Connectivity is not anymore restricted to ground but is increasingly becoming accessible at sea or in the air. In the past five years, the connectivity trend for the mobility markets (regrouping Maritime and Aero markets) is showing a decrease of MSS market share in favour of VSAT services. This is the direct effect of the deployment of High-Throughput Satellites, bringing more capacity to the end-users. However, thanks to continuous technology improvements by the satcom industry, a transition towards the next generation of VSAT connectivity should occur in the coming years and it should have the effects of a small revolution for the mobility connectivity markets.
Looking more specifically at the Maritime market, we have observed a democratization of the VSAT connectivity with now VSAT service offers targeting customers willing to spend less than a thousand dollars for their connectivity. For heavier consumers of bandwidth, like the Cruise ships, the new standard is about to reach several hundreds of Megabits per second. Overall, the average revenue per ship remains relatively stable at around $23,000 per month for Cruise ships but with a strong increase in terms of bandwidth (from 4 Mbps to 8 Mbps for Cruise ships).
This craze for VSAT connectivity services has linked to an important erosion of MSS market share. Nevertheless, this legacy type of connectivity can still cover several needs of the Maritime market. Hence, consumers who are satisfied with a little amount of bandwidth will rely on the MSS. These services also satisfy users with occasional or specialized needs. Another type of application where MSS are commonly used is asset tracking, which is a market with substantial potential growth. Finally, it is to note that a wide number of VSAT systems are backed up by MSS solutions. This variety of applications has led Iridium to launch and deploy its Iridium NEXT constellation associated with its Certus solution in 2019, introducing new offers. Despite these use cases of MSS solutions, the number of terminals has decreased recently alongside with the global service revenues, therefore leading to a global Average Revenue per Unit (ARPU) decreasing as well to reach $1,560 per year.
Concerning the Aero market, the deployment of High-Throughput Satellite systems has allowed airlines to answer their passenger’s growing connectivity needs, thanks to higher data rates available at acceptable costs. However, regional markets have evolved differently. Whilst the US market is dealing with a relative slowdown in intakes (from 285 terminals committed in 2017 to 234 in 2018 for single-aisle aircraft) due to a higher level of maturity being largely equipped in terms of In-Flight Connectivity (IFC) solutions, the European and Latin American markets are experiencing strong increases of IFC penetration rates (from around 12% in 2017 to close to 20% in 2018). At the airlines’ level, IFC early birds are starting to look into the next generation of connectivity and at all the advantages they could take from even higher data rates offered by satellite connectivity. At the same time, airlines are trying to find new opportunities for their connectivity business models as competition is growing in the IFC sector. Therefore, good-quality streaming and offering some connectivity services for free should be two main drivers for the competition landscape in the mid-term.
For airlines flying regionally, the Air-To-Ground (ATG) technology is an alternative to the more common VSAT solutions. Already active in the USA since a decade with Gogo, the ATG market has reached its maturity and is now preparing for next generation networks like the 5G. Simultaneously, Inmarsat is launching the first European ATG solution, called European Aviation Network or EAN, in association with Deutsche Telekom, while China is planning to run some tests of a 4G/5G network for Civil Aviation. The Business Aviation segment is also a significant target for ATG service providers and SmartSky Networks is planning to launch its system in 2020 for business jets over the USA.
In conclusion, the mobility markets are in a transitioning phase between legacy connectivity solutions offering relatively low data rates and therefore offering connectivity for their end-users as a premium and next generations of connectivity solutions. The latter will be various, especially for the VSAT solutions as the Very High-Throughput Satellites orbiting in geostationary orbit and the satellite constellations orbiting in low- and medium-Earth orbits are expected to be launched from 2021 onwards. Moreover, those new capacity supply technologies will require suitable terminals, able to handle several Gbps while in movement in the air or at sea.
Xavier Lansel is a Senior Consultant at Euroconsult based in Paris, France. He works in Euroconsult’s consulting team in satcom markets, services and applications.
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