Connecting the growing mobile and wireless infrastructure in Asia to the World Wide Web is by far the best potential long term market for satellite capacity in this part of the world after television broadcast driven requirements. Our data collection, research and resulting analysis shows that over the next 2 – 5 years internet driven markets will represent 25 – 35% of the South East Asian satellite broadband customer base and by the year 2020 this market will have grown to represent 80% - 90% of the customer base.
As internet traffic increases - driven by streaming media, peer-to-peer, social networks, and other bandwidth hungry applications, voice traffic will remain a key service ingredient, but no longer the most important ingridient. If fiber and satellite connectivity are compared, latency inevitably is one of the topics to be considered. Not only for voice applications (which considers anything over 75-100 ms as an unacceptable delay), but also internet throughput is impacted by latency, thus latency will always be an important factor in delivering high-quality connectivity beyond the locations served by fiber—but we found it is not the most important factor.
In South East Asia Broadband Wireless Access represents the largest opportunity for transponder capacity lease, with an expected growth of 4 – 6% Compounded Annual Growth Rate (CAGR) through 2020.
What’s Driving Asia’s Broadband Growth
The growth recognized in Asia is the same as the rest of the world – video streaming, photo sharing, social networking, peer-to-peer networks, etc. There is one major difference though in South East Asia. While the bandwidth drivers are the same or localized versions of the same hungry applications, internet penetration in the South East Asian marketplace is very low - about 10% by 2009 estimates.
A Key Theme of the Morgan Stanley Mobile Internet Report, published in December 2009, is that "Mobile Internet Potential in Emerging Markets Should Not Be Underestimated". Specifically the report referred to the emerging markets of Asia (excluding China and India):
"Other Emerging Asia – mobile broadband already taking off in Malaysia / Philippines; Indonesia + Thailand have / planning to issue licenses. Given high literacy levels but limited fixed broadband, mobile is expected to be the main "access" point for Internet. Expect larger operators with balance sheet / spectrum / backhaul to benefit. These include Telkom Indonesia, AIS, PLDT and Axiata."
Morgan Stanley also reports on Wi-Max’s significant growth. According to the report, Wi-Max covers more of the APAC population than all other emerging markets combined.
Morgan Stanley observes that offering internet service via Wi-MAX & 3G, at today’s costs, can be 5 times lower in "cost per/bit" than DSL for last mile connectivity. Wireless infrastructure also offers the ability to connect entire cities and towns in a matter of a few days. Lower costs, combined with rapid deployment, speak strongly for robust internet access growth in South East Asia.
The Potential for Satellite Backhaul Services in South East Asia
South East Asia relies on mobile connectivity for voice and its growing internet connectivity as shown above, which in turn creates significant opportunities for satellite connectivity.
Industry monitors agree that the regional market for satellite transponders in Southeast Asia had an approximate 10.6% growth from 2007 – 2008, noting that this was the fourth year in a row of continuous growth.
In fact despite the global economic downturn, demand has remained strong and continues to increase, driven by the introduction of new Direct Broadcast Satellite Systems (pay TV) and by increasing requirements for telecom services, including for cellular trunking and a growing Broadband Wireless Access requirement.
When looking at the supply of transponders versus the increasing demand in Asia, based on a review of satellites under construction and launch vehicle reservations, in 2015 the downward slope of transponder availability will intersect with the upward demand slope.
Wireless infrastructure bandwidth requirements drive the majority of the broadband requirements (outside of the television broadcast arena), thus the level of mobile service penetration vs. internet connectivity define the Satellite Broadband market. When mobile subscriber growth is considered against the internet population, satellite broadband service demand projections are the result.
When the overall South East Asian market, a market which is based primarily on cellular and wireless infrastructure, a market literally addicted to the internet, with a strong and growing economic engine is examined, one comes up with both the qualitative and quantitative conclusion that Broadband Wireless Access (BWA) will be the largest market segment for Satellite Broadband in Asia.
Cost Per Bit is the Most Significant Factor
Through interviews we carried out over the last six months with operators, equipment vendors, and consulting entities, We found that Asian operators held price above quality in every case except for television distribution. Discussions with both end users (cellular and telephone companies) as well as satellite service providers confirmed that "it’s all about price".
This is not such a difficult position to appreciate when one takes a look at the upcoming demand vs. availability. The top six countries in South East Asia by population have an average of 10% internet penetration. When the availability of a critical resource (internet) is this scarce, it will always be more important to deliver "something" at an "acceptable" quality and price - rather than a lesser amount at a higher quality and price.
This is exactly the model satellite based television broadcasters use in the developing markets as well. It is a better business case to have more television channels of reasonably good quality picture, than less at a quality and cost fewer can afford.
Conclusion
As more and more broadband wireless infrastructure is built out, be it 3G, LTE, Wi-Max, to satisfy the internet driven demand for web access and bandwidth, Satellite Broadband services will continue to grow. This growth, given the competitive nature of the mobile and wireless industry, costs and issues associated with laying fiber, will be a principal business base for satellites based services, here in Asia for the next 10 – 15 years.
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Tom van der Heyden is the Director and CEO at Sky Fiber Asia, a Hong Kong start-up focused on developing regional satellite infrastructure businesses. Tom is a digital broadcast and satellite communications industry pioneer, with 25 years building satellite systems and companies across Asia. He can be reached at phone +852 9862 8558 or e-mail at: tom.vanderheyden@skyfiberasia.com
