Angel Falls in Venezuela. Photo courtesy of Prensa MINTUR.

High Throughput Satellites (HTS) remain a hot topic of conversation in the industry, but their impact outside of North America is harder to examine. In Latin America, a vibrant region for satellite communications, we assess what impact HTS could have.

In May, Hispasat announced the start of service of Amazonas 3, a $300 million, high-powered Brazilian satellite, operated and managed by Hispamar, a subsidiary for Hispasat in Brazil. According to Hispasat, virtually the whole capacity of the satellite has been bought during its first three months in orbit, a phase of technical adjustments, since its launch in February. Three of the nine beams will serve demand for capacity in places such as São Paulo, Rio de Janeiro and Brasília. Other beams will serve demand in Mexico City, Buenos Aires, Bogotá, Lima and Santiago.

Hispasat has been one of the first major operators to place a bet for HTS in the region. “We see a big demand for residential satellite broadband services in the region, despite the efforts of the main telecoms operators to deploy other technologies such as fiber and 4G,” says Ignacio Sanchis, chief commercial officer, Hispasat. “The nature of the Latin American market will mean there will be huge parts of populations that will not be able to connect using terrestrial technologies. Therefore, we see a big demand for residential broadband. But, we also believe Ka-band can help us provide broadband services to corporations. Our forecast is really positive. That is why have committed to the Amazonas 4B, which we will launch in 2015. This will be a full Ka-band satellite reaching some of the major markets in the region.”

A strong demand for residential broadband could fuel these services. “Our research showed that in Brazil and Mexico there is a potential demand of millions of households for residential satellite broadband services. When you combine the expected pace of deployment of other terrestrial broadband networks with the expected increase of many population groups that today cannot afford these services but will in the coming years, the result is that millions of households are potentially customers. We see a strong demand over the next decade,” Sanchis adds.

However, others are not so sure what impact HTS will have in the residential broadband market. Mauricio Segovia, president of Axesat, a key service provider in the region, doubts its success, mainly because of the price point associated with HTS. “If you want to charge $60 for a broadband connection, there is not a lot of people outside the big cities that can pay for this, particularly in countries like Colombia,” he says. “Once you go into the big cities, where people can afford to pay, you are then competing with telcos, so it becomes that much harder. It will be hard to compete; I am not sure what the residential play will be. I think the price points will be too high outside of the cities. It will take a lot of work to get those high throughput beams filled up.”

Cellular Backhaul
In Latin America, most countries are right in the middle of the transition to the latest generations of mobile technology. According to Carmen González-Sanfeliu, Intelsat’s regional vice president for Latin America & Caribbean, cellular backhaul is also another market to watch. She says “major opportunities” for HTS will be found in this sector due to the evolution from 2G to 3G to 4G/LTE.

Carlos Placido, analyst, NSR is also optimistic about HTS’ role here. “The lower revenue per transport bit of an increasingly data-driven cellular environment is challenging the economics of traditional FSS backhaul but HTS capacity (both GEO and MEO) will come to the rescue of the satellite-based cellular backhaul business model and better enable 3G/4G backhaul as well as new ways for leveraging HTS capacity on-demand,” he says.

Economics
The economic crisis in Europe is also a strong driver for investors to search for new markets, and Latin America remains an attractive bet. Hispasat has shifted its focus from Europe to Latin America and has almost 60 percent of its business in the region.

“Unlike the experiences in the United States and Europe, demand for high throughput satellite capacity in Latin America could be rather driven by a mix of consumer-class and enterprise-class services but with a stronger enterprise play,” Placido says. “There are strong roots for enterprise VSAT services in the region which will gradually migrate towards HTS services as capacity becomes available.”

Rob Kilroy, vice-president of sales in Americas for iDirect, and González-Sanfeliu agree that besides DTH and cellular backhaul, enterprise services are also a strong driver to HTS in Latin America. According to them, the market is growing fast in this area as well. Other drivers are mobility needs in mining, oil and gas market, but not restricted to that. “There are also strong opportunities in maritime, energy, mining, hospitality, retail, health care and manufacturing – with double digital growth rates expected,” says Kilroy. “This demand will be aided by government-funded projects throughout the region aimed at bridging the digital divide, a loosening of foreign direct investment regulations and telecom industry deregulation.” He says other countries are also prone to go to the same direction, opening opportunities for companies to capitalize on the extensive need for satellite coverage to support the increased demand in several areas. “I also see the need for increased coverage happening in most other LatAm countries as they expand their economic growth and drive the need for increased communications both at the government, private enterprise and consumer level,” Kilroy says.

Transition and Oversupply
Although the trend is clear, it is still uncertain how fast and how much impact will HTS have on overall communications infrastructure, simply because it is still an emerging market – not only in Brazil, but also in other big markets, such as Mexico, Colombia and Argentina. Kilroy believes that not all demand is for HTS. “There is certainly an increased demand for additional satellite capacity throughout all of Latin America but not necessarily all for HTS,” he says. “Several of the countries are already quite far down the road to having new satellites built for them or have already just launched new satellites. However, this is on top of new capacity coming or planning on coming into Latin America from Satmex, Intelsat and Telesat to name a few.”

Placido is also skeptical about a big HTS deployment completely disrupting the market. “So far the approach has been rather evolutionary: Hispasat´s Ka-band payload on the Amazonas 3 and Intelsat´s plans for EpicNG in the region suggest that operators may tend to granularly match supply and demand. O3b is also targeting the need for high-speed trunking and backhaul access,” he adds.

In the past, Latin America went through a scenario of oversupply. “You can never discard a scenario of oversupply if an ‘HTS land grabbing scenario’ unfolds,” says Placido. “The downside of a gradual approach for established leading operators such as Intelsat, StarOne and SES is that HTS capacity supply could be spread across a number of satellites and operators.”

While a concern, Kilroy says it doesn’t seem much of a worry, due to abundance of current capacity contracts and strong market growth projections. He also points out that operators are being more cautious and looking forward to selling capacity before launching new satellites, which diminishes the possibilities of oversupplying the market. “Additionally the new capacity is now being introduced on a ‘can we sell this satellite out before we position it’ model which tends to alleviate the concern of too much capacity. Other new satellites are being introduced by governments, which will tend to be more of a closed offering to government and military departments. With newer applications driving the demand for more bandwidth along with stronger Latin American economies, the need to share more and more data is a key driver to requiring more coverage,” he says.

Intelsat does not see this as an issue. “The state of the satellite industry in Brazil, and all of Latin America, right now is strong,” says González-Sanfeliu. “Latin America remains one of the fastest-growing regions for Intelsat worldwide. As the region continues to post economic gains, demand for satellite communications will be robust. Media services continue to drive growth in Latin America.” VS