Satcom Opportunities and Challenges in the 2020s

Satellite 2020 Series: Satcom Opportunities and Challenges in the 2020s

The SATELLITE Show in Washington DC will celebrate its 40^th anniversary in 2021. Over the past 39 years, the show has expanded significantly, from being a show largely focused on satcom, to one focused on a broad variety of different space verticals, including satellite manufacturing, small/medium launch vehicles, Earth Observation, and basically all other elements of the commercial (and in some cases government) space sector. With that being the case, the conference remains at its core one about satcom.

This has meant that over the past several years, the conference mood has sometimes been rather grim, with satellite capacity price declines, decreases in orders for communication satellites, and capacity oversupply in some regions all causing issues for the industry. Industry research houses have for some years predicted a large increase in satellite capacity leasing revenues, but with this large increase still not happening, it may be time to start asking—what to do about satcom? And what will be the opportunities and challenges in satcom in the 2020s?

Satellite 2020: The Operator Panel

The biggest satcom panel of the SATELLITE conference is the “CEO Panel”, which occurs on Day 2 morning, and includes the CEOs of the “Big Four” satellite operators (Intelsat, SES, Eutelsat, and Telesat), and in some years CEOs of Inmarsat, Hughes, and/or ViaSat. This year saw a smaller CEO panel, with the CEOs of Intelsat, Telesat, and ViaSat not attending. On a panel with SES, Eutelsat, and Hughes, the CEOs discussed the satcom industry today, and expectations for the future.

In general, the picture is not particularly great today. SES and Eutelsat both see video broadcast accounting for more than 50% of revenues. The two operators, though, have taken very different attitudes towards the state of the video broadcast market today. On the one hand, Eutelsat’s co-CEO Michel Azibert was very clear on the panel– Eutelsat’s video business is doing reasonably well. He noted that video accounts for 60% of company revenues, split around 50/50 between mature markets (EU) and emerging markets. While EU is declining slowly, emerging markets are still growing, with Azibert highlighting Nigeria, Democratic Republic of the Congo, Ethiopia, and Egypt as markets with new channels coming online.

On the other hand, SES CEO Steve Collar did not explicitly state that video was dying a slow death, but the writing did appear to be on the wall. Coming one week after SES announced financials that saw video revenues decline by nearly 10% year-over-year, Collar was extremely upbeat on O3b, O3b mPOWER, SES Networks, and basically every part of SES that was not the video markets that represent ~60% of revenues. Collar outlined a vision where SES launches a multi-orbit, high-throughput network of flexible satellite capacity, with the aim of filling in gaps in the terrestrial communications network. Indeed, while Azibert was doubling down on video for Eutelsat, Collar was talking about SES’s desire to potentially split the company so as to allow more conservative investors to invest in the video business, while more risk-tolerant investors could invest in the higher-growth, higher-risk networks business. In the coming 18 months, SES is expected to launch the first 7 of its O3b mPOWER satellites, which Collar mentioned were standardized, scalable, and would allow SES to ramp up capacity more quickly and efficiently than if they were procuring individual satellites.

Apart from the difference in opinion about the role of video, the satellite operators seem less well-prepared to compete with the prospect of LEO constellations, should the constellations materialize (a prospect that now seems less likely with the subsequent OneWeb bankruptcy). Hughes CEO Pradman Kaul welcomed the constellations due to Hughes’ unique position as a GEO operator, and also a LEO equipment provider, which would allow them to sell terminals to LEO constellations. SES’s Collar, meanwhile, was politely skeptical of the whole business plan, making it clear that SES feels in a strong position with their first-mover GEO/NGSO advantage in O3b. Meanwhile, Azibert was the most skeptical of the LEOs, to a certain extent dismissing questions about Elon Musk’s keynote from the night before. This was partly due to Eutelsat’s LEO strategy, which involves a low-cost, rapid-deployment “Eutelsat LEO for Objects” (ELO), an IoT-focused narrowband LEO constellation to launch in the coming couple of years, but also seemed partly to be a more general pessimism about huge, vertically-integrated LEO broadband constellations such as Starlink, a pessimism that was shared by

Satellite Manufacturing: More Capacity on the Way

Satellite operators have continuously faced the challenge of more capacity entering the market, and prices for capacity declining. This has become especially problematic as large HTS payloads have entered the market, bringing with them in some cases more capacity in a single satellite than existed over a single market at the time of launch. One such example is ViaSat-1, which has >100 Gbps of capacity, making it larger than all other satellites over North America combined when it was launched in 2011. This has meant that satellite operators that have not bought HTS satellites have found themselves unable to compete on price. This is a trend that will only continue.

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The satellite manufacturer panel featured representatives from 6 of the world’s premier satellite manufacturers: Airbus, Boeing, Lockheed Martin, Maxar, Northrop Grumman, and Thales Alenia Space. The manufacturers talked about several broad trends—increasingly large satellites, increasingly flexible satellites, and increasingly software-defined satellites. This means that even though there is already a huge increase in capacity in the market, there will be an even larger increase in capacity over the coming few years. Airbus noted significant demand for its OneSat platform, while Thales and Boeing also mentioned strong demand for their own small GEOs. Other trends in satellite manufacturing include “digital twinning”, whereby the satellite manufacturer would create a digital version of the entire satellite to allow for tracking, preventative maintenance, and other data collection and analysis. This technology has been used for some years on things such as airplane engines, and is, according to satellite manufacturers, becoming a very common request from customers, particularly as satellite insurance rates become more unpredictable.

A separate panel about Very High Throughput Satellites (VHTS) featured Lon Levin, CEO of GEOShare, a Lockheed Martin subsidiary. Levin mentioned that GEOShare hopes to build a VHTS of around 500 Gbps, and then sell “shares” of the satellite to 4-5 or more customers, with each customer able to buy around 100 Gbps. This will, according to GEOShare, allow smaller regional satellite operators to have the economies of scale that VHTS offers, while not needing to buy an entire VHTS themselves. While this may be good for individual operators and their customers, it would also bring a huge amount of additional capacity into the market, further driving down pricing and putting pressure on existing satellite operators that do not upgrade to HTS or VHTS.

From a technological perspective, satellite manufacturers are using different ways to increase the efficiency and flexibility of payloads. GEOShare mentioned the ability to flexibly reallocate payload power from one beam to another, allowing for a higher degree of capacity flexibility. Boeing, partly through work with SES on O3b mPOWER, has developed a flexible, digital satellite bus, the 702X. Maxar, on the other hand, has focused on trying to shorten production time, and is now capable of producing satellites in ~24 months or less.

Where does Satcom go from Here?

SATELLITE 2020 may have provided more questions than answers for satcom. Satellite manufacturers were optimistic in saying that orders would likely increase in the future, further recovering from the lows of 2017-2018. However, most manufacturers agreed that even if the number of orders increased, the size of the satellites being ordered would likely continue to decline.

Satellite operators, on the other hand, are clearly facing pricing and revenue pressures. Buying large numbers of standardized, flexible satellites may allow for some operators to fulfill the often-heard promise of filling gaps in the terrestrial telecoms infrastructure, but it will also cause operators that do not buy such satellites to become uncompetitive on price, particularly for fast-growing verticals such as consumer broadband or village Wi-Fi. With the satcom world facing significant uncertainty and rapid changes, it seems that the most likely outcome is consolidation among satellite operators, continued emphasis on flexible, software-defined capacity by manufacturers, and potentially, a highly disruptive force entering the market in the form of a vertically-integrated SpaceX/Starlink or other. While the coming few years will likely be challenging, there has never been a more innovative and potentially transformative time in the satcom industry.

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