The Uncertain Promise of High Speed and Massive Satellite Internet

At present, large global projects that aim to massively provide high-speed Internet for both urban and rural areas are in progress. On one hand, Google intends to implement a network of more than a thousand satellites that allow internet access in remote places [1], while the company Oneweb is looking to install around 1900 satellites in the next 5 years [2]. On the other hand, SpaceX aims to install around 12,000 satellites in the next decade [3].

Google wants to take internet where it still doesn’t exist. Space X has the objective of providing broadband internet connectivity in rural zones of the planet, trying to generate competitive prices, attractive even to urban zones. Meanwhile, OneWeb works in a model of economy at scale that allows to make viable a high speed internet, mobile and portable, in such a way that any person can move freely with his internet around the world, achieving an accessible cost [4].

Are high-speed satellite Internet projects viable and do they have a future?

By: Gabriel E. Levy B. –

The initiatives of Google, OneWeb and SpaceX, (among others) are not the first ones that occur in the field of the massification of the Satellite Broadband Internet. The annals of history contain antecedents of many other companies of satellite services that tried and in a very strange way failed in the attempt.Para el consultor de la industria de satélites Roger Rusch, basado en la experiencia de otras compañías, es casi improbable que un modelo de negocio como el que plantean estas compañías pueda ser viable:

“It is highly unlikely that anyone can create a successful business out of this.”[5] Roger Rusch

For Elon Musk, CEO of Space X, his business can be feasible as long as it manages to maintain low operating costs and an affordable fare, since there is a significant unmet global demand for broadband connections. [6]

“At SpaceX we are developing a constellation of satellites, because we believe that our potential future customers are not currently satisfied with their broadband Internet access options, so we are looking to fill a need by providing global broadband capacity at reasonable and affordable prices” [7]. Elon Musk CEO of Space X

Likewise, Musk, in the face of criticism against his model, has been emphatic that he is striving to develop an efficient system, preventing the company from spreading too much or getting out of control, so he is being cautious about the development pace [8].

In Google’s case the company has been quite tight in not disclosing information, however, PatentYogi [9] published the patent file in 2017: US 20170005719 registered in 2014 and which was issued by the United States Patent Office. This file shows that Google would be focusing its efforts on building a constellation of about a thousand satellites moving within the range of the Earth’s orbit in different trajectories, variable, programmable and adjustable. Thus providing Internet access at acceptable speeds in any area of the planet, no matter how remote or inaccessible, reaching a much more significant covering than the one provided by current fixed and mobile networks.

According to the patent documents, the satellite constellation would be made up of two “layers” of satellites with a variable altitude and inclination with respect to the Earth [10].

Everything would seem to indicate that Google’s project seeks to have the thousand satellites form an interconnection network, which would be linked to different earth stations that would eventually provide access to final users.  Through this model, Google hopes to cover 75% of the planet [11].

How do they plan to achieve it?

From a technical point of view, the satellites that the three companies intend to launch would be small, that is, between 100 and 500 kg of mass, which on average will orbit at an altitude of approximately 1,100 kilometers.

In SpaceX case, they will operate at a lower altitude of approximately 550 kilometers, seeking greater efficiency and less space pollution [12]. The satellites will use optical connections with each other and digital phase beam antennas in Ku and Ka-bands, according to documents submitted by SpaceX to the United States Federal Communications Commission (FCC) [13].

The system will use a peer-to-peer protocol that is said to be “simpler than IPv6”, although details have not yet been published [14].

Another difficulty they will have to face is that of latency:

“Internet traffic through a geostationary satellite has a theoretical minimum latency of at least 477ms from the user to the satellite, but in practice this latency is 600ms or more.

Starlink satellites would orbit between 1/30 and 1/105 of the distance of geostationary orbits and, therefore, offer more practical latencies of between 7 and 30ms, comparable or lower to existing cable or fiber networks” Jon Brodkin Article in ARS Technica [15]

The challenge of achieving competitive costs

In regard to satellite costs, the strategy would be to generate economies of scale through mass production, at a much lower cost per unit of capacity than existing satellites.

“We are going to try to do for the satellites what we have done for the rockets. To revolutionize space, we have to take care of both satellites and rockets, the production of smaller satellites is crucial to reduce the cost of Internet and space-based communications. Elon Musk CEO of Space X [16]

While lowering manufacturing and positioning costs is an essential part of a massification strategy, it is not enough to achieve truly affordable rates. In a prospective analysis exercise, based on speculation and the historical background of other companies, it is possible to assume that the financial schemes of both SpaceX and OneWeb will imitate models such as those developed by Netflix. That is to say, monumental investments charged to stock market investment capital, with very long term return on investment estimates and leverage in rapid cash flows that disguise operational losses, accompanied by debts with permanent refinancing, until reaching volumes that make the economic models feasible. In other words, a model of long-term financial speculation.

As for Google, it will most likely charge the costs to corporate investment plans, supporting losses with other business units, just as it did at the time with YouTube.

In simple terms, it is very unlikely that the three companies are expecting short term profits and their bet of will be the massification of the service, the cash flow, the financial speculation until the model reaches a balance point, which probably will not happen in the first decade.

Is it a threat to traditional telecommunication companies?

For now, the numbers do not close for the satellite broadband business and the differential approaches are aimed at providing coverage in areas where the Internet has not yet arrived. Traditional telecommunications companies should be on the alert, because unlike in the past, those behind these projects are entrepreneurs who are used to carrying out highly complex projects. Either in the case of aviation, where Richard Branson revolutionized the market with Virgin’s Low Cost and now bets on the Internet Satellite business with OneWeb. Or in the case of Google itself, which has proven to be a company that through innovation is capable of carrying out even the most daring and “impossible” projects.

Perhaps the aspect in which traditional telecommunication companies must pay more attention is global portability of Internet. It will be very attractive for the business executives, airmen and in general all type of travelers. To have a really portable and mobile Internet could end up threatening the income and growth projections of other business models like 5G, 4G and the business of the optical fiber itself.

In conclusion, although for now the massive broadband satellite Internet seems more a science fiction story than a real possibility to materialize, behind this project there are daring entrepreneurs willing to risk everything for this model: Google, SpaceX and OneWeb, whose teams are working day and night in the development of new technologies, looking for economies of scale, reducing costs, conquering investment capital and betting strongly on this business.

It is very likely that before 2030 an affordable high-speed satellite Internet will be a reality so traditional telecommunications companies will have to be prepared. Meanwhile the user will be the most benefited and, for the first time, those who live in areas where it was impossible to think that an accessible high-speed Internet could reach before will be favored.

[1] Google intends to create a satellite network for Internet access

[2] BBC World article on Global Satellite Internet projects

[3] Eric, Ralph (December 21, 2018). “SpaceX’s Starlink eyed by US military as co. raises $500-750M for development.

[4] “Elon Musk and Richard Branson invest in satellite-Internet ventures”. Los Angeles Times. Accessed January 19, 2015.

[5] «Elon Musk and Richard Branson invest in satellite-Internet ventures». Los Angeles Times.

[6] «Shotwell says SpaceX “homing in” on cause of Falcon 9 pad explosion». SpaceNews.

[7] «Shotwell says SpaceX “homing in” on cause of Falcon 9 pad explosion». SpaceNews.

[8] Elon Musk, Mike Suffradini (July 7th, 2015). ISSRDC 2015 – A Conversation with Elon Musk (video).

[9] PatentYogi document

[10] PatentYogi document

[11] Specialized ADSL Zone article

[12] Grush, Loren (November 9, 2018). “SpaceX wants to fly some internet satellites closer to Earth to cut down on space trash”.

[13] Space Exploration Holdings, LLC (November 15, 2016).

[14] “Elon Musk”. February 25, 2018.

[15] Spacexs satellite broadband nears fcc approval first test launch.

[16] “SpaceX chief Elon Musk has high hopes for Seattle office”. Seattle Times.

Disclaimer: The published articles correspond to contextual reviews or analyses on digital transformation in the information society, duly supported by reliable and verified academic and/or journalistic sources.  The publications are NOT opinion articles and therefore the information they contain does not necessarily represent Andinalink’s position, nor that of their authors or the entities with which they are formally linked, regarding the topics, persons, entities or organizations mentioned in the text.