Ongoing Price Wars, Consolidation Seen for Satellite Industry

"I don't think we have hit bottom" on prices, especially with point-to-point connectivity, said Asia Broadcast Satellite CEO Thomas Choi, saying video distribution is more price resilient. He said those price declines will continue for three to four years, until the rollout of 5G, which could then eviscerate satellite by hugely lowering the cost of terrestrial delivery of rural broadband. He said the 2019 World Radiocommunication Conference will likely see wireless interests making big pushes for access to 20 GHz and 30 GHz spectrum for that 5G effort.

However, countered Pierre-Jean Beylier, SpeedCast CEO, mobile network operators don't care as much about rural areas, and 5G deployment costs will be huge, leaving satellite "a play at the edge."

Many experts at Satellite 2017 said the ongoing price pressures could, on the upside, open the door to satellite access. Panasonic Avionics Vice President-Global Communications Services David Bruner said there are price wars in areas with competition and good capacity supply, but some areas of the world are operating in a capacity shortage and will remain that way for at least the next couple of years. He also said satellite operators' prices are dropping, but buyers of that data capacity are contracting for much more capacity. "The industry will be just fine," he said.

The satellite industry is in an investment bubble with numerous investors likely losing money over the next five years, said satellite analyst Chris Quilty of Quilty Analytics. "There are 50 or 60 launch companies in development. The world does not need 50 or 60 launch companies," he said. Others said they saw the industry as on the cusp of long-term growth. Asked about the thousands of low earth orbit (LEO) satellite proposals now before the FCC, Global Eagle Entertainment Executive Vice President-Aviation Connectivity Joshua Marks said the question is whether there's a commensurate level of demand to be served by all those constellations. He also said he's "pretty optimistic" about demand levels, likening LEO operators using small satellites to terrestrial wireless networks densifying their networks with cell deployments. But he also said industry consolidation is likely in coming years

After declines in service revenue growth in 2015 and 2016, the satellite industry seems to have bottomed out, said Wells Fargo analyst Andrew Spinola. He said the video distribution business in mature markets like the U.S. is likely facing continual revenue drops year over year due in part to over-the-top video (OTT) substitution helping with the ongoing cable subscriber declines. But he said video distribution remains a growth business for satellite in emerging markets like Latin America. He said the declines in military work probably have hit bottom in the Iraq/Afghanistan drawdowns, and broadband should see double-digit growth this year and next. But Spinola said Wall Street remains skittish about satellite: "Memories of the late '90s still exist in 2016."

In most nations, vast numbers of consumers still are watching sizable amounts of linear TV, making it practically impossible and hugely cost prohibitive to move all that video distribution traffic to OTT, said Jean-Hubert Lenotte, Eutelsat chief strategy and strategic marketing officer.

Mergers and acquisitions remain one of the best opportunities for satellite, Spinola said. "There are way too many players in this space," he said, saying EchoStar seems best positioned to pursue such deals. EchoStar didn't comment

Numerous speakers talked about emerging disruptive technology trends. Kratos Vice President-Advanced Technology Stuart Daughtridge said work is going on toward virtualizing ground systems so antennas can be placed in separate locations from ground processing, calling the ability to locate those independently "critical." He also said the insatiable demand for connectivity is driving demand for low earth and medium orbit constellations but such constellations bring with them very different grond infrastructure and interference mitigation needs from geostationary orbit constellations. With LEO and MEO, interference is transient but repeating event.

Satellite and terrestrial mobile "have to figure out how to cooperate and work together," said iDirect Senior Vice President-Engineering and Emerging Technology Wayne Haubner, with 5G deployment and software defined networks being such overlap areas. With the growing demand for complementary satellite systems, the industry needs to have a bigger voice in spectrum allocations in coming years, especially as high-throughput satellite use necessitates moving into higher-frequency feeder links such as the V and Q bands, said Adrian Morris, chief technology officer at Hughes. Added Communications Satellite Consultants Principal Denis Curtin, "That’s gong to be a real fight.”

The unaddressed issue about the legions of LEO satellites being proposed is space traffic management and controlling those swarms of objects, “any one of which can cause complete havoc up there," said Chris Kunstadter, global underwriting manager-space, XL Catlin.