LEO constellations are starting to disrupt GEO capacity contracts

July 2024 · 2 minute read

WASHINGTON — Satellite broadband customers are increasingly demanding shorter-term contracts to hold out for better prices in a market set for a flood of low Earth orbit (LEO) capacity, according to executives of regional satellite operators.

While Starlink and OneWeb are still working on expanding their LEO constellations globally, operators of satellites in geostationary orbit (GEO) said March 14 they already see an impact on their businesses.

Customers are increasingly pushing GEO operators for contracts they can renew annually where previously they were expected to sign five-year deals, Amit Somani, CEO of United Arab Emirates-based ABS, said during the Satellite 2023 conference here.

Customers see LEO constellations touting terabits of capacity and they “think there is an overwhelming oversupply of capacity that’s coming to the market,” said Abdulhadi Alhassani, chief strategy officer of Saudi Arabia-based Arabsat

But not all of this capacity “is actually useable capacity,” Alhassani said, because of the time LEO satellites spend over oceans and other unpopulated areas as they roam across Earth, compared to GEO satellites stationed in fixed locations to provide continual coverage of populated regions.

“That’s putting a lot of pressure on us when we negotiate contracts with customers,” he said.

The attention and investments the LEO industry has been getting in recent years compared with GEO are also affecting the industry, added Kyle Whitehill, CEO of U.K.-based Avanti Communications.

“So I think if you’re a GEO operator trying to fund a new satellite constellation, it’s way tougher now than it used to be,” Whitehill said.

However, the LEO constellations — and Starlink in particular — have helped raise the profile of the entire satellite industry, which the executives said is helping to attract more business for their services in general.

Shorter-term contracts can also lead to more revenues, Somani of ABS quipped, because these customers forgo the discounts they would get with longer-term orders.

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