call to action by regulators and policy makers to make the process of gaining HTS licenses faster and more efficient. Governments across Africa are setting up forums and learning from the experience of others to look at how they adopt upcoming technologies and smooth out the regulatory process.

“I’ve seen a lot of progressive steps taken by governments and policy makers with the regulatory framework. There is a lot of effort being put in across regions to ensure that this is being effectively addressed” says O3b’s Kamaitha.

Perfect Storm for HTS in Africa?

So, is it all too much too soon, or is Africa really ready for this influx of capacity? The current situation over the region is far from ideal. Already swamped with capacity, it is going to take time for the region to soak up this excess. That said, operators are excited about the potential that Africa holds for their businesses and they are obviously upbeat and positive about their plans for the nation.

From perspectives of the operators surveyed here, there are no real fears about overcapacity because the pent-up demand across the region is so great. Perhaps this glut that we see today is all part of a cycle that will eventually satisfy Africa’s desire for connectivity.

Crucially, the satellite systems being lofted all have differentiating factors that will allow them to work as complementary systems, rather than opposing ones. It will be down to the users of the capacity to determine which system’s capabilities fit the needs of their individual applications.

There has been talk of the “perfect storm” in terms of Africa’s connectivity needs. Perhaps this is finally it, and perhaps the satellite operators do have the perfect answer to meeting the needs of a continent hungry for capacity. VS