Lately, several satellite firms, including Elon Musk's SpaceX, Amazon's Project Kuiper and Bharti Airtel and the British Government's OneWeb, have made a beeline for the Indian market. There are also media reports of Canada's Telesat collaborating with the Tata Group to enter the Indian market, but this is yet to be confirmed.
SpaceX has already started pre-booking for its low earth orbit (LEO) satellite communications and hopes to launch the services next year. And OneWeb has recently gotten a license to provide global mobile personal communication by satellite or Very Small Aperture Terminal (VSAT) in India. It is only recently that VSAT licensees were approved to offer backhaul services for wireless networks. Both SpaceX and OneWeb plan to collaborate with Indian vendors for gear.
It is easy to see why prominent satellite firms are setting up bases in India. A key reason is that 50% of India's vast population (around 1.3. billion) is yet to be connected. This is mainly because of the high cost of setting up a network in rural areas with low returns spread over a long time. Further, varied terrain adds to the challenge of setting up networks in rural areas.
Satellite is being touted as one of the technologies that can provide connectivity in remote and difficult-to-reach areas. While India has an overall teledensity (including wireless and wireline) of 88.27%, most users are from urban areas, which has a teledensity of 140.93%, while rural teledensity is just 60.44%. (Note: The reason teledensity can exceed 100% is because the data considers the number of SIMs, and in India the phenomenon of dual SIM is fairly common.)
The number of satellite users is likely to increase from 300,000 to 2 million by 2025, according to ICRA, a credit rating agency. Satellite-based broadband can open up several new market opportunities like smart agriculture, e-health and e-education. This may spur competition in this sector, resulting in lower costs.
"The cost of time and resources involved in execution and maintenance of fiber builds is far outweighed by use of satellite communications that have proved their resilience and value in demanding circumstances for past few decades," said Anil Prakash, director general of the Satcom Industry Association (SIA).
Another area of opportunity is providing backhaul connectivity via satellite to connect the mobile towers. Only 30% of more than 600,000 mobile towers in India are fiberized. However, fiber is required for 5G services, which are likely to be launched in the coming year. "Satellite backhaul in many cases is the most viable option for quick deployment and an accelerated go-to-market strategy for the terrestrial cellular players," said Prakash.
And the challenges…
One of the biggest issues faced in providing satellite services in emerging markets like India is the high cost. While the cost has come down when compared with a few years back, it is still very high for developing economies. For instance, SpaceX's Starlink is booking orders for a refundable amount of $99, clearly unaffordable for the rural areas.
"I am confident that with extensive proliferation, satellite broadband will not only be used for access in rural and remote terrains but also penetrate urban markets at competitive price points," said Prakash. The Indian market offers unprecedented economies of scale, and this is one reason why the cost of satellite broadband might come down as the number of subscribers grow in India.
Further, the availability of the devices is an issue. The regulations surrounding satellite-based services are also not yet clearly defined. For instance, there is the problem of whether the spectrum to be used for satellite services should be auctioned or not.
There are other regulatory issues as well. "With a maze of multi-agency approvals and associated delays, international players are trying to find ways to cross the chasm," said Prakash.
While India clearly appeals to the satellite players, it is not the only region they are exploring. For instance, SpaceX hopes to launch services in South Africa by the end of the year. Potentially satellite-based services can play a crucial role in bridging the digital divide in areas with no fiber. However, there are a few market and regulatory issues that need to be resolved for that.