Shaping the Conditions for an FSS Sector Rebound

Sector's current investment phase key to new growth on the horizon

Paris, Montreal, Washington D.C., September 4, 2014 - According to Euroconsult's newly released research report, Satellite Communications & Broadcasting Markets Survey, Forecasts to 2023, the FSS sector had revenue growth of about 2.2% in 2013, a significant slowdown compared to that of the past several years. But the sector is currently in an investment phase, a condition necessary for new growth which is seen on the horizon. The industry must address multiple challenges in the coming years to facilitate new growth, both in mature and emerging regions.

THE TV MARKET IS GROWING BUT IS NO LONGER THE GUARANTEE THAT IT ONCE WAS

The broadcast sector continues to be a key segment for the FSS industry and the largest revenue source for many operators. In 2013, satellite TV signals increased by more than 3,000 units to reach over 35,500. Emerging digital TV markets, involving the growth of new DTH platforms and content distribution to cable, IPTV and DTT networks, should require greater satellite capacity. However, the TV segment also faces challenges that could jeopardize segments of the future satellite business.

  • -Online video/OTT services continue to impact subscriptions to linear TV services, notably in mature TV markets with good quality broadband networks; lower audience or subscriptions could then effect the economics of linear channels
  • -The rollout of the HEVC video compression standard means reduced capacity requirements for HD and SD channels, which could negatively affect operators' business. On the other hand, HEVC is mandatory for broadcasters' business case for rolling out U-HD channels, which would require more satellite capacity from operators
  • -The success and adoption rate of U-HD is still far from guaranteed; broadcasters might opt for investments in new mobile and online services over the launch of ultra-high definition channels

LOWER TRANSMISSION COSTS A CONDITION FOR FUTURE GROWTH, THE RISE OF HTS

Reducing transmission costs is a key requirement for the satellite sector in the medium to long term, as it is the only way to offer cost-effective solutions to customers seeking higher data rates. In emerging markets where mobile ARPU is usually a few dollars, being part of the future cellular backhaul game requires a continuous decrease in the cost per byte; this trend will only accelerate due to the increasingly data-driven nature of communications. HTS systems are the satellite operators' solutions to drive down the cost per byte. There are currently 20 FSS operators that have invested in an HTS satellite or payload. Eleven FSS operators offered HTS capacity to the market in 2013, while nine operators will launch their first HTS satellite or payload within the next four years.

"Overall, HTS capacity could represent up to 50% of total satellite capacity requirements (including regular and HTS capacity) in 2023, compared to 17% in 2013," said Pacôme Revillon, CEO of Euroconsult and editor of the report. "In our latest forecasts, we distinguish between HTS capacity used and HTS capacity leased (including commitments); by 2023, HTS capacity usage is projected at 1,300 Gbps and HTS capacity leased at 1,350 Gbps."

MORE OPERATORS, MORE M&AS AND MORE PARTNERSHIPS

Investments by new countries and some private companies should result in a larger number of satellite operators, which could contribute to an increase in direct and indirect competition for existing players and ultimately put pressure on prices. One way for commercial operators to grow will be acquisitions, assuming that valuation and legal/political constraints allow it. Selective investments into value-added services are also possible, a recent example being the launch of an in-flight connectivity service by Thaicom, notwithstanding investments by operators into technical platforms to support broadband services. Even more numerous than M&A transactions will be partnerships between operators to assist in overcoming some of the previously-mentioned challenges. Multiple announcements of co-investments in satellite systems have occurred recently, involving for example Telesat, Arabsat, Inmarsat, AsiaSat and Thaicom.

FSS INDUSTRY REVENUES BACK ON TRACK BY 2023

Total FSS capacity revenues are projected to accelerate over the decade at a CAGR of 5.3% to reach nearly $20 billion by 2023. Revenues from regular bandwidth provisions are expected to grow at a 2% annual growth rate over the next 10 years, and should reach $13.3 billion by 2023. The market value of HTS capacity is expected to substantially increase with a 10-year CAGR of over 20% for a value of about $6.3 billion by 2023. "In comparison with regular capacity, HTS capacity is projected to represent nearly 50% of the total satellite bandwidth requirements but only contribute to a third of the total market value by 2023," concluded Mr. Revillon.

About the Report

Now in its 21st edition, Satellite Communications & Broadcasting Markets Survey is the definitive business planning tool supporting investment decisions in the satellite industry. Released annually, it provides the most complete and accurate picture of market conditions and extensive, insightful analysis of market trends. For more information on this report, please visit www.euroconsult-ec.com/shop.