NSR’s Satellite Capacity Pricing Index, 5th Edition (2019), finds accelerated pricing decline across operator segments, with a global average decline of 18% over the past 12 months. NSR’s Global Mean Price Index for video declined by 7.1%, mobility by 13%, with the data segments declining by as much as 24%. The key driver for such a large market correction is attributed to cheap and bulk supply of HTS capacity that has rendered legacy satellites increasingly obsolete. Increasing backhaul, cruise, and broadband deployments have given a boost to the capacity demand, albeit underscoring the topline through price elasticity.
NSR projects video will continue to decline at a faster rate of 11% in 2019-2020 on account of increased compression rates and high market saturation. Mobility is also expected to decline faster with developing country opportunity and increase of cruise bandwidth demand in the total maritime market share. “These drivers mark a key shift in satcom dynamics and represent not only a commoditized market but also a higher rate of capacity commoditization than anticipated in 2018. Operators have been slow in transitioning to service business lines, keeping hinged on legacy lean organizational structures, while service providers look to ramp up growth in aero-backhaul-consumer segments for a 4th straight year,” states Gagan Agrawal, NSR Senior Analyst and report author.
While prices are falling, regions of significant demand still exist across developing countries for backhaul and village Wi-Fi that may support marginal revenue increase via volume deals, whereas Aero and Gov/Mil segments will continue to grow in under-served regions and drive profitability – but only for the right asset match. Operators will need to strengthen tiered pricing and improve efficiency via inclined orbit, localised HTS payloads or Non-GEO assets. Focus on increasing demand through price elasticity remains paramount to growth, and enabling new sub-verticals in aero, broadband and Gov/Mil could give operators an upper hand to differentiate premium vs volume offerings.