The FSS sector and the LEO-GEO stalemate

Is the industry jumping the gun and prematurely dismissing investment in geostationary satellites? There are a lot of LEO constellations ready to compete with GEO satellites in the media; there are far fewer of them in the factories, much less in orbit.
SpaceNews.com

            Maxar’s Space Systems/Loral, the longtime market-share leader in the construction of geostationary satellites, is considering exiting the GEO business entirely. An exit by such an established industry leader would have been inconceivable until recently.
Orders for traditional geostationary satellites have fallen precipitously over the past three years. Industry counts show orders dropped from 26 GEO orders in 2014, to 15 in 2016 and seven in 2017. Most observers don’t believe 2018 will be much better. There are many reasons for the decline, ranging from a plateau in satellite video distribution to rapidly evolving high-throughput satellite (HTS) and digital payload technology that has created overcapacity in some segments and makes operators anxious about ordering long-life satellites that may soon be obsolete. These risks might be manageable if not for the planned low Earth orbit (LEO) constellations, with their promises of lower pricing, amplifying pricing and capacity concerns.
Is the industry jumping the gun and prematurely dismissing investment in geostationary satellites? There are a lot of LEO constellations ready to compete with GEO satellites in the media; there are far fewer of them in the factories, much less in orbit. Financing for multibillion-dollar LEO constellations has mostly stalled over the past two years. If this continues, the industry may go from overcapacity to a capacity shortage never seen before.
Business plans for the large LEO constellations are primarily, albeit not entirely, predicated on being able to use their low-cost capacity to address the underserved consumer broadband market that was not previously financially feasible. These underserved consumers are the only market segment with a realistic chance of absorbing the enormous amount of new satellite capacity the planned LEO constellations plan to unleash. Viasat and EchoStar’s experience with delivering internet via satellite to households underserved by terrestrial options illustrates the demand elasticity of the consumer broadband markets. ViaSat 1 and EchoStar’s Jupiter 1 nearly tripled fixed-satellite service (FSS) capacity over the U.S. However, they quickly sold out this capacity by creating an affordable consumer broadband service serving nearly 2 million subscribers.
The idea of replicating Viasat and EchoStar’s success on a grander scale with even cheaper LEO capacity that might be affordable in less affluent developing countries is appealing. There are many challenges for such ventures. However, one of them is often minimized. The low-cost, non-mechanically steered antennas needed to make the consumer market viable don’t currently exist. Nor is there a clear technical development path or timeline for when they will be available. Without low-priced consumer hardware, most of the business models for planned LEO broadband constellations simply don’t work. This uncertainty is a major reason investment in LEO constellations is lagging.
The lack of clarity over the satellite industry’s future has led to an incredible standoff. On the one hand, the satellite industry is in a situation where investment in geostationary satellites is stalled due to uncertainties over the long-term industry outlook, particularly when LEO constellations enter. On the other hand, investment in LEO constellations is stalled due to shorter-term concerns about the availability of affordable consumer hardware.
Will a LEO antenna manufacturer emerge to meet the performance and price targets needed to break this deadlock or will there be a realization that the technical challenges are insurmountable? The odds are high that low-cost and high-performance non-mechanically-steered LEO antennas will eventually be available; if a clearly defined technical problem needs a solution, smart engineers usually figure it out. But how soon? And what happens in the interim? How do industry players manage the risk of investing in long-life replacement capacity when so little is known about what the future will hold, against the risk of not spending and watching their business decline? At the same time, oversupply is lowering prices and sale channels are becoming disintermediated.
It’s a tough time to run an FSS company. It’s no surprise there has been so much CEO turnover.

J. Armand Musey, CFA is a satellite industry analyst and founder of Summit Ridge Group, a New York-based valuation and consulting firm specializing in the satellite, telecom and media sectors.
SpaceNews.com

Source: The FSS sector and the LEO-GEO stalemate