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Dec 23 2019
SpaceX’s Starlink and the push towards global satellite-based internet
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25 min
What’s Happening
Elon Musk’s SpaceX will have launched 180 low-orbit Starlink satellites by the end of this year across 3 missions. SpaceX had successful launches in May and Nov 2019, with the final one planned for the day before New Years Eve. It has US FCC approvals for 12,000 satellites and is requesting permission for another 30,000, for a total of 42,000 satellites (though SpaceX may not deploy all the satellites approved right away). It plans to launch 60 satellites every 2-3 weeks over the next year – each launch will bring online about one terabit per second of “useful connectivity,” enough for 40,000 people to stream video simultaneously. 24 Starlink launches are expected in 2020, enough to reach most populated areas.
The constellation being built by rocket-maker SpaceX is intended to enable SpaceX to offer low-latency broadband internet – up to 1 Gbps with latencies as low as cable – globally by mid-2020. CEO Elon Musk has indicated that Starlink will need 400+ satellites in orbit to begin providing “minor” coverage and 1000+ satellites to provide “economically viable” coverage. Starlink plans to provide commercial service to the Northern US and Canada next year and reach near-global” coverage – including in areas where high-speed internet is unavailable or prohibitively expensive – by 2021. SpaceX is going “nation by nation” to get authorization to provide service, in some cases partnering with local telecoms.
Official pricing has not been confirmed, although SpaceX president Gwynne Shotwell has used “$80 per month” as a comparative benchmark for broadband in the US. SpaceX has already applied to operate 1M “earth stations” or consumer-friendly user terminals, which are how people will connect to Starlink. Each $250 user terminal manufactured by SpaceX – essentially a flat-panel antenna – would be the size of a pizza box and readily installed on a rooftop or other open-air private space. (SpaceX is also planning several hundred internet-gateway stations and two “telemetry, tracking and command” stations.)
Musk believes broadband could be a $30B to $50B business in annual revenue for SpaceX (which currently generates $2.5B annually), funding its next generation of spacecraft and ambition for Mars. Globally, only 55% of households are connected to the internet today; Musk’s projections assume SpaceX can help increase that number and capture a reasonable share. This is a big bet for SpaceX, requiring an outlay of $10B+ by its own estimates and potentially more.
Traditional vendors (such as ViaSat, HughesNet and Inmarsat) typically use large geostationary satellites rotating with the earth at 22,200+ miles above a given position, offering limited and sometimes laggy internet at pricey rates to a small-scale customer segment (just 2M in the US). Starlink, in contrast, is part of a wave of low- and medium-Earth orbit satellites (LEO/MEO) – orbiting at just 200-900 miles above earth. Lower orbit means higher internet speeds and low latency, though it also means a constellation of satellites is needed for coverage (compensating for faster travel speeds at lower orbit). To create its constellation, SpaceX has the advantage of being able to launch satellites with its own Falcon 9 rockets (and Starship rockets in the future), lowering launch costs substantially.
More, lower and smaller satellites
The Starlink constellation joins an increasing number of satellites in orbit – there are 2,200+ currently in operation, representing double-digit growth over last year. SpaceX’s anticipated 1,400+ satellites over the next year would represent a substantial jump, not even considering any ambitions for tens of thousands more. Industry watchers are projecting that the number of satellites in orbit could quintuple over the next 10 years, driven by smallsat mega-constellations expected from a few players (SpaceX, Amazon, OneWeb, Telesat).
The anticipated growth is driven by constellations of lower-cost small satellites under 500 kg. An emerging class of satellites, smallsats are presenting vendors and entrants with commercial opportunities such as high-speed broadband internet, low-power narrowband communications (e.g. for military and IoT), and geospatial imagery and analytics. Broadband internet is expected to be the predominant use case for small satellites, particularly in rural and developing regions like Africa. The satellite-based broadband industry is expected to grow dramatically, from $4B today to $22B by 2024 and $41B by 2029.
The lower costs associated with smallsats – stemming from standard form factors, modular design, off-the-shelf parts, mass production, shorter development cycles and smaller design teams – have been key in making smallsat-powered services more accessible to businesses. These businesses, in turn, will be able to tap into a vast array of newly enabled opportunities, ranging from the next generation of connected-vehicle applications, to “smart nation” services, asset tracking and agriculture.
Satellites historically have cost in the range of $50M to $400M to build and launch. If SpaceX’s 227-kg Starlink satellites were on par with low-Earth competitors like OneWeb, that would mean a build cost of $1M each. However, statements from Musk suggest each Starlink satellite might cost even less – likely in the hundreds of thousands of dollars to build.
The recent Starlink missions were launched with SpaceX’s own Falcon 9 – already one of the lowest-cost players in the rocket industry. Launch costs for customers are around $62M, though SpaceX’s direct costs are estimated at $30-40M per launch. SpaceX’s highly anticipated Starship mega-rocket also has the potential to reduce the cost of each launch by a factor of 10 to as little as $2-5M per launch and carry perhaps 300-400 Starlink satellites on each mission. According to SpaceX, Starship will be ready as soon as next year, though some industry watchers are skeptical about SpaceX’s ability to meet that timeline.
Cost of build and launch is a pressing issue for smallsat companies because smallsats are refreshed more frequently than large geostationary satellites. The lifespan is 2-3 years for ultra-small cubesats and 4-5 years for SpaceX’s Starlink satellites – shorter than the typical 7-10 years for a geostationary satellite. When smallsats deorbit, they typically burn up in the atmosphere and cannot be reused. Even after a full constellation has been launched, there is still a substantial annual cost associated with replenishing satellites.
Securing launch services is a pain point as well. There are third-party launch services from established players and startups (e.g. ILS Launch, Arianespace, Virgin Orbit, Rocket Lab), but access to launch rockets remains a bottleneck for getting constellation satellites in orbit. SpaceX has been trying to solve this by offering a “rideshare” option for smallsats that offers more flexibility for satellite players looking to launch.
Despite these challenges, there has been a steady stream of players and startups entering the satellite space. In 2009, the satellite sector was dominated by fewer than 10 companies; since then, 435+ satellite startups have received a total of $20B in funding.
Notable low-Earth smallsat players focused on broadband
Broadband players are typically launching smallsats in the 200-300 kg range (much larger than a cubesat). While costs are lower than traditional geostationary satellites, there are usually still substantial build and launch costs for a constellation. This means that the players and entrants in broadband are, in large part, constrained to large companies and well-funded startups.
  • Amazon’s Project Kuiper is headed by the former head of SpaceX’s Starlink program, along with a few other members of the Starlink team who left after a Musk-driven reorg. Amazon is still awaiting approval from the US FCC on its application, filed earlier this year, to launch 3,236 low-Earth satellites. The project’s intent is to provide internet to tens of millions in “unserved and underserved communities around the world.” It is reportedly 2-3 years behind SpaceX, recently announcing a giant factory opening in 2020 for R&D, prototype manufacturing and qualification. Amazon is investing heavily in the project, with 164 postings for Project Kuiper at the time of writing. It also has assets it can leverage to differentiate its offering – notably the managed AWS Ground Station service situated in AWS data centers and integrated with AWS’ vast universe of cloud offerings, and CEO Jeff Bezos’ rocket company Blue Origin, which expects its first launch in 2021. Morgan Stanley predicts that Project Kuiper could represent as much as a $100B opportunity for Amazon.
  • UK-based OneWeb, backed by SoftBank and Virgin (among others) with $3.4B in total funding, is probably SpaceX’s closest competitor in low-Earth satellite broadband. OneWeb’s initial constellation will have 650 satellites with ambitions for up to 1,980. After some delays, OneWeb launched 6 satellites earlier this year, plans to launch 30 satellites per mission every month starting in Jan 2020, and anticipates global coverage by 2021. According to OneWeb, its joint venture with Airbus can build up to 2 satellites per day at $1M each at its new $85M factory in Florida. Each satellite has 10 Gbps of capacity, with tests demonstrating speeds of 400+ Mbps and average latency of 32ms. OneWeb views its LEO smallsat network as complementary to other networks – e.g. extending 5G connectivity beyond the reach of traditional carriers. In addition to planning to serve 1.5M user terminals in the US, OneWeb signed deals with telecom firms Talia (Africa, Middle East) and Intermatica (Europe) earlier this year. It also recently signed a memorandum of understanding with established satellite communications company Iridium to work together on joint offerings. On the launch front, it has arrangements with Arianespace, Virgin Orbit, and Bezos’ Blue Origin. Its partnerships, however, don’t always work out, with litigation underway with Virgin Orbit over cancelled launches and with Intelsat over alleged bad faith in a merger that fell through.
  • At Boeing, plans for a LEO broadband constellation of up to 3,000+ satellites have been brewing since 2016. After reports in 2018 of a stalled effort, it picked up steam earlier this year when its initial FCC application for 147 satellites was moved to the next phase. Boeing has also been working on a flat satellite antenna to bring broadband to military aircraft, as well as a next-generation of more flexible, reprogrammable satellites.
  • Facebook has been working on an experimental LEO cubesat called Athena under a subsidiary called PointView Tech LLC since 2016. The research project is testing the use of millimeter-wave radio signals (E-band) in beaming 10-Gbps internet to the ground. The application specified 3 ground stations in southern California. Earlier this year, Athena was granted approval by the FCC and will likely launch the satellite with Arianespace, though there has been little news since. PointView has also been working on optical/laser technology for satellite-to-ground communications, and is building two observatories on Mount Wilson near Los Angeles.
  • Apple, according to Bloomberg, has been working on satellite connectivity since 2017 with a team of a dozen aerospace, satellite and antenna engineers. Details of the project, which is still early-stage and could be shut down, are limited. It is reportedly focused on avenues for transmitting data directly to phones, circumventing wireless networks. While it’s unknown whether the emphasis is on satellite constellations or on-the-ground equipment, industry watchers consider the latter more likely. Possible avenues include location tracking, linking devices together without a wireless network, one-way broadcast content (e.g. Apple TV+), mobile internet access in remote regions or globally, or otherwise preparing for satellite internet being more widely adopted. The project is led by alumni of Skybox Imaging (later Google’s Terra Bella, which was in turn acquired by Planet Labs), who report to Apple’s hardware engineering division under the head of iPhone engineering. The team is actively hiring, with results expected within 5 years. Apple has lately been working to bring more enabling technology in-house (such as chips) and this project is reportedly a priority for CEO Tim Cook.
Notable low-Earth smallsat players focused on narrowband/IoT
There are dozens of players – both established and new – working to build smallsat constellations for IoT connectivity, especially in narrowband. Low-power narrowband can help connect the growing number of IoT sensors and devices, even in remote and hard-to-access places, as well as serve the communications needs of the military and other specialized use cases.
Many of these players are using very small cubesats – in some cases, as small as a piece of toast – and have been able to launch quickly at relatively low cost. For instance, Astrocast’s planned network of 80 satellites, plus ground stations, is expected to cost less than $50M in total. The lower cost of entry means there are more entrants piling into this space than in broadband.
  • Established geostationary satellite operator Eutelsat is planning its own LEO smallsat constellation for the Internet of Things (IoT), offering low-speed (few Kbps) connectivity for objects. It intends to integrate satellite connectivity from its Eutelsat LEO for Objects (ELO) fleet with IoT terrestrial networks, starting with a partnership with French IoT network operator Sigfox. Eutelsat has 5 satellites ordered from Tyvak, Loft Orbital, and Clyde Space, with plans for a 25-satellite constellation by 2022. Launches are planned beginning in H1 2020 and extending into 2021.
  • In Oct 2019, Spire Global announced it plans to double the size of its constellation from its current 88 LEO smallsats, as well as extend its platform to offer global aircraft and fleet tracking capabilities. Spire’s constellation of satellites, each no larger than a textbook, are used for maritime, aircraft and asset tracking as well as monitoring weather systems worldwide. It also operates 30+ ground stations.
Challenges and criticisms
The sheer size of these new satellite constellations are creating challenges for market players. First, avoiding collisions or other interference with other satellites in space is already a substantial challenge for operators. More than 1/3 of debris today comes from just two collisions a decade ago. Scientists are concerned that more satellites in orbit will increase congestion, leading to even more satellite collisions and more space debris. While satellites can dodge other spacecraft and debris, they sometimes fail – for instance, 5% of SpaceX’s Starlink satellites have already failed and deorbited. Amazon recently reported to the FCC that the likelihood of a collision between a satellite and 10-cm+ piece of space debris could be as much as 6-17% under certain conditions.
NASA scientists are recommending that 99% of all satellites be immediately removed from space when they expire to avoid collisions increasing. While countries are working on debris removal technologies (e.g. robotic arms), this is not an easy task. There are currently 3,000+ satellites in orbit that are non-operational, as well as 34,000 pieces of space debris longer than 10 cm and millions more that are smaller in size. SpaceX claims to have redesigned future satellites to be fully destroyed during reentry.
Another complaint regarding the growth of low-orbit satellites is light pollution. Many astronomers and scientists are up in arms about the possibility of astronomy research being forever altered as organizations such as SpaceX deploy mega-constellations visible to the human eye. SpaceX, responding to the uproar, will test a special less-reflective coating on one of the satellites in the upcoming launch at the end of Dec 2019.
Finally, there has been growing concern about whether the host of newer entrants are all complying with the regulatory regime required of incumbents. For instance, Swarm Technologies continued its launch even after the FCC rejected its application – an unusual circumstance that raised questions as to how the FCC would respond. Swarm ultimately faced a $900K fine, but the situation raised the alarming specter of private firms disregarding regulatory rules.
What It Means
This isn’t yet a sure thing. Most of the players are still in early stages and working out the kinks of their respective technologies and approach. While there are a good number who have launched satellites, most are trials and there are only a scant few who have constellations of any scale. The technological uncertainty isn’t just about the satellites either; players usually also have to build out a ground network (e.g. internet-gateway stations, telemetry, tracking and command stations, user terminals). For a company like SpaceX, how they design and manufacture a consumer-facing, mass-market user terminal at the right price point will have long-term impact on their installation and service model, and cost structure. Other players may need to partner for elements of their ground network. There’s also the aspect of how these technologies and elements work together, their vulnerabilities and failure points, and how they recover from failure.
The even bigger challenge is the one of business model: The satellite market is notoriously difficult to succeed in. Satellite-based internet experienced a hype cycle in the 1990s and early 2000s, during which startups and big tech players alike – Iridium, GlobalStar, Bill Gates-backed Teledesic, Alcatel-based SkyBridge, ICO Global Communications, Orbcomm – failed memorably, squandering billions. In a more recent example, LeoSat, an ambitious effort founded in 2013 which had FCC approval as well as $2B in soft commitments from customers, recently shut down in Nov 2019 after running out of money. According to the head of a space VC firm, none of the incumbent satellite telecom players “are really solvent and haven’t been for a long time.”
The use cases and price points are still being tested. It’s not clear, for instance, whether there are enough customers willing to pay for satellite broadband at $80/month to account for the sizable upfront and ongoing costs of maintaining/replenishing a constellation and ground network. In urban areas, many people are paying less than that today. The same question about whether there are enough customers goes for the narrowband IoT front as well, with the added uncertainty of serving a need, market and ecosystem that are continuing to change rapidly under the players’ feet. In many cases, the magic will be in how these new services integrate with existing technologies and workflows – which is still far from being well-developed.
Who will win
In this dicey market, it’s not obvious whether anyone will win. If it does pan out, there is probably only room in the market for a few competitors, at least at the global level. We can certainly expect to see a shakeout of the hundreds of space startups that have entered so far, with most either merging or being acquired, or otherwise shutting their doors. The few winners in broadband will have billions in funding, deep technical experience, a clear business model that considers the massive capital required and uncertainties ahead, and a positional advantage in cost structure, technology and/or strategic alliances.
Right now, SpaceX is the most likely of the broadband players to be among the winners. In addition to being ahead of the others in launches (not to mention the torrent of launches planned), SpaceX has the unique advantage of owning the lowest-cost rocket launch platform (Falcon 9), with the promise of the Starship mega-rocket driving down launch costs further by a factor of 10. It also means Starlink doesn’t have to wait as long for a launch slot or negotiate with brokers and third-party launch services – a pain point for many in the industry that has constrained constellation growth. It also has manufacturing chops, which SpaceX is hinting has already driven down the build cost of a satellite to just hundreds of thousands of dollars.
As a bonus, SpaceX also has a special relationship with Tesla, with which it shares a CEO – potentially offering it access to a pool of high-income early-adopter consumers who might be interested in acquiring satellite broadband, perhaps on their car as well as at their vacation homes or boats. As Tesla pushes towards in-car services and autonomous vehicles, there is obvious synergy with the connectivity offered by satellite broadband. Tesla’s energy storage customers – both consumers and commercial/utility customers – are also potential candidates for satellite broadband.
Among the narrowband IoT players, it’s much harder to make any kind of call – the jury is very much still out. The winners are most likely the ones who have technology complementary with leading terrestrial IoT networks and can build strategic ecosystem relationships.
Traditional satellite operators and telecom companies will be among the hardest hit, unless they can adapt. Satellite operators were recently hit hard by the decision last month by the FCC to free up C-band spectrum for 5G services by auctioning it off. The C-band was in use by satellite incumbents Intelsat, SES, Eutelsat, and Telesat, and the news sent Intelsat’s stock down 40%. Terrestrial telecom companies will also be impacted as well, depending on the market they serve.
The promise for businesses
Terrestrial cellular networks only cover 20% of the planet today. Just over half of households globally are connected and part of the digital economy. Despite their challenges, low-orbit satellite connectivity has the potential to unlock enormous value for both providers as well as businesses that use satellites to extend their enterprise or consumer offerings. Connectivity also extends the efficacy of IoT devices, which have an extensive set of use cases across industries.
A range of new opportunities across industries will emerge for businesses:
  • Providers of digital services – such as cloud services, ecommerce, content streaming, gaming, and advertising (see our Oct 24 2019 brief on video-streaming and Nov 5 2019 brief on cloud gaming) – stand to gain via access to new markets.
  • In logistics, the ability to continuously track assets as they move – even in regions that are normally “dead zones” – can improve supply chain visibility, product safety, security, and efficiency.
  • Energy and resource companies can track sensors on equipment and monitor operational technology, including in remote places like oil platforms or windmill farms, resulting in better planning, safety and investments.
  • Agriculture businesses and farmers can monitor their crops, soil, and equipment in areas not serviced by other networks.
  • Insurance companies can track assets globally to manage risk, detect fraud, and facilitate claims.
  • In mobility, satellite connectivity can extend the reach of drone delivery services (see Oct 11 2019 brief), create new opportunities for in-car services and services on passenger trains, and support autonomous vehicles (see Oct 18 2019 brief on driverless trucks) as the sector continues to develop.
  • Connectivity can also support government agencies and first responders in responding to natural disasters and other emergencies, as well as enhance border security.
  • Business intelligence functions and companies can tap into the new data offered by satellites, using the alternative data to make better investments, understand competitor activity, and identify market opportunities and risks. There’s also a growing vendor ecosystem eager to help companies control satellites and manage sizable streams of satellite data. These range from cloud services like AWS Ground Station; satellite data and control offerings such as Lockheed Martin Verge, Spire Global, DigitalGlobe, BlackSky, ATLAS Space Operations; as well as other data management/pipeline and analytics/AI firms.
  • Global connectivity can also help with virtual work and remote teams, enabling high-bandwidth video-conferencing and real-time collaboration in documents and tools.
  • It will also make it more viable to live and work further from cities or crowded areas, potentially increasing the value of real estate in less populated areas.
Digital nationalism extends to the sky
National governments are launching new satellite constellations of their own, as the satellite “arms race” begins to heat up. Governments are looking to capture orbital slots and establish advantageous positions in both commercial opportunities and defense systems. US-based satellites, both commercial and public sector, account for about 45% of all satellites globally (excluding multinational endeavors). Other countries are looking to grow their own presence in the skies, most notably China.
Most Chinese space startups, even if nominally commercial in scope, are state-owned, state-controlled, or otherwise a proxy for the Chinese government. China has two major LEO constellations underway – the Hongyan broadband constellation (320 satellites planned) and Xingyun narrowband constellation (156 satellites planned). Norway recently announced it would be launching two satellites of its own in 2022, bringing broadband coverage to its Arctic north and policing travel of foreign satellites above its country. Earlier this year, France similarly said it would deploy a “blinding” laser system against satellites that threaten its own space assets. Canada is supporting Telesat’s LEO broadband efforts through its Strategic Innovation Fund.
It looks like the growing trend towards “digital nationalism” (see Nov 22 2019 brief on the global cloud race) is already extending into space. While anti-satellite defense systems are currently more focused on preventing surveillance by foreign countries, it isn’t a stretch to think that countries could one day try to disrupt the operations of foreign communications or satellite-based services operating above their borders. For instance, they could attempt to exercise “shutter control,” forcing imaging equipment to stop capturing geospatial pictures, or prevent localization technology from tracking assets. This presents a risk for certain use cases that might require continuous connectivity – e.g. control of vehicles.
Right now, there is no comprehensive on-orbit regulatory regime at either the global level or among the 70+ countries working on smallsats. Astronomers, for instance, troubled with satellite constellations’ light pollution have no recourse to international space law. Satellite providers need to proactively work with regulators and stakeholders in each country to gain market access and ideally help shape laws to ensure satellites can operate across as many geographies as possible. This may mean working with local telcom partners and building infrastructure in local geographies, to satisfy countries with “data localization” regimes.
There is a possibility, given the concerns about collisions and light pollution, that LEO satellites will be restricted in the future – creating incentives for early entrants to launch as many as possible (in addition to the motivation of capturing orbital slots). However, a wholesale ban by any nation is unlikely, given their incentives are not aligned with hampering their own competitiveness.
It’s an exciting time
Market uncertainty aside, it’s an exciting time in the satellite space, with a wave of innovation emerging to solve longstanding problems and supported by the regulatory agencies. The techniques employed by this new wave of satellite players – e.g. low-orbit smallsats – have the potential to do more than solve the issues that have plagued the satellite-internet market such as poor latency and high costs. It could transform how we think about internet access globally, closing the digital divide and reversing the shift towards more fragmented realities.
Innovation is also still happening – e.g. new orbits and spacing, communications technologies such as millimeter-wave radio signals and optical/laser, smallsats in geostationary orbit. If this wave continues, we can expect to see more innovation in user terminals, both form factors and associated applications – i.e. how consumers interact with satellite broadband, and how IoT devices interact with satellite narrowband.
Imagine a world of global connectivity, where even people in rural and remote areas can get online and access all the resources available there, where we can go anywhere – in a car, train, boat or plane, or hiking on top of a hill – and not worry about how to call home or work from afar. While we are still far from that vision, the push towards global satellite-based internet is bringing us closer.
Disclosure: Amazon is a vendor of 6Pages.