On Jul 30, the FCC (Federal Communications Commission) unanimously approved Amazon’s Project Kuiper. The project, originally announced in Apr 2019, will deploy and operate a constellation of 3,236 low-Earth orbit (LEO) satellites to provide broadband internet to the United States. The FCC stipulated that Amazon must have at least 50% of satellites in operation by 2026, with all satellites fully deployed by 2029.

Amazon’s stated goal is to provide affordable, reliable internet access to underserved populations globally, particularly in remote areas. The plan is to provide service directly to customers, as well as high-speed “backhaul” for wireless carriers to allow them to provide LTE and 5G service in less accessible areas through 5G cell towers (rather than laying down fiber). Current speculation based on the language of the announcement is that Kuiper will focus first on the United States before expanding internationally. Morgan Stanley predicts that Project Kuiper could represent as much as a $100B opportunity for Amazon.

Amazon is committing $10B+ to Project Kuiper, which is actively investing in research and services, led by the former head of SpaceX’s Starlink program. In Dec 2019, Amazon announced plans to open a giant factory in 2020 for satellite R&D, prototype manufacturing and qualification, and is currently looking to fill about 100 full-time roles. Amazon has also invested in related offerings, such as its AWS Aerospace and Satellite Solutions cloud-solutions business unit (Jun 2020), and its AWS Ground Station (May 2019) to help manage satellites and their vast streams of data. (CEO Jeff Bezos also has sizable investments in Blue Origin, which is expected to launch its New Glenn rocket in 2021-2022.)

Project Kuiper is reportedly 2-3 years behind Elon Musk’s SpaceX Starlink internet satellite constellation, which had its first launch in May 2019. Starlink’s original plans were to launch 60 satellites every 2-3 weeks throughout 2020, each launch bringing online about one terabit per second of “useful connectivity” (enough for 40,000 people to stream video simultaneously). Despite launch delays, Starlink now has 595 LEO satellites in orbit after launching an additional 57 this morning – putting within range of the 400 to 800 satellites needed for “minor” coverage. It has US FCC approvals for about 12,000 satellites and is also requesting permission for another 30,000, for a total of 42,000 satellites.

Last month, SpaceX said it plans to launch a private beta this summer, followed by a public beta for "those in high altitudes." Starlink will initially provide service in the northern US and lower Canada, and will expand to “near-global coverage of the populated world” by 2021. The price of Starlink internet remains under wraps, though current speculation based on SpaceX’s comments is that it will run about $80 plus $100-300 upfront for terminal equipment. 700,000+ people so far have registered interest for the service on the company’s website.

Satellite-based broadband will be a gamechanger for both underserved consumers and businesses in multiple industries. Terrestrial cellular networks only cover 20% of the planet today. Just over half of households globally are connected and part of the digital economy. Satellite connectivity will unlock enormous value for both the satellite-internet providers and businesses that use satellites to extend their offerings – from digital services to logistics to remote work. Connectivity also enhances the efficacy of IoT devices, which have an extensive set of use cases across industries. Satellite broadband holds the promise of transforming how we think about internet access globally, closing the digital divide and reversing the shift towards more fragmented realities.

Jul 24 2020 (3 Shifts): The push towards Mars by the UAE, China and US

Dec 23 2019: SpaceX’s Starlink and the push towards global satellite-based internet

This week, Google announced it would invest $450M in security services firm ADT for a 6.6% stake. The deal includes a “long-term, strategic partnership” bringing together Google’s Nest smart-home devices with ADT’s security solutions.

Google’s current Nest portfolio includes cameras, video doorbell, alarm and safety systems, smart locks, thermostats, smart speakers, and routers. ADT’s offerings for residential and business customers, in turn, include security systems (e.g. video cameras, digital panels, motion sensors, access control); safety products (e.g. smoke and carbon monoxide detectors, flood sensors, panic buttons, medical alerts); smart automation (e.g. smart locks, smart plugs, garage controller); and associated 24/7 monitoring. 71% of ADT’s revenue comes from residential customers, while the other 29% is from business customers.

The rationale for the deal is heavily reliant on ADT’s 20,000+ professional technicians, who will sell, install and service Nest devices, and ADT’s professional monitoring network. As part of the deal, ADT will eventually “exclusively support Nest products.” Over time, Nest devices will be integrated with ADT’s offerings into an ADT + Google “helpful home security” solution, targeting both DIY and professionally installed segments.

The shift will happen across 3 horizons: (1) Introduction of current Nest products to ADT customers in the next 12 months; (2) a fully integrated solution with Nest products and new features, no later than Jun 2022 (Google and ADT have been working together on product development for almost a year); and (3) new intelligent products and AI-powered smart-home experience, such as differentiated monitoring, video analytics, and prioritized alarm response (to reduce false alarms to the police). (The Nest Aware video-recording subscription, which will be made available to ADT customers, already has a facial-recognition feature.) Subject to milestones being met, ADT and Google will each invest another $150M in 3 tranches for co-marketing, product development, technology, and training.

ADT’s stock shot up 76% after the Google announcement. Despite ADT reporting losses once again just two days later in its Q2 2020 earnings, its stock remains 40% above pre-announcement levels. ADT has been the leader in the residential monitored security industry (with 30% share of the North America market at the time of IPO) but has faced growing competition. It hasn’t been profitable since going public again in Jan 2018 and its customer base has declined from 7.2M at IPO to 6.5M today. For ADT, the partnership represents the potential for a new long-term growth trajectory and opportunity to capture consumers who are “smart home-first” rather than security-first.

Amazon and Google continue to be locked in a largely two-man race (outside China) in the smart speaker market, a key gateway into the smart home. As of Q1 2020, Amazon had the edge with 23% of global smart speaker sales, while Google had 19%. Amazon’s Feb 2018 acquisition of connected smart-home company Ring for $1B expanded the Amazon Alexa smart home ecosystem with a bevy of surveillance and security capabilities. With this partnership with ADT, Google is looking to level up its own Assistant smart-home ecosystem to compete with Amazon.

Google’s partnership comes at an interesting time, with rising scrutiny of facial recognition and “suspicionless surveillance.” Amazon, Microsoft and IBM, for instance, all recently pulled back on efforts to market facial recognition to police departments. Google notably has not followed suit with a similar announcement, though it put a pause on selling general-purpose facial recognition as an off-the-shelf service in late 2018. Integrating Nest Aware into ADT offerings has the potential to expand facial recognition to the home and business environments of ADT’s 6.5M customers in the US.

Jun 12 2020 (3 Shifts): Tech firms pull back on facial recognition use by police

Nov 19 2019: Underdogs in the smart home – Apple, Samsung & IKEA

Mobile-only neobank startup Varo Money finally received approval from the US Office of the Comptroller of the Currency (OCC), becoming the first fintech to receive a full-service national bank charter. (Square received a Utah Industrial Bank charter, a different pathway, in Mar 2020.)

The approval signifies that the new Varo Bank can now control its own deposits without having to work with partner banks. It can use these deposits to fund loans and safeguard deposits across state lines. (The company previously gained approval from the FDIC to use federal deposit insurance in Feb 2020.) Varo Bank, is subject to national banking laws, began using its charter on August 1. It plans to transition 2M+ accounts away from its partner bank Bancorp and add new credit cards, loans, and savings products, supported by a recent $241M Series D round.

If a neobank can’t get its own charter or licenses, its options are to partner with a bank (the most common route), acquire a bank with a charter, or operate on a limited basis. In the US, all of the pathways for a fintech to attain approval are long and uncertain: (1) Get a national bank charter (Varo is the first fintech to receive one), (2) become a state-chartered and FDIC-supervised Industrial Bank or Industrial Loan Company (ILC) (Square’s route), or (3) collect licenses state by state. It took Varo 3 years to get approval from the OCC, 2-1/2 years for Square to get approval for its Utah Industrial Bank, and Robinhood pulled its application in Nov 2019 in the face of regulatory burden and scrutiny. An OCC effort to introduce a special-purpose national bank charter for fintechs was overruled last year by a federal judge.

Varo’s approval could signify that the gates might be opening for fintechs to become banks, despite the persistent pushback by traditional banks. Social Finance (SoFi) applied for a national bank charter last month, which would allow it to lend money and accept deposits on its own and offer more competitive rates. Neobank Monzo, which has 4M+ users in the UK, also applied for a national bank charter in Apr 2020. The acting OCC comptroller has suggested that approval may come more quickly now that Varo has broken ground.

While retail banking has traditionally been a lower-margin business than the tech sector, big tech firms and fintechs have been drawn to it by the allure and possibilities of consumer financial data. Just this week, Google announced it had partnered with 6 more banks to provide digital checking and savings accounts to Google Pay users in the US, bringing Google’s bank partner total to 8 banks. Agreements such as this are mutually beneficial – big tech firms can use customer data to offer new services (such as financial insights and budgeting tools), while retail banks gain ready access to a large pool of mobile-first consumers, their associated streams of revenue, and a low-cost source of deposits. Google has indicated it will stay out of the “financial plumbing” – helping it avoid the associated compliance and need for a banking license.

With 1st-party data garnering so much attention of late (amid privacy regulation and the looming death of 3rd-party cookies), the ability for a fintech to operate a bank directly becomes even more compelling. A national bank charter can be a strategic moat that differentiates a fintech from the pack.

Feb 7 2020: Visa’s $5.3B bet on Plaid & the pathway to open banking

Dec 13 2019: Tech players expand their ecosystems through payments & financial services