1

Routes to Market Report

04 - Satellite Technologies for Broadband to Ships

2

Contents

1. Introduction ..................................................................................................................................... 4

2. Market Overview ............................................................................................................................ 4

2.1. Commercial shipping .............................................................................................................. 4

2.2. Leisure Marine ........................................................................................................................ 5

2.3. Fisheries .................................................................................................................................. 5

2.4. Offshore Platforms .................................................................................................................. 6

3. Market opportunities for Broadband to Vessels: ............................................................................ 6

3.1. Secure connectivity for enhanced business and operational integration. ................................ 6

3.2. Crew welfare – Future Training and Health & Safety solutions ............................................. 6

3.3. Services for Small Autonomous Surface Vessels and Maritime Sensor Networks: ............... 7

3.4. Enhanced e-Navigation with Route Optimisation ................................................................... 8

3.5. Broadband Services Enabled by Phased Array Antenna for Leisure Marine, Fisheries and

Ferries: ................................................................................................................................................ 8

4. The customer or end user for Broadband to Vessels ....................................................................... 9

4.1. Secure broadband connectivity for enhanced business and operational integration: .............. 9

4.2. Crew welfare – Future Training and Health & Safety solutions ............................................. 9

4.3. Services for Small Autonomous Surface Vessels and Maritime Sensor Networks ................ 9

4.4. Enhanced e-Navigation with Route Optimisation ................................................................... 9

4.5. Broadband Services Enabled by Phased Array Antenna for Leisure Marine, Fisheries and

Ferries: ................................................................................................................................................ 9

5. Proposition to the customer and end user ..................................................................................... 10

5.1. 1. Secure connectivity for enhanced business and operational integration. .......................... 10

5.2. 2. Crew welfare – Future Training and Health & Safety solutions ....................................... 10

5.3. 3. Services for Small Autonomous Surface Vessels and Maritime Sensor Networks .......... 10

5.4. 4. Enhanced e-Navigation with Route Optimisation ............................................................. 10

5.5. 5. Broadband Services Enabled by Phased Array Antenna for Leisure Marine, Fisheries and

Ferries: .............................................................................................................................................. 10

6. Alternatives and Competition for the Opportunity ....................................................................... 11

7. The Role of UK Space Companies in Providing Broadband to Vessels ....................................... 11

8. Revenue Projections ...................................................................................................................... 12

9. SWOT analysis ............................................................................................................................. 13

9.1. Opportunity 1. Secure connectivity for enhanced business and operational integration. ..... 13

9.2. Opportunity 2. Crew welfare – Future Training and Health & Safety solutions .................. 13

9.3. Opportunity 3. Services for Small Autonomous Surface Vessels and Maritime Sensor

Networks: .......................................................................................................................................... 14

9.4. Opportunity 4. Enhanced e-Navigation with Route Optimisation ........................................ 14

3

9.5. Opportunity 5. Broadband Services Enabled by Phased Array Antenna for Leisure Marine,

Fisheries and Ferries: ........................................................................................................................ 15

10. Key Actions to Exploit Opportunities: Barriers/Enablers ......................................................... 16

11. Market Dynamics ...................................................................................................................... 16

11.1. Dynamics of the Maritime Satellite Sector ....................................................................... 16

11.2. Dynamics of the Commercial Shipping Industry .............................................................. 17

11.3. Global Fishing Fleet .......................................................................................................... 18

11.4. Superyacht Fleet ................................................................................................................ 18

12. Market Trends ........................................................................................................................... 18

4

1. Introduction

This report covers the global shipping industry which includes vessels such as Commercial ships (Tankers; Bulk; Containers; Reefers; Supply Vessels and work boats), Large fishing vessels (the smaller artisanal boats under 10 meters are not part of this report’s focus), Passenger (Cruise Ships and Ferries), Leisure marine (Superyachts and larger privately owned or chartered pleasure vessels). This report does not include vessels for military or naval use. The international nature of the commercial shipping industry requires that this report covers global activities of the maritime sector. Data is derived from global studies but the information about companies and supply chains tends to reflect business in Western Europe and to some extent the Far East.

2. Market Overview

The mobile VSAT (Very Small Aperture Terminal) market is currently valued at $600-700 million, and is buoyant with maritime revenues expected to grow at 15% CAGR from 2015-2025 (Euroconsult) doubling the number of maritime VSAT installations to 2020. These services have enabled shipping companies, cruise ship operators and service vessel companies to realise the benefits of broadband at sea. This has led to a pent-up demand for applications using broadband with specifications like that of terrestrial offices and homes, which is now available from systems such Inmarsat’s Fleet Xpress (Ka Band). There is a direct upgrade path from narrow “L Band” to broadband for many vessels especially with company’s such as Inmarsat having a good penetration of the global maritime market (Inmarsat claims 80% of commercial vessels). However, the provision of communication satellite bandwidth to the maritime sector is in danger of becoming oversupplied. The trend to the commoditisation of bandwidth and reduced prices requires UK space companies to move along the supply chain to provide value added services such as content and applications. This requires a greater understanding of the customer’s business and their supply chain.

2.1. Commercial shipping The commercial industry operates on low margins and is driven by compliance with regulations as opposed to business improvement through innovation or a desire to satisfy customers. The counter cyclical nature of investment in vessels and long lead times of ship building reduces the demand from ship owners/operators to invest in new technology including satellite communications. The commercial shipping sector is highly distributed both in terms of shore based personnel at their company’s international offices and the vessels at sea. It is therefore often complex and expensive to sell services and products to the commercial maritime sector. With ships either at sea on in distant ports when it is time to install or maintain equipment, the cost of sales and support to shipping customers considered to be difficult and expensive. The total number of commercial vessels greater than 1,000 gross tonnes is circa 64,000 (Clarksons 2014) and currently reducing as new builds decline. When compared to other industries, this is a small number of assets, of varying age and design and purpose (e.g. tankers, bulkers, containers, cruise & ferry, car carriers, support vessels etc) often with mixed fleets owned by a shipping line but operated by ship managing companies, making engagement with “the customer or decision maker” complex.

5

The commercial maritime ICT market is small and less innovative than the shore based equivalent. Prices of maritime ITC and support are relatively high, leading to a reluctance to upgrade equipment, and ultimately a large variety of systems deployed across the global fleet. Commercial vessels of the future will be “Smart Ships” seamlessly connected with “Smart Ports” as just one part of the integrated global supply chain. But to achieve this, cost effective broadband services such as Inmarsat’s Fleet Xpress or Intelsat One Flex, are needed to support a growing number of business and operational solutions. However, the commercial maritime sector is slow to increase vessel to shore connectivity as the ship operators and their IT directors of concerned about the threat of Cyber Attacks. Traditionally, the unconnected ship was perceived as not being threatened by the same level enterprise cybercrime. In addition, Captains are seldom trained to defend against cyberattacks and many ships do not have an experienced IT manager in the crew, relying instead on shore based IT support from their parent company or a contractor. Smart Ships with hundreds of sensors are now being built or retrofitted and it will not be uncommon for future vessels to generate and transmit 60GB of data per day (Futurenautics Satellite Communications. 2016). However, the uptake Edge computing will eventually reduce the need to transmit large volumes raw data to shore (e.g. for engine condition monitoring) as more processing takes place on board.

2.2. Leisure Marine The fastest growing sector of the maritime market is the leisure marine industry. Driven by a growing global middle class, and ageing demographic with high disposable income, and increased leisure time. The fastest growth is in the Far east and especially China where the development of leisure yachts and marinas to attract high wealth tourists is an economic policy goal of central and regional government. This market is particularly aiming at the 200,000 ‘Ultra High Net Worth’ international households as well as the far larger middle-class market. The UK is well positioned to exploit the global leisure marine sector with a successful luxury yacht builders such as Sunseeker, Princess and Pendennis with over 5000 other companies in the sector. The UK maritime Strategy for Growth report forecasts a £25Bn market by 2020 for UK companies in this sector. The global leisure yacht fleet is estimated between 50,000 to 100,000 vessels over 10 metres of which 5,000 are superyachts over 30 metres. Leisure marine is also more willing to adopt innovation with less constraining regulations and faster decision making than the commercial maritime sector. It is anticipated that the leisure sector will be early adopters of technology such as phased array antennas, novel satellite broadband and high bandwidth content service, the use of augmented reality and a high demand for physical and cyber security services.

2.3. Fisheries The UN Food & Agriculture Organisation (FAO) estimates the global fishing fleet to be 3.5 to 4 million vessels but 65% are less than 10 m with no deck (i.e. open) or mechanical propulsion. Of these 80% are artisanal and based in Asia. One per cent of the fishing fleet is over 24 metres of which half (25,600) are in China. The number of vessels is declining as the industry consolidates. One important driver is the move from wild catch to aquaculture as the main source of fish for consumption. The management and monitoring of offshore ‘mariculture’ and associated support services is expected to generate a high demand for satellite connectivity, including low bandwidth IoT solutions and

6

broadband for vessels and the delivery of services such as CCTV to control rooms of the larger operators.

2.4. Offshore Platforms The use of satellite broadband on maritime platforms other than ships is also a sector that will grow rapidly in the next decade. Advances in robotics, Artificial Intelligence, improved interoperability standards and the reduction of personnel operating in dangerous, remote or boring locations will drive the need for broadband connectivity for both data transmission and command & control. The offshore energy and minerals sector continue to explore and operate in increasingly remote areas, managing deep ocean wells and seabed exploitation requiring facilities such as Floating Production Storage & Offloading (FPSO), command vessels for remotely operated platforms and autonomous vessels for surveying and monitoring. A continuously growing demand from Governments and the private sector for marine environment monitoring and maritime surveillance is also driving demand for innovative autonomous vessels, sensors buoys and ocean gliders that are being equipped with more sensors and are demanded to provide close to real time data. In addition, data from these platforms are being integrated with UAVs and potentially High-Altitude Platforms, all of which will generate high levels of data to be transmitted to user on shore.

3. Market opportunities for Broadband to Vessels:

3.1. Secure connectivity for enhanced business and operational integration. An opportunity exists for broadband satellite communications companies to collaborate with ERP (Enterprise Resource Planning) and fleet management system vendors to provide end to end supply chain connectivity in one highly secure package. Business critical information is shared among a diverse community of stakeholders in the maritime logistics supply chain including Manufacturers, Cargo Shippers, Ship Owners, Operators and Managers as well as insurers of goods, port authorities, customs, surface transport companies and the recipient of the goods. Increasingly the land based stakeholders are being interconnected by e-commerce platforms, JIT (just in time) systems and especially Enterprise Resource Planning systems such as SAP or Oracle ERP. Although some larger shipping companies such as Maersk have integrated their ships into the land based business process, most commercial ships still operate independently from their land based business and other stakeholders. The volume of data generated by business processes continues to increase on shore as bandwidth becomes available, and connected vessels are expected to feed into the systems although bandwidth has traditionally been constrained. Improved ship to shore and ship to ship connectivity enables all stakeholders in the supply chain to benefit from improved transactions via the developing “Maritime Cloud” which improves ease of access to secure vital business information.

3.2. Crew welfare – Future Training and Health & Safety solutions Crew Welfare is currently the largest user of maritime satcoms bandwidth and will continue to grow with new broadband services and content rich applications. Futurenautics estimate the 2014 commercial shipping crew connectivity market to be $2.6 Bn. Crew welfare services are an important element to attract and retain high quality crew. In addition, some ship operators have used revenue derived from crew broadband services (calling home, infotainment etc) to build the business case for installing satellite communications in the first place.

7

Once installed, it is easier for the advocates of ship broadband to extend the use and coverage to additional operational areas. There is an opportunity for UK space companies to work with training and visualisation suppliers to supply globally respected training. On board crew training and certification using the latest simulation or augmented reality solutions will be used for example, engineering and navigation, training course while at sea. Remote monitoring of crew health & Safety (as distinct from “Telemedicine” for which there is a very limited market) is considered by shipping HR professionals and important area that requires new applications and approaches. In addition to traditional crew monitoring that integrates vessel activity with crew tracking, man over board or lone working, the need is to include sleep patterns, stress levels and other health parameters. Depending on policy the appropriate “authority” would provide feedback to the crew member and company doctor. It should be noted that shipping company ICT managers are concerned about the cyber security implications of Crew Welfare services that encourage crew to “Bring Your Own Devise”, citing that on an older vessel, a crew tablet or smart phone may have more computing power than the whole of the bridge and there is seldom a highly trained ICT technician on board to resolve problems.

3.3. Services for Small Autonomous Surface Vessels and Maritime Sensor Networks:

Provide expertise, services and highly secure broadband connectivity in operating remote Autonomous Surface Vessels (ASV) integrated with sensor buoys, UAVs and remotely operated underwater vehicle (ROV) etc. Although fully autonomous commercial fleets are many years away, the use of specialist Autonomous Surface Vessels (ASVs) will grow rapidly over the next ten years initially as monitoring platforms for situational awareness, small work boats or tugs. The offshore survey and Oil & Gas sector will use them as part of a system of systems, possibly operating with UAVs or other Remotely Operated Vessels (ROVs). Oil companies and their service suppliers (e.g. Fugro Subsea or Schlumberger) are adopting ‘Integrated Operations’ in which exploration and production analysts perform their activities in teams onshore, relying on good broadband connectivity from the remote site or vessel. This reduces labour costs and helps with the problem of finding experienced analysts to work in remote locations. This trend is also encouraging the uptake of autonomous vessels, robotics and potentially Augmented and Mixed Reality. There is an immediate demand to transfer large video Currently the defence and security sector leads developments in the smaller ASVs with manufactures such as Atlas Elektronik, BAE Systems, General Dynamics, Mitsubishi Heavy Industries and Raytheon being most prevalent but technologies are being transferred into the civil market, particularly for marine monitoring by firms such as ASV, and Teledyne Marine. These organisations have a challenge of transmitting large volumes of data such as real-time video or sonar bathymetry with very low power budgets. These are much the same challenges addressed and surmounted by the space sector with their fleets of satellites. The billing regime for connectivity is an area that needs to be developed, providing flexible solutions for customers who may need “billing by the hour” as opposed to “all you can eat,” especially if they have to pass charges through to their client. This is particularly the case for organisations that seasonal requirements such as Oil and Gas exploration vessels operating.

8

Expertise and solutions developed in this market will also provide vendors with the capability to develop and operate maritime sensor networks for marine science, safety and security (including disaster warning) monitoring marine environments for commercial and government clients. Fusing data from sources such as Earth Observation (optical, SAR, etc), weather satellites, sensor buoys, High Altitude Platforms, ASVs, UAVs, video cameras and vessel observations, commercial vendors will have the capability to offer information rich services to a wide range of clients. It should be noted that many of the maritime sensors will be deigned to utilise narrow band IoT networks (including 4G when close to shore) as opposed to broadband, but it is anticipated the growth in numbers of sensors and volume of data will require broadband backhaul and as satellite broadband costs reduce broadband will be seen as viable option for data rich applications.

3.4. Enhanced e-Navigation with Route Optimisation The 2008 IMO mandate for the phased introduction of Electronic Chart Display Information Systems (ECDIS) across the commercial shipping sector by 2020 has greatly accelerated the move to the use of Electronic Navigation Charts (ENC) and the greater use of digital data (weather, sea state, route optimisation, cargo manifests, business reporting, condition monitoring etc). The opportunity for UK space companies is to collaborate with ECDIS suppliers (Transas, Furuno, Northrop Grumman, Raytheon), chart vendors (UKHO, C-Map), weather and marine data services as well as maritime business data exchange organisations (Clarkson’s, Lloyds List, DNV GL - Veracity) to use cloud and Big Data technologies to produce a common standard information service that supports both shore based fleet managers and vessel based crew to optimise routes, plan schedules, and link cargo manifests etc to ports and other stakeholders. Partial services are already provided by space related organisations such as KVH working with Applied Weather Technology but these rend to be partial solutions, sold to a relatively small number of existing shipping clients. The opportunity is for a large-scale service delivered over a resilient broadband network which encourages new vendors to offer innovative services globally.

3.5. Broadband Services Enabled by Phased Array Antenna for Leisure Marine, Fisheries and Ferries:

The commercial development of electronically steerable phased array antennas (ESA) by companies such as Kymeta and Phasor are expected to create an opportunity to expand maritime broadband services to smaller vessels including the large leisure vessels sector (estimated to be eighteen million boats) that have previously found installing large, mechanically steerable dish antennas an impractical and expensive method of connectivity. The opportunity for the UK Space sector is to co-operate with the maritime phased array antenna manufactures and the UK leisure marine sector to develop services and support specifically designed to take advantage of the growth of broadband in the global leisure marine sector. This type of broadband system would also be a solution for businesses such as ferry companies that operate beyond terrestrial communications coverage but must provide connectivity for passengers and retail transactions. It is also expected that smaller fishing vessels would benefit from these developments, potentially using broadband for activities such as video monitoring to prove fish discard compliance or providing additional safety and security features for lone workers at sea. In addition, operators’ aquaculture units in remote areas would be able to use higher bandwidth than just IoT solutions to video monitor their facilities to ensure security and fish health.

9

4. The customer or end user for Broadband to Vessels

4.1. Secure broadband connectivity for enhanced business and operational integration:

The primary end user is the shore based business of the shipping company and ship operator. Funding of ‘business solutions’ often receives more board level support than purely ship operational projects. Additional end users of the information are insurance companies, port and customs authorities the cargo shipper. The business case is predicated on more efficient services for the cargo shipper and better fleet management by the ship operator (including savings of fuel and port fees). Ship operators (e.g. V-Ships UK) could be targeted as early adopters. Also, companies offering business systems to shipping industry such as IFS (Industrial and Financial Systems AB), BASS, Inchcape Shipping Services (ShipNET ERP) and SAP or Oracle ERP systems would be able to offer and ‘end to end’ logistics service to their clients with integrated broadband communications.

4.2. Crew welfare – Future Training and Health & Safety solutions The ultimate end purchaser of the service would be a ship operator, however, the satellite broadband enabled service would be sold to or marketed in conjunction with existing crew welfare / H&S service providers such as Snap TV (maritime infotainment), ECDIS Ltd (specialist training) and crewing services such as Northern Marine Manning Services (crew recruitment).

4.3. Services for Small Autonomous Surface Vessels and Maritime Sensor Networks

The customers for integrated broadband services for small ASV would include the developers and suppliers of the vessels themselves. Enabling them to provide a complete Comms package with their equipment. But the combined system of systems approach would also be attractive to companies supplying for example the offshore energy sector such as Gardline or Subsea 7. In addition, science and research organisations would be interested in a broadband network that can link sensor buoys and ASVs.

4.4. Enhanced e-Navigation with Route Optimisation The ultimate end user for the service is primarily the ship operator, both on the vessel (navigator) and on-shore (fleet manager, dispatch planner, port liaison etc). However, the broadband enabled service would be sold in collaboration with ECDIS companies, weather services providers and other shipping data organisations who are part of the value chain. As such the service, with permission of the ship operator would also have benefit for maritime insurance companies, the cargo shipper, and possibly, when combining engine and other equipment performance data, for engineering companies in planning maintenance and servicing etc.

4.5. Broadband Services Enabled by Phased Array Antenna for Leisure Marine, Fisheries and Ferries:

Direct sales would be made to leisure and fishing boat owners via organisations that sell and install maritime electronics. In addition, the broadband service would be available to maritime infotainment providers (possibly Baze, Oceanlink or KVH Media etc) who would be able to bring broadband service to a new leisure market that had previously been able to purchase satellite broadband.

There would also be an opportunity to make direct sales with leisure marine boat builders who could offer a complete Comms package to the customer.

10

5. Proposition to the customer and end user

5.1. 1. Secure connectivity for enhanced business and operational integration. Improved connectivity will enable the vessel to be a seamless part of the enterprise supply chain. This allows the shipping company to offer a better service to their clients and other stakeholders such as freight forwarders and ports, by providing regular status updates on the cargo. This provides a competitive advantage attracting and retaining clients, with the possibility of developing premium, value added services.

5.2. 2. Crew welfare – Future Training and Health & Safety solutions Employee retention and well skilled and certified personnel is vital for vessels with smaller, multitasking crews. As technology on board takes over the roles of some crew members, the remaining crew must expand and increase their skill sets. Time at sea is now expected to include training, which will be administered over the internet from a shore based centre. Following the trends in other industries, training is increasingly interactive and video based. Once trained, the crew have an increased human capital value and ship operators are encouraged to retain staff through improved crew welfare. In addition, IMO (International Maritime Organisation) and ILO (International Labour Organisation) conventions put additional pressure on operators to provide improved health and welfare service to their crew, including broadband connectivity to home, health services, infotainment and educational opportunities.

5.3. 3. Services for Small Autonomous Surface Vessels and Maritime Sensor Networks

Although currently a small market and similar in character to work boats and survey vessels, ASVs have a need to transmit data to shore, often beyond line of sight. Data is traditionally stored to a physical memory and manually transferred from the vessel when it returns to shore. Operators require a cost-effective method of transmitting data from on board sensors without either visiting the platform or waiting for return to port. The benefit of using ASV’s as opposed to manned vessels will be to enable long loiter times without the high cost of crewing. This benefit will be lost if high volumes of data cannot be retrieved without disrupting the platforms operations.

5.4. 4. Enhanced e-Navigation with Route Optimisation The ability for broadband to enable the delivery of richer information for e-navigation and improved route optimisations services will increase safety and reduce wasted time and fuel by ensuring optimal routes are selected for the vessel. In addition, the ability to down load mandated e-charts whilst at sea, in theory, allows a vessel to take routes and charters which had not been scheduled at the beginning of the journey. In turn, this will allow fleets to be operated more flexibly, increasing business opportunities.

5.5. 5. Broadband Services Enabled by Phased Array Antenna for Leisure Marine, Fisheries and Ferries:

Small form factor antennas and broadband satellite connectivity away from the coast, will enable owners and operators of smaller vessels (below 30 meters) to benefit from the same internet services larger vessels enjoy. Ferries will be able to provide cost effective mobile phone connectivity for passengers. They will then be able to provide a range of value added services (onward ticketing, e-purchasing at on-board shops etc.), that they are currently unable to offer. Smaller fishing vessels, with good broadband connectivity will be able to forward sell their catch on e-market platforms as well as use broadband enhanced navigation and vessel efficiency services found on larger ships.

11

The availability of reliable and cost-effective broadband to the leisure marine sector will stimulate an industry developing consumer marine services that could be expected to find a market of many millions of users for innovative applications aimed at a growing and lucrative global market.

6. Alternatives and Competition for the Opportunity

In the maritime broadband opportunities, there are few alternatives to satellite communications (due to the remote location of vessels) but there are various vendors offering a range of bandwidths and pricing propositions. Narrow band services focusing on IoT could be seen to compete with applications of maritime broadband that in fact do not specifically require high band width (engine condition monitoring, or environmental sensor for example). However, when a service platform approach is taken as in most of the opportunities under review, it is possible to use the ‘appropriate’ technical solution, which may include integrated broadband band and narrow band services to provide a cost-effective solution for the customer. The main alternative to broadband would be terrestrial 4G (in future 5G?) or other broadband solutions when a vessel is close to shore or in a dedicated network (e.g. North Sea Oil and Gas 4G relays). In this case the service offering should once again include a seamless switch to the appropriate communications solution.

7. The Role of UK Space Companies in Providing Broadband to Vessels

The global leader in providing international maritime broadband coverage is the UK based satellite operator Inmarsat. In addition to their long-established L-band, which is a narrow band service but with the benefit of high resilience and availability, Inmarsat started marketing their Ka band Global Xpress broadband service in 2016. The Fleet Xpress (FX) broadband service is the maritime focused offering from Inmarsat, combining GX and L-band services. Inmarsat operate through a global network of Value Added Resellers (VAR) and Manufactures (VAM) but also encourage the development of solutions through a Certified Application Partners programme that support the development services using Inmarsat connectivity. As such UK companies can develop applications and solutions for the maritime market with the help of Inmarsat. Sales can be achieved through the Inmarsat Gateway that allows ship clients to purchase solutions from a store of applications which are sold with the appropriate bandwidth costs as part of the package. Although other satellite operators such Eutelsat, SES, Intelsat and Viasat provide broadband for the maritime sector, the greatest penetration for commercial shipping has been achieved by Inmarsat, with competitors often focusing on niche or regional markets. Although for some communications services there is currently excess bandwidth, the specific user requirements and nature of maritime traffic distribution (high and consistent power levels with global distribution but concentrated in hot spots) there could be a capacity shortage for mobility applications in certain areas (e.g. USA) and UK companies can take advantage of this by providing advanced network management solutions to targeted ship operators. However, Inmarsat has less broadband penetration in the Cruise Liner sector although this is growing with Ku demand from the vessel operators, and solution providers could engage companies such as Orb3 and Speedcast to access the rapidly growing Cruise sector

12

Demand on cruise liners for multiband antenna (C and Ku band) to keep pace with 25% increase in annual demand passenger broadband services. Improved maritime antenna (especially reliability and low maintenance) offer an opportunity for UK manufacturers. UK suppliers may have to partner international organisations. For example, EMC (now part of Global Eagle) has entered into a long-term strategic agreement with Norwegian Cruise Line Holdings for the provision of high throughput satellite (HTS) links, infotainment, and other terrestrial services. Through major investments in new multi-band antennas that are allocated in multiple strategic angles and Wi-Fi infrastructure, Norwegian Cruise Line has improved customer service by using Very Small Aperture Terminals (VSAT) technology to have broadband access.

8. Revenue Projections

2016 2020 2030

Opportunity Current levels Scale of growth/decline

Scale of growth/decline

Opportunity 1. Secure broadband connectivity for enhanced business and operational integration

£50 million £150 million £300 million

Opportunity 2. Crew welfare – Future Training and Health & Safety solutions

£ 80 million £175 million $400 million

Opportunity 3. Services for Small Autonomous Surface Vessels and Maritime Sensor Networks

£10 million £28 million £100 million

Opportunity 4. Enhanced e-Navigation with Route Optimisation

£35 million £60 million £80 million

Opportunity 5. Broadband Services Enabled by Phased Array Antenna for Leisure Marine, Fisheries and Ferries

£1 million (waiting for

development and integration of phased array

antenna)

£200 million (global market

adoption phased array flat antenna)

£450 million

13

9. SWOT analysis

9.1. Opportunity 1. Secure connectivity for enhanced business and operational integration.

Strengths

• UK company Inmarsat has 80% of commercial vessel L-band market providing a channel to customers for additional broadband services

• UK based satellite broadband operator with relevant commercial ecosystem

• Possible to engage with major global businesses based in the UK that would benefit from a better integrated logistics and supply chain.

• Maritime insurance and law firms would be key development stakeholders, many based in UK

• Business, software development and Maritime activity conducted in English

Weaknesses

• Leading ERP (SAP, Oracle, Microsoft) and Maritime Management software (IFS and BASS) not UK based.

• UK Space sector not directly engaged with the large number of smaller shipping companies, nearly all of whom are outside UK

Opportunities

• Broadband satellite communications companies to collaborate with ERP (Enterprise Resource Planning) and fleet management system vendors to provide end to end supply chain connectivity in one highly secure package

Threats

• Oversupply of HTS encourages FSS to develop mobile services, some suitable for maritime use.

• Moves already by some smaller companies in Singapore and India to develop this type of service

• Shipping companies may develop in-house solutions or only work with existing vendors.

9.2. Opportunity 2. Crew welfare – Future Training and Health & Safety solutions Strengths

• Satellite operators seen to be expert in secure communications and could resolve Cyber Security issues (but at a perceived high cost)

• UK has globally respected maritime training institutions

• National access to leading satcom broadband operator

• UK has leading edge training, gaming, simulation and visualisation technologies

• English is the Lingua Franca of the maritime industry

Weaknesses

• Competitive global market with majority of crew being from Far East and vessels and head offices not in UK (need to understand national traits?)

• Vendors do not help procurers of connectivity services to make a business case that can be taken to the boards of ship operators, many of whom may not have been to sea.

Opportunities

• Crew welfare – Future Training and Health & Safety solutions.

• Global provision of enhanced crew welfare services including leading edge training and simulation platform

• Global provision of personalised crew health and safety monitoring

•

Threats

• Growth in 3rd party Ship Management companies weakens relations with crew and emphasises competitive bidding for contracts

• Installation of broadband across a mixed fleet may not be cost effective, in the interest of ‘fairness’ none of the fleets crew have access

14

• ICT managers restricting BYOD for cyber security reasons.

• Perception that connectivity does not in reality increase crew retention

• Training and certification via “Telelearning” may not have credence of shore based courses

• Privacy issues related to crew monitoring

• Only reputable shipping companies invest in crew welfare until forced by legislation (i.e. Maritime Labour Convention 2006, but still not universally enforced)

• Procurement decisions in shipping companies are commonly between unrelated projects (broadband v warehouse equipment) and require buy-in from functionally diverse and geographically distributed managers.

9.3. Opportunity 3. Services for Small Autonomous Surface Vessels and Maritime Sensor Networks:

Strengths

• Manufacturers of Autonomous Surface Vessels in UK (e.g. AutoNaut Ltd)

• Potential and actual end users based in UK (Oil & Gas, National Oceanography Centre, MoD QinetiQ, BMT Marine etc)

• Government support to autonomous technology via Innovate UK, MoD, DSTL

• Strong maritime concept of operations expertise in UK organisations (especially Royal Navy, BMT etc)

• Academic research base for autonomy software (sea, land and air)

Weaknesses

• Autonomous technology is still being developed

• Largest fleet being operated from USA

• Currently small number of units deployed makes difficult business case (but high growth expected)

Opportunities

• Provide expertise, services and highly secure broadband connectivity in operating remote Autonomous Surface Vessels (ASV) integrating sensor buoys, UAV etc

• Develop capabilities for maritime sensor networks in parallel

Threats

• Manufacture of autonomous vessels becomes commodity (i.e. in China) with software and Command & Control being developed overseas.

• Performance of vessels does not meet expectations, reflected in low sales.

9.4. Opportunity 4. Enhanced e-Navigation with Route Optimisation Strengths

• UK based Inmarsat engaged with ECDIS vendors

• UK has excellent reputation for ECDIS and maritime training

• Interested maritime insurance and shipping class societies (Lloyds Register) in UK

• Potential to involve Trinity House, IMO, UKHO, Met Office (UK based, global reach)

Weaknesses

• Leading ECDIS developers based outside UK (Russia, Norway, USA, Japan, China)

• New build vessels in Far East (S. Korea, China).

• Deep understanding of maritime purchase cycle required but not common in UK space sector

Opportunities

To collaborate with ECDIS, weather service, shipping information, ports and other maritime stakeholders etc to provide comprehensive Big Data fleet management and route optimisation service

15

Threats

• Platform for maritime data integration development led by international ECDIS manufacturer (e.g. Raytheon) and satellite broadband is just a commodity purchased by ship operator

• Ship operators and other maritime stakeholders unwilling to change operations

9.5. Opportunity 5. Broadband Services Enabled by Phased Array Antenna for Leisure Marine, Fisheries and Ferries:

Strengths

• Strong UK leisure marine industry with global reach

• Large UK leisure marine customer base to develop offering in UK

• Focusing on services and content means that if a low-cost antenna enters the market (e.g. a marine version of Satpro PA450 from China) it will not impact on potential service related sales, a cheaper antenna would increase the market

• Inmarsat working with Kymeta (US) to develop mTenna for Global Express

• Potential for further innovation from QinetiQ, Cobham, Bae Systems etc

Weaknesses

• UK Leisure marine activities are frequently in coastal waters, often within 4G coverage

• UK leisure marine activities are highly seasonal meaning the focus of sales would be international

• Flat, marine phased array antenna development is mainly outside the UK (e.g. Kymeta USA, Phasor Solutions USA but with UK office and Satpro China)

• Limited global retrofit installation and support capacity

Opportunities

Collaborate with the maritime phased array antenna developers and the UK leisure marine sector to develop broadband applications and services that take advantage of the new technology and are suitable for leisure marine, smaller fishing vessels and ferries.

Threats

• Phased array antenna technology fails to perform or reach high market penetration

16

10. Key Actions to Exploit Opportunities: Barriers/Enablers

The relatively small size of the global fleet when compared to other sectors (e.g. road transport, households, mobile phones or businesses etc) as well as the remote and transient nature of the ships means selling to and servicing this sector is expensive. In addition, the UK “maritime” market is fragmented and small, having over the years lost the critical mass provided by indigenous shipping companies, fishing fleets, commercial ship builders and now with a minor role in merchant navy crewing and registering of foreign ships. In contrast, the UK benefits from a vibrant maritime service sector that includes marine insurance, a leading certification body (Lloyds Register), Third Party Ship Management companies, maritime finance and legal services, the headquarters of the International Maritime Organisation (IMO) as well as world leading marine and maritime technical consultants such as BMT or the National Oceanographic Centre. As such, UK satellite broadband solution vendors to this sector must engage very actively with commercial networks such as the British Chamber of Shipping, Society of Maritime Industries, Satellite Applications Catapult and the Maritime Foundation to build relationships with the disparate players in this sector and benefit from other UK organisations when engaging world maritime markets. Slow uptake of technology, especially for mandated or safety systems such as those pertinent to the Global Maritime Distress and Safety System (GMDSS, a system using satellite technology and ship-board radio systems for the rapid alerting of rescue services) inhibit innovation of equipment. There is the potential for LEO and MEO satellite constellations to provide maritime broadband services, but these are considered less suitable for broadband to ships although they have the advantage of low latency compared to GEO satellites, they can cover polar regions and the reduced unit satellite costs enable competitive services to be offered. However, they have disadvantages such as difficulty to coordinate frequency worldwide, they have a complex (i.e. costly) system architecture requiring either multiple ground gateways or inter satellite links. It is also assumed terminal costs would initially be higher than conventional Inmarsat FX type products.

11. Market Dynamics

11.1. Dynamics of the Maritime Satellite Sector The key players in the Maritime Satellite broadband market are include operators such as Inmarsat, Intelsat, SES Maritime, O3B, Iridium, (OpenPort), Thuraya (MBB) and Eutelsat. However, because of the dispersed nature of the maritime sector with offices around the world and vessels usually away from port, satellite operators sell their services via airtime partners who may also sell hardware, install and maintain equipment. Such companies are located near major ports around the world and tend to have strengths in particular regions. Examples of the hundreds of companies include Radio Holland, Navarino, Satcom Global. The use of installation partners leads to satellite operators not necessarily understanding how their services are used or perceived by eventual end users. This has led to a disconnect between satellite operators and vessel owners. As such UK companies that can help bridge the gap with value added solutions would be welcomed by the satellite sector.

17

11.2. Dynamics of the Commercial Shipping Industry Following the 2008 financial crisis, there has been a shift in vessel ownership of many fleets to organisation such as banks and pension funds that have no capability to operate the vessels they own. This has led to a growth in Third Party Ship Management (TPSM) companies such as Anglo-Eastern, V-Ships and Seaspan, with up to 30% of the global commercial fleet operated by 3rd parties. The 2013 market for “ship management was estimated at $3-5bn with over 2,000 companies managing 26,000 – 30,000 ships. Most of the Third-party ship managing companies are mid or small size with only 150 companies such as V-Ships and Anglo-Eastern each managing more than 40 ships. The managed fleet continues to grow but the challenges are tight margins, technically more challenging assets, shortage of crew (especially senior officers) and stricter environmental, safety and welfare regulations. Because ship managers are contracted by vessel owners, usually through a competitive tender, it is in the Ship Manager’s interest to operate as cost effectively as possible but there will be a disincentive to invest in equipment that does not directly reduce operating costs. Although the contracts between ship owners and managers range from a “hands off” approach, to involvement in operations by the owner, the managing company will normally have to seek the owners’ approval for capital expenditure - “owners are always reluctant to invest, they are not worried about vessel performance but do recognise applications such as Planned Maintenance Systems help certification and protect their investment.” Currently there is a period of consolidation in the ship management sector with V-Ships acquiring Bibby Ship management. August 2015 saw the merger of two sizeable Hong Kong-based players, Anglo Eastern and Univan, bringing together a combined fleet of some 700 vessels under full management or crew management. Bibby itself signed an alliance pact in 2014 with Singapore-based United Ship Management, designed to take advantage of growing opportunities in China. Apart from owners and ship managers, other stakeholders to be considered in the satellite communications procurement process are Charterers, Fleet Managers, Operations Managers, ICT Directors, Procurement Managers, Shore based engineers and Financial Controllers. The distributed nature of the industry means these decision makers are often in different offices and rarely meet. Respondents pointed out that Masters and crew are usually on short term contracts and are often left out of the procurement process, whilst procurement managers frequently have no practical maritime experience. Charterers and shippers have little say in vessel equipage and operations unless they are a major client with sole use of the vessel. However, charterers normally pay the fuel bill and would be expected to select vessels with greater fuel efficiency, which may be expected to pressure owners to install energy efficiency systems and use Condition Monitoring services. However, the current low oil price, has at least temporarily removed the focus on energy efficiency. The vendors and OEM’s supplying equipment to the maritime sector are also crucial to the stakeholder dynamics and are at least partially responsible for some of the challenges faced when introducing new solutions such as satellite based applications. For example, the propulsion sector is dominated by a very small number of global companies including Wartsila, Rolls Royce and ABB, ensuring related products should be aligned to the large OEMs technologies otherwise it would be difficult to gain traction in the market. In contrast, because of the long life of the vessels (often 25 years plus) and with long lead times for construction, other OEM equipment such as ICT, navigation and deck machinery may be old and

18

incompatible with newer systems being installed. This diversity of equipment on a fleet’s vessels was frequently cited as one of the key barriers to installing any type of fleet wide system to improve operational effectiveness.

11.3. Global Fishing Fleet According to the Lloyd’s database, the number of industrialized fishing vessels and fish carriers (that is, above 100 gross tonnage) operational in 2007 was 23,000 and 740, respectively. The numbers of such fishing vessels and fish carriers have stayed around the same level in the last ten years. Since 2001, there has been a dramatic decline in the number of new fishing vessels being built, and this number has dropped to under 200 per year in the last few years. Several major fishing nations have established programmes to cut the size of their fishing fleets. The number of motorized fishing vessels in 2006 was estimated to be 2.1 million, of which almost 70 per cent were in Asia. Almost 90 per cent of motorized fishing vessels are less than 12 metres long, and these vessels particularly dominate in Africa, Asia and the Near East.

11.4. Superyacht Fleet The global superyacht industry has an annual turnover of €24 billion, from yacht-build to repair, services, berths, crewing etc, with 54 per cent of the annual turnover created in Europe. The superyacht fleet has more than doubled in the last ten years, with nearly 5,000 yachts over 30 metres currently in service, and the industry directly employs 148,000 to 163,000 personnel worldwide

12. Market Trends

Ship operators will continue to manage costs by reducing the number of crew per vessels, many large commercial ships have fewer than eight crew. This leads a need for greater connectivity to monitor the vessel and cargo condition. In the longer term, innovative ship owners are looking to increase the amount of automation found on future vessels. The amount of cargo carried by sea will continue to grow as inter regional trade expands. The strongest growth will be experienced in the Far East and China. The size of vessels may have peaked as port and canal operators demonstrate to ship owners and builders that further vessel size growth is not achieving additional benefits for the ports or hinterland infrastructure (leading to road congestion and many ports being unable to expand to accommodate larger vessels). However, concerns about cyber security issues, not previously considered a major risk by operators of 'disconnected' vessels may be inhibiting the introduction The cyclical nature of shipping industry economics will continue to be driven by fluctuations in world trade and the long lead times for vessel construction. Overcapacity leads to narrow margins and eventually consolidation of ship operating companies. However, the globally distributed nature of vessel ownership tends to inhibit full consolidation in the sector with the result that there will continue to be a long tail of small shipping companies. In addition, ship operators, especially those providing a service to specific client sector (e.g. Oil and Gas services) are dependent on markets beyond their control, leading to vessel lay ups and very competitive pricing for tenders. Maritime regulations will also be a key factor in activities the maritime and shipping sectors. The introduction of new regulations from bodies such as the International Maritime Organisation (IMO), International Hydrographic Office (IHO) and International Labour Organization (ILO) have a direct

19

impact on vessel operations and equipage, and owners invest in equipment to comply with Certification and to continue operating legally. Regulations require the monitoring of SOx and NOx emissions, Ballast Water discharge and mandating of Electronic Navigation Charts (ENC) as well as improved Crew Welfare. In addition, since January 2013, the industry has had to comply with IMO regulations for Ship Energy Efficiency Management Plans (SEEMP) leading to investment in monitoring systems. Reports and data generated from vessels to comply with these initiatives will need to be transmitted to shore, increasing the demand for reliable satellite communications.