The satellite internet landscape in Africa – developments and future scenarios

Technology is forever changing; and change has become so constant and prevalent in the technology world that we sometimes don’t really appreciate the possible impact of these changes on our current and future business landscape. What is even more surprising is that the architects of these changing landscapes also sometimes don’t realise all the implications of the momentum they are creating. It is like a proverbial snowball effect where the process is started and then creates a momentum and direction of its own.

The current satellite industry as a whole and in particular in Africa, is at the brink of such a changing landscape and few business executives will be able to predict the future landscape… naturally because of all the politics and challenges faced…

Satellite-based communication networks have long been the workhorse of long-distance connectivity solutions and most recently, been the success behind satellite TV services. Total capacity of these data satellites is somewhat limited and expensive compared one-on-one to wireless and fibre options, and was mostly used for business critical application. Now the industry has developed High Throughput Satellites (HTS). These satellites are typically based on Ka-band and are optimized for data applications, using techniques such as multiple spot beams with extensive frequency reuse, which means they achieve significantly greater capacity than that of conventional band satellites optimized for broadcast applications such as TV.

For example, the EchoStar XVII satellite with JUPITER™ high-throughput technology covers North America with 60 spot beams, and has well in excess of 100 Gbps of capacity, enough to deliver high-speed Internet service to an estimated 2 million subscribers. Satellites with this type of specification will start entering the African domain in late 2016 and 2017. Once these satellites are operational we can have user communities of well over 2 million subscribers using satellites terminals as low-cost broadband access. This will be possible and very affordable, just as satellite technology has unlocked the market potential for DStv, so will the new HTS satellites unlock large-scale broadband market sectors at price points of less than R0.02c/MB.

To simply expect that we will see large-scale satellite broadband industry successes on the back of HTS technology innovations will be equivalent to assume that the success of DStv was purely technical and that the MTN mobile network growth was simply because GSM technology was developed. We all know that technology is an enabler, yes, and then we need dedicated business people with smart strategies to finally build the market place, especially if that market place is in Africa.

What will it take to develop a large-scale satellite broadband industry in Africa?

Firstly we need the HTS satellites. These are key to make it possible, these satellite are currently under various stages of development and are expected to be in service late 2016 starting 2017. Although this will technically be the second wave of HTS satellites for Africa, (the 1st wave was the Yahsat service) it will still be somewhat limited and not yet developed at full capacity.

Once the HTS satellites are operational we need investments required to implement the broadband network equipment (or hub equipment) that will apply the networks to “broadcast” the internet to millions of users. To provide an end-to-end broadband service to Africa it is necessary that network infrastructure to be installed and connected to the Internet core network at specific gateway locations. These broadband core network equipment (or hubs) requires major investment plans. It is estimated that between $100M – $200M will be required to service one million subscribers.

Three possible scenarios for African continent

The first option is that the satellite network operators will expand vertically, make the core network investments themselves and then take end-user services to market through a reseller model. This will require operators to become effective wholesale service providers and build a network of licensed and competent service providers in Africa to resell the services. This model leaves the investment and risk in the hands of the satellite operator while the market access and client ownership will be left in the hands of the local resellers.

A second option is that satellite network operators enter global joint venture programs and seek partners that are established in the Internet and broadband landscape. Such partnerships are typically, as was recently announced between Eutelsat and Facebook for providing broadband satellite services to Africa. This model offers satellite operators options to secure investment partners that also have strong brands in the broadband market. This might have relative easy subscriber acceptance. But it still doesn’t resolve the regulatory requirements for satellite services in each Africa country and it also still leaves the satellite joint venture organisation with the full investment responsibility with limited access to the user market.

A third option might be the forming of Africa’s “satellite giants” who are prepared and capable to make the required investment and take the end-user service directly to market. This can be a logical expansion for the current mobile operators who want to expand revenues and add new markets. Although approving this type of investment and taking the service to market is probably the smallest decision for the current mobile giants; for them it is rather an issue of scale. Although 2 million subscribers are very lucrative and highly sought after revenues for satellite operators, this might not be considered strategically important and might just dilute attention and effort from more important drives.

There are probably more options and possibilities that can unlock the potential of HTS services for the Africa market and this review is not intended to clarify all possibilities in details. What remains to be noted is that the new HTS technologies are set to change the broadband landscape in Africa for ever and that the business models and industry structures to do so are not yet finalised. For Africa service providers like Q-KON who has actively developed satellite broadband services since 2001 this simply spells OPPORTUNITY.