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Bank: “Starlink to become world’s largest satellite operator”

April 12, 2021

By Chris Forrester

Investment bank Exane/BNPP, in a report on the state of the satellite industry, talks optimistically about the prospects for Elon Musk’s Starlink mega-constellation. Analyst Sami Kassab says that Starlink, and the constellations from OneWeb and Telesat (Lightspeed) will “change industry economics for good.”

“For the last six decades, the economics of the satellite industry were dictated by the scarcity of supply. Satellite operators’ business models were based on charging high prices ($4000 per Mbps per month and more) on limited volumes (40-60 Mbps per traditional satellite transponder). Mega constellations will upend the model as they are to charge much lower prices on substantially higher volumes,” says Kassab.

He forecasts that satellite capacity will expand 100-fold in the period 2020-2025.

“Space X’s Starlink is to account for the majority of this capacity increase. On completion of Phase II of its deployment plan (by 2025), we believe it will have become the largest satellite operator in the world in terms of sellable capacity. Thanks to its upcoming mPower constellation (which holds priority Ka-band rights for MEO) SES will be the second largest,” adds Kassab (and with OneWeb a distant third place).

The bank’s report does caution on the prospects for industry failures, noting: “LEO constellations are now offering global coverage (bar for regulatory restrictions). As a result, we believe that only the most competitive systems will be able to capture demand growth. Given the massive increase in sellable capacity supply coupled to the increase in geographic coverage, we expect a large number of incumbent satellite operators to struggle financially and possibly to go out of business as they do not have the capital resources to invest in new competitive systems. State-owned or state-sponsored operators are likely to be kept alive for national sovereignty considerations but will no longer be competitive in the market place, in our view. Some local satellite operators may become local distributors of these mega constellations. Others may end up in bankruptcy.”

But not Musk’s Starlink. The bank suggests that Musk and Starlink have capital resources and proven technological skills and believes Space X also enjoys strong lobbying power and US government and regulatory support.

Kassab says it believes Starlink will have around 3000 satellites in orbit by the end of 2021, commenting: “We believe it is on track to reach its deployment milestones of 11,924 satellites by November 2027 as well as the 50 per cent milestone by March 2024 (ie c6000 satellites).”

“We believe that Starlink’s initial commercial momentum is very solid. Starlink launched a beta test programme in October 2020. Early February 2021, Starlink reported in its FCC filings that it had over 10,000 subscribers. The Starlink feed on currently has 96,800 members including 3,410 Flaired Beta Testers (ie Reddit members tagged as beta testers). estimates the current number of Starlink Beta Testers worldwide at 28,000 to 48,000. It is however unclear how arrives at this estimate. 73 per cent of all Reddit Starlink Beta Testers are currently in the US, 25 per cent in Canada, 2 per cent in the UK & Germany and 0.5 per cent in New Zealand,” says the bank.

Starlink already has widespread spectrum ‘landing rights’ and the bank says it expects permissions to be given just about everywhere except for Russia and China. There’s also a question mark over India where Bharti’s influence might prevail and thus favour OneWeb. However, “Starlink has filled for authorisation with the India telecom regulator last November. We have assumed Starlink is permissioned to operate in India,” says the bank.

Kassab has number-crunched the likely prospects for Starlink, saying he expects Starlink to reach 240,000 global subscribers by year end 2021 and 777,000 by year end 2022. He forecasst this to be driven by 62,000 in North America in 2021 and 111,000 as of the end of 2022. He estimates that Starlink capacity utilisation rate over North America will reach circa 60 per cent by the end of 2022.

“We forecast Starlink will have close to 4 million subscribers by 2026 and will account for 0.3 per cent of global fixed broadband subscriptions and 0.5 per cent of the US. We forecast Starlink Global Consumer Broadband revenues to reach US$4 billion by the middle of [this] decade,” adds Exane/BNPP.

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