The Satellite Mobility market consists of three key verticals: the aeronautical/in-flight; maritime and land mobile communications on the move (COTM) markets. Of those three markets that cover the air, sea and land, two of those verticals are probably the hardest hit sectors of the satellite industry by the ongoing global COVID-19 pandemic.
In the last few years, the aeronautical and maritime markets, where satellites have little or no competition from terrestrial networks, was touted as the next wave driving demand for satellite services and equipment. The restrictions to movement and the steep decline in air travel and the complete shutdown of the cruise industry has severely impacted the bottom line of satellite service providers and ground equipment manufacturers who invested heavily in the aero and maritime markets.
The global pandemic hit the aero and maritime markets hard with a number of high-profile bankruptcies such as GogoAir and Speedcast, among others.
However, while the short-term prospects in the aero and maritime markets may look dim, the outlook for the aero and maritime markets are actually quite promising according to research findings by key consulting firms.
The Aeronautical Market
The recovery of the airline market is already underway according to a survey for an event called “FlightPlan: Charting a Course into the Future” conducted by Inmarsat and the Airline Passenger Experience Association (APEX). The poll – completed by more than 500 professionals from across the global aviation industry between April and June 2020 – shows that more than half of respondents (60%) expect a recovery period between 18 months to three years. Despite bracing for a slow recovery, the poll reveals a sense of optimism for the industry’s future, with digitization expected to drive the return to profitable growth.
Philip Balaam, President of Inmarsat Aviation, said: “The immediate priority for airlines and the wider aviation industry is clearly surviving the unprecedented impact of COVID-19. Aviation is taking its first steps towards a recovery and it is encouraging that many in this industry have been proactive in adapting and planning for the future. These survey results, together with the numerous discussions and debates during FlightPlan, indicate that the COVID-19 crisis may prove a decisive moment for digital transformation in an industry that’s historically been behind the curve, with the vast majority of aviation professionals expecting digital technologies to help drive a stronger return towards profitable growth.”
Research and Markets projected that the the Global Airborne Satcom market accounted for US$5.51 billion in 2018 and is expected to reach US $9.80 billion by 2027 growing at a CAGR of 6.6% during the forecast period according to Research and Markets. Rise in long-haul flights and traveller traffic and raise in the number of high-throughput satellites are the major factors propelling the market growth.
As the APEX survey revealed, it might take 18 months to three years for the aviation industry to recover, but in the meantime satelltie executives I’ve interviewed see opportunties in aero applications for defense, goverment and the Unmanned Aerial Vehicles (UAV) markets.
The Maritime Market
In its latest research titled, “Prospects for Maritime Satellite Communications,” Euroconsult projects that the previously growing maritime connectivity market will experience a significant setback due to the Covid-19 pandemic. Maritime VSAT connectivity reached an all-time high of 28,200 connected vessels at the end of 2019 but because of the current health crisis, the previous projection of 49,300 terminals by 2023 has been reduced to 40,600 units.
In 2019, the Maritime satellite VSAT communications market experienced high growth with the total number of terminals increasing by 17.5 percent year over year, and VSAT services revenue growing by 11 percent to approach $1.3 billion. Increasing demand from passengers, as well as regulatory pressure on communications and crew welfare were major factors pushing maritime operators to install new generation satellite systems on their vessels.
“Despite the current setback, the fundamentals of maritime connectivity should continue to apply, with strong demand from the shipping industry as well as for leisure and business connectivity and operational applications,” said Pacôme Révillon, CEO of Euroconsult. “In light of technology advances and the appetite for applications and bandwidth we expect the industry to return to growth in two years’ time.”
The research provides detailed analysis of five market segments including merchant shipping, the cruise industry, offshore energy production, fishing, and private yachting, all of which are expected to reflect some slowing in the current environment. Merchant shipping is the largest market segment for VSAT with 17,700 connected vessels and revenues of US$ 565 million in 2019.
“Because of the current limits on international trade and the economic downturn resulting from the pandemic, new ship deliveries and the subsequent VSAT installations they entail are forecast to slow,” said Xavier Lansel, Senior Consultant at Euroconsult. “Despite the presence of fixed contracts, docked vessels will likely result in a lower average revenue per user for connectivity services.
The cruise industry was also a major demand driver for maritime satellite connectivity. In some cases, service provider revenues reached US$ 110,000 per month for the largest cruise ships. This is expected to be the market segment most impacted by the current health environment, with most ships temporarily docked.
Euroconsult forecasts that the cruise industry slowdown will continue for several years prompting cost-reductions and delaying demand for new vessels. Even as fast internet connectivity has become a requirement for cruise ship passengers there will be a sharp decrease in VSAT services revenue in 2020, and projections are that it will take until 2025 for revenues to reach 2019 levels again.
Land Mobile Satcom
The bright spot in the mobility market is the land sector. NSR’s Land Mobile via Satellite, 8th Edition, released in July, finds that satcom land mobile markets continue to have a strong future, with over 750,000 new in-service units coming over the next decade, across nine distinct applications. Many of these units will trend towards higher ARPU levels with enhanced revenue prospects, despite a near-term COVID-19 revenue dip. Connected vehicles play a major role in long term growth, as broadband overtakes narrowband demand across all land mobile applications.
In the near-term, COVID-19 is having, and will have, a more muted impact on land mobile revenues with enterprise users, especially when compared with aeronautical and maritime mobility markets. Nonetheless, the greater uptake of satellite service by consumers in the last few years, especially for eco-tourism purposes, has resulted in a greater revenue decline in 2020 and 2021. However, the upside is that device de-activations remained at similar levels to 2019, so there will not be a “COVID-19 plunge” across land mobile, providing much-needed near-term optimism for the market according the report.
While the past has been dominated by lower ARPU L-band devices, flat panel antennas (FPAs) will soon hit the market and longer-term will begin generating outsized revenues for mobility applications, especially for first responders type vehicles. A high-growth scenario for connected cars is also forecasted for a set of conditions, where satellite capacity and FPAs can proliferate in the consumer vehicle space according to NSR.
“The emergence of LEO constellations is driving a wave of investment and innovation in FPAs,” said World Teleport Association executive director Robert Bell. FPAs which can be used for all mobile applications are considered the one of the most innovative advances in satellite technology in recent years. However, it full commercial deployment is facing some technical and financial challenges. Among the issues FPAs have to surmount include coming us with a product that is competitive in price.
Conclusion
The big takeaway from all the recent research on the prospects of the satcom mobility market is that the fundamentals of the sector are sound and that recovery is inevitable. As Carl Novello, CTO of NXTCOMM, who has been heavily involved in the developmentof FPA said: "The underlying fundamentals that is driving the satellite mobility market such as the need for communications connectivity have not changed due to the pandemic. The fundamentals remain sound and the outlook is very positive." If anything, the pandemic and the temporart setback in the aeronautical and maritime markets is an opportunity to jumpstart the development of FPAs ans other innovations in the comms on the move segment, according to Novello.
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Virgil Labrador is the Editor-in-Chief of Los Angeles, California-based Satellite Markets and Research which publishes a web portal on the satellite industry www.satellitemarkets.com, the monthly Satellite Executive Briefing magazine and occasional industry reports called MarketBriefs. Virgil is one of the few trade journalists who has a proven track record working in the commercial satellite industry. He worked as a senior executive for a teleport in Singapore, the Asia Broadcast Center, then-owned by the US broadcasting company CBS. He has co-authored two books on the history of satellite communications and satellite technology. He holds a Master’s in Communications Management from the University of Southern California (USC). He can be reached at virgil@satellitemarkets.com
