NSR’s VSAT and Broadband Satellite Markets 17th Edition report, released today, forecasts cumulative revenues of $159 billion in the next decade, with 13.4% annual growth in the installed base of consumer sites alone. Enterprise VSAT is also a solid contributor with $12.3 billion in capacity revenues by 2027, driven by key verticals worldwide.
“Satellite Consumer Broadband is just scratching the surface of the opportunity, capturing less than 1% of the potential addressable market,” states Lluc Palerm, NSR Senior Analyst and report co-author. “Subscribers are very sensitive to more generous data caps and cost. Consequently, lower capacity pricing will trigger strong demand elasticities. Additionally, the ecosystem is still underdeveloped in many regions. A stronger focus on retail, and newly available capacity, will see accelerated growth. Furthermore, new business models like Wi-Fi Hotspots are proliferating, which would open the lowest segments of the market. Smallcells will drive 43% of Service Revenues by 2027.”
Video is, by a significant margin, the primary driver of data traffic. Multiple offers are now publicizing unmetered services for web browsing, email, and other critical functions, but “streaming time allowance” is the main influencer on subscribers’ quality of experience. Limiting video quality to 720p is now standard among platforms so that users can enjoy faster streaming time, albeit sacrificing video quality. Even with these measures, data caps are still very restrictive with the current balance between ARPUs and capacity pricing. However, once prices decline below 100 USD/Mbps/Month, data allowances can grow generously, activating demand elasticities.
On the Enterprise VSAT side, Gagan Agrawal, NSR Senior Analyst and report co-author, comments, “Growth returns in the enterprise segment. Backhaul remains the key vertical and will generate 55% of cumulative revenues in the next 10 years. HTS is also revitalizing Social Inclusion, as multiple governments adopted a ‘wait-and-see’ attitude before the architecture matures. While some regions continue under turbulent times, Asia has generated excellent growth with numerous big deployments.”
Business models need to adapt to the new ecosystem. Operators are getting closer to end-customers, deveolping closer partnerships with equipment vendors and distributors, at times building their own offers to go direct-to-market in emerging applications like Backhaul. But the skillset to achieve this is not easy to develop, triggering an active vertical M&A market. At the service level, value is climbing to higher layers, like security or app-specific tools, as connectivity commoditizes. Building meaningful partnerships and/or reaching scale to develop those tools will be critical to stay differentiated.