The mobility market segment has been a bright spot in the satellite industry in recent years, as video revenues continue to decline. New advances in ground system technology like flat panel antennas are enabling higher bandwidth connectivity in mobility sectors like aero, maritime, and land. Yet the COVID-19 pandemic has hit this sector hard. Cruises are stuck at port and many planes are grounded as leisure travel has ground to a complete halt.
NSR mobility analyst Brad Grady said in the 10 years he has been working with the satellite market, this is the most challenging situation he has seen yet.
“There are some spots that are still okay,” says Grady. “Government, military, and first response are still doing okay. The airline market — significant challenges there. In maritime, new installations are down, vessels are challenged. Bandwidth demand we think is going to be up by the end of this year, relative to last year, because everyone is still communicating and requiring more and more updates. But overall, this is one of the harder times that I've seen.”
This challenge comes as companies that have been developing new antenna technology have been gathering speed and ushering in a new era of ground system technology to pair with Low-Earth Orbit (LEO) and Medium-Earth Orbit (MEO) constellations. Although the market is experiencing challenges now, leaders in the sector see reason to be optimistic for the future.
Jon Harrison, European office general manager for Intellian, a provider of stabilized satellite antenna systems, says the pandemic is demonstrating the need for high-speed connectivity and the technology that enables it.
“Reliable, high-speed connectivity has clearly become the vital thread which is keeping the human race functioning during this historic and distressing time,” Harrison says. “Whether this is enabling personnel from a vast range of industries to work remotely in a virtual office environment ... or allowing families, friends, and colleagues to communicate face-to-face via popular messaging apps, its value not just to the global business infrastructure, but also to everyone’s physical and mental well-being should not be underestimated. The technological integration which supports all of this would have been inconceivable not so long ago.”
Headwinds for Aero Markets
The aeronautical market has been hit the hardest by the COVID-19 pandemic. Delta Air Lines, for example, has reduced its total system capacity down 85% and parked more than 650 aircraft. Virgin Atlantic predicts that a recovery to pre-crisis levels will take up to three years. GoGo, the In-Flight Connectivity (IFC) service provider, announced in April that the company is furloughing 54% of its workforce, negotiating customer and supplier contracts, and delaying aircraft equipment installation to cope with lost revenues due to the pandemic.
The effects of this trouble have reached antenna companies as well. Phasor, which was developing electronically steered, multi-beam antennas for mobility markets including aero, is now undergoing financial reorganization in the United Kingdom with its U.K. subsidiary, Phasor Solutions Limited. Phasor recently told Via Satellite that the company was nearing completion of an investment round with a large corporate/strategic investor, but the COVID-19 pandemic and its effects on global capital markets put the process on hold. Creditors initiated “Administration” (similar to Chapter 11 bankruptcy in the U.S.) of its U.K. subsidiary in early April.
Yet it’s not all bad news. Bill Milroy, CTO of ThinKom, says that while the pandemic will likely push schedules out a few quarters, and lead to consolidation among the players, satellite connectivity is key to getting through. ThinKom makes Ku- and Ka-band, low-profile, high-throughput ThinAir antennas that are in use on more than 1,400 commercial aircraft.
Milroy says the company is still talking to airlines, Internet Service Providers (ISPs), and gateway suppliers, and that business is still moving ahead.
“Everybody is still moving forward, albeit oftentimes calling in from home,” Milroy says. “But all the different plans and the needs, they're not just stagnant. Everybody is still working at full speed ahead. Although I’m sure there'll be some delays and challenges, the industry continues to move forward. I don’t believe the pandemic is stagnating the industry any more than what's absolutely reasonable and necessary.”
NSR’s report, “Aeronautical Satcom Markets, 8th Edition report” projects that despite recent challenges, the long-term IFC market is viable and once air travel resumes, planes will require more connectivity than ever. According to the report, this will yield a market opportunity more than two times larger than 2019, with $5 billion in annual retail revenues by 2029.
Grady, echoing Milroy, says the pandemic just pushes timelines back for IFC connectivity plans. “There's already plans in place to roll out free Wi-Fi across U.S. airlines. But, that roll out has been paused,” says Grady. “That’s not going away. It's just gonna take a few more years for them to do that. And, while their fleet size might not be the same as what it was before, airlines are still still going to go there.”
Mixed Bag for Maritime
While cruises are stuck in port for the next few months, the overall maritime mobility satellite market remains resilient, and increased bandwidth demand from shipping vessels offers a need that antenna companies can meet.
Cruises seemed to be a key part of the pandemic’s spread around the world. A review by The Washington Post of cruise line statements, government announcements and media reports found that the coronavirus infected passengers and crew on at least 55 ships, about a fifth of the total global fleet. The Centers for Disease Control in the United States has issued a No Sail Order, which at this point is in effect until July 24, 2020. Yet there are already signs of cruises moving back into operation, as Carnival Cruise Lines has recently announced plans to bring a few cruises back in August.
NSR analyst Grady said that as cruise ships were sailing during the pandemic, they opened up Wi-Fi networks and removed pay barriers, and this factors into increased bandwidth requirements moving forward. NSR’s “Maritime SATCOM Markets, 8th Edition” report predicts that this year will see a 7% increase in bandwidth demand over 2019 figures, even while in-service units and retail revenues decrease. Many shipping vessels are increasing connectivity for crew welfare programs and as cruises return, Grady says, the demand for connectivity will be increased moving forward.
Intellian executives validate that experience, and say the pandemic has cued a “significant” spike in bandwidth demand from the commercial shipping market, particularly for high-quality video streaming, as shipboard operations and crew welfare have increased their around-the-clock data demands. Harrison says access to a secure and dependable communications link is making a real difference keeping ships crew’s minds healthy during extended periods of downtime.
Intellian CEO Eric Sung says the short-term is difficult, but in the long-term, the need for high-throughput data service for passenger ships will continue to increase, as Netflix and YouTube are becoming part of the de-facto service offering rather than traditional TV broadcasting in guest rooms.
“Customers may not choose a cruise or ferry that doesn’t have a home-grade connection. From the passenger ship business perspective, after lockdown, if they want to get customers back to cruise again, an attractive environment should be prepared to attract customers. Having high throughput connectivity onboard will be a great marketing tool as well as essential part of service,” Sung says.
In addition, Intellian’s Harrison says that the remote operations situation caused by the pandemic has emphasized the operational and environmental benefits of smart shipping concepts. For shipping and oil and gas industries, satellite services have been key to monitoring, and engineering and predictive maintenance of offshore assets has been ramped up.
NSR’s report says vessels are adopting Very Small Aperture Terminal (VSAT) connectivity and higher bandwidth provisioning rates. Retail revenues yield a cumulative $34.5 billion with broadband connectivity accounting for over 80%, capacity demand grows 24%, and the addressable market will expand to over 500,000 vessels by 2029.
However, one challenge the maritime market will face this year is social distancing restrictions to onboard anything like satellite hardware on new vessels, Grady says. Shipping vessels, for example, may be restricted in terms of coming into port, or who can board.
Bright Spots for Government Suppliers
Reliable satellite, and satellite and cellular hybrid broadband connectivity solutions give governments, medical professionals and first responders the capability to be effective in fighting the pandemic, says Kymeta President and COO Walter Berger.
Kymeta is currently launching its next-generation, flat panel, electronically steered antenna platform, the Kymeta u8, which is built specifically for mobility and designed for the needs of both military and commercial customers. Berger said that getting the u8 terminal, antenna and Kymeta Connect to defense and first responder customers is the company’s No.1 objective.
“Part of being effective is the speedy and reliable collection and dissemination of critical data needed to both understand the changing conditions of a pandemic, as well as how best to react and fight them — and this need is greatly magnified during times such as these. Reliable connectivity to non- or poorly- connected areas becomes urgent in order to deliver data at fast speeds, to the right people in real time,” Berger says.
Milroy echoed the importance of government customers, and said ThinKom has continued to operate as an essential business because many of its products are dual use, meaning they have both civilian and military applications. In addition, ThinKom is working with large defense aerospace companies who purchase its systems for different platforms.
Isotropic Systems CEO John Finney expects the pandemic to spark a significant drive among nations to rebuild critical telecommunications infrastructure to ensure productivity, safe conduct of business, and access to health care in preparation for a second or third wave, or the next pandemic.
“Every country in the world didn't quite believe that it would really happen in our lifetime and pushed [critical communications infrastructure] off to meet higher priorities. And that's a mistake that everyone now regrets worldwide. So the future will look different as a result. In the end it will, it will return different industries back to growth,” Finney says. “Leveraging connectivity is a must as the virus continues to level off and businesses begin to reopen economies around the world. We strongly believe we're going to see demand for even better connectivity capabilities as we move through the recovery phases.”
Moving Forward — Market Consolidation and Technology Timelines
NSR’s Grady says the next few years will be challenging, and there will likely be consolidations and mergers across the whole service provider landscape, as evidenced already by Phasor’s reorganization. But Grady said the biggest question is whether that consolidation means satellite operators acquiring service providers, or service providers acquiring other service providers — or the creation of a fully vertically integrated business from satellite operator, to service provider, and hardware provider.
Finney looks to inevitable consolidation among service providers and possibly antenna companies is something that may be forced by COVID-19, but was already in the works as too many players have been underperforming in terms of revenue and profitability. Consolidation “will be blamed on COVID-19. But it should have happened a year ago,” he says.
One bright spot is that for some ground system tech companies working on new technologies, the timeline when things will rebound from the pandemic will better align with when their technology will be ready for market.
Grady explains that this is, “particularly on the aeronautical front where advanced terminal form factors are one of the key enablers for next-generation network designs, this could be one of the silver linings to come out of this rapid change in market dynamics. The other, being an easing of supply constraints in key markets and regions.”
For Intellian, Harrison says the company’s global warehousing strategy, which was implemented several years ago, has helped Intellian fulfill customers’ needs with limited delays. The company has several products in its pipeline, including the GX60NX system, which will leverage existing and future global Inmarsat network capabilities; and the v60E, a 60 cm Ku-band antenna intended for leisure, fishing, coastal, and commercial markets. Harrison says there are no plans to delay the launch of any future products.
And Isotropic, for example, is working with SES on software-defined, multi-beam customer edge terminal antennas compatible with O3b mPOWER — ahead of the commercial launch of the terminals with the O3b mPOWER MEO system in 2022. Finney said the pandemic has made Isotropic double up on its supply chain to accommodate any delays that might arise, and reevaluate its funding plan, but the company is confident that it can meet its testing milestones this year and its broader timeline.
Overall, the need for connectivity will only increase, Finney says: “The need for end user terminals will remain the same and in fact, in some way over the medium- to long-term — it's going to grow as a result of this. No one’s going to be switching off their need for satellite connectivity.” VS