The broadband satellite market over the last two years has been very successful with consistent gains in sites, subscribers and revenues. The strong growth recorded in 2007 flowed through into 2008, and as of the writing of this study, the market appeared to still be holding up in most parts of the world. While many in the industry are confident that the broadband satellite sector will weather the current difficult economic climate only lightly scathed, there is no doubt a strong undercurrent of uncertainty. The sales process has been slowing for broadband VSAT networking services, satellite capacity issues and high capacity prices are impacting certain markets, fiber and undersea cable continues to be rolled out impacting trunking services, and no one today is sure to what extent various government programs to bring broadband to rural areas in developed countries will truly help single site satellite broadband service providers.

The general consensus is that as long as the global economic downturn bottoms out in 2009 and true growth returns by the end of the year, the satellite broadband market should come through these dark days in relatively strong shape. However, if the crisis continues well into 2010, then all bets are off, and damage to the industry could start to pile on.

It is NSR’s view that Q2 and Q3 2009 will be the real indicators of how the satellite broadband market will end up faring the economic downturn. Key to watch will be the sales process and how quickly, or not, deals will close. This applies both to the broadband VSAT networking and trunking and backhaul segments. The single site satellite broadband Internet access market appears to be somewhat more insulated because people are spending more of their leisure time on the web as opposed to spending discretionary income elsewhere. Further, broadband access is being seen ever more as a necessity in life (at least for developed countries), and households and businesses are more willing to sacrifice in other areas in order to maintain a broadband service.

Nonetheless, the upfront costs of taking on a single site satellite broadband service is still viewed as challenging by some, and continued difficult economic times make this barrier appear ever higher. The move by North American service providers like WildBlue and Hughes to leasing of equipment is certainly a step in the right direction, and government programs like the Australian Broadband Guarantee Program, which NSR truly hopes is emulated in one fashion or another in North America and Western Europe, is another. Still, even the single site satellite broadband Internet access market is bound to be impacted if the global economic crisis continues beyond 2009.

In this eighth edition of the Broadband Satellite Markets study, NSR continues to maintain its consistent, bottom-up approach to modeling and forecasting demand for broadband VSAT networking services, single site satellite broadband Internet access services, and the broadband trunking and backhaul sector. Compared to one year ago, the most substantial change to NSR’s view on the market is the realization of the severity of the current economic crisis roiling global markets and the impact this could have on demand as described above.

On the most uppermost level, NSR is generally confident that the broadband satellite markets assessed in this study will make it through these difficult economic times and, in fact, it is likely that there will be a spike in demand in the 2011-2013 period. This is driven by the assumption that delayed projects will be restarted as economic conditions improve, plus a number of satellite launches expected in 2009 and 2010 should ease some capacity constraints on certain markets, such as Sub-Saharan Africa, the Middle East & North Africa, and Latin America, so that projects that had been blocked because of capacity issues will be able to roll out.

Beyond 2014 the picture is somewhat less clear, but NSR currently does not see any reason to expect anything less, on a global average, than growth at least equal to historical rates of the last several years.

For the forecasts in this Broadband Satellite Markets, 8th Edition study, NSR continues to use a bottom-up methodology that starts with an assessment of the number of active broadband VSAT sites or satellite broadband Internet access subscribers in each region under investigation for the end of year 2008 and then projects forward growth in each market segment based on a detailed analysis of regional growth drivers and restraints. This forms the core of each forecast and drives all other aspects of the forecast. Once the sites or subscribers assessment is completed, NSR next estimates revenues generated from service fees and customer premises equipment (CPE) sales. Then NSR forecasts total satellite bandwidth demand needed to provision all services and, finally, the portion of this bandwidth that comes from commercially leased C-, Ku-, and high throughput satellite (HTS) capacity.

Forecasts by Market Segment
Global Site and Subscriber Forecasts

• The base forecasts for the BBSM 8th Edition study, upon which all further projections are made, are for one-way and two-way broadband VSAT networking sites, single site satellite broadband Internet access subscribers, and broadband trunking and backhaul sites
• The forecasts are made individually for North America, Latin America, Western Europe, Central & Eastern Europe, the Middle East & North Africa, Sub-Saharan Africa, and Asia Combining the global base of broadband VSAT networking sites, single site satellite broadband Internet access services subscribers, and broadband trunking and backhaul sites, NSR forecasts a better than tripling of the worldwide installed base and a net gain of over 4.8 millions sites/subscribers
• Single site satellite broadband Internet access services will lead the way with a projected net global gain of better than 3.8 million subscribers. North America will be the biggest market over the entire forecast period, and Western Europe will quickly come to dominate second place with the fastest rate of subscriber growth
• Broadband VSAT networking services will see sustained gains from both corporate clients and government projects with an anticipated net gain of almost 1.1 million sites. Two-way broadband VSAT services will dominate the market, and North America will remain the single most important region. Yet, Asia and Sub-Saharan Africa will have some of the fastest rates of site growth, and Latin America will have the third largest net broadband VSAT site gain after Asia and North America
• The broadband trunking and backhaul market is no doubt the smallest of the three addressed, but it does generate the highest revenues per installed site, making it a very critical sector for the market. Total trunking and backhaul sites will increase by better than 2.4 times driven by growth in backhaul for cellular and broadband wireless access networks. Developing parts of the world will account for the most new demand with Sub-Saharan Africa leading in terms of net site gains, followed closely by Asia and then the Middle East & North Africa

Global Service & CPE Revenues Forecast

• Service revenues come from per-site fees paid by customers to managed service providers for the VSAT network or trunking/backhaul site. In the case of dedicated hubs, this is equivalent to capacity leasing and maintenance costs that a company or government agency would pay. For a single site satellite broadband Internet access service, service fees are the monthly subscription fees paid by the service user Customer premises equipment (CPE) revenues come from the sale of all hardware and software needed by the customer for each VSAT or single site satellite broadband location. The service revenues described above specifically exclude any CPE revenues
• NSR projects that total service and customer premises equipment revenues to be generated by the broadband satellite market will climb from US$3.3 billion in 2008 to over US$7.6 billion in 2018, representing a net gain of some US$4.3 billion
• Service revenues account for around 90% of all revenues in the industry over the ten-year forecast period and will be growing at a substantially faster rate than CPE revenues. This illustrates the importance industry players place on moving into the services side of the market
• North America will be the single biggest market in service and CPE revenue terms; however, Western Europe will have one of the fastest rates of growth based on NSR’s expectation that single site satellite broadband services are on the verge of breaking out in this region

Global Bandwidth and Leased Commercial TPE and Capacity Demand

• The bandwidth forecast conducted by NSR includes all satellite bandwidth, whether originating from commercial or dedicated satellites, used to provision services for broadband VSAT networking, single site satellite broadband, and broadband trunking and backhaul. For this study, NSR classifies Wildblue-1 and Spaceway-3 (plus any follow-on satellites for these companies) as the only dedicated satellites active in the market
• As stated in previous years, it is both growth in sites and subscribers as well as the increasing amount of bandwidth provisioned to existing sites and subscribers that are the underlying trends in the bandwidth demand assessment Single site satellite broadband Internet access services will quickly become the largest consumer of satellite bandwidth, and North America will be the leading region due to its strength in both single site Internet access and broadband VSAT networking services
• Beyond transponder leasing of classic C-band and Ku-band FSS capacity, NSR has defined a new categorization for the “high throughput satellites” (HTS) that are playing an ever more predominant role in broadband satellite markets. These are satellites or payloads that have at least twice, but usually many times more, the throughput of a classic FSS satellite for the same orbital spectrum allocation
• In very general terms, trunking and backhaul services are driving most of the C-band capacity demand gains, while broadband VSAT networking and again trunking and backhaul services are behind the increasing demand in Ku-band FSS capacity
• It is single site satellite broadband Internet access services that account for most of NSR’s anticipated gains in leased commercial HTS capacity, though broadband VSAT networking services are increasingly expected to be provisioned by HTS capacity later in the forecast period