Constellations spoke with Nathan de Ruiter, Managing Director of Euroconsult Canada, about the state of the satellite communication sector and its growth opportunities as it digitally transforms and pivots to exploit new markets. He shared key findings from Euroconsult’s Satellite Connectivity and Video Market Report.
Drivers of Demand and Supply
De Ruiter said the demand for bandwidth was being driven first and foremost by digital transformation, with enterprises continuing to adopt more cloud applications and consumers who have made video, such as YouTube and Netflix, part of their daily lives.
While these factors are driving demand, there has been a change in supply as well. “The other key element is that, historically, we’ve been very limited by what satellite systems could supply; and that’s drastically changing. We now see these data caps or limitations being taken away, and that definitely translates into much greater usage.”
He cited a key data point in a recent Euroconsult Satellite Connectivity and Video Market Report that found that total capacity over satellite networks increased from 2021 to 2022 by 70%. “We now see exponential growth in the traffic flowing over satellite networks.”
Broadband Drives Growth in Key Markets
De Ruiter highlighted three key market opportunities for broadband growth: mobility, universal broadband access, and defense and security. He explained mobility in terms of connecting ships and aircraft beyond the reach of terrestrial networks as a “natural play for satellite.” Universal broadband access is connecting schools, hospitals and rural communities around the globe to bridge the digital divide. Defense and security, already a longstanding satellite use case, is seeing increased interest to securely connect UAVs, ships and bases.
De Ruiter said these opportunities represent a market potential of close to $60 billion in annual revenues. “The satellite industry has only scratched the surface of that opportunity today.”
He also pointed to land mobility, a previously insignificant vertical market to deliver broadband to RVs, trucks, buses and trains, that was growing quickly.
“Starlink has designed a specific solution that has really started to take off. And we see many
more new developments, either on the terminal front, but also the service offerings to address that segment,” said de Ruiter
“Realistically, we should be able to see about 400,000 terminals being connected in that segment, which—from a market that was really non-existent just two years ago—that’s quite significant growth.”
5G and Direct-to-Device Trends
De Ruiter also cited integration of 5G networks with satellite as a rising trend. With the first 5G sites now being backhauled over satellite in the United States and Japan, he expects growth in backhaul of remote 5G in emerging regions to be especially strong. “Based on our latest forecast, we think that it could go well beyond 10,000 sites by 2032.”
“The other domain we look at with a of a lot of interest is what we call the direct-to-cellphone play that basically transforms satellites into mobile towers in space to directly connect to an unmodified cell phone.” Noting that most were currently limited to emergency-type services, “I think we’re still a few years away, but that’s definitely on the horizon to truly bring 5G from space.”
What to Watch In the next 12-24 Months
In the short term, de Ruiter said an important change to watch would be the impact of other new NGSO constellations that are coming online in addition to Starlink, including OneWeb and O3b mPOWER. “It’s going to be very interesting to see their market uptake and how much change they bring.”
He said he had been surprised by Starlink, which outperformed Euroconsult’s initial projections from a year ago. “That’s pretty impressive. And a testament that what they bring to the market has created a shift in terms of the service offering, the speeds they provide, but also the economics.”
He also pointed out the vertical integration and M&A activity taking place in the industry, with satellite operators acquiring service companies, and horizontal consolidation occurring as well. “I would say the full ecosystem is kind of redesigning itself.”
Global Civil Government
Longer term, de Ruiter pointed to what he called “civil government space,” as gaining quite a bit of momentum. “You see on multiple levels, many more RFPs or projects announced for governments that want to connect their schools in rural areas. It’s a global phenomenon from Asia to Latin America to Africa. That’s very important because at the end you need a government driving and supporting these networks to be built on the ground.”
Operators Challenged but Shifting
The decline in broadcast revenues has been a significant challenge for satellite operators, but de Ruiter said it has led to a shift in focus to broadband connectivity with significant investment in new infrastructure.
The question, he said, was whether sufficient revenues can be generated to justify the capital investment. “The industry is at a point where all these massive investments in new satellite infrastructure are coming to the market and it’s the time to see how they will play out.”
To hear more about satellite communications trends, including new technology and efforts to eliminate friction points through manufacturing and interoperability, click here.
