September 11, 2017
Most sailors know the old saying, “Red Skies in Morning, Sailors take warning… Red Skies at Night, Sailors Delight”, yet that saying only applies in a specific band of the northern or southern hemispheres. If you happen to be around 30 degrees latitude on the equator, the saying is reversed, given the prevailing wind conditions.
Just as the suitability of the saying depends on whether you are sailing with the western or eastern trade winds, the maritime satellite connectivity market is looking towards the sunrise trying to figure out just what colour it is going to be – and which one is good for them.
In its most recent examination of the market for Maritime Satellite Connectivity, consultancy NSR predicts that, over the next 10 years, the rate of ships adopting broadband connectivity will exceed the rate of growth within the core maritime satellite addressable market.
Amongst all the challenges of the maritime market (newbuilding oversupply, crude and fuel oil challenges, disposable income impact on cruise bookings), the business of connecting ships at sea remains well-positioned for growth.
That growth – nearly 30,000 additional vessels – will have broadband connectivity by 2026, generating over $3.5bn in revenues for broadband connectivity. Combined with demand for narrowband connectivity on smaller ships, or for dedicated voice and data purposes, maritime satellite connectivity will be almost a $5bn opportunity for the satellite communications sector.
Set against the revenues in the shipping, cruise or offshore sectors that is a tiny amount – but for the satellite sector, maritime connectivity continues to draw the attention of players across the value-chain.
From the equipment manufacturers and systems integrators/service providers to satellite operators, investing in new technologies to reduce the equipment footprint onboard, developing new satellite designs to squeeze more megabits per second to the ship and formulating new models to capture business, change is afoot in the market.
All told, now is a better time than ever to be involved in the maritime satcom market from both a consumer and provider perspective.
From the position of the end-user, everyone from the passenger live-streaming from a cruiseship off Nassau to a refrigerated container crossing the Atlantic Ocean is demanding more connectivity. Nowhere is the demand for connectivity growing faster than in the passenger maritime sector.
Just as on land, the expectation aboard is ubiquitous access to social media, email and the Internet – and with thousands of passengers all expecting to update their social media accounts, the demand for satellite connectivity can be tremendous. Over the next 10 years, passenger ships will see a fourfold increase in the average amount of throughput provisioned per vessel.
While it is easy to point to the insatiable demand for connectivity in the cruise industry, even the merchant industry will see VSAT bandwidth provisioning increase. While average Mbps per ship in the merchant sector is expected to double over the next 10 years, the average spend for VSAT connectivity per merchant vessel remains relatively flat. Why? New technology from the satellite sector is increasing the amount of capacity in orbit. Buzz words such as High-Throughput Satellites, Flat Panel Antennas, LEO (Low Earth Orbit) or MEO (Medium Earth Orbit) constellations are all technologies that are reshaping the way the satellite sector does business.
Yet, those new investments, while they allow better prices to end-users, are putting pressure on satellite operators to become more involved in the value-chain. They are looking at other ways to continue to generate profits and are moving closer towards the traditional roles of maritime connectivity service providers.
Service providers and systems integrators meanwhile are developing new applications and value-added services to diversify their revenue streams away from being purely connectivity providers – moving more and more towards being an end-to-end solutions provider.
Overall, there remains room for both models to coexist with each other as satellite operators and service providers look for a new equilibrium.
The bottom line is that technology is changing in the satellite sector at breakneck speed and is only expected to change faster in future. Business models are adapting in parallel. Meanwhile, end-users are reaping the rewards of better prices for more throughput to meet their increasing needs for connectivity. Depending on just where you are in the value chain, that red sky could be a good or bad omen.
For more information on the 5th NSR Maritime Satcom Markets report, please click here.