Tag: Project Kuiper

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The Industry

Update on Satellite Broadband

It’s been a busy few weeks with announcements from the satellite broadband industry. The industry keeps moving us closer to a time when almost anybody in the world will potentially have access to broadband.

The first announcement came from OneWeb. The company successfully launched 36 new satellites with rockets supplied by NewSpace India Limited. This new rocket company was formed in 2019 and is a public sector undertaking sponsored by the Indian Government and an arm of the India Space Research Organization. This launch is a reminder that many parts of the world are now interested in the space business.

These new satellites bring the OneWeb fleet of satellites up to 462. The company says it will ultimately launch 648 satellites. OneWeb intends to soon open up the constellation to global coverage. OneWeb’s business plan is to reach the remotest places in the world. The company has also been hinting at using the satellites to bring broadband to remote cell towers and to remote outposts for governments and militaries around the world.

Project Kuiper, owned by Amazon and Jeff Bezos is finally ready to hit the skies and plans to launch its first two prototype satellites in early 2023. The company has an ultimate goal of launching a total of 3,236 satellites. The first launch will use rockets from the United Launch Alliance using the new Vulcan Centaur rockets. Project Kuiper has already secured 38 additional launches on the Vulcan Centaur rockets, but the majority of its satellites will be deployed using the ULA Atlas V rockets. The company is rumored to have secured as many as 92 rocket launches.

One of the most interesting pieces of news comes from subscribers of Starlink. The company recently added new language to the terms of service for both residential and business customers that introduces the idea of a data cap. The new terms of service say that customers will get a monthly limit of ‘priority access’, and once that limit is reached, the customer will no longer be prioritized over traffic generated by other customers.

This is interesting from several perspectives. First, Starlink said in the early days of the business that it would never put a cap on usage. And with this announcement, it still hasn’t done that since customers will be free to continue to use broadband for the remainder of the billing cycle.

This feels eerily reminiscent of plans offered by the high-orbit satellite companies where usage slows down after customers reach a monthly usage limit.

Numerous engineers have speculated that any satellite constellation will have a finite capacity to move data, and this announcement hints that that data limit is already foreseeable for Starlink. Of course, the company can continue to launch more satellites and has plans on the drawing board to have as many as 30,000 satellites in its constellation. But for now, with a little over 2,300 satellites, this announcement says that the constellation is probably already getting over-busy at times. The ability to slow down customers is a classic way to serve more customers than the capacity of a network. The technique has been used for years by cellular carriers, and the supposed unlimited cellular data plans are not really unlimited because user speeds get significantly slowed when a customer reaches the subscribed data limit.

Satellite providers face the same dilemma as all ISPs in that the average broadband data consumption by consumers continues to grow at a torrid pace. According to Ookla, the average monthly broadband usage in the US has grown from 215 gigabytes per month in early 2018 to 481 gigabytes in June of this year. This growth puts a strain on all networks, but it has to be more of a problem for a satellite constellation which is going to have more backhaul restrictions than a landline network fed by fiber.

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Current News The Industry

Can Satellite Broadband be Affordable?

When we first heard of the possibility of broadband from low-orbit satellites, there was a lot of speculation that the technology could bring affordable broadband to the masses around the globe. The latest announcement from Starlink shows that affordable broadband is probably not coming in the immediate future.

Starlink announced a premium tier of service with a $500 monthly fee for 150-500 Mbps. The receiver has a one-time cost of $2,500. The product offers faster speeds by doubling the size of the receiving area of the receiver. These prices are a big step up from the current Starlink broadband product that offers 50-150 Mbps service for $99 per month with a $500 fee for the receiver.

I’ve been thinking about the issues faced by a satellite constellation owner in trying to recover the cost of the network to make a profit. At current costs, it’s incredibly expensive to launch Starlink satellites. It’s rumored that it currently costs about $60 million for one launch that can place 49 satellites into orbit. That’s a cost of over $1.2 million per satellite before considering the cost of the satellite hardware. But this cost is supposed to be dropping due to the ability to reuse rocket components, with near-future costs soon to be around $30 million per launch. That would still mean a cost per satellite of $600,000 each. Elon Musk says his goal is to get the cost per launch down to $10 million, and that would still mean a launch cost per satellite of over $200,000.

These costs wouldn’t be bad if the satellites had some longevity, but it’s estimated that low-orbit satellites will remain in orbit from 5-7 years, meaning a satellite owner must recover its launch costs in a relatively short period of time.

This is not to say that Starlink can’t make money, and I have to assume that the current prices are set so that the company can become profitable. But it’s hard to imagine lowering prices until a satellite company has a large enough customer base to cover operating costs and the continued cost of replacing satellites.

Starlink also admits that it is subsidizing the home receivers it sells for $500. But with mass production, that cost is likely to plummet. But for now, it’s one more financial hurdle to overcome.

The other component of cost to consider is the cost of backhaul. In the U.S., it will be easy for Starlink to build a series of earth stations that can download and upload data with the satellite constellation. We have fiber backhaul routes crisscrossing the country, and there are numerous carriers willing to negotiate good prices with Starlink for connecting earth stations to the Internet.

But this is not going to be so in much of the rest of the planet. Consider places like inland Africa where there are far fewer fiber middle-mile routes, and where the amount of bandwidth is limited and expensive. Lack of backhaul could make it a challenge to operate in markets like Africa.

There are also countries that will block Starlink or that might impose big license fees to deliver the broadband. China is unlikely to allow broadband connections that bypass the Great Firewall of China. India is discussing license fees with Starlink, and could make it expensive to do business there. Those two countries alone contain 36% of the world’s population.

The last complexity faced by any satellite broadband company will be competition from other satellite owners. It’s likely that within five years that we’ll see worldwide coverage from Starlink, OneWeb, and Project Kuiper – and other companies and countries are considering satellite constellations. The industry math will quickly get challenging if there is any downward pressure on prices through competition. Starlink is only going to be able to sell $500 premium connections if no other satellite company offers something less expensive.

Elon Musk has said many times in the last year that there is no guarantee of financial success at Starlink and that the company could easily go bankrupt. The company must be losing money during this early beta stage, but that’s experienced by all new ISPs. Let’s also not forget the stated original reason for funding Starlink. The goal was to create a cash cow that would spin off the funding needed to settle Mars. The need to generate cash isn’t going to tempt the company to have affordable rates. There is a lot of moving parts to operate a satellite business, with many of the long-term costs still unknowable. It will be interesting watching the satellite companies figure out the business on the fly.

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Technology

Keeping Track of Satellites

The topic of satellite broadband has been heating up lately. Elon Musk’s StarLink now has over 540 broadband satellites in the sky and is talking about starting a few beta tests of the technology with customers. OneWeb went into bankruptcy but it being bought out by a team consisting of the British government and Bharti Airtel, the largest cellular company in India. Jeff Bezos has continued to move forward with Project Kuiper and the FCC recently gave the nod for the company to move ahead.

These companies have grandiose plans to launch large numbers of satellites. Starlink’s first constellation will have over 4,000 satellites – and the FCC has given approval for up to 12,000 satellites. Elon Musk says the company might eventually grow to over 30,000 satellites. Project Kuiper told the FCC they have plans for over 3.300 satellites. The original OneWeb plan called for over 1,200 satellites. Telesat has announced a goal of launching over 500 satellites. A big unknown is Samsung, which announced a plan a year ago to launch over 4,600 satellites. Even if all of these companies don’t fully meet their goals, there are going to be a lot of satellites in the sky over the next decade.

To put these huge numbers into perspective, consider the number of satellites ever shot into space. The United Nations Office for Outer Space Affairs (NOOSA) has been tracking space launches for decades. They reported at the end of 2019 that there have been 8,378 objects put into space since the first Sputnik in 1957. As of the beginning of 2019, there were 4,987 satellites still in orbit, although only 1,957 were still operational.

There is a lot of concern in the scientific community about satellite collisions and space junk. Low earth satellites travel at a speed of about 17,500 miles per hour to maintain orbit. Satellites that collide at that speed create many new pieces of space junk, also traveling at high speed. NASA estimates there are currently over 128 million pieces of orbiting debris smaller than 1 square centimeter, 900,000 objects between 1 and 10 square centimeters, and 22,000 pieces of debris larger than 4 inches.

NASA scientist Donald Kessler described the dangers of space debris in 1978 in what’s now described as the Kessler syndrome. Every space collision creates more debris and eventually there could be a cloud of circling debris that will make it nearly impossible to maintain satellites in space. While scientists think that such a cloud is almost inevitable, some worry that a major collision between two large satellites, or malicious destruction by a bad actor government could accelerate the process and could quickly knock out all of the satellites in a given orbit.

There has only been one known satellite collision when a dead Russian satellite collided with an Iridium communications satellite over a decade ago. That satellite kicked off hundreds of pieces of large debris. There have been numerous near misses, including with the manned Space Station. There was another near-miss in January between the defunct Poppy VII-B military satellite from the 1960s and a retired IRAS satellite that was used for infrared astronomy in the 1980s. It was recently reported that Russia launched a new satellite that passed through one of StarLink’s newly launched swarms.

The key avoiding collisions is to use smart software to track trajectories of satellites and provide ample time for the satellite owners to make corrections to the orbital path to avoid a collision. Historically, that tracking role has been done by the US military – but the Pentagon has made it clear that it is not willing to continue in this role. No software is going to help avoid collisions between dead satellites like the close-call in January. However, all newer satellites should be maneuverable to help avoid collisions as long as sufficient notice is provided.

A few years ago, the White House issued a directive that would give the tracking responsibility to the Commerce Department under a new Office of Space Commerce. However, some in Congress think the proper agency to track satellites is the Federal Aviation Agency which already tracks anything in the sky at lower levels. Somebody in government needs to take on this role soon, because the Pentagon warns that its technology is obsolete, having been in place for thirty years.

The need for tracking is vital. Congress needs to decide soon how this is to be done and provide the funding to implement a new tracking system. It would be ironic if the world solves the rural broadband problem using low orbit satellites, only to see those satellites disappear in a cloud of debris. If the debris cloud is allowed to form it could take centuries for it to dissipate.

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The Industry

An Update on LEO Satellites

A lot of rural America continues to hope that low orbit satellite (LEO) service will provide a broadband alternative. It’s been a while since I’ve covered the status of the companies proposing to deploy constellations of satellites for providing broadband.

In March, OneWeb filed for Chapter 11 restructuring when it was clear that the company could not raise enough cash to continue the research and development of the satellite product. In July, a bankruptcy court in New York approved a $1 billion offer to take over the company filed jointly by the British Government and Bharti Airtel. Airtel is India’s largest cellular company. The restructured company will be owned with 45% stakes by Britain and Bharti Airtel, with the remaining 10% held by Softbank of Japan, the biggest original shareholder of OneWeb. Other earlier investors like the founders, Intelsat, Totalplay Telecommunications of Mexico, and Coca-Cola have been closed out of ownership by the transaction.

There is speculation that the British government purchased the company to create tech jobs in the country and that all R&D and manufacturing for OneWeb would immediately shift to England from Florida.

Of more concern for rural broadband is speculation that the mission of the company will change. Greg Wyler, the original CEO of the company had a vision of using the satellites to bring broadband to parts of the world that have no broadband. He chose a polar orbit for the satellites and was going to launch the business by serving Alaska and the northern territories of Canada like Nunavut. I’ve seen speculation that the revised company is likely to concentrate instead on wholesale connections to telcos and ISPs, such as providing backhaul for rural cell sites.

Elon Musk’s satellite venture StarLink was recently in the news when the company said it was going to raise ‘up to $1 billion’ to continue the development of the business. The company still has a long and expensive road to success. The company has raised over $3.5 billion to date before this latest raise, but a recent Bloomberg article estimates that the company will need to raise an additional $50 billion between now and 2033, which is when the company is projected to be cash-positive.

StarLink now has over 540 satellites in orbit, but the business plan calls for over 4,000. Keeping the constellation in place will be an ongoing challenge since the satellites have an estimated life of 5 to 6 years. Starlink will forever have to be launching new satellites to replace downed satellites.

The US government and the FCC seem to be in StarLink’s corner. The FCC is still evaluating if it will allow StarLink to participate in the upcoming RDOF grants auction in October. It would be incredibly unusual to award giant federal grants for a product that is still on the drawing board and for an ISP that hasn’t raised 10% of their needed funding.

StarLink recently made a very-public announcement that it was looking for beta customers – likely as a way to spur fundraising. Early Starlink customers will likely see blazingly fast speeds, which would happen for any broadband technology that could devote the bandwidth from one server to connect to one or two customers. The bandwidth delivered on a fully-subscribed satellite network will be far less – but that won’t stop the company from using a beta test to set unrealistic expectations of future satellite broadband speeds.

The last LEO player that is still active is Jeff Bezos venture that is still using the preliminary name of Project Kuiper. The FCC recently approved the licensing for Project Kuiper to move forward. Immediately following the FCC approval, Jeff Bezos announced that he will be investing $10 billion in the business. This ability to self-fund likely gives Project Kuiper an advantage over other competitors. It was reported that just for the month of July that Bezos’s net worth had climbed by $9 billion.  Funding is going to be a constant hurdle for the other two major competitors, but Project Kuiper might be the fastest to deploy if funding is not an issue.

The FCC approval pf Project Kuiper and the funding announcement by Bezos came at the same time that Starlink is seeking another round of financing and is trying to get into the FCC auction. It’s going to be interesting to see how the battle between two billionaires unfolds – my bet is on Amazon due to easy access to funding.

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Technology The Industry

The Impact of Satellite Broadband

Recently I’ve had several people ask me about the expected impact of low-orbit satellite broadband. While significant competition from satellites is probably a number of years away, there are several major initiatives like StarLink (Elon Musk), Project Kuiper (Amazon), and OneWeb that have announced plans to launch swarms of satellites to provide broadband.

At this early stage, it’s nearly impossible to know what impact these companies might have. We don’t know anything about their download and speed capacity, their pricing strategy, or their targeted market so it’s impossible to begin to predict their impact. We don’t even know how long it’s going to take to get these satellites in space since these three companies alone have plans to launch over 10,000 new satellites – a tall task when compared to the 1,100 satellites currently active in space.

Even without knowing any of these key facts, BroadbandNow recently grabbed headlines around the industry by predicting that low-orbit satellites will bring an annual savings of $30 billion for US broadband customers. Being a numbers guy, I never let this kind of headline pass without doing some quick math.

They explain their method of calculation on their web site. They are making several major assumptions about the satellite industry. First, they assume the satellite providers will compete on price and will compete in every market in the country. Since the vast majority of American live in metro areas, BroadbandNow is assuming the satellite providers will become a major competitor in every city. They also assume that the satellites will be able to connect to a huge number of customers in the US which will force other ISPs to lower prices.

Those assumptions would have to be true to support the $30 billion in projected annual consumer savings. That is an extraordinary number and works out to be a savings of almost $20 per month for every household in the US. If you spread the $30 billion over only those households that buy broadband today, that would be a savings of over $23 per month. If your further factor out the folks who live in large apartments and don’t get a choice of their ISP, the savings jumps to $27 per household per month. The only way to realize savings of that magnitude would be from a no-holds-barred broadband price war where the satellite providers are chewing into market penetrations everywhere.

I foresee a different future for the satellite industry. Let’s start with a few facts we know. While 10,000 satellites is an impressive number, that’s a worldwide number and there will be fewer than 1,000 satellites over the US. Most of the satellites are tiny – these are not the same as the huge satellites launched by HughesNet. Starlink has described their satellites as varying in size between a football and a small dorm refrigerator. At those small sizes these satellites are probably the electronic equivalent of the OLT cabinets used as neighborhood nodes in a FTTH network – each satellite will likely support some limited and defined number of customers. OneWeb recently told the FCC in a spectrum docket that they are envisioning needing one million radio links, meaning their US satellites would be able to serve one million households. Let’s say that all of the satellite providers together will serve 3 – 5 million homes in the US – that’s an impressive number, but it’s not going to drive other ISPs into a pricing panic.

I also guess that the satellite providers will not offer cheap prices – they don’t need to. In fact, I expect them to charge more than urban ISPs. The satellite providers will have one huge market advantage – the ability to bring broadband where there isn’t landline competition. The satellite providers can likely use all of their capacity selling only in rural America at a premium price.

We still have no real idea about the speeds that will be available with low-orbit satellite broadband. We can ignore Elon Musk who claims he’ll be offering gigabit speeds. The engineering specs show that a satellite can probably make a gigabit connection, but each satellite is an ISP hub and will have a limited bandwidth capacity. Like with any ISP network, the operator can use that capacity to make a few connections at a high bandwidth speed or many more connections at slower speeds. Engineering common sense would predict against using the limited satellite bandwidth to sell gigabit residential products.

That doesn’t mean the satellite providers won’t be lured by big bandwidth customers. They might make more money selling gigabit links at a premium price to small cell sites and ignoring the residential market completely. It’s a much easier business plan, with drastically lower operating costs to sell their capacity to a handful of big cellular companies instead of selling to millions of households. That is going to be a really tempting market alternative.

I could be wrong and maybe the satellite guys will find a way to sell many tens of millions of residential links and compete in every market, in which case they would have an impact on urban broadband prices. But unless the satellites have the capacity to sell to almost everybody, and unless they decide to compete on price, I still can’t see a way to ever see a $30 billion national savings. I instead see them making good margins by selling where there’s no competition.

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