May 19, 2020

Establishing the Business Case for Backhaul

By Lluc Palerm, NSR Senior Analyst

Lluc Palerm-Serra

For a long time, satellite backhaul was a limited application, primarily serving rural areas through government programs. Today however, technology and market dynamics are aligning to accelerate growth in Satellite Backhaul. The recent declines in satellite capacity pricing and performance enhancements in the satellite ground segment are matched with the emergence of low-CAPEX Base Stations. A vast addressable market is unlocking as 4G spreads and 5G increases demand for ubiquitous connectivity.

Major growth ahead

Lower costs of satellite capacity, mobile infrastructure and handsets—along with higher throughput terminals and improvements in data efficiency—are opening the door for satellite to help mobile network operators to move outside saturated markets. According to NSR’s Wireless Backhaul via Satellite, 14th Edition report, satellite backhaul is still in its infancy, with installed base tripling over the next 10 years crossing the 200k sites threshold.

With satellite, mobile operators primarily will have an opportunity to further expand their reach into remote, rural and ultra-rural markets. As new populations come online in massive numbers, they will expect the same connectivity as the rest of the world. Whereas 2G and 3G placed a high demand on voice, more 4G/LTE networks are being rolled out to handle the prevailing data and video traffic that make up the majority of today’s traffic profiles.

There’s an incredible amount of room for mobile traffic demand to multiply from 2G to 4G and feed the growth of traditional backhaul. The latest Ericsson Mobility Report projects that more than 90% of the world’s population will have access to 4G/LTE coverage by 2025.

There are also new use cases opening for mobile network operators to capture additional sources of revenue where satellite is a key enabling technology. For example, NSR estimates that 5G-differentiated applications such as 5G backhaul and hybrid networks will generate close to one-third of net satellite capacity revenue growth in backhaul over the next ten years. This is due in part to the fact that 5G backhaul capacity demand will consume four to five times the bandwidth of a 4G site, according to NSR.

The key enabler: Ground equipment

As satellite backhaul becomes an attractive solution—thanks to its low CAPEX set-up costs and high competitive capacity pricing—ground equipment will play a leading role in unlocking future growth. Ground segment platforms will require both sophistication and features that integrate with everything from 2G to 5G networks. NSR predicts the transition from 4G to 5G will trigger a move toward these higher-end modems and drive equipment revenue growth at 21.9% CAGR.

To capture future growth, ground segment will need the following technology features:

  • Modem throughput must surpass 100 Mbps
  • High spectral efficiency for major OPEX savings
  • Data compression and optimization for optimal UX
  • A clear technology and company vision for 5G

In short, mobile network operators require, as well as the satellite service providers that support them, a platform that can handle every application use case and business requirement. With this, mobile operators can realize the full potential of cellular backhaul as a growing and profitable market.

Read more about the business case for backhaul here.


About Lluc Palerm, NSR Senior Analyst, Spain

Mr. Palerm joined NSR as an analyst in 2015. His primary areas of focus are Capacity Supply, Satellite Broadband and Ground Segment covering key growth areas such as new markets unlocked by HTS, opportunities opened by innovations in ground segment, how SatCom integrates in the telecom ecosystem or Cellular Backhaul and 5G. He is the lead author for NSR’s Wireless Backhaul via Satellite (WBS) report, industry’s unique Commercial Satellite Ground Segment (CSGS) report, and co-authors the Global Satellite Capacity Supply and Demand (GSCSD) report. Mr. Palerm regularly participates in consulting projects related to supply and demand forecast for new satellite systems, new markets entry strategy or ground segment equipment and services demand for emerging opportunities among others.

Prior to joining NSR, Mr. Palerm worked at Zero2Infinity in technical and business roles. While involved in the startup, he worked in the mission analysis for the company’s microsat launcher project and leaded the development of a rocket engine prototype successfully tested. He also contributed to the project’s business plan with market research and financial assessment. Lluc undertook fund raising efforts and built the relation with customers.

Graduated as an Aerospace Engineer from Universitat Politècnica de Catalunya (2011), he collaborated with one of its research centers developing CFD codes (CTTC). Afterwards, he received a Master in Management from ESADE Business School (2012) specializing in Innovation and Entrepreneurship.