Satellite capacity pricing volatility continues as operators vie for high-volume verticals

NSR’s Satellite Capacity Pricing Index (Q3 2017), 3rd Edition (SCPI3), releasing tomorrow, finds that in an era of shorter contract lengths, consolidating end users, technology change, and generally lower pricing; factors influencing price are more complex than ever. NSR’s report finds that satellite capacity pricing has continued to erode globally across most, if not all, verticals and regions; however, this does not tell the entire story, with pricing having been found to fall across a wide spectrum determined by a multitude of end user requirements and other key factors.

“The fact that average satcom capacity pricing is decreasing is increasingly accepted as reality, even by satellite operators for which it poses challenges. However, not all capacity is created equal, and the price paid today can still fall across a wide range,” states Gagan Agrawal, NSR Analyst and report author.

NSR’s SCPI3 finds that satellite capacity pricing continues to fall, being driven in part by competition between operators with significant overcapacity in regions like Sub-Saharan Africa and APAC. The largest falls—in some instances more than 15-20% year-over-year—have come in Enterprise Data and Commercial Mobility, where large service providers are buying up capacity in bulk. “Companies launching new fleets today can have a markedly lower average CAPEX cost per unit of capacity than those with legacy fleets. So ultimately if operators continue to engage in a ‘race to the bottom’ on price, there seems to be more room to fall,” states NSR’s Agrawal. When compiling the major factors that we understand influence lease price, NSR found that discounts in certain circumstances could be as high as 60% compared to the market rate, with this being just one example of the significant difference in range NSR sees today.

Overall, the pricing environment in the satellite industry is more volatile now than ever before. Bargaining power continuously shifts towards horizontally consolidated Service Providers even as rivalry increases between satellite operators. The interrelation between supply-demand, sales positioning, and growth strategy factors influencing price is becoming more complex, and the needs of end users likewise.

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