Analysis of the global satellite backhaul market april 2015

Analysis of the Global Satellite Backhaul Market

Economic Growth in China and India Drives New Demand for

Satellite Services

April 2015

9ABF-66

9ABF-66 2

Contents

Section Slide Number

Executive Summary 3

Definitions 8

Satellite Backhaul Analysis 10

Regional Analysis 14

The Last Word 25

The Frost & Sullivan Story 28

9ABF-66 3

Return to contents

Executive Summary

9ABF-66 4

• 2G and 3G cellular services continue to drive global cellular expansion due to the high

quality of services for voice capabilities (2G) and high-bandwidth data capabilities (3G).

However, many remote or difficult to cover locations around the world remain unconnected.

This is due to the expense associated with expanding traditional backhaul technologies

(fiber and microwave) over vast distances and adverse geological conditions.

• Mountainous regions, vast landscapes without infrastructure, water bodies, and densely

forested barriers contribute to the difficulty of expanding fiber technology or achieving line

of sight (LOS) with minimal hops for microwave technology. As a result, satellite technology

(primarily Ku- and Ka-band) is currently favored by cellular operators as the technology of

choice for quickly and efficiently connecting remote locations.

• Other vertical markets and use-cases also have a significant impact on the growing need

for satellite backhaul to enable cellular connectivity. The growing mobile workforce and the

need to always remain connected are directly influencing the need to expand cellular

networks to previously unconnected locations.

• Oil and gas drilling and exploration, as well as other in-the-field jobs continue to have a

similar effect on the industry. These solutions often include mobile cellular towers that can

be transported from one site to another to quickly enable connectivity in any location

around the world.

Source: Frost & Sullivan

Executive Summary (continued)

9ABF-66 5



• Emergency and backup communications are a growing application for satellite backhaul

services; particularly in locations which already have significant cellular connectivity. These

solutions are typically owned and operated by the cellular operators themselves, coupling

mobile cell-towers with a satellite backhaul solution, which can typically be transported via

a van or a large truck.

• These mobile solutions will continue to grow in importance as natural and man-made

disasters often disrupt or disable cellular connectivity, leaving people in the dark and

without any communication.

• Portable solutions such as these are not only used for emergency situations but planned

events as well, aiding the existing, traditional cellular technologies by offloading some of

the traffic. When events are planned, and if the location has a significant population

density, mobile satellite solutions can be brought in to prevent degradation of service, loss

of service, and slow performance or decreased end-user experience.

9ABF-66 6



• With a low CAGR of 0.7%, North America has the lowest demand for satellite backhaul due

to its industry leading land-line and cellular networks.

• Latin America is significantly larger than North America, and is expected at a strong CAGR

of 4.5% during the forecast period.

• Due to the diversity in governments, economic performance, and existing infrastructure,

the EMEA region is expected to grow a modest $7 million over the next 7 years.

• APAC currently leads the satellite backhaul market with a CAGR of 6% due to the growing

economies and the need to connect more people than any other region.

• The ROW region includes many locations that would benefit from satellite technology.

However, cost and current economic performance of these locations have limited adoption

to a CAGR of 3.9% during the forecast period.

• Hughes, Gilat, and Intelsat continue to drive the satellite backhaul market globally due to

their vast global footprints, high-performance technology, and the ability to fulfill large-scale

communications projects at the country level.

9ABF-66 7

Frequency Band Potential for Mobile Satellite Applications B

an

dw

idth

Cost for Service

Ku

Ka

C

X

S&L Ideal bandwidth and price.

However, antenna size limits

its usefulness for mobile

applications.

It has potential, mostly in the

government market (for

which X band is typically

used).

Main drawback is price, and

the speed is unnecessary for

most mobile applications.

Ku is versatile and may be used

where more bandwidth is needed

(although Ku congestion could

limit the push for high-volume Ku

M2M).

Low cost and low bandwidth

make both S & L bands ideal

for M2M applications.

Due to the high-quality of service/high bandwidth, Ka- and Ku-band satellite

technologies are most commonly used for backhaul applications. Source: Frost & Sullivan

9ABF-66 8

Return to contents

Definitions

9ABF-66 9

Definitions

• VSAT or very small aperture terminal refers to any fixed, two-way satellite communications technology

that utilizes C-band, Ku-band, or Ka-band frequencies. Thus, VSAT ranges drastically in dish size,

power needs, bandwidth, and interference from weather.

• Frequency ranges for these technologies increased from C-band to Ku-band and Ka-band. Therefore,

Ka-band has the most bandwidth, but it also suffers from the most rain attenuation; while C-Band is at

the opposite end of the spectrum (and Ku-Band is in between).

• Cellular network technologies such as HSPA+, EVDO Rev A, and LTE are used to connect modern

mobile devices with voice, SMS, and data services. These technologies are backhauled by different

technologies, which may include satellite, depending on the conditions of the cell-tower deployment.

• Satellite backhaul in this research refers to satellite services which are used to enable cellular

communications. Satellite services for this application are typically Ku- or Ka-band VSAT satellite

technology. Cellular technologies backhauled by Ku- and Ka-band satellite technology typically consist

of 2G and 3G technologies (for both voice and data), and sometimes 4G. Additionally, satellite

backhaul can either be used as a permanent means for connecting cell towers in some areas or as a

temporary measure to expand networks—to supplement existing networks, to enable communications

in remote locations as needed, or to enable communications in emergency situations.

• This research covers VSAT technology which is used as backhaul for cellular 2G, 3G, and 4G

technologies.


9ABF-66 10

Return to contents

Satellite Backhaul Analysis

9ABF-66 11

Revenue Forecast

0.00

100.00

200.00

300.00

400.00

500.00

600.00

2013 2014 2015 2016 2017 2018 2019 2020

Revenue 319.03 328.73 339.84 352.72 367.33 383.38 401.14 420.56

Re

ve

nu

e (

$ M

illi

on

)

Year

• The satellite backhaul market is anticipated to grow by $101.53 million from 2013 to 2020.

• Forecasts in this research were calculated from primary and secondary sources for the VSAT market,

coupled with regional trends, economics, and existing communication technology penetration.

Total Satellite Backhaul Market: Revenue Forecast, Global, 2013–2020

CAGR (2014–2020): 4.2%

Note: All figures are rounded. The base year is 2014. Source: Frost & Sullivan

9ABF-66 12

Market Share

Intelsat 17.0%

SES 9.4%

Eutelsat 5.5%

Hughes/Echostar 26.3%

Gilat/Spacenet 15.9%

ViaSat 4.8%

iDirect 7.6%

Others* 13.6%

Total Satellite Backhaul Market: Percent of Revenue, Global, 2014

*Others include Isotropics, Infotech, Mainstream Data, Data Technology Solutions, and X2nSat


9ABF-66 13

Global Satellite Backhaul Discussion

The satellite backhaul market is growing steadily with a global CAGR of 4.2%. Much of this

growth comes from China, India, Russia, Latin America, and the Middle East.

Unlike most other satellite related markets, North America does not have a large presence in

this market due to a lack of significant need for alternative backhaul technologies. This is due

to the robust existing infrastructure of the region and lack of remote/difficult to connect

locations.

Hughes, Gilat, and IntelSat continue to dominate this market due to their global reach,

high-bandwidth/high-quality of service, competitive pricing, and industry reputation.

Ensuring a global footprint, physical presence, and expertise within adopting and potential

adopting countries are becoming increasingly important for new revenue growth for

satellite-enabled cellular backhaul.


9ABF-66 14

Return to contents

Regional Analysis

9ABF-66 15

North America—Revenue Forecast

Due to a lack of necessity from robust existing landline and cellular networks, North America

will experience only a slight growth during the forecast period.

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

2013 2014 2015 2016 2017 2018 2019 2020

Revenue 3.19 3.22 3.24 3.27 3.29 3.31 3.33 3.35

Reve

nu

e (

$ M

illi

on

)

Year


Satellite Backhaul Market: Revenue Forecast, North America, 2013–2020

CAGR (2014–2020): 0.7%

9ABF-66 16

North America—Revenue Forecast Discussion

• North America, particularly the US, has the most

robust existing landline and cellular network

infrastructure globally. Thus, the demand for

satellite backhaul for cellular services is extremely

limited in this region, resulting in the lowest

overall revenue potential and CAGR.

• Despite the limited demand, satellite is used to

backhaul cellular services in some remote

locations in Alaska and Canada.

• Additionally, satellite is often used for emergency

backhaul scenarios for cellular operators in this

region.

• The vast majority of satellite backhaul

applications used for cellular network expansion

are in Canada and Alaska. There are a few

examples of this use case in the United States.


9ABF-66 17

Latin America—Revenue Forecast

0.00

20.00

40.00

60.00

80.00

100.00

2013 2014 2015 2016 2017 2018 2019 2020

Revenue 52.80 54.20 55.89 58.12 60.68 63.62 66.93 70.61

Re

ve

nu

e (

$ M

illi

on

)

Year

Although cost and return on investment (ROI) can be a barrier in this region, satellite

backhaul is expected to increase by almost 18 million from 2013 to 2020.


Satellite Backhaul Market: Revenue Forecast, Latin America, 2013–2020

CAGR (2014–2020): 4.5%

9ABF-66 18

Latin America—Revenue Forecast Discussion

• Latin America includes many locations that are

underserved by existing network technologies.

Thus, unlike North America, there is a significant

need for satellite technology to enable cellular

communications in some towns and cities.

• More importantly, many of these towns and cities

are experiencing economic growth, either from

manufacturing or from oil and gas drilling and

exploration. Therefore, the need to connect more of

Latin America is growing in multiple ways, and cost

is becoming less of a barrier.

• In addition to the oil and gas market throughout

Latin America, Mexico is experiencing significant

economic growth from manufacturing for a variety

of markets. This increase in revenue and lack of

substantial existing networks make satellite an ideal

choice for increasing connectivity.

• Political unrest in this region currently could

potentially slow down the adoption of satellite

backhaul due to a shift in regional focus/priorities. Source: Frost & Sullivan

9ABF-66 19

Europe—Revenue Forecast

0.00

20.00

40.00

60.00

80.00

100.00

2013 2014 2015 2016 2017 2018 2019 2020

Revenue 84.19 85.20 86.25 87.35 88.49 89.65 90.87 92.10

Re

ve

nu

e (

$ M

illi

on

)

Year

Similar to North America, the European region has excellent existing landline and cellular

communications networks which limit the potential for satellite.


Satellite Backhaul Market: Revenue Forecast, Europe, 2013–2020

CAGR (2014–2020): 1.3%

9ABF-66 20

Europe—Revenue Forecast Discussion

• Although Europe has robust existing landline

and cellular networks, the diversity of

government/local economics and geographical

characteristics has created a need for satellite

technology.

• Similar to North America, satellite is most often

used as a backup technology for carriers or as a

means for supplementing existing cellular

networks which might be overburdened due to

events in locations that create vastly more

network traffic than normal.

• Additionally, Russia is quickly becoming a prime

candidate for many satellite services, including

satellite backhaul. Due to the expansiveness of

this country and the need to increase

connectivity, it is expected to be the primary

driver for new satellite backhaul growth.


9ABF-66 21

APAC—Revenue Forecast

0.00

50.00

100.00

150.00

200.00

2013 2014 2015 2016 2017 2018 2019 2020

Revenue 122.54 127.93 134.26 141.53 149.99 159.29 169.72 181.26

Re

ve

nu

e (

$ M

illi

on

)

Year

With a CAGR of 6%, APAC continues to drive growth in the satellite backhaul market.


Satellite Backhaul Market: Revenue Forecast, APAC, 2013–2020

CAGR (2014–2020): 6.0%

9ABF-66 22

APAC—Revenue Forecast Discussion

• The Asia-Pacific region includes the quickest

growing economies in the world. In addition, the

existing landline and cellular infrastructure is

inferior to most of North America and EMEA.

Therefore, satellite backhaul has significant

potential in this region.

• Economic growth will be the largest driving factor

in this region, with China and India comprising

the majority of new growth for satellite services.

• Additionally, as many locations with

communications deficit are densely populated,

satellite backhaul projects in this region are often

far larger in bandwidth and subsequent revenue

than any other region.

• Australia is another quick growing region for

satellite backhaul adoption. Although Australia is

not experiencing the same economic boom as

China and India, the remoteness of many towns

and populated areas is driving demand.


9ABF-66 23

ROW—Revenue Forecast

0.00

20.00

40.00

60.00

80.00

100.00

2013 2014 2015 2016 2017 2018 2019 2020

Revenue 56.31 58.18 60.19 62.46 64.88 67.51 70.29 73.23

Reve

nu

e (

$ M

illi

on

)

Year

The rest of world (ROW) region is experiencing strong growth for satellite backhaul due to the

remoteness of many populated areas. Note: All figures are rounded. The base year is 2014. Source: Frost & Sullivan

Satellite Backhaul Market: Revenue Forecast, ROW, 2013–2020

CAGR (2014–2020): 3.9%

9ABF-66 24

ROW—Revenue Forecast Discussion

• The rest of world (ROW) region includes countries

with the least amount of adequate existing network

infrastructure. These countries vary considerably in

economic growth and performance, and therefore

they have inconsistent levels of satellite need and

adoption capabilities.

• In this region, shear necessity for enabling

communications to remote towns and cities will

drive adoption. There is not yet a market for

emergency cellular backup or supplemental

coverage as POP coverage is currently so low that

expansion is the driving factor.

• Africa is notable in the ROW region due to the

extremely low level of existing landline and cellular

communications coupled with vast distances

between populated areas.


Return to contents

9ABF-66 25

The Last Word

9ABF-66 26

The Last Word—3 Big Predictions

2 Improving economic conditions in locations where existing landline and

cellular infrastructure is lacking continue to be the largest driver for satellite

backhaul.

3 Disaster preparedness and temporary supplemental coverage prevent

satellite backhaul from declining in locations nearing 100% POP coverage

for their cellular networks.

1 Ku- and Ka-band satellite frequencies continue to evolve and expand the

capabilities for satellite, making VSAT a growing technology for backhaul

services.


9ABF-66 27

Legal Disclaimer

Frost & Sullivan takes no responsibility for any incorrect information supplied to us by

manufacturers or users. Quantitative market information is based primarily on interviews and

therefore is subject to fluctuation. Frost & Sullivan research services are limited publications

containing valuable market information provided to a select group of customers. Our

customers acknowledge, when ordering or downloading, that Frost & Sullivan research

services are for customers’ internal use and not for general publication or disclosure to third

parties. No part of this research service may be given, lent, resold or disclosed to

noncustomers without written permission. Furthermore, no part may be reproduced, stored

in a retrieval system, or transmitted in any form or by any means, electronic, mechanical,

photocopying, recording or otherwise, without the permission of the publisher.

For information regarding permission, write to:

Frost & Sullivan

331 E. Evelyn Ave. Suite 100

Mountain View, CA 94041

© 2015 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan.

No part of it may be circulated, quoted, copied or otherwise reproduced without the written approval of Frost & Sullivan.

9ABF-66 28

Return to contents

The Frost & Sullivan Story

The Journey to Visionary Innovation

9ABF-66 29

The Frost & Sullivan Story

9ABF-66 30

Value Proposition: Future of Your Company & Career

Our 4 Services Drive Each Level of Relative Client Value

9ABF-66 31

Global Perspective

40+ Offices Monitoring for Opportunities and Challenges

9ABF-66 32

Industry Convergence

Comprehensive Industry Coverage Sparks Innovation Opportunities

Automotive &

Transportation

Aerospace & Defense Measurement &

Instrumentation

Information &

Communication Technologies

Healthcare Environment & Building

Technologies

Energy & Power

Systems

Chemicals, Materials

& Food

Electronics &

Security

Industrial Automation

& Process Control

Automotive

Transportation & Logistics

Consumer

Technologies

Minerals & Mining

9ABF-66 33

360º Research Perspective

Integration of 7 Research Methodologies Provides Visionary Perspective

9ABF-66 34

Implementation Excellence

Leveraging Career Best Practices to Maximize Impact

9ABF-66 35

Our Blue Ocean Strategy

Collaboration, Research, and Vision Sparks Innovation

Documents

Analysis of the global satellite backhaul market april 2015