The beginning of 2019 has seen a flurry of satellite-related announcements, most of which are following wholesale business models. Although it is unlikely that all the planned fleets of satellites will reach commercial service, the desire to provide ubiquitous, high-capacity, and high-quality broadband and backhaul services across the globe is driving rapid growth in the satellite market. Satellite service providers should concentrate on wholesale business models because the retail demand for remote broadband connectivity is far too fragmented to be addressable directly.
Wholesaling satellite service providers point the way
Satellite-based communications is the only commercially viable option for providing broadband connectivity and backhaul services to many distant locations and communities, to remote mobile users, or at short notice. It is too expensive to roll out fiber-optic cables to every town and village, mine, or farmstead, and technically impractical to provide cellular communications to ships and aircraft around the globe. Advances in miniaturization, power generation, and launch technologies have increased the capabilities and affordability of modern satellite fleets making them a realistic option for communications service providers.
To exploit these opportunities, most of the new generation of satellite service providers are choosing to deploy wholesale business models, selling to fixed and mobile operators, aggregators, and distributors rather than attempting to sell their services direct to consumers, enterprises, and government agencies. These satellite service providers can reach vast numbers of potential users more easily by wholesaling their services through partners with greater knowledge and experience of local target markets.
In February this year, OneWeb launched the first six of its satellites into Low Earth Orbit (LEO), an altitude of less than 2,000km. Although it will take until 2021 to complete the fleet of 648 satellites, OneWeb has already announced its first two wholesale customers. Talia will use the service to provide broadband to consumers using WiFi connections from its ground stations, and Intermatica plans to use OneWeb to support business broadband and VoIP. In the same month, Iridium switched over from the last of its 20-year-old satellites to its new fleet of 66 LEO second-generation IridiumNEXT satellites, without interrupting its service. The new generation of IridiumNEXT satellites offer global broadband, tracking, IoT, voice, and other services through a network of global partners and distributors. Sky & Space Global (SAS) is also proposing to follow a wholesale model, selling the communications services of its projected fleet of about 200 satellites through a variety of service partners, including Brazil’s AltaRede and Inovsat Telecom, and India’s Globe Teleservices.
The most ambitious satellite-based broadband projects announced to date are SpaceX’s Starlink network and Amazon’s Project Kuiper, both of which will apparently use thousands of LEO-based satellites to provide low-latency, high-speed broadband connectivity to unserved and underserved communities around the world. At present, it is not clear what business models these two initiatives will pursue. However, we recommend that they too develop a wholesale business model. The retail demand for broadband connectivity in remote places is highly fragmented and extremely difficult to serve without local contacts and experience. By working with established retail communications service providers and distributors, satellite service providers can reach a greater target market more quickly and effectively than they can directly.
"Satellite's entry into mainstream begins a new boom period," TE0012-000603 (July 2017)
"Satellite announcements confirm the importance of wholesale service models,” TE0012-000590 (February 2017)
Wholesale Satellite Services: Ready to Meet the Broadband Challenge, TE0012-000578 (September 2016)
David James, Practice Leader, Wholesale Telecoms