Satcom and Telco: The Balance of Cooperation Versus Competition

Until quite recently, satellite communication services largely played a complementary, if somewhat of a niche role, to terrestrial telcos in telecommunications. Chiefly, satcom operators could potentially provide coverage for communities in rural areas and areas that lacked telco infrastructure. Deploying traditional backhaul network infrastructure in these rural areas is a costly endeavor for operators. Rural end users often have low monthly average revenue per user and the high CapEx/OpEx considerations associated with rural network build outs, which can make ensuring a return on investment within a reasonable time of about five years difficult or even impossible. As a result, such challenges were often resolved by tapping into partnerships with satcom operators for cost-effective backhaul as support.

This dynamic, however, could potentially change, as expectations for broadband Internet and voice communications in developed and developing rural, and potentially suburban areas, rise. This could help drive the adoption of satellite connectivity solutions in several markets.

According to the ITU’s Measuring Digital Development: Facts and Figures 2021 report, international bandwidth usage accelerated in 2021 and grew by an estimated 30 percent to 932 terabits per second. Alongside the increase in bandwidth demand, innovations are happening in the satcom industry with ultra-high throughput satellite (UHTS) and Earth stations in motion (ESIM) solutions. Furthermore, Low-Earth Orbit (LEO) satellites are showing a dramatic increase in popularity for non-terrestrial network (NTN) deployments and are considered by the World Economic Forum as one of the key technologies in bridging the digital divide. The role of the satcom industry is expected to help expand wider broadband connectivity adoption in the decade to come.

The Evolving Role of Satcom

To date, Geostationary Orbit (GEO) systems have served an invaluable role in offering ESIM connectivity and communications to the aeronautical, maritime, and land-based vehicular sectors. Alongside ESIM services, other complementary services include TV broadcasting, remote tracking, and critical response access.

Satcom has been evolving alongside and supporting terrestrial communication networks by providing high-capacity backhaul. In many of these industries, worksites are often remote and difficult to reach with terrestrial broadband and are best positioned for the unique strengths of ubiquitous and reliable coverage from satellite services. With an increase of high throughput satellite (HTS) architectures replacing legacy satellite communications, and satcom operators demonstrating what they are capable of, we have an upside forecast of 890,000 backhaul links by 2027, demonstrating a CAGR of 21.5 percent.

Satcom services also have a golden market opportunity. Despite the increasing demand for better broadband connectivity, only a little more than half of the world’s premises were connected to fixed broadband, wireless, or satellite broadband service in mid-2021. In this respect, there is a gap in the broadband communications market with unserved and underserved premises and communities.

ABI Research estimates that by 2026, 580 million people will remain uncovered by cellular, 140 million premises will remain uncovered by fixed wireless access (FWA), and 966 million premises will remain uncovered by fiber optics. This market gap, alongside the growing small office and home office and customer premises market, is very much a target for incumbent satcom operators like Eutelsat, Hughes Network Services, and Viasat, among other GEO satellite operators, but also LEO-based providers, such as Starlink and OneWeb.

Given the growth in the world’s population and building construction, developed and developing, ABI Research estimates that the serviceable addressable market for satcom services — defined as a household or small office that has the income afford a satcom service and does not subscribe to fiber, fixed wireless, or DSL — to grow to 330 million premises, equivalent to 1.3 billion household members by 2026. In addition to population growth and building construction in rural areas and remote small towns, satcom adoption will also be stimulated by increasing data demand, operator and regulator focus on extending network reach, and lower cost of satellite internet.

LEO satcom operators have been garnering publicity and are building momentum, but they still have a lot to prove. Companies like Starlink have already started to carve out their share of the market, with around 3,000 Starlink LEO satellites in orbit and more than 250,000 service users. With ITU filings showing the company is targeting more than 42,000 satellites. Starlink reported median download speeds of 105 megabits per second in 2021. While GEO satcom operators like Hughes Network Systems and Viasat provided data throughput in the range of 20 to 25 megabits per second. Many of the GEO satellite providers are responding to the presence of Starlink by launching higher speed and capacity satellites.

It is not a slam dunk for Starlink, however, service costs are in the range of $110 to $200 per month and network speeds are nowhere near the speed and pricing of what’s on offer in the terrestrial broadband market. Fiber and fixed wireless access, for example, offer median download speeds ranging from 140 Mbps to 184 Mbps. In this respect, the answer to any speculation about Starlink breaking into the mainstream broadband market should be “no,” at least for now.

Satcom operators are set to play a more prominent role in the world’s broadband connectivity narrative. They can bridge the digital divide and prime economic growth for communities in developed and emerging markets. This network connectivity gives these communities the means to access information and services, such as health services, education, banking, finance, etc.

According to The World Bank and ABI Research’s whitepaper, Emerging Markets Broadband Objectives: Spectrum Requirements, a 10 percent increase in broadband services access can boost a country’s economy and GDP by 1.38 percent in emerging markets and 1.21 percent in developed markets. While unlikely to ever compete with fiber and fixed wireless access directly, satcom will remain the only practical means for providing digital connectivity in remote and rural areas, as well as to enterprise verticals due to the infrastructural challenges and financial impracticality of deploying fixed-line and even wireless backhaul.

Furthermore, Satcom is integrated into the 3rd Generation Partnership Project’s (3GPP) broader objectives of delivering versatile network connectivity for diverse applications of 5G. This deep arsenal of wireless infrastructure solutions, of 5G terrestrial and satellite, can better equip operators to deliver inclusive broadband services to urban, underserved, and unserved populations. VS

ABI Research dedicates this article to the memory of Khin Sandi Lynn, Industry Analyst at ABI Research, who sadly passed away in April 2022. Lynn previously covered the satellite industry.

Andrew Cavalier, Industry Analyst at ABI Research, is responsible for projects focusing on wireless network and infrastructure and other emerging technology industry sectors.