Rising Transponder Prices Mask Regional Disparity

by

PARIS — The average price of leasing a telecommunications satellite transponder increased just about everywhere in 2011 except in North America, the Middle East and North Africa, according to a market assessment released Aug. 23.

The report by Euroconsult of Paris said the average transponder price of $1.62 million per year for 36 megahertz of capacity hides a wide regional price disparity. The report says there is a “risk of price erosion” in the coming years as some markets soften with new satellites entering service.

As has been the case for years, Western Europe continues to be the highest-price market for leasing satellite bandwidth, at an average of $3.2 million per transponder in 2011, Euroconsult said.

Northeast Asia featured the second-most-costly transponders, at $2.6 million per transponder per year, followed by the region around Australia and New Zealand, where prices averaged $1.7 million per year.

The least-expensive transponders were to be found in South Asia, where prices averaged only slightly more than $1 million per transponder per year. Satellite operators have said that absent revolution in satellite or launch costs, $1 million is a kind of threshold price below which it is difficult to make a profit.

For some smaller satellite operators financed by their governments, making a profit may not be a primary concern. As these operators proliferate, their approach to the market may affect the business models of the established operators for which profitability is the principal motivation.

Not surprisingly, North America appears in the Euroconsult report as a place where overall market size and prices, at around $1.4 million per transponder per year, have been flat in recent years and are likely to remain so for some time.

The world’s two largest satellite-fleet operators, Intelsat of Luxembourg and Washington and SES of Luxembourg, both are focusing their efforts in the developing markets of South America, India and Africa, where growth rates are viewed as positive in the coming years.

Euroconsult said that for the operators of fixed satellite services that report financial results, the average EBITDA — earnings before interest, taxes, depreciation and amortization — was 75 percent of revenue in 2011. But as with transponder prices, this figure masked wide variations, with the most profitable operators reporting 80 percent EBITDA margins, while others reported margins of 50 percent.

Television broadcasts remain the core of the market’s profitability as demand for high-definition television programming, which requires more bandwidth, has outpaced advances in video compression that puts downward pressure on bandwidth demand.

Global military demand for commercial fixed satellite services bandwidth, which has been led by the U.S. Defense Department, is likely to decrease in the coming years with the winding down of U.S.-led military coalition activity in Afghanistan and Iraq, Euroconsult said.

But countering this trend will be growth in U.S. military use of Ka-band satellite broadcast frequencies.

The U.S. military spent more than $450 million purchasing conventional commercial fixed satellite service capacity in 2011, according to Euroconsult. To this figure is added L-band capacity purchases from mobile satellite services operators such as Iridium of McClean, Va., and Inmarsat of London.

One of the highest-growth segments of the telecommunications satellite industry is in delivering broadband Internet access to unserved or underserved areas. A new generation of platforms, called high-throughput satellites, is being fielded in North America, Europe and Australia, with more to come in other regions, according to most market assessments.

Euroconsult forecasts that high-throughput satellites, which provided 35 gigabits per second of capacity worldwide, will be beaming around 850 gigabits per second in a decade’s time.

More than half that capacity will be used to provide consumers with broadband access from their homes. North America, which has been the biggest early adopter of satellite broadband despite insignificant government support, will remain the biggest market for this technology through the next decade, Euroconsult said.

ViaSat Inc. of Carlsbad, Calif., and Englewood, Colo.-based EchoStar Corp.’s Hughes division are both deploying high-throughput satellites for their established consumer broadband businesses.