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Pessimistic expectations for satellite capacity pricing

By general agreement the planet is awash with satellite capacity for data traffic. While high-profile satellite providers which have high-profile ‘neighbourhoods’ of DTH clients will always command commensurate high prices for their transponder capacity, other client sectors can frequently pick and choose their satellite operator. The problem is that there’s significant over-capacity of bandwidth, and a slew of so-called high-throughput satellites is only exacerbating pressures on prices.

One major user of this capacity is US-based KVH, perhaps best-known for its ‘TracVision’ global maritime products and broadband marine connectivity services. KVH has an enviable position in supplying VSAT satellite capacity to the oil and gas industries, for example, and is busy adding aerial ‘drone’ coverage to its portfolio of products as well as developing remote control applications for so-called ‘driverless’ cars and trucks.

However, in a conference call with analysts for its Q3 results on November 2nd, said they expected prices for satellite capacity to fall by up to 50 percent in the year ahead. Martin Kits van Heyningen, CEO, told analysts that “We are talking about our cost going to half what they are,” he said. “That’s our internal goal in terms of new capacity. There have been discussions of excess capacity causing a bandwidth clot that lead to the commoditization of service and falling prices in maritime markets. That’s hurt the share price of most of the satellite companies. But [as] one of the world’s largest customers for maritime bandwidth, we see this as great news for KVH. Imagine how Starbucks would feel about falling coffee bean prices and you will understand how we feel about falling airtime costs.”

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