Monetization in Satcom - Should the Players Focus on B2B?

It has been an open secret that satcom is the next big leap in communications technology. Therefore, given the opportunities it will create for people and companies alike, the big question is: how do we monetize this?

Opportunities for Satcom Players

In an answer to a question asked by V&D at India Satcom 2021, Rahul Vatts, Chief Regulatory Officer at Bharti Airtel, and Director, OneWeb, listed out what satcom capabilities can deliver.

"We (OneWeb) are generating capacity on your network with low latencies, and whatever applications come out to us are welcome, whether it is maritime, whether it is in-flight connectivity, whether it is a government user, defense user, really, it’s a matter of having stock ready with stuff to give to customers, and we have those capacities available. So, we welcome the opportunities that come out", he said.

In the same vein, Chris McIntosh, CEO, Methera Global Communications, said, "When we look at those areas with a focus on monetizing, of course, in-flight (connectivity) is an area of interest, especially military as well as civil, and defense market as a whole is an area which we know generally has some form of premium".

In short, satcom can do a lot.

The Allure of Enterprise

Here's a number: 300,000.

That is the total satcom connections in India right now. All enterprise. This should serve as foreshadowing for the next-gen LEO constellation operators. In India, terrestrial networks rule the broadband market, and it would be hard for satcom players to crack in. Therefore, the enterprise represents a huge opportunity for monetization in the early days of satcom in India. Speaking at the India Satcom 2021, Rahul Vatts emphasized the same.

"Generally the initial start happens with these sorts of applications; government is one of the bigger users for such capacities in the beginning, so there are bigger opportunities in the B2B space initially because B2C is largely still taken up by the terrestrial customers. So, it’s a matter of having everything under the B2B to go off", Vatts said.

With the government developing a policy framework to facilitate satellite communications, things are looking on the up. In July, DCC accepted TRAI's recommendation of allowing VSAT players to provide satellite backhaul to telcos.

The biggest enterprise business is that of providing backhaul to cellular sites. Up until recently, a satcom player in India had to acquire an NLD license to do so. However, after the government scrapped NLD for satcom, it has become easier to provide backhaul. Along with satellite backhaul, in-flight connectivity, defense, and maritime applications also are huge monetization opportunities.

This means that not only the satcom companies can now install ground stations to better amplify and distribute their bandwidth, they can also provide backhaul.

The Promised Land of B2C

There are more people than companies at any given time in a country. Except maybe Monaco.

However, assuming that as a general trend, there is more money in B2C than B2B, simply because of the larger number of customers. The same is true for satcom too; the operators know that. However, right now, satcom in India is far from cheap; Starlink had started pre-bookings in India back in June, for $99, or roughly Rs. 7,500.

Convincing the end-users to move from terrestrial networks remains the primary challenge for satcom operators. Why would a user want to go away from their WiFi, install a dish, and have internet delivered from space? It is a hassle for the customer any way you look at it. The promise of satcom lies in the magic it can deliver. The novelty will prove to be a good selling point; after all, when I get a Starlink connection, I'm going to be fascinated by it for at least a month. But what then?

Satcom players are sitting on a multi-billion-dollar opportunity. India alone has millions of people who have no access to the internet. The government has plans to change that status quo; this also represents an opportunity for private players. Therefore, the industry needs to look at not just the ways to acquire customers but to retain them as well. Given the network capacities, satcom players can build an ecosystem with partners to deliver content bundled with connectivity.

The Economies of Scale

Telcos across the world have seen substantial cost reductions, because of the ridiculous number of customers they have. Satcom won't be an exception to the magic of economies of scale. However, they need to find that many users first.

Let's talk about Starlink for a bit. Its "Better Than Nothing" beta is live in the US and Canada, and users reported that Starlink charges $99/month, with $499/Rs. 37,210 for the antenna, or Dishy McFlatface. However, when the network has moved on to a full-scale commercial rollout, the pricing will go down - at least the monthly bill will.

One calculation on a NASA Spaceflight Forum by the user Robotbeat discussed how much will Starlink cost in the US. Google can also do the calculation for you as well.

Here is the complete calculation by them:

((cost per kg of satellite hardware)+(cost per kg launch to operational orbit))/((Capacity factor)*(throughput per kg of satellite hardware)*(satellite lifetime))

For a globally available Starlink constellation (cap factor = 25%) launched with Falcon 9 for $1000/kg with a satellite hardware cost of $1000/kg, 2.5GB/s for each 250kg satellite (0.01GB/s/kg), 6.34 year lifetime (200 million seconds):

($1000/kg+$1000/kg)/(.25*.001GB/(s*kg)*2*10^8s) in $/GB = 0.4 cents per GB.

For the early days (when only 4% capacity factor is feasible, and using the more realistic $30 million per Falcon 9 launch instead of the $15 million) is:

($2000/kg+$2000/kg)/(.04*(17Gbps/(263kg))*4 years)  in $/GB

=10 cents per GB.

What’s more, by using Starship instead of Falcon 9, they can bring the costs down even further. This can see Starlink per GB costs slide down to as low as 0.01 cents/GB. This is still ignoring the increase in data throughput capacity that will come from Moore’s Law.

Even if Moore’s law fails in the near future, this still will put expenses far below anything else. For comparison, in India, mobile data costs stand at 68 cents per GB. However, if Starlink achieves the ideal scenario, this figure becomes 6800 times what Starlink would end up costing.

This should serve as enough evidence that satcom can be affordable; it could also be cheaper than terrestrial networks.

Final Thoughts

At the India Satcom 2021, Chris McIntosh noted the importance of the government's role in satcom's early days.

"Often, where the governments will get the most benefits, is not necessarily where the operators will be able to monetize effectively and efficiently. I agree that we got to take this as a whole and look at the different areas, but I think the key message is that satellite operators have got to realize that somewhere, they’ll have to be willing to take a loss, but subsidize those losses from other areas".

Chris further said, "I am a firm believer that the only way in which we can provide connectivity where it’s really needed – the rural, difficult-to-reach area – is by ensuring that we can bring in enough of those high-value targets, and high-paying targets, so that the cost for government is therefore reduced. So I see it very much as an infrastructure play, that governments and certain high-value targets, will actually end up paying for".

As Rahul Vatts had also said, initially, B2B will be the focus. Therefore, we will see synergies develop between satcom and other industries. The key high-value targets for satcom operators in India will be the government and the telcos.

TL;DR - satcom companies need to focus first on B2B to start the cash flow and then move to the B2C market.