Satellite Capacity
Pricing Declines Slow, But Price Pressure
Expected To Increase With New Supply Entering
Service In 2023
30 November 2020
In its latest research
titled, “FSS Capacity Pricing Trends,”
Euroconsult, reported that the dramatic pricing
declines of the past five years have slowed as a
result of notable slowdowns in new capacity
supply additions. However, intense pricing
pressure is expected to return in advance of new
capacity coming online in the 2022-23 timeframe.
Over the past five years,
average capacity pricing levels in video markets
have dropped 30 percent in aggregate, while data
markets have experienced 60 percent declines.
While pricing is beginning to stabilize, the
previously strong mobility market is now seeing
pricing erosion in the short term, due to the
COVID-19 pandemic and its impact on global
travel.
“We are seeing a mixed
landscape in current pricing trends,” said Brent
Prokosh, Senior Affiliate Consultant at
Euroconsult and author of the report.“Despite the generalized pricing declines
globally, , strong demand for HTS capacity in
places such as North America and Southeast Asia
has led to regional shortages, alleviating
pressure in the short-term. While fewer regions
have reported sharply declining capacity pricing
levels, more challenging competitive
environments are reported for Latin America and
the Russia & CIS regions. Further, at key
orbital hotspots, Direct to Home (DTH)
television platform pricing has also been
notably resilient.”
While DTH pricing of up to
$8,000/MHz/month is still in effect in some
locations, many platforms have sought to reduce
their commitments through lower volume and/or
shorter-term renewals. On the lower end,
capacity pricing ranges have remained relatively
stable over the past year, with $600/MHz/month
for regular and less than $100/Mbps/month for
large-volume long-term HTS capacity leases still
prevailing.
In its 3rd annual edition
of the report on satellite capacity pricing
trends, Euroconsult provides an analysis of the
structural trends impacting the industry and
delves into regional pricing for nine different
parts of the world. The analysis is based on an
expansive database of more than 2,000 capacity
pricing contracts and includes roughly 100 new
price points derived from more than a dozen
interviews and continuous desk research
conducted over the past 12 months.
It includes capacity supply
fill rates and case studies on the cost base of
satellite capacity. It also breaks out pricing
trends by spectrum and type of service and
includes an overview of milsatcom and mobility
pricing. Additionally, for the first time, this
year’s edition of “FSS Capacity Pricing Trends”
includes a section on in-orbit life extension
services. It also provides an analysis of the
cost base of capacity for nearly 40 HTS systems,
including all major Very High Throughput
Satellite (VHTS) systems and Non-Geostationary
Orbit (NGSO) broadband constellations.
The research projects that
HTS fill rates, which are comparatively lower
than regular capacity, are expected to drop from
50 percent as of 2020, to below 20 percent by
2023 with new capacity expected to come on line
in that time frame. This oversupply will put
further pressure on capacity pricing. As a
result, Euroconsult projects that operators will
seek to drive utilization of new capacity by
testing the price elasticity of demand.
“Another way that operators
are responding to oversupply and pricing erosion
is by adopting vertical integration strategies,”
said Prokosh. “This has the potential to provide
them with a higher degree of control over
pricing conditions. It is an especially relevant
trend, given expectations that competition will
continue driving the benefits of lower cost base
of capacity towards end user services as opposed
to the tradition FSS operator wholesale lease
model.”