Industry Voices—Menon: Satellite mega-constellations are connectivity’s new frontier post-5G revolution

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2021 is poised to be the year for witnessing the start of a new satellite revolution, according to MTN Consulting analyst Arun Menon. (Pixabay)

As the world gradually embraces the power of 5G, network operators set their focus towards the next wave in wireless networking—satellites. Satellite connectivity has come a long way since its introduction more than six decades ago—from just offering broadcasting (TV and radio) and weather forecasting services, to a more comprehensive communication system that extends into mobile, voice and remote sensing services. The raw capacity of submarine fiber cables long ago surpassed what satellite could offer, relegating satellites to providing backhaul support for higher speed core networks.

Satellite systems are becoming relevant again, however, as several traditional companies and technology giants such as Amazon, SpaceX, OneWeb, and Facebook are taking to the skies to deploy mega-constellations of low earth orbit (LEO) satellites beaming broadband internet services.

Why the sudden rush?

Several key drivers aid the recent space rush for LEO satellites. The foremost is the impending explosion of bandwidth and spectrum availability constraints stemming from the ever-increasing number of connected devices and rise of high-speed wireless networks such as 5G. Connectivity demands are expected to compound further in the coming years, which satellite broadband operators look to serve in conjunction with terrestrial networks.

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Another key enabler is the miniaturization of satellites and their components, allowing operators to mass produce more quickly and cheaply. Armed with advanced manufacturing processes and dedicated factories, operators are now able to churn out compact and modular satellites at a faster pace. For instance, OneWeb Satellites (a JV between OneWeb and Airbus) currently produces eight satellites a week at its Florida factory. OneWeb claims the industry norm is one satellite produced every 12-18 months against its capacity of two satellites a day.

Satellite launch bills have also gone down significantly in recent years, aided by low-weight satellites coupled with the advent of commercial launch providers such as SpaceX. The launch costs for a LEO satellite that averaged  $18,500/kg between 1970 to 2000, dropped by ~7x to just $2,720/kg with the introduction of Falcon 9 by SpaceX in 2010.

Low (orbit) is the new high

As noted, both pure-play and non-traditional players are vying for the satellite broadband market. Pure-play satellite operators include the likes of SpaceX (Starlink), Telesat, Iridium, OneWeb, and Kepler Communications, among others. Non-traditional companies include webscalers such as Amazon (Kuiper Systems) and Facebook, but also a few others operating through partnerships like Tencent (“WeEarth,” a partnership with Satellogic, Luokung Technology, and China Aerospace Science & Industry Corp), and Alphabet (in partnership with Telesat).

Apple is rumored to be planning a satellite broadband network exclusively for its devices. More recently, Microsoft announced the launch of its space-focused business, Azure Space, to offer modular cloud computing data centers that can be deployed at any location using Starlink’s and SES’ O3b internet satellites.

A common factor that stitches the satellite-based internet efforts of all these operators is their focus on building mega-constellations of LEO satellites. LEO networks have much lower latency than higher-altitude equivalents (MEO and GEO) and require less energy for orbit placement and less power for signal transmissions. But unlike MEO and GEO, the number of satellites deployed tend to be on the higher side in LEO as orbital periods are shorter and inter-satellite relays in LEO become vital for wider coverage. This helps enable LEO mega-constellations to achieve what terrestrial networks cannot—overcoming long distances and inhospitable terrains.

Although LEO networks have been in existence for some years now with Iridium and Globalstar operating 66 and 24 satellites, respectively, they never achieved commercial success. The outlook is brighter now due to technological advancements and low-cost manufacturing, along with the rise of cash-rich and high-tech players such as Amazon and SpaceX who appear determined to turn the tide with satellite technology.

Greater revenue potential in enterprise markets than consumer markets

If 5G is all about blazing speeds and high performance, satellite internet connectivity is about providing a comparable experience to a wider audience. Despite the advances in connecting the world, just over a half (51.4%) of the world’s total population had access to the internet by the end of 2019, according to the International Telecommunications Union (ITU). This worsens if developing nations and least developed nations are looked at individually, standing at 44.4% and a meager 19.5%, respectively. While that presents significant revenue potential for satellite operators to connect the unconnected and under-served in lesser-developed nations and remote regions, it is likely to have a very few takers.

Even with the promise of faster internet, satellite broadband connectivity in its present form is expensive for direct-to-consumer markets. This is evidenced by Starlink’s recent beta testing of satellite internet in the rural and remote areas of Canada. The gear kit alone for Starlink’s service costs CAD649 plus taxes, along with which the user must pay CAD129 per month for the broadband service. This is bound to turn off many customers in lesser-developed nations where there may not be many paying customers. To serve such markets, satellite operators would need to bring down the prices of their offerings, which may happen when more competitors enter the fray.

From satellite operators’ perspective, a wider subscriber base is key to attain the breakeven point and make it a profit-making proposition eventually. One way to achieve that would be to develop a plethora of offerings for the enterprise market. This is easier for webscale companies providing satellite broadband, who can cross-sell their cloud and other services by leveraging satellite technology. Amazon is already exploring this in a big way by building a network of six ground stations (dubbed AWS Ground Station) that let users connect with satellites for managing large amounts of data, in addition to real-time access to AWS services. Pure-play satellite operators would look to tap telcos and other communications companies for providing backhaul support for 5G and other networks. For instance, Telesat has partnered with Telefonica to test LEO satellites for providing wireless backhaul services.

IoT is another key market segment in which LEO satellites present the means to connect with a network of objects and devices across smart factories and supply chains. Other markets all satellite providers can target include logistics and the transportation industry, remote maintenance, and government projects requiring remote and dedicated connectivity.

What to expect in 2021?

LEO satellites will play a crucial role as more parts of the world get connected to 5G networks in 2021. Satellites can work seamlessly with 5G cellular networks to allow end users experience consistent, reliable, high-performance connectivity. Service providers will be flexible in deciding the best means to serve customers—whether it is through satellites, fiber cables or mobile networks, or a combination of all three. China has taken this to the next level by launching a commercial 5G LEO satellite, Yinhe-1, in January 2020. The test project is a part of Chinese private operator Galaxy Space’s bigger plans for global 5G constellations that would have 144 satellites launched across the next three years. A few months later, the operator claimed to have successfully tested video calls with 5G speed via its LEO satellite in space. Not stopping there, China recently launched a satellite to test data-transmission speeds supposedly faster than 5G from space.

The new year is also primed to witness advancements in ground-side infrastructure and components such as user terminals. This is essential for enabling wider reach in price-sensitive consumer markets where the current costs of terminals (offered by Starlink, for instance) are on the expensive side. Very recently, Amazon developed a compact, low-cost broadband terminal for consumer markets that can deliver speeds up to 400 Mbps, as a part of its upcoming LEO satellite-based internet service.

2021 is poised to be the year for witnessing the start of a new satellite revolution, although bringing about a transformational change is still a few years away. Conventional telcos are unlikely to be disrupted as their core users would continue to prefer more affordable connectivity solutions offered by them compared to the satellite operators. Telcos and the satellite players are likely to work together at least in the short to medium run to improve backhaul services for mobile connectivity.

All this would still not be easy for satellite operators who are faced with many operational and technical hurdles that span battling for spectrum rights, delivering promised speeds consistently, and managing orbital junk.

Navigating the regulatory hurdle will be the biggest headache for satellite companies operating in different countries. Despite these considerable challenges, the space rush will continue with more new players entering the market, including from the developing markets of India and China that have many LEO satellite launch projects in pipeline.

Arun Menon is Lead Analyst at MTN Consulting, with 13 years of experience in strategy and research. He primarily tracks the webscale sector, including the big tech firms (FAMGA), to assess their network infrastructure-related strategy, key investments, and spending pursuits. He is also involved in providing critical insights and analysis in areas such as strategic, financial, competitive, and market assessments. Prior to joining MTN Consulting, he worked in research and consulting roles at Deloitte and Datamonitor. He can be reached via [email protected] and LinkedIn.

Industry Voices are opinion columns written by outside contributors—often industry experts or analysts—who are invited to the conversation by FierceTelecom staff. They do not represent the opinions of FierceTelecom.