LEO Satellite Broadband Market Outlook
LEO satellite broadband connectivity’s demand has been ever increasing. As of 2020, there were one billion broadband subscriptions including Digital Subscriber Line (DSL), cable, or fiber-optic broadband services. Telecoms have been working to replace low-speed DSL broadband with fiber-optic broadband service. In 2020 alone, there were 42 million fiber-optic broadband net additions.
Cable network operators also continue to upgrade the networks to DOCSIS 3.1 to support Gigabit speed broadband access. Despite the advancements in different broadband technologies, only around half of total households in the world are connected to a type of fixed broadband. Among the households which are not connected to fixed broadband access, mobile network is the primary connectivity for internet access since many populations use internet via their mobile phones. Fixed Wireless Access (FWA) broadband services using mobile networks and proprietary technologies have also been filling the broadband gap across different markets. Satellite has been an important technology to provide broadband in remote areas where it is challenging to deploy other terrestrial broadband networks.
The COVID-19 pandemic spotlighted the importance of broadband connectivity in both social and economic aspects of work, learning, communication, shopping, and healthcare. Although network operators have managed the traffic surge contributed by home broadband networks well, governments around the world have witnessed that populations without efficient connectivity faced challenges to navigate through the pandemic. While households in the areas with limited fixed infrastructure need to rely on mobile network to access internet, it should be noted that 8 percent of the world’s population is still outside the mobile internet coverage according to the GSA. There is clearly a digital divide across different markets which needs to be addressed.
The Role of Satellite Broadband
Internet access via satellite networks has been a crucial solution for use cases such as emergency response, maritime, aviation, and broadband access in remote areas. Geostationary Orbit (GEO) satellite systems are the primary platform to provide broadband service, but only at a limited speed, between 5 Megabytes per second to 100 Megabytes per second, and with high latency, around 500 milliseconds, compared to other broadband platforms. Hardware and installation cost, usually above $300 is relatively high for consumers in emerging markets to get satellite broadband service. It is estimated that satellite market is providing around 3.5 million subscriptions worldwide as of today with the highest subscriber concentration in North America, followed by Europe.
Although satellite networks cover almost everywhere around the world, high cost of receiver hardware, low speed, and high latency have been a barrier for satellite broadband services to gain mass adoption. Recent Low-Earth Orbit (LEO) satellite development by SpaceX, OneWeb, and Amazon’s Project Kuiper are expected to change market dynamics since shorter distance from Earth’s surface enables LEO satellites to support latency as low as 30 milliseconds.
What is the Outlook for LEO Satellite Broadband in 2022?
LEO satellite broadband is still a niche market. According to SpaceX, which launched LEO broadband service Starlink in late 2020, it has now achieved around a 90,000-user base. It recently gained license to operate StarLink service in Mexico and is now trying to secure license to operate in India, one of the markets with lowest fixed broadband penetration. OneWeb, another LEO platform which aims to enter broadband market, has launched over 300 satellites in late 2021 after securing agreement with AT&T to provide broadband connectivity for AT&T business customers. Amazon provide a new progress regarding Project Kuiper as they announced that they have secured up to 83 launches from three commercial space companies—Arianespace, Blue Origin, and United Launch Alliance (ULA)—to provide heavy-lift capacity for the program..
Although LEO platforms supports low latency, high terminal cost is possibly a key challenge to expanding the customer base. Considering majority of the market opportunity existing in emerging market, heavily subsidized terminal cost of $500 is beyond the reach of most consumers. Despite attempts by industry players to reduce terminal cost, the current adoption rate which needs only low hardware volume, terminal cost deduction cannot be done enough yet. Furthermore, LEO platforms face inevitable competition from terrestrial broadband platforms. Especially the expansion of LTE networks and future 5G roll outs in emerging markets will continue to compete against LEO broadband services. Due to mass adoption, terrestrial networks tend to achieve faster ecosystem development which brings wider choice of hardware and software and lower cost to develop cost per user.
LEO platforms will need other players coming into the market soon since competition is expected to increase adoption rate and create a force to lower the terminal cost. Considering current market dynamics, there is a potential to of LEO broadband market to grow in 2022, however at the limited pace. LEO broadband services are likely to gain subscriber base from both consumer and business segments in advanced markets. However, business and government user base are likely to be major drivers of LEO broadband market in emerging markets. Initial target of LEO platforms is not to replace wired broadband services, but to connect the unconnected population. To achieve their goal, the ability to support enough capacity in targeted market is crucial. As competition arrives, improvements in hardware cost and features are expected to speed up accelerating the adoption in the residential market in the next few years.