[Satellite News 04-24-09] Satellite industry analysts praised the strength and potential of the broadband sector in new research reports. According to NSR senior analyst Patrick French and IDATE satellite analyst Maxime Baudry, satellite broadband is the industry’s current hot topic as the sector has recently been boosted by strong performances from Hughes and WildBlue in the U.S.
    The analysts predict that the broadband sector’s success will be compounded with even more growth as governments and administrations around the world look to reduce digital divides by investing into connecting rural communities to broadband.
Two major research firms, IDATE and NSR, have released reports on the satellite broadband market, titled “Satellite Broadband in Europe & North Africa: Residential Market Outlook,” and “Satellite Markets, Eigth Edition,” respectively. The reports outline the prospects for the satellite broadband industry.
    “NSR’s current assumption is if the economic recession in North America and Europe begins to turn around at the end of this year, there will probably be no significant impact on satellite broadband services. If the recession continues beyond 2009 and into 2010, then all bets are off. If things go really bad, it will be really bad for everyone, not just in the satellite sector,” said French.
    Baudry believes the satellite broadband sector has little to fear from tough economic circumstances. “We don’t see any threat on satellite broadband (from the global economic downturn). In fact, it could be the opposite, satellite broadband could benefit from the numerous ongoing governmental plans. The European Commission (EC) and the U.S. Administration have demonstrated their will to connect the remaining households. Several countries such as the U.S., Switzerland, France, the U.K. have adopted programs to do so, and satellite will probably take part in this but satellite operators have to be proactive in demonstrating their offerings and their competitiveness, as terrestrial players are often seen as offering better solutions,” she said.
    Both analysts give some credit to government-sponsored stimulus packages in the United States and Europe. The satellite industry has been involved in an intense lobbying process to try to secure funds. While there is a lot of money at stake, French does not believe this is a “live or die” situation for satellite broadband players.
    “Getting stimulus money is not a live or die situation issue for satellite broadband, but it would certainly be a nice plus for the market. It would probably be a way to guarantee that satellite will not be a tiny niche in the long-term, but a substantial niche. The question is does satellite serve the 1-2 percent of remote households or maybe up to 10 percent of rural households long-term. I think the stimulus could make the addressable market for satellite in the long-term larger, meaning that it will be a larger niche,” said French
Baudry highlighted three key findings of IDATE’s satellite broadband report as major talking points. “Firstly, in people’s mind, satellite broadband is a very expensive solution with limited bitrates. But, if you check the latest offerings from Tooway, Astra2Connect, or HughesNet (based on Spaceway-3) in the U.S., prices have sharply declined in the last few years and in France for instance, Eutelsat and Astra offer satellite broadband for 35 euros ($45.67) a month (including CPE),” said Baudry.
Baudry also highlighted weaknesses that exist with satellite, also exist with terrestrial technologies. “Secondly, satellite offers are often limited in terms of monthly traffic allowed but it is the same situation for competing terrestrial technologies: WiMAX offers are about the same price of satellite offers and are limited to a few GB/month, whereas for 3G, the same situation exists,” she said.
Finally, there could be health issues associated with wireless technologies. “In comparison with these technologies, satellite doesn’t have any coverage issues and there isn’t the problem of antennas, which starts to become a problem in some countries where some health concerns are progressively appearing,” said Baudry.
    French highlighted the performance of WildBlue in the U.S. as a potential surprise from its own report. “I will note while WildBlue did very well in 2008, they got more subscribers than Hughes, their growth rate is down substantially from 2007. I don’t think many people realize that. This is not a knock on WildBlue. In 2007, WildBlue was in a very steep part of their growth curve. They just had WildBlue-1 go into service. They were able to build up very fast. Plus in 2008 they had the capacity issues in some beams that slowed growth for part of the year, which contributed to the lower subscriber net gain,” he said.
    While the analysts agree that the U.S. market is healthy for satellite broadband, the key to solid growth is determining which other markets will prove to be lucrative ones for these services. “We definitely think there are some opportunities for satellite broadband to cover underserved households but it strongly depends from the purchasing power of the households, the PC penetration, and of course the current and future situation of the terrestrial infrastructure. IDATE strongly believes there is a market in North Africa/Middle-East and in some African countries for instance. YahSat has perfectly understood that by adapting their YahClick offering,” said Baudry.
    French believes with strong disposable incomes needed for satellite broadband services, the markets for these services could be limited. “There are satellite broadband services in South Korea, which serve very remote parts of the country. It is a niche of a niche market. You need to have people with disposable income to spend on the service. Even with stimulus money, satellite broadband will still likely come at a slight premium. Without stimulus money, it will be a more substantial premium. Over the next 4-5 years, quite frankly, there are not a whole lot of markets throughout the world where you have that criteria. You can find that in the U.S., Canada and a number of countries in Western Europe but less in Central and Eastern Europe. The markets in Eastern Europe and Latin America are not going to be huge anytime soon. You don’t have a lot of well off people in the middle of nowhere in these regions with the disposable income to pay for satellite broadband,” said French.
    More powerful satellites are also likely to be launched in the future paving the way for more of these types of services, according to French. “Longer term, NSR would not be surprised to see more high throughput satellites launched. These satellites are what some people call Ka-band satellites. Examples are Thaicom 4, WildBlue 1. We believe we will be seeing more of these satellites launched longer term in different parts of the world such as in Latin America and other parts of Asia. When an operator launches a high throughput satellite, one market they will certainly try to address will be consumer class broadband services. But they will not limit themselves to this and will likely go after many other markets like VSAT networks, micro broadcasting, etc. There is a lot you can do with these high throughput satellites,” said French.