Satellite Broadband: Pet Project or Solution to Digital Inclusion?

Near space could revolutionize connectivity, but at a huge cost

Satellite broadband has generated a lot of interest this year, not least from high-profile and deep-pocketed investors. It’s also a subject I’ll be discussing during CCS Insight’s upcoming event on 12 to 14 October, so be sure to sign up here to learn more.

SpaceX, Amazon and OneWeb are all among the firms seemingly ready to make significant investments in the technology. Eventually, this could revolutionize the way hundreds of millions of people communicate.

But satellite broadband has a chequered history. Spectacular failures of the past send a clear warning to today’s hopefuls intending to stump up vast sums with no guarantee of a return on investment.

Much enthusiasm has centred on satellites in low Earth orbit (LEO), about 200 to 2,000 kilometres above the surface of the planet. This is much closer than traditional geostationary orbit at 35,000 kilometres, and therefore offers crucial improvements in latency because of the shorter round trip a signal must undertake between the user and the satellite.

Still, the huge costs involved in this area raise serious questions about the viability of these satellite projects. In June 2021, SpaceX CEO Elon Musk estimated his company could eventually spend $30 billion; no wonder he joked that one of Starlink’s primary objectives is to avoid going bankrupt!

Spending billions to help bring more people online is a commendable goal, particularly given the global connectivity inequalities so starkly highlighted during Covid-19 lockdowns. But I can’t help wondering whether Mr Musk is truly motivated by narrowing the digital divide, or whether his venture is more of a “pet project” to raise his and his companies’ profiles.

SpaceX’s Starlink broadband service is now operating in beta mode in 14 countries, including the UK and US. But the high cost significantly limits its initial target market. Customer hardware alone is about $500; connectivity adds another $100 per month. This includes unlimited usage, but still costs much more than most broadband contracts, especially in markets outside the US.

Early adopters of satellite broadband are therefore likely to be restricted to affluent people in developed markets, who live in places where broadband access is poor to non-existent. But for this admittedly small market segment, the service could be transformative, enabling people to work from home, better stay in touch with friends and family and gain access to the Internet. It could also be a game-changer for small businesses, particularly those in sectors like agriculture or tourism.

However, for Mr Musk to meet his ambition to connect people living in the world’s most remote communities, he’ll need a range of business models beyond selling direct to consumers. So, it came as no surprise to hear in September 2021 of a deal between SpaceX and Japanese telecom operator KDDI. This agreement would provide backhaul to 1,200 remote mobile towers, possibly as soon as 2022. Deals with other operators are almost certainly in the pipeline.

Another satellite provider targeting operators is OneWeb, and high-profile early partnerships with AT&T and BT offer encouragement for its LEO venture. They also mark a major change in fortunes for a company that filed for bankruptcy in March 2020, before being bailed out by the UK government and India’s Bharti Enterprises.

Rival Amazon has been much more guarded about its LEO venture, called Project Kuiper, announced in 2019. But it would be rash to underestimate the company’s ambition, given its history of placing long-term bets on emerging technologies including drones and robotics.

Although cost is clearly the biggest barrier to the success of satellite broadband, questions of performance and reliability cast further doubt over its long-term potential. Starlink advertises data speeds of 50 to 150 Mbps, suggesting it would be more than capable of meeting the connectivity demands of most households today.

However, potential obstructions like trees, tall buildings, other objects in the sky and even heavy rain or wind can cause loss of signal. This would be unacceptable for users, and potentially disastrous for satellite providers, were the technology to earn an early reputation for being unreliable.

There are other uncertainties too, including allocating and sharing spectrum, governing an Internet beamed from space, the growing accumulation of space debris and the environmental impact of launching satellites.

A question I’m often asked is whether network operators should consider satellite broadband a threat. I don’t believe so, at least not for many years yet. My view is that they should embrace an opportunity to strike partnerships, which would help expand their connectivity reach, particularly in areas that would otherwise be uneconomic to serve. But, if satellite providers eventually seek to offer coverage in urban areas, as Starlink is understood to have plans to do, this would of course create direct competition.

Satellite broadband is an exciting new opportunity, and one that I’ll be monitoring closely over the coming years. On the one hand, it could revolutionize connectivity for hundreds of millions of people. On the other, monumental costs and a host of technological and regulatory uncertainties could just as easily turn near space into a billionaire’s scrapyard in several years’ time.

This article is an abridged version of an Insight Report published by CCS Insight on 16 September 2021. The report considers why satellite broadband has become relevant and assesses the leading players’ strategies and achievements to date. CCS Insight clients can access it here.

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