05 October 2023

Carlo Agdamag, space and spectrum policy manager, Access Partnership

Unless you have been living under a (space) rock, you are probably aware that the biggest trend that jolted the space industry in the past year was a string of mergers and acquisitions, mostly involving established satellite companies.

Beyond altering the dynamics of competition in the sector, these deals are likely to influence the pace of space-related developments and how overall innovation in this fast-moving industry would play out. In such a case, flagging market concentration may not remain a purely economic assessment, as regulatory and scientific factors must also be equally considered, such as ITU filings, orbital slots, and spectrum holdings.

While the eventual aftermath of this trend of consolidation remains to be seen, this would surely have repercussions on how to determine an ideal number of satellite operators in a market, how this affects the road to network convergence, and how Asia would play a role in the unfolding of these developments.

An optimal number of satellite players

Despite the continuous boom of the satellite industry, the number of players has become increasingly smaller, with one acquisition after another. As such, prior to the consummation of these transactions, regulators have been assessing whether the heightened level of concentration would be harmful to the market, and the possible measures that can be done to avert likely harms. To this date, not even the most proactive regulators, such as the European Commission, have raised major red flags about the deals. At most, the concerns flagged only pertain to a specific subsegment of services (such as inflight connectivity) in a confined geographic area.

Stripped of technicalities, the absence of market concentration issues could be attributed to the continuing presence of a sufficient number of players competing in the market. However, as satellite companies find it more efficient to combine their operations and technologies, reaching a breaking point could become an immediate possibility. Determining an ideal number of players in telecommunications remains a long-running debate, especially in the realm of mobile networks. While having three – or even four – mobile network operators has long been regarded as the magic number, this is disputed by several assessments and even by competition regulators, who say that each jurisdiction must be judged on its own merits.

Whether such an optimal number would come to exist for satellites remains up in the air. For one, the method for analysing competitive impact varies per industry. Unlike in mobile markets, where the issue of spectrum allocation is a major factor in determining the presence of competitive harm, the dynamics are different in the case of satellites. However, with the evolving landscape of terrestrial and satellite connectivity, even the method for assessing harm in the market may likely change as well.

A challenge to industry convergence

Perhaps the most game-changing development in telecommunications in recent memory is the advent of direct-to-handset (DTH) connectivity. Previously, there existed a clear demarcation in the markets of satellite operators and terrestrial networks. However, with DTH technology, the lines are now blurred as easily accessible consumer handsets, such as smartphones, are now capable of connecting to satellites. Much has been said about the immense benefits that this convergence would bring to consumers. From providing an additional layer of safeguard in disasters and emergencies to making ubiquitous connectivity anywhere in the world more accessible, DTH signifies a new frontier in telecommunications.

However, while the technical aspect of this innovation seems to be in advanced stages, the regulatory component remains to be fleshed out. This includes how the competition dynamics of the mobile-satellite divide would be treated. With a backdrop of DTH mainstreaming, coupled with a continuous trend of consolidation among satellite players, it might be inevitable that both satellite and mobile operators would be considered within the scope of a single market for the provision of connectivity to consumer handsets. While satellite operators have been marketing DTH as a mere complementary service to mobile networks, how it is perceived by competition regulators may be starkly different, especially when assessed with factors like spectrum sharing.

Implications for Asia

Mergers of satellite companies happen on a global scale, and the jurisdictions which initially flagged concerns about these transactions are mostly from the western region. However, there are two notable developments happening in the Asia Pacific region which could be pivotal in how the competition dynamics between terrestrial and satellite ecosystems pan out.

The first involves a wave of mergers by southeast Asian telecommunication firms. For instance, in Thailand, the second-ranked operator True has merged with third-ranked DTAC, creating an entity which dislodged the erstwhile leader AIS from the top spot. The same situation transpired in Malaysia, with Celcom combining with Digi.com to create a new market leader in the country. Both transactions resulted in a more concentrated mobile network market, and while they are purely independent from satellite or DTH developments, regulators could regard the resulting concentration in terrestrial markets as a factor in assessing satellite-related transactions, given the possible complementarity or substitutability scenarios arising from DTH technology.

The other involves the wave of DTH developments happening in Asia. Currently, most DTH services are limited to emergency communications, and given the geographical and topographical conditions of Asian countries, many operators are initially piloting their services in the region. The most relevant among these are partnerships between mobile network operators and satellite operators, some of which encompass the latter’s use of the licensed mobile spectrum. The rules regarding this are on shaky ground, and again, how these partnerships unfold would be a relevant factor in assessing the competition dynamics in the satellite industry.

All told, it appears that the current trend of consolidation among satellite firms would create a ripple effect that could have tremendous implications for the entire telecommunications industry, including in Asia. But while satellite business strategies and technological innovations are trying to outpace each other, competition regulation is still playing catch-up. Until then, the market remains in a wait-and-see attitude as to how these developments would be perceived.