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Sep 04 2015

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Very interesting analysis of commercial SATCOM

Why Revenue Per Bit Is The “Fill Rate” Of The HTS World… NSR Examines… Commercial SATCOM is not my forte’, which is why I think that NSR’s analysis is interesting. It’s only a few paragraphs long so it’s worth going over and reading it yourself, but in summary (and I’m doing this mostly for myself to get this sunk in my head):

Geo wideband SATCOM measures performance via Fill Rate (% of channels/data used at any one time by a customer).

For High-Throughput Satellites (HTS), particularly for non-Geo constellations, Fill Rate is not as useful. Why? Because:

First, spot beam architectures carry an inherent inefficiency in terms of total vs. usable bandwidth. Most HTS operators are uncomfortable disclosing usable bandwidth because it could reveal weakness against competition. As a result, any fill rate figure is questionable as to whether it applies to total or usable bandwidth. Furthermore, many HTS operators offer managed services (not raw capacity) thus making utilization irrelevant. Until, of course, it actually saturates individual beams and one must stop adding customers to avoid contention issues.

The big 3 legacy providers (Intelsat, SES and Eutelsat — combined revenue of $6.8 billion) have a Fill Rate of around 70%. However, non-Geo HTS companies (Avanti and Yahsat — combined revenue of $355 million) have a Fill Rate of around 20%. Yet on a Revenue per Leased Bit basis, both the Legacy companies and the non-legacy companies make somewhere around $20-$30 per.

Here is NSR’s conclusion in full:

Fill rates are important when an operator only has to sell raw bandwidth in MHz. Operators have graduated to selling contended (or dedicated) services with packages in Mbps and download caps. Here, the more inventory one has available, the better your control on quality of service and user experience. What matters is that you have customers, that they buy premium packages and pay their bills on time. In other words, the race is to build revenues at a high, or healthy, Revenue per Bit leased. If they start dropping prices, eventually poor margins will catch up. However, if investors have faith in the business and the management can grow customers smartly, the returns are promising. Clearly the relevance of fill rates reduces as you build bigger HTS satellites and more so with LEO-HTS constellations. What matters is keeping the Revenue per Bit leased at a level such that about half way into the lifetime of your satellite, an operator has enough cash flow to pay for the next one.

Very, VERY interesting.

Permanent link to this article: http://www.newspaceraces.com/2015/09/04/very-interesting-analysis-of-commercial-satcom/

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