Cellular backhaul via satellite is a big sector for the satellite industry. It is also a vanishingly small percentage of total backhaul. In 2020, the arrival of 5G has offered a similar paradox: hundreds of megahertz of C-band capacity have gone to feed the bandwidth appetite of 5G, yet 5G is the first cellular standard that is incorporating satellite as a native backhaul option. Our industry could be forgiven for feeling some whiplash.
In December, the World Teleport Association published a report, Teleports and the 5G Opportunity, that makes sense of all this for satellite service providers. Here are some of the key findings for managers who need to make vital decisions about their cellular backhaul strategy.
5G is Already the Fastest-Growing Generation of Wireless Tech in History
China, South Korea and Japan are the biggest drivers of growth, and adoption is being aided by the ability of mobile network operators (MNOs) to repurpose existing 4G/LTE spectrum, base stations, core and transport networks for 5G, thanks to the Evolved Packet Core standard introduced for 4G/LTE. Compared with 4G/LTE subscribers, 5G mobile subscribers consume twice the volume of data, and much greater data growth is expected from non-consumer markets.
The 5G Rollout Coincides with an Historic Drop in Backhaul Pricing
Satellite has long represented the only effective solution to extending mobile networks into low-density or geographically challenged markets. But it was always a last resort because of the high cost of capacity and ground equipment. The dramatic success of high-throughput satellite (HTS) architecture has completely changed the financial equation. Massive increases in effective bandwidth have driven capacity prices down¬ward. For MNOs, connectivity costs have passed through US$ 3 per Gbyte on its way to US$ 2, the sweet spot for backhaul. Meanwhile, higher Ku and Ka-band frequencies allow for smaller antennas, while advances in ground segment technology have shrunk size, cost and power consumption. It is a good time for satellite to become a much cheaper backhaul option, because average revenue per user (ARPU) has been falling for MNOs.
5G Will Become the Unified Network Platform, Changing Satellite in the Process
NSR forecasts that 5G will generate $21 billion in 2019-29 cumulative revenue for fixed satellite services, mostly from backhaul. But what makes the standard truly ground-breaking is that it has been designed from the ground up as a network of networks that can seamlessly integrate technologies including satellite into the 5G core. These advanced features mean that 5G has the potential to become a unified network platform, which satellite services can adopt to deliver plug-and-play convenience to fixed and mobile network operators. That alone will significantly increase satellite’s appeal as a backhaul platform. But there will be another bonus: satellite service providers will be able to take advantage of 5G’s incorporation of the latest developments in software-defined networks, cloud services and virtualization, saving them from having to re-invent the wheel to optimize their own operations.
There Will Be Major Opportunities in Enterprise-Grade Services
A final benefit expected from the 5G rollout is the fact that MNOs plan to concentrate on enterprise-grade services for corporate networks, oil and gas and maritime, where they can most quickly monetize their investment. Lower satellite prices overall, and the unique capability of satellite to dynamically allocated a shared pool of bandwidth, may create a completely different business case in select rural areas where there is likely to be strong demand for 5G capabilities: oil and gas basins, wind farms and solar stations, military installations and remote industrial plants, mining regions and large farms.
The good news is that these markets align perfectly with the verticals already serviced by teleport and satellite operators. The evolution of 5G will also create “islands” of connectivity in places otherwise lacking good terrestrial broadband: large resorts in developing economies, national and state parks, and tourist towns in wilderness areas.
Meanwhile, the 5G rollout to consumers will follow the pattern of previous generations: first in dense urban areas where customers are plentiful, then in suburbs and finally in exurbs and truly rural areas where MNOs will turn to satellite. 5G backhaul for consumers may take many years to become a meaningful opportunity in most of the world.
IoT? Not So Much
Since the beginning of commercialization of 5G, one of the use cases most frequently cited is for Internet of Things services. But our report is skeptical about the opportunity. Most IoT devices transmit tiny bursts of data at intervals. As one technology executive put it, “There are millions of IoT terminals out there now, many of which are still using 2G, which is well suited to this market segment. In the future, there may be applications that require low latency, but right now the vast majority of IOT applications do not.” IoT is about statistics and observing, he noted. Things like smart meter reading or connecting vending machines need a cheap chipset and wide coverage that 2G or L-band satellite provide.
WTA interviewed executives from teleport, satellite and tech companies to produce the report, and many were skeptical about the size of the opportunities and the costs operators would have to take on to access them. But on the other side of the equation is revenue. Most of the operators interviewed are already working with MNOs in some way, from one managing a satellite network backhauling from 12,000 cell sites in developing nations to a company already delivering content to edge servers at cell sites for Netflix. They see 5G as a step-change that requires careful navigation but will be well worth the journey.
Teleports and the 5G Opportunity is available for free to members and for sale to non-members at https://www.worldteleport.org/store/viewproduct.aspx?id=17555841.
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Robert Bell is Executive Director of the World Teleport Association, which represents the world’s most innovative teleport operators, carriers and technology providers in 46 nations. He can be reached at rbell@worldteleport.org “High Performance: Insights That Improve Quality of Service” is available for free to members and for sale to non-members at https://www.worldteleport.or
