Tag Archives: satellite broadband

The Trajectory of the Broadband Industry

For well over a decade, it was fairly easy to understand the trajectory of the broadband industry. In the residential market, cable companies snagged all of the growth while telcos shrank as customers abandoned DSL. Other technologies like fiber or fixed wireless gained customers but were a blip on the national scale. In the business market, a dozen large companies competed fiercely for large business customers while smaller businesses were stuck with the same technologies used to deliver home broadband. There was no suspense in predicting where the industry was headed from year to year.

But the broadband industry is now in total turmoil. Within a short time, cable companies have stopped growing. Currently, all of the industry growth among big ISPs is coming from FWA cellular wireless. Last-mile fiber networks are being built across the country. WISPs finally have the radios and enough spectrum to be serious competitors.

When I talk about trajectory, I’m not talking about predicting 2024. The challenge is to guess where the industry is headed over the next five years. Who will be the winners and losers over that time? The easiest way for me to think about this is to look at each industry segment.

Let me start with the cable companies. You can’t have this conversation without first acknowledging that Comcast and Charter together have over 50% of all broadband customers today. That puts a big target on their backs because they have the customers that everybody else is chasing. The cable companies have clearly lost the perception war – the general public seems to have accepted that fiber is better than coax. The cable companies got blindsided by the pandemic when millions of people suddenly cared about upload bandwidth, and a lot of people got a bad taste for the cable companies. The companies are now scrambling to implement mid-split technology to boost upload speeds to 100-200 Mbps. Most are talking about implementing DOCSIS 4.0 much earlier than they had originally planned. The big unknown is if these two upgrades will be enough to turn public perception. Cable companies don’t help their case by having the highest broadband rates in most markets that continue to increase each year. The one advantage the big cable companies have is aggressive bundling with low-price cellular.

Fiber overbuilders are now everywhere. Big fiber overbuilders like AT&T talk about achieving a 30% penetration rate in a few years and reaching 40% after 4-5 years. But the telcos also have to overcome a public perception problem since they did such a poor job of customer service over the last decade while pushing the clearly obsolete DSL. Smaller fiber overbuilders don’t have this history and are aiming higher, and have penetration rate goals of 50% and beyond. Fiber gains don’t only come from cable customers, and a lot of fiber gains are from converting the remaining DSL customers. In five years it’s not hard to believe that fiber will have half of the customers in neighborhoods with fiber.

The big unknown is FWA cellular wireless. Already today, this product has picked up all of the industry growth over the last 18 months, and that trend looks to continue for a while. It’s a real mystery where the carriers are getting most of the growth. I can tell by looking at detailed speed test data that a lot of the growth is coming in rural areas where customers within two miles of a cell tower finally have a solid and fast broadband product faster than 100 Mbps. Any gains in cities are probably coming from customers who care most about price – FWA is much cheaper than cable broadband. But over the long run, this technology faces challenges. In rural markets, FWA will compete against faster WISPs and with fiber networks that will be built by BEAD grants. The wildcard for the industry will be the impact of using C-Band spectrum. That is supposedly going to at least triple the speeds – again within relatively short distances from towers. But FWA technology has a big long-term constraint in that cellular networks were never designed to deliver steady-use home broadband. While carriers might love this new income, one would think they are not going to be dumb enough to endanger their cellular customer satisfaction, which is their real source of revenue.

WISPs have a rosier future through the combination of better radios that minimize interference and the use of new spectrum, particularly 6 GHz, which can mean gigabit speeds in ideal circumstances. It’s really hard to predict the trajectory of this sector. In many rural areas, WISPs will be competing against fiber networks funded by grants and operated by highly popular ILECs and cooperatives. But in other markets, WISPs might become the virtual monopoly provider if they can win the broadband grants. That makes it hard to judge the overall trajectory in rural markets. WISPs will always face challenges in urban markets where they can’t serve more than a small percentage of homes and where frequency interference is rampant.

We can’t forget satellite broadband. Starlink has done well by bringing broadband where nobody else would – but that is also going to change due to the rural grants. Starlink’s prices are already a barrier for many potential users. The big unknown in the industry is what Jeff Bezos and Amazon will do. The company finally launched test satellites and might be aggressive with non-traditional bundling and affordable prices.

All of this competition will be happening in an environment where households will use 20% more bandwidth each year. Any technology that has overall bandwidth constraints will eventually feel this pinch. This will affect FWA cellular and satellite broadband the most but can hit any ISP that hasn’t built a robust enough network.

What does all of this mean in five years?

  • Fiber will continue to eat away at cable companies, and in five years, the cable companies might not have a choice and will have to bite the bullet and convert to fiber to compete. It’s hard to envision a future where cable companies don’t lose customers annually for the next five years.
  • DSL will finally die, and its market share will be absorbed by FWA and fiber.
  • FWA companies will continue to grow at a rapid pace for the next couple of years. Low prices will always find a market. But if the carriers can’t find a way to guarantee bandwidth at peak times, a lot of homes will lose faith in the product. FWA will see a lot of competition in rural markets. I think the industry will eventually reach a market equilibrium – at some level higher than today’s DSL penetration.
  • WISP’s success will be market by market and will depend upon the other competition and local conditions – the technology will always struggle in places with rough terrain like Appalachia.
  • Satellite broadband will still be the technology of choice for the most remote places. Satellite’s real long-term markets are in the parts of the world that don’t have other good rural ISPs. But Amazon might find a bundling option that will still make the company a serious player in the U.S.

The FCC is Redlining Rural America

The recent statistics of broadband usage in the US provide evidence that, unwittingly, the FCC is redlining rural America. OpenVault recently released its Broadband Industry Report for 4Q 2019 that tracks the way that the US consumes data. OpenVault has been collecting broadband usage for more than ten years, and the last two reports have been eye-opening.

The most important finding is that the average data consumed by households grow by 27% from 2018 to 2019 – in the fourth quarter of 2019 the average US home used 344 gigabytes of data, up from 275 gigabytes a year earlier.

The report also looks at power users – homes that consume a lot of broadband. They report that nearly 1% of homes now use 2 terabytes per month and 7.7% use over 1 terabyte per month. A terabyte is 1,000 gigabytes. The percentage of homes using over 1 terabyte almost doubled from 4% a year earlier. This statistic is important because it shows the number of homes that are hitting the 1 terabyte data caps of companies like Comcast, AT&T, Cox, and Mediacom is quickly growing.

Homes are starting to buy gigabit broadband when it’s available and affordable. 2.8% of homes in the country now subscribe to gigabit speeds, up 86% from the 1.5% of homes that bought gigabit in 2018.

54% of homes now purchase broadband plans with speeds of 100 Mbps or faster. Another 23.6% of homes are subscribing to broadband between 50-75 Mbps. This means that nearly 78% of homes are subscribing to data plans of greater than 50 Mbps. The average subscribed speed grew significantly in 2019, up from 103 Mbps to 128 Mbps.

What’s the point of all of these statistics? They show that broadband usage and speeds in urban America is growing by leaps and bounds while broadband in rural America sits still. Urban broadband speeds have increased so rapidly that the average home in the US in 2019 got speeds that were 25 Mbps faster than what they had in 2018. The average speed of broadband in 2019 was more than 100 Mbps faster than the FCC definition of broadband. I contend that FCC actions and inaction have now culminated in the redlining of rural broadband households. It may sound drastic to call the FCC inaction redlining, but I think the word fits the situation.

Redlining historically has been used to describe how big corporations discriminate against poor neighborhoods. Redlining is more often due to neglect than to conscious decisions – grocery stores don’t consider poor neighborhoods as places to build; cable companies and telcos make upgrades in neighborhoods where they have the most customers or the highest revenue per customer. The consequence of redlining is that some neighborhoods get left behind.

The FCC has taken a series of actions that is dooming large parts of rural America to poor broadband for decades to come. One of the most egregious actions by the FCC is refusing to consider a faster definition of broadband, although every statistic shows that urban America is leaping far ahead of rural America and the broadband gap is now growing rapidly each year.

The decision to stick with the outdated 25/3 definition of broadband then boxes the FCC into having to allow federal grant dollars go to build technologies that meet the 25/3 definition of broadband. Considering how fast broadband speeds and consumption are growing, this is an amazingly shortsighted decision when considering that that grant recipients for programs like RDOF have six years to construct the new networks. There will be ISPs still constructing 25/3 broadband networks using federal money in 2026.

Next, the FCC has made it clear that any rural area that gets any federal or state subsidy – even if it’s to support 25/3 Mbps, or to support satellite broadband is not going to be eligible for future federal assistance. Once the FCC sticks you with poor broadband, they’re done with you.

Finally, the FCC continues to hide behind ludicrously dreadful maps that show good broadband available for millions of homes that have no broadband option. The rules for the 477 data collection are lousy, but that’s only half the problem, and I can’t recall ever hearing any discussion at the FCC about penalizing ISPs that file fraudulent speeds. There should be huge financial penalties for a telco that claims 25/3 speeds when nobody gets speeds even close to that or for WISPs that claim 100 Mbps speeds and deliver 15 Mbps. These ISPs are stopping whole counties from being eligible for broadband grants.

All of these FCC actions and inaction have doomed huge swaths of rural America from even participating in federal grant programs to get better broadband. If that’s not redlining, I don’t know what else to call it.

Farm Access to Broadband

The US Department of Agriculture has been measuring computer usage on farms and publishes the results every two years in its Farm Computer Usage and Ownership report. The most recently released report for 2019 was compiled by asking questions to 20,000 farmers. This is a large sample from the more than 2 million farms in the country.

One of the key findings of the report is that 75% of farms reported having access to to the Internet in 2019, up from 73% in 2017. The breakdown of farms by type of connection is as follows:

2017 2019
Satellite 23% 26%
DSL 28% 22%
Cellphone 19% 18%
Cable 16% 16%
Fiber 9% 12%
Dial-up 3% 3%
Other 2% 3%

There are a few notable highlights in these numbers.

  • First, farms are abandoning rural DSL, as are many other customers. If CAF II upgrades had been done right, the DSL category ought to at least be holding even.
  • I also find it surprising that fixed-wireless isn’t listed as a choice. Fixed wireless is now available in many parts of the country. While many WISPs today offer slow broadband speeds, this category of connections should grow as speeds improve significantly over the next few years.
  • It’s a national shame that 3% of farms are still stuck with dial-up.
  • Far too many farms still use their cellphone for Internet access.

The report is also an interesting way to look at general broadband availability in rural America. For example, a few states have a high fiber coverage rate to farms, such as North Dakota (61%), Montana (39%), and South Dakota (36%). Other states have practically no broadband to farms, such as California and Louisiana at 1%, and other states below 5% including Georgia, Michigan, New York, Ohio, Pennsylvania, and South Carolina.

The states with the biggest reliance on cellphones for farm broadband include Louisiana (52%), Michigan (37%), and Florida (34%).

The poor penetration rate of real broadband is further evidenced by the way that farmers conduct business. 49% of farmers used a desktop or laptop to conduct business in 2019 while 52% used their cellphone. 24% of farmers buy agricultural inputs over the Internet and only 19% use the Internet to sell their goods.

There has been a lot of press in the last few years talking about how technology is transforming farming. However, these innovations are not coming to farms that are stuck with dial-up, satellite or rural DSL technology.

We’ve seen that better broadband can come to farms by looking at the high fiber coverage of farms with fiber in Montana and the Dakotas. That fiber has been built using a combination of subsidies from the Universal Service Fund and low-cost loans from the USDA and cooperative banks. We know how to fix rural broadband – we just don’t have the national will yet to get it done.

The Busy Skies

I was looking over the stated goals of the broadband satellite companies and was struck by the sheer numbers of satellites that are being planned. The table further down in the blog shows plans for nearly 15,000 new satellites.

To put this 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 report that there have been 8,378 objects put into space since the first Sputnik in 1957. As of the beginning of 2019, there were still 4,987 satellites still in orbit, although only 1,957 were still operational.

There was an average of 131 satellites launched per year between 1964 and 2012. Since 2012 we’ve seen 1,731 new satellites, with 2017 (453) and 2018 (382) seeing the most satellites put into space.

The logistics for getting this many new satellites into space is daunting. We’ve already seen OneWeb fall behind schedule. In addition to these satellites, there will continue to be numerous satellites launched for other purposes. I note that a few hundred of these are already in orbit. In the following table, “Current” means satellites that are planned for the next 3-4 years.

Current Future Total
SkyLink 4,425 7,528 11,953
OneWeb 650 1,260 1,910
Telesat 117 512 629
Samsung 4,600 4,600
Kuiper 3,326 3,326
Boeing 147 147
Kepler 140 140
LeoSat 78 30 108
Iridium Next 66 66
SES 03B 27 27
Facebook 1 1
 Total 5,192 9,300 14,492

While space is a big place, there are some interesting challenges from having this many new objects in orbit. One of the biggest concerns is space debris. Low earth satellites travel at a speed of about 17,500 miles per hour to maintain orbit. When satellites collide at that speed, they create a large number of 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 and 900,000 objects between 1 and 10 square centimeters.

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 will 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. It would be ironic if the world solves the rural broadband problem using satellites, only to see those satellites disappear a cloud of debris.

Having so many satellites in orbit also concerns another group of scientists. The International Dark Sky Association has been fighting against light pollution that makes it hard to use earth-based telescopes. The group now also warns that a large number of new satellites will forever change our night sky. From any given spot on the Earth, the human eye can see roughly 1,300 visible stars. These satellites are all visible and once launched, mankind will never again see the natural sky that doesn’t contains numerous satellites at any given moment.

Satellite broadband is an exciting idea. The concept of bringing good broadband to remote people, to ships, and to airplanes is enticing. For example, the company Kepler listed above is today connecting to monitors for scientific purposes in places like lips of volcanos and on ocean buoys and is helping us to better understand our world. However, in launching huge numbers of satellites for broadband we’re possibly polluting space in a way that could make it unusable for future generations.

Should Satellite Broadband be Subsidized?

I don’t get surprised very often in this industry, but I must admit that I was surprised by the amount of money awarded for satellite broadband in the reverse auction for CAF II earlier this year. Viasat, Inc., which markets as Exede, was the fourth largest winner, collecting $122.5 million in the auction.

I understand how Viasat won – it’s largely a function of the way that reverse auctions work. In a reverse auction, each bidder lowers the amount of their bid in successive rounds until only one bidder is left in any competitive situation. The whole pool of bids is then adjusted to meet the available funds, which could mean an additional reduction of what winning bidders finally receive.

Satellite providers, by definition, have a huge unfair advantage over every other broadband technology. Viasat was already in the process of launching new satellites – and they would have launched them with or without the FCC grant money. Because of that, there is no grant level too low for them to accept out of the grant process – they would gladly accept getting only 1% of what they initially requested. A satellite company can simply outlast any other bidder in the auction.

This is particularly galling since Viasat delivers what the market has already deemed to be inferior broadband. The download speeds are fast enough to satisfy the reverse auction at speeds of at least 12 Mbps. The other current satellite provider HughesNet offer speeds of at least 25 Mbps. The two issues that customers have with satellite broadband is the latency and the data caps.

By definition, the latency for a satellite at a 23,000 orbit is at least 476 ms (milliseconds) just to account for the distance traveled to and from the earth. Actual latency is often above 600 ms. The rule of thumb is that real-time applications like VoIP, gaming, or holding a connection at a corporate LAN start having problems when latency is greater than 100-150 ms.

Exede no longer cuts customers dead for the month once they reach the data cap, but they instead reduce speeds when the network is busy for any customer over the cap. Customer reviews say this can be extremely slow during prime times. The monthly data caps are small and range from $49.99 monthly for a 10 GB data cap to $99.95 per month for a 150 GB data cap. To put those caps into perspective, OpenVault recently reported that the average landline broadband household used 273.5 GB per month of data in the first quarter of 2019.

Viasat has to be thrilled with the result of the reverse auction. They got $122.5 million for something they were already doing. The grant money isn’t bringing any new option to customers who were already free to buy these products before the auction. There is no better way to say it other than Viasat got free money due to a loophole in the grant process. I don’t think they should have been allowed into the auction since they aren’t bringing any broadband that is not already available.

The bigger future issue is if the new low-earth orbit satellite companies will qualify for the future FCC grants, such as the $20.4 billion grant program starting in 2021. The new grant programs are also likely to be reverse auctions. There is no doubt that Jeff Bezos or Elon Musk will gladly take government grant money, and there is no doubt that they can underbid any landline ISP in a reverse auction.

For now, we don’t know anything about the speeds that will be offered by the new satellites. We know that they claim that latency will be about the same as cable TV networks at about 25 ms. We don’t know about data plans and data caps, although Elon Musk has hinted at having unlimited data plans – we’ll have to wait to see what is actually offered.

It would be a tragedy for rural broadband if the new (and old) satellite companies were to win any substantial amount of the new grant money. To be fair, the new low-orbit satellite networks are expensive to launch, with price tags for each of the three providers estimated to be in the range of $10 billion. But these companies are using these satellites worldwide and will be launching them with or without help from an FCC subsidy. Rural customers are going to best be served in the long run by having somebody build a network in their neighborhood. It’s the icing on the cake if they are also able to buy satellite broadband.

Technology and FCC Grants

This is the next in the series of blogs looking at the upcoming $20.4 billion FCC grant program. I ask the question of how the FCC should consider technology in the upcoming grant program.

Should Satellite Companies be Eligible? I think a more fundamental question is if the current generation of high-orbit satellites really deliver broadband. Over the last few years I’ve talked to hundreds of rural people about their broadband situation and I have never met anybody who liked satellite broadband – not one person. Most people I’ve talked to have tried it once and abandoned it as unworkable.

This goes back to the basic definition of broadband. The FCC defines broadband by download speeds of at least 25/3 Mbps. In their original order in 2015 the FCC discussed latency, but unfortunately never made latency part of the broadband definition. As a reminder, the standard definition of latency is that it’s a measure of the time it takes for a data packet to travel from its point of origin to the point of destination.

A few years ago, the FCC did a study of the various last mile technologies and measured the following ranges of performance of last-mile latency, measured in milliseconds: fiber (10-20 ms), coaxial cable (15-40 ms), and DSL (30-65 ms). Cellular latencies vary widely depending upon the exact generation of equipment at any given cell site, but 4G latency can be as high as 100 ms. In the same FCC test, satellite broadband was almost off the chart with latencies measured as high as 650 ms.

Latency makes a big difference in the perceived customer experience. Customers will rate a 25 Mbps connection on fiber as being much faster than a 25 Mbps connection on DSL due to the difference in latency. The question that should be asked for federal grants is if satellite broadband should be disqualified due to poor latency.

I was unhappy to see so much money given to the satellite providers in the recent CAF II reverse auction. Even ignoring the latency issue, I ask if the satellite companies deserve broadband subsidies. There is no place in rural America where folks don’t already know that satellite broadband is an option – most people have rejected the technology as an acceptable broadband connection. It was particularly troubling seeing satellite providers getting money in a reverse auction. Once a satellite is in orbit it’s costs are fixed and that means that the satellite providers will be happy to take any amount of federal subsidy – they can bid lower than any other grant applicant in a reverse auction. I have to question the wisdom of providing federal subsidies to companies that are already failing at marketing.

I don’t have enough information to know how to feel about the upcoming low-orbit satellites that are just now being tested and launched. Because of lower orbits they will have lower latency. However, the satellite companies still have a huge advantage in a reverse auction since they can bid lower than anybody else – a satellite company would be happy with only a few dollars per potential customer and has no bottom limit on the amount of grant they are willing to accept. If the new satellite companies can bid in the same manner as everybody else we could end up with the situation where these companies claim 100% of the new grant funds.

What About DSL? My nightmare scenario is that the FCC hands most or all of the $20.4 billion to the big telcos to upgrade rural DSL from 10/1 Mbps to 25/3 Mbps. This is certainly within the realm of possibility. Remember that the first CAF II program was originally going to be open to everybody but at the last minute was all given to the big telcos.

I find it troublesome that the big telcos have been quiet about the announced plans for this grant. The money will be spent in the big telco service areas and you’d think they be screaming about plans for federal money to overbuild them. Recall that the big telcos recently were able to derail the Re-Connect grants by inserting the rule that only 10% of the grant money could be used for customers who receive at least 10/1 Mbps broadband. This FCC clearly favors the big telcos over other ISPs and could easily hand all of this money to the big telcos and call it CAF III.

Even if they don’t do that, the question is if any federal grant money should be used to upgrade rural DSL. Rural copper is in dreadful condition due to the willful neglect of the big telcos who stopped doing maintenance on their networks decades ago. It’s frankly a wonder that the rural copper networks even function. It would be a travesty to reward the telcos by giving them billions of dollars to make upgrades that they should have routinely made by reinvesting customer revenues.

I think when the dust clears on CAF II we’re going to find out that the big telcos largely cheated with that money. We’re going to find that they only upgraded the low-hanging fruit and that many households in the coverage areas got no upgrades or minor upgrades that won’t achieve the 10/1 Mbps goals. I think we’ll also find that in many cases the telcos didn’t spend very much of the CAF II funds but just pocketed it as free revenue. I beg the FCC to not repeat the CAF II travesty – when the truth comes out about how the telcos used the funding, the CAF II program is going to grab headlines as a scandal. Please don’t provide any money to upgrade DSL.

This blog is part of a series on Designing the Ideal Federal Broadband Grant.

 

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.

One-Web Launches Broadband Satellites

Earlier this month OneWeb launched six test satellites intended for an eventual satellite fleet intended to provide broadband. The six satellites were launched from a Soyuz launch vehicle from the Guiana Space Center in Kourou, French Guiana.

OneWeb was started by Greg Wyler of Virginia in 2012, originally under the name of WorldVu. Since then the company has picked up heavy-hitter investors like Virgin, Airbus, SoftBank and Qualcomm. The company’s plan is to launch an initial constellation of 650 satellites that will blanket the earth, with ultimate deployment of 1,980 satellites. The plans are to deploy thirty of the sixty-five pound satellites with each launch. That means twenty-two successful launches are needed to deploy the first round.

Due to the low-earth orbits of the satellites, at about 745 miles above earth, the OneWeb satellites will avoid the huge latency that is inherent from current satellite broadband providers like HughesNet, which uses satellites orbiting at 22,000 miles above the earth. The OneWeb specifications filed with the FCC talks about having latency in the same range as cable TV networks in the 25-30 millisecond range. But where a few high-orbit satellites can see the whole earth, the big fleet of low-orbit satellites is needed just to be able in see everywhere.

The company is already behind schedule. The company had originally promised coverage across Alaska by the end of 2019. They are now talking about having customers demos sometime in 2020 with live broadband service in 2021. The timeline matter for a satellite company because the bandwidth license from the FCC requires that they launch 50% of their satellites within six years and all of them within nine years. Right now, OneWeb and also Elon Musk’s SpaceX have both fallen seriously behind the needed deployment timeline.

The company’s original goal was to bring low-latency satellite broadband to everybody in Alaska. While they are still talking about bringing broadband to those who don’t have it today, their new business plan is to sell directly to airlines and cruise ship lines and to sell wholesale to ISPs who will then market to the end user.

It will be interesting to see what kinds of speeds will really be delivered. The company talks today about a maximum speed of 500 Mbps. But I compare that number to the claim that 5G cellphones can work at 600 Mbps, as demonstrated last year by Sprint – it’s possible only in a perfect lab setting. The best analog to a satellite network is a wireless transmitter on a tower in a point-to-multipoint network. That transmitter is capable of making a relatively small number of big-bandwidth connections or many more low-bandwidth connections. The economic sweet spot will likely be to offer many connections at 50 – 100 Mbps rather than fewer connections at a higher speed.

It’s an interesting business model. The upfront cost of manufacturing and launching the satellites is high. It’s likely that a few launches will go awry and destroy satellites. But other than replacing satellites that go bad over time, the maintenance costs are low. The real issue will be the bandwidth that can be delivered. Speeds of 50 – 100 Mbps will be welcomed in the rural US for those with no better option. But like with all low-bandwidth technologies – adequate broadband that feels okay today will feel a lot slower in a decade as household bandwidth demand continues to grow. The best long-term market for the satellite providers will be those places on the planet that are not likely to have a landline alternative – which is why they first targeted rural Alaska.

Assuming that the low-earth satellites deliver as promised, they will become part of the broadband landscape in a few years. It’s going to be interesting to see how they play in the rural US and around the world.

Delays in Satellite Broadband

One of the big unknowns for rural broadband is if there will ever be a better satellite broadband option. The industry was surprised last year when Elon Musk announced that he planned to blanket the earth with over 4,000 satellites and operate as a worldwide ISP under the newly formed Starlink. These satellites would be launched by SpaceX, another Elon Musk company that that provides commercial rocket launches.

I’ve been following the financial news about the Elon Musk family of businesses, and about SpaceX and Starlink more specifically, since a successful launch of the business could provide another rural option for broadband.

There are several financial analysts predicting that Starlink is now largely on hold, due mostly to funding issues. They report that Starlink has stopped hiring the new employees needed to implement the business plan. Further, it appears that SpaceX needs up to $10 billion to fulfill its own business plan and that any money raised by the company is likely to go there first before Starlink is funded. At a minimum this probably means a major delay in satellite launches for Starlink.

These analysts warn that the SpaceX business plan is not yet solid. The commercial launch business is now seeing other major competitors. ULA, the existing major competitor to SpaceX has been stepping up their game. Boeing is behind Space Launch Systems, another newcomer to the field. Jeff Bezos of Amazon has started Blue Origin and has started construction on a spaceflight center in Florida. There is also a new competitor announced in Japan. The competition is going to drive down the cost of space launches and will also spread the launches among numerous parties, diluting any early advantage enjoyed by SpaceX.

SpaceX was counting on riding the coattails of other commercial launches to get the broadband satellites into space. The company is scheduled to complete 28 launches by the end of this year but is only scheduled so far for 18 launches in 2019. The company is also banking on making money from selling commercial space travel to rich tourists, but the analysts doubt that will be enough revenue to keep the company afloat.

Starlink had originally announced plans to have 40 million broadband subscribers generating $30 billion in annual revenues by 2025. That’s an average revenue per customer of $63 dollars per month. It now looks like the date for getting the company started will be significantly delayed. Starlink launched two test satellites earlier this year, but has not reported how they performed.

I’ve also wondered if Starlink would strongly pursue the residential broadband business in North America. While they will be a great alternative for rural America, they will be just another player in cities. Being an ISP makes a lot more sense in those parts of the world where the company could enjoy a near-monopoly.

In the US and Canada there is probably a lot more money to be made instead by serving the many proposed small cell sites if 5G turns out to be a relevant business plan. Starlink says they can deliver speeds of a gigabit or more to a given customer, but the math behind the bandwidth available at any given satellite means that would only be available to a relatively small number of customers rather than to the whole residential market. Speeds for residential broadband are likely to be at much lower speeds. However, gigabit satellite broadband could be the backhaul solution that 5G needs and might let it escape the bottleneck of needing fiber everywhere. I’ve never seen any discussion of such a partnership, but that’s probably because the satellite business is still somewhat theoretical and at a minimum, delayed from the original projected time line.

Getting Militant for Broadband

My job takes me to many rural counties where huge geographic areas don’t have broadband. I’ve seen a big change over the last two years in the expectations of rural residents who are now demanding that somebody find them a broadband solution. There have been a number of rural residents calling for better broadband for a decade, but recently I’ve seen the cries for broadband grow into strident demands. As the title of this blog suggests, people are getting militant for broadband (but not carrying guns in doing so!)

The perceived need for broadband has changed a lot since the turn of this new century. In 2000 only 43% of homes had a broadband connection – and in those days that meant they had a connection that was faster than dial-up. In 2000 DSL was king and a lot of homes had upgraded to speeds of 1 Mbps. There have always been homes that require broadband, and I’m a good example since I work from home, and when I moved fifteen years ago my offer on a new house was contingent on the home having broadband installed before closing. My real estate agent at the time said that was the first time she’d ever heard about broadband related to home ownership.

As I’ve cited many times, the need for broadband has continued to grow steadily and has been doubling every three years. By 2010 the number of homes with broadband grew to 71%, and by then the cable companies were beginning to dominate the market. By then DSL speeds had gotten better, with the average speeds at about 6 Mbps, but with some lucky customers seeing speeds of around 15 Mbps. But as DOCSIS 3.0 was implemented in cable networks we started seeing speeds up to 100 Mbps available on cable systems. It was a good time to be a cable company, because their rapid revenue growth was fueled almost entirely by adding broadband customers.

Broadband in urban areas has continued to improve. We’re now seeing Comcast, Charter, Cox and other cable company upgrade to DOCSIS 3.1 and offer speeds of up to 1 Gbps. DSL that can deliver 50 Mbps over two bonded copper lines is becoming old technology. Even urban cellular speeds are becoming decent with average speeds of 12 – 15 Mbps.

But during all of these upgrades to urban broadband, huge swaths of rural America is still stuck at 2000 or earlier. Some rural homes have had access to slow DSL of 1 – 2 Mbps at most. Rural cellular speeds are typically half of urban speeds and are incredibly expensive as a home broadband solution. Satellite broadband has been available the whole time, but the high prices, gigantic latency and stingy data caps have made most homes swear off satellite broadband.

Rural homes look with envy at their urban counterparts. They know urban homes who have seen half a dozen major speed upgrades over twenty years while they still have the same lousy choices of twenty years ago. Some rural homes are seeing an upgrade to DSL due to the CAF II program of speeds of perhaps 10 Mbps. While that will be a relief to a home that has had no broadband – it doesn’t let a home use broadband in the same way as the rest of the country.

To make matters feel worse, rural customers without broadband see some parts of rural America get fiber broadband being built by independent telephone companies, electric cooperatives or municipalities. It’s hard for them to understand why there is funding that can make fiber work in some places, but not where they live. The most strident rural residents these days are those who live in a county where other rural customers have fiber and they are being told they are likely to never see it.

This disparity between rural haves and have nots is all due to FCC policy. The FCC decided to make funds available to rural telcos to upgrade to better broadband, but at the same time copped out and handed billions to the giant telcos to instead upgrade to 10 Mbps DSL or wireless. To make matters worse, it’s becoming clear that AT&T and Verizon are intent in eventually tearing down rural copper, which will leave homes with poor cellular coverage without any connection to the outside world.

The FCC laments that they cannot possibly afford to fund fiber everywhere. But they missed a huge opportunity to bring fiber to millions when they caved to lobbyists and gave the CAF II funding to the big telcos. Recall that these funds were originally going to be awarded by a reverse auction and that numerous companies had plans to ask for the funding to build rural fiber.

It’s no wonder that rural areas are furious and desperate for better broadband. Their kids are at a big disadvantage to those living in towns with broadband. Farmers without broadband are competing with those using agricultural IoT. Realtors report that they are having a hard time selling homes with no broadband access. People without broadband can’t work from home. And rural America is being left behind from taking part in American culture without access to the huge amount of content now available on the web.