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Euroconsult reveals significant shifts in satellite capacity pricing trends

The evolving landscape of satellite service pricing, propelled by next-gen satellite systems, persists in reshaping the industry, prompting a shift towards managed services and compelling $/GB economics.

Euroconsult, a leading consulting firm in the satellite industry, has released its FSS Capacity Pricing Trends report, uncovering ongoing transformations in the landscape of capacity pricing.

Satellite capacity pricing is undergoing rapid declines within an increasingly disruptive market environment, largely driven by the emergence of next-generation geostationary (GEO) and non-geostationary orbit (NGSO) high-throughput satellite (HTS) systems. The market is experiencing a surge in supply, leading to a commoditisation effect on connectivity. This phenomenon has prompted a shift towards managed service offerings with attractive $/GB economics, primarily propelled by the influence of Starlink.

Over the past five years, the global average capacity pricing in video and data markets has plummeted by approximately -16% (-3% CAGR) and -77%, (-26% CAGR) respectively. The decline is particularly pronounced in data markets due to the abundant supply from NGSO (notably Starlink) and HTS systems. In contrast, video markets have witnessed a lesser decline, attributed to stagnant regular supply and the adherence of market players to long-term contracted prices.

The report also highlighted the decreasing cost base of capacity, indicating the efficiency of capital expenditure (capex) invested in satellite manufacturing considering sellable capacity and expected lifetime. This trend, initiated with the advent of Starlink, is expected to stabilise over the next two to three years, potentially leading to a slower capacity price erosion compared to previous years.

The insights presented in the report signify ongoing changes for the industry, suggesting a structural shift away from traditional wholesale capacity leasing towards managed service packages complemented by value-added services. This shift is prompting a realignment of operational strategies among industry stakeholders. Operators are increasingly pursuing vertical integration by offering managed capacity plans directly to service providers and/or end users. Concurrently, service providers are embracing pre-made packages from satellite operators to streamline capacity management complexities and focus on delivering value-added services such as cybersecurity, cloud connectivity, telematics, and IoT solutions.

Senior Consultant Grace Khanuja said: “Starlink’s pocket-friendly pricing and higher availability of service plans have triggered a structural shift in the industry away from wholesale capacity leasing to more managed solutions setting a wave of strategy re-alignment across players. Operators are choosing to directly serve end customers with managed service plans giving them greater control of capacity prices while service providers are moving away from capacity management, focusing on value add-ons.”

With the evolving dynamics in the industry, the price per GB has witnessed a convergence trend across key geographies over the past three to four years. The period before 2021 was characterised by median prices ranging from greater than $2 to $5 per GB per month, owing to the limited available capacity of legacy satellite systems that constrained monthly GB allowances. However, the launch of Starlink and the introduction of new service plans from incumbent satellite players (such as Viasat, Hughes in the Americas, and Eutelsat Konnect in Europe) have significantly lowered the price range to $0.2 to $1.5 per GB per month in 2023. This shift is attributed to the disproportionate increase in GB allowances compared to service plan costs.