The satellite communication market is an established and significant market with total global sales of approximately USD 127 billion in 2018. The market had an annual growth rate of approximately 3 percent between 2010 and 2018.
The four largest satellite operators – Eutelsat, Inmarsat, Intelsat and SES – dominate the market. Customers have historically faced an inherent trade-off in satellite communications, having to choose between mobility or bandwidth. Ovzon’s solution enables satellite communication with high bandwidth and small, mobile terminals.
Market size and drivers
The consumer portion of the market represents the majority of the market, amounting to approximately USD 102.4 billion, or 81 percent of the market, in 2018. It consists primarily of revenue from the transmission of direct-to-home satellite television with fixed antennas. This market is not a part of Ovzon’s addressable market.
The share of other fixed satellite services (FSS) in 2018 totalled USD 17.9 billion, or 14 percent; this market consists of satellite transfers for companies and government agencies, with fixed antennas. Ovzon estimates that approximately one fourth of this market (around USD 4 billion) will be reachable, since customers could be attracted by and switch to communication with the high bandwidth they have now but with increased mobility in addition.
The mobile satellite service (MSS) market segment amounted to USD 4.1 billion, or 3 percent of the total market, in 2018 and includes revenue from the transmission of mobile data and voice services. The data services sub-segment is believed to be entirely addressable by Ovzon as customers will be attracted by the potential of mobile communication with higher bandwidth. There is a great and growing need for satellite-based data communication that is being insufficiently met owing to the low bandwidth, low mobility and high costs of current solutions. Accordingly, Ovzon’s assessment is that the total addressable market for the company is approximately USD 8 billion.
In addition to the potential described above, Ovzon believes that there are a number of business opportunities that are not included in the market size above. Ovzon offers both high-mobility and high bandwidth satellite communication to customers that historically have been compelled to choose either one. The new potential in Ovzon’s offering is expected to lead to additional demand, and thus to new business opportunities.
Satellite value chain and example companies
- Orbital ATK
- Ovzon (with Ovzon 3)
- Government agencies and defense forces
Key market drivers
The company believes that an overarching market driver for satellite communication is the development of applications that combine high bandwidth with high mobility. Global internet traffic is expected to continue to increase strongly going forward. This growth will be driven by the need for more capacity and speed, the development of more data-rich solutions, new apps and a growing need for new security solutions, all requiring additional bandwidth. Additionally, as broadband connectivity becomes an integral part of peoples’ everyday lives, ubiquitous and reliable connectivity will be demanded even in the most remote areas.
The satellite communications value chain comprises five different main segments (see image above), but with a complex web of relationships and interlinkages.
In the GEO satellite segment, there are more than 50 satellite operators that together operate 300 satellites. The sector is dominated by the four largest providers Eutelsat, Inmarsat, Intelsat and SES, which essentially provide global coverage and jointly receive nearly two thirds of revenues, according to Euroconsult. Service providers encompass a wide range of different actors providing the market with different services necessary for satellite communication. Firms in this segment include Marlink and Speedcast, as well as Ovzon.
The overall satellite communications market is characterized by a high degree of competition with a limited number of large satellite operators, each holding significant market shares. Ovzon has designed its system to provide a competitive advantage by balancing several characteristics to match the requirements of its targeted customer segment, including mobility, terminal size, high uplink and downlink data rates and high link availability. Ovzon believes that there is limited competition in the niche of high-bandwidth satellite communication services with mobile terminals.
The closest competing service is Inmarsat BGAN. These services have terminals of similar size, but Ovzon has significantly higher data speed in comparison with these services. Competitors’ new offerings based on high-throughput satellites, such as Intelsat’s EPIC and Inmarsat’s GlobalXpress services launched in 2016 and 2015 respectively, have been designed to offer the largest possible total accumulated bandwidth in the satellite, equally distributed over a large geographical area. The main competitive advantages of these types of services are coverage area and price, which is often lower than Ovzon’s. From a mobility perspective, however, this choice of structure with a large total bandwidth over an extensive geographical area is a trade-off against lower transfer speed and/or larger terminals on the ground, which are consequently less mobile.
High-throughput satellites (HTS)
The introduction of new satellite systems involves long lead times for design, frequency applications, financing, manufacture and launch. Ovzon believes that the trend of HTS will continue for some time yet. Projects for which planning began long ago are now becoming ready for launch. These satellites will have even more total bandwidth compared with their predecessors, but they have similarly been forced to sacrifice mobility in their system design.
In 2019, several new initiatives were launched in the low earth orbit (LEO) segment. In 2019, SpaceX launched a total of 122 satellites in its Starlink venture. Over the long term, Starlink’s network is planned to involve over 12,000 satellites to provide global coverage – an investment of over SEK 100 billion. The vision for SpaceX’s Starlink is to provide broadband services to locations where laying fiber is not economically viable. Amazon has initiated Project Kuiper and applied to send up over 3,000 LEO satellites. Another project, OneWeb, plans to send up 30 satellites in early 2020 and intends to achieve global coverage in 2021 with approximately 650 satellites. The challenges for LEO systems are many. Achieving profitability in these projects has proven difficult. Ico and Iridium, similar projects launched 20 years ago, went bankrupt. LEO satellites must be replaced more often and a large number is required for the technology to function. Even the technological challenges are great, since the satellites form a chain around the Earth that must communicate both with itself and with users on the planet’s surface. In relation to GEO satellites, LEO systems have more laws of nature to contend with and fundamental obstacles in their way. There are also regulatory challenges. GEO has priority over LEO satellites, which means that if a disruption occurs, LEO satellites have little to no protection. Ovzon believes that these ventures, like previous ventures in the LEO segment, have limited potential for scaling up in accordance with existing plans. If these players succeed, however, then LEO players are potential business partners for Ovzon.