According to Euroconsult's soon-to-be-released report, SatCom for Defense & Security: Strategic Issues & Forecasts, global military demand for commercial satellite capacity has fallen by an estimated 20% from a peak of 12.5 GHz in 2011 following tremendous growth over the previous decade, due in large part to lower usage of the U.S. DoD.
Looking forward, heightened global instability and security concerns are translating into prospects for an acceleration in defense spending globally, presenting opportunities through modernization of communications systems aboard military assets. Launches of next generation commercial satellites and procurements of next generation military satellite systems in the 2020-2022 time-frame represent potential game-changers for the milsatcom eco-system.
"While military satcom requirements still carry a relatively high degree of uncertainty, these developments could combine to see satellite capacity demand in the segment surge by upwards of 60% over the coming decade," said Brent Prokosh, Senior Consultant at Euroconsult and editor of the report. "Bottom-up analysis of fundamental demand drivers within leading military application segments reveals positive signs looking forward."
While commercial capacity demand began stabilizing in 2016, proprietary satellites are serving a growing share of total military FSS capacity requirements as defense agencies seek to optimize usage of these sunk-cost assets. As of 2016, proprietary systems were estimated to account for more than 35% of overall military satellite communications demand. The number of countries investing in proprietary military satellite communications systems, whether directly or through partnerships, has expanded heavily in recent years, and is projected to reach upwards of 30 countries by 2021, from a base of just 11 in 2006. Capacity supply from proprietary military satellites is expected to grow seven-fold over the same period to nearly 70 Gbps by 2021. Public-private partnership activity has also remained strong, with LuxGovSat and Japan's DSN satellite projects as leading examples.
Given the heightened utilization and supply rollouts of proprietary systems, challenges may persist for commercial operators in the absence of a major renewal of military conflict activity globally. Looking forward, Euroconsult sees a continued shift in demand towards managed services and solutions (away from raw capacity) and growing adoption and introduction of lower cost, higher capability high-throughput satellite capacity as favorable growth vectors for the commercial industry.
Euroconsult's report delves into the underlying drivers of demand at the application level, including analysis of satcom usage by land, naval and air forces globally; key findings include:
Demand from naval forces has grown sharply in recent years, notably on proprietary military satellite systems, helping partially offset satellite capacity demand from land forces. For example, the U.S. Navy has grown its utilization of WGS capacity at an average annualized pace of 25% since 2010 to reach 600 Mbps as of 2015, which equates to 85% of the departments's overall satcom usage.
Over 650 UAVs are relaying data over satellite links, a figure which can be expected to double in the medium term based on current procurement plans.
In 2015-2016, the U.S. military still generated an average number of manned and unmanned reconnaissance flights per month over Afghanistan that were well within the range observed at the height of combat operations in 2010-2011.
Outside the U.S., accelerating investment activity in naval fleet procurements and in high/medium altitude long endurance UAVs is observed across all regions, presenting international diversification opportunities for commercial players.
Satellite capacity demand for military communications is more volatile than that of other market segments, as it is mainly driven by political events and conflicts which are difficult to predict in terms of location and magnitude. The study reviews past efforts to model future military communications demand, providing data and an innovative tool to help clear this uncertainty. Taking into account all key trends, drivers and limitations of military satellite communications, Euroconsult's Forecast Tool has been updated and allows users to see the impacts of hundreds of scenarios by selecting the number, nature and possible timing of conflicts for land, air and maritime segments, simulating capacity (GHz) and throughput (Gpbs) requirements by frequency band, military segment, and commercial vs. proprietary systems.