Telcos Talk Satellite, LEO, and Where the Relationship is Headed

The relationship between telcos and satellite players could be changing. A number of factors are leading to a perfect storm, giving satellite a larger opportunity to serve telcos. One recent example is SpaceX's new partnership with T-Mobile to provide satellite-to-cell connectivity through Starlink in the future.

As the world moves toward a 5G ecosystem, satellite technology, once seen as miles behind the telco equivalent, has progressed quickly in recent years. In this feature, telcos from Latin America, Africa, and Alaska share their view on satellite technology and how they will incorporate it into their network rollouts.

Telefonica has High Expectations for Satellite

Telefónica is one of the world’s leading telecommunications service providers, with a presence in Europe and Latin America. Telefónica Global Solutions manages the Telefónica Group’s satellite business and has been delivering satellite projects for different segments and industries for many years, particularly in Latin America as well in Europe and Africa.

Enrique Macho Mateos is the director of Global Satellite Presales for Telefónica Global Solutions. He says he is “very positive” about the future of how the telecoms and satellite industry can work together, and even says that in his almost 25 years of experience in the satellite business in Telefónica, he doesn’t remember a moment where the expectations have been higher for satellite.

“During the last decades the satellite industry has reinvented itself several times. But for many years satellite solutions were only an alternative when other options were not viable technically and/or economically. The old paradigm of satellite — latency, price, SLA [service level agreements] — is being shot down before our eyes.”

Macho Mateos says a set of factors has contributed to this change. He talks of how different technological innovations in the satellite industry are driving cost reductions. He also points to a healthy new dynamism in the industry generated by new players such as SpaceX and Amazon. “For all these reasons, Telefónica Global Solutions will keep in mind the use of the satellite solutions to attend to the connectivity needs of our customers,” he says.

Macho Mateos has decades of experience implementing satellite cellular backhaul for the Telefónica Group and other mobile network operators in Latin America and Europe. Telefónica has activated around 700 satellite backhaul links all of them using Geostationary Orbit (GEO) constellations. “Today, thousands of users maintain phone calls, messaging chats and video meetings using satellite links without experiencing any delay or loss of quality,” he says.

The onset of 5G and the technologies surrounding this ecosystem could change the nature of the relationship between telecoms and satellite, and latency is key.

“Satellite can help support the high-throughput that 5G can offer per user. A substantial reduction of satellite latency is required for this. In my opinion, 5G will be the main engine that accelerates the use of LEO/MEO [Low-Earth Orbit/Medium-Earth Orbit] constellations, and then GEO satellites could be oriented to traditional solutions such as video broadcast for instance,” adds Macho Mateos. “The new LEO constellations will reduce latency by more than 10 times, which will enable the integration of 5G backhaul over a satellite link. We still do not know what the impact of demand generated by 5G connectivity will be. But without a doubt, the satellite industry is taking the appropriate steps in the right direction.”

Macho Mateos believes companies coming into the satellite sector are more tech companies and their heavy investments into satellite are changing things for everyone else. He says, “This strategy represents a gamechanger and will require a change to the traditional model. Because these companies will adopt a new distribution model to go to market and commercialize the huge volume of capacity that will be available. The telco will adapt to this new ecosystem and will establish an agreement as reseller of these services.”

Macho Mateos says that the digital requirements that emerged during the pandemic have been the catalyst for the rollout of 5G networks globally. This represents a challenge for ground and space transport networks. He says most of the MNOs have already accelerated 5G deployment to respond to traffic growth higher than before the pandemic.

“The implementation of 5G native networks will allow the mass adoption of millions of connections in different industries: farming, IoT, oil and gas, mining, etc. The 5G standard has the intelligence to differentiate traffic according to the final customer requirements — low latency, high- throughput, etc. 5G is capable of delivering the appropriate traffic for each application.”

Africa Mobile Networks Looks for Cost-Effective Solutions

Another telco that could look at LEO alternatives in the near future is Africa Mobile Networks (AMN). Michael Darcy, CEO of AMN says that while the company is spending more on satellite capacity than it ever has, he thinks the relationship between satellite and telecoms remains far from easy.

“I don’t think that telcos like satellite very much. This has always been the case. It is about high cost, high latency, and generally limited bandwidth. For those reasons, they only use satellite when they have no other choice. It has been VSATs for 30 years. Telcos would much rather use a microwave link. I think it is interesting when a Starlink or a OneWeb comes in with lower latency services. If the cost per bit and the throughput are much closer to what they are used to, then it might change. It might change their view, but I don’t think it will be quick.”

While the relationship may still need some work, AMN is already looking at the possibilities beyond GEO and may even take steps to work with a LEO/MEO player this year.

“We think LEO/MEO is a game-changer. AMN has had discussions with LEO/MEO providers and is exploring the possibilities. We see LEO and MEO as important going forward to our applications. It is certainly feasible that we could sign something this year,” Darcy says. “When it comes to deployment, we have 3,000 base stations and we are not going to go back and take a GEO VSAT on 3,000 sites. There may be some sites where we need the bandwidth because they are high traffic sites, because they are retrofits. At some point, we might be building new sites. From a deployment point of view, nothing happens that quickly.”

AMN plans to offer 5G services in the future and currently offers 2G on all sites, 3G on most sites, and 4G on some sites. Its business focuses on building mobile network base stations, and it is all about the volume. So, AMN will focus on more sites, more countries. The company will continue to focus on Africa, but is looking to expand into Latin America.

Darcy says, “We have just signed a contract in Panama in Latin America. So, we will be building a couple of pilot sites, with a view to signing a full rollout contract, which might be a few hundred sites there. We want to demonstrate our application is not just regional, but that it is a global application. But, we would like to take the business to more than 3,000 sites by the end of this year to more than 5,000 sites by the end of 2023. Most of which will be in Africa.”

The company also hopes to fill a void between rural and urban centers. There is also a middle ground to exploit, which could involve the deployment of bigger base stations. “We have deployed, but not yet in large numbers, bigger base stations, 20 meter sites. But, when you look at semi-rural, urban, we think there is an interesting battleground here between our focus on the ultra-rural and the conventional telco focus on the macro sites. We think we are well equipped to win business in that middle ground, where we might potentially overlap. We come at this from an ultra-low cost. We have to be utterly ruthless on capital expenditure and operating expenditure. Commercial telcos less so,” he says.

AMN’s challenges to growing the business are mostly on the economic side, versus the technology. In villages of 1,000 people of all ages and maybe 500 adults and with ARPUs below $1, offering an economically sustainable solution is the biggest challenge, he says. “AMN has shown it is possible by ruthless optimization of CapEx and OpEx. Our model is based on high volume and low unit cost. A cost-effective satellite solution is critical to achieving this,” he says.

Alaska Communications Highlights Growing Demand for Bandwidth

While Alaska Communications does not currently provide satellite backhaul for cellular service providers, the company plays a key role in bringing communications services across Alaska. Mark Ayers, vice president of Engineering, believes satellite-based cellular backhaul is a fundamental component of middle-mile service delivery in rural Alaska. He believes the demand for this type of service is likely to grow as LEO providers deploy low-cost access networks capable of reliably supporting 3GPP middle-mile links with performance comparable to terrestrial paths.

Ayers says as LEO service delivery methods mature and become as reliable and dependable as existing GEO methods, the demand for capacity will continue to increase. He believes this demand, coupled with the influx of infrastructure grant funding from the U.S. government, will change the landscape of communications networks in rural Alaska within a single generation.

“Current middle-mile capacity and performance constraints will be largely a thing of the past, even in small communities. The divide between rural and urban performance levels should become imperceptibly small within five to 10 years,” he adds.

Ayers believes the most significant network challenges continue to be the challenge to drive lower costs per bit in delivering broadband connectivity to the telco’s customers, regardless of the technology. He believes Alaska is unique in its demand for satellite capacity. “If terrestrial or submarine connectivity remain out of reach for communities in rural Alaska, the demand for and investment in satellite capacity to serve those communities will continue to grow. Growth of satellite delivered services is a fundamental component of our long-term business strategy. Many of our customers have distributed networks with a variety of terrestrial and satellite-connected remote campuses and locations,” he says.

Alaska Communications is an interesting case study when looking at the needs for connectivity, and working with the satellite industry. Ayers says as connectivity becomes more commoditized in the telecommunications industry, boutique solutions will become rarer as the market gravitates toward off-the-shelf solutions.

“The demand for broadband access is by far the most common use case in modern sales opportunities. The ability to integrate a complete, transparent connectivity option for customers that utilizes owner operated and leased capacity when required will be the premium broadband portfolio offering of the future,” he says. “Satellite operators will continue to evolve their business models to adapt to changing demands. The demand for broadband connectivity continues to grow year over year, but the nature of how it is delivered, and the cost of that service, is changing. We will continue to partner with the satellite operators that offer services with compelling value propositions.”

Analysts See the Business Case Improve

While telcos have long worked with satellite providers, the scale of potential deals is changing. Lluc Palerm-Serra, analyst for NSR, an Analysys Mason company, reports the size of the deals is growing significantly.

Just three to five years ago, a 100-site deployment was “massive” for backhaul. Today, some deals involve thousands of sites. “In Mexico for their rural network, and in Brazil, Indonesia, and Japan, we are seeing deployments involving thousands of sites. That is a trend. We expect the size of the deals will continue to grow over the coming years,” he says.

Palerm-Serra points to the fact that five years ago it was tough to close the business case with satellite due to the cost of satellite capacity and the capabilities of the terrestrial ground segment. “Satellite was only used in the last resort, or in niche deployments. But with cheaper capacity prices, a more powerful ground segment, and the arrival of small cells, and with an evolution of things on the terrestrial side of things, we think it is possible to close the business case for these remote regions,” he says. “We are seeing lots of examples in Africa and Latin America. There are players leading the way for ultra-rural deployments.”

Big names like Starlink and Amazon are pushing mobile operators to take a second look at satellite capabilities. “Mobile operators are more willing to expand coverage to remote areas. Regulators are pushing a lot for remote coverage. You are seeing that in the U.S., Brazil etc. Brazil has massive coverage obligations. This is also happening in Europe. This will create a lot of demand for satellite over the coming years,” Palerm-Serra says.

While many are talking about a 5G future, Palerm-Serra says it is not widely appreciated how disruptive 5G will be for the satellite industry.

“On one side, there is infrastructure, how backhaul, how private networks, mobility will integrate with the main telecoms ecosystem. The telco will be able to manage satellite networks with their own network management system. This is the basic concept of 5G, on the backend of the infrastructure,” he says. “Then, you have the direct satellite-to-device technology. There has been a lot of traction here and this could be massive for the satellite industry, both in terms of IoT and connecting devices.” VS