When incumbents team up with disruptors – mobile operators join forces with satellite companies
Even as the Indian government blocked Elon Musk’s Starlink, the company launching thousands of low-earth-orbiting (LEO) satellites blanketing the earth to beam down the Internet, mobile operators in other parts of the world are teaming with the LEO providers to create new value propositions. LEO satellites are attracting interest from operators that wish to deliver fixed broadband connectivity to rural areas. This is turning into an interesting case of established players forging alliances with likely disruptors, preempting a technological shift.
In total, there were around 7,500 satellites in LEO as of September 2021, according to the United Nations’ Outer Space Objects Index. While it took more than five decades to reach a thousand simultaneous active satellites, the growth in the active orbital population has exploded over the last decade, driven largely by companies like SpaceX designing satellite constellations to provide internet access.
More than 100,000 more satellites have been proposed – with nearly 40,000 proposed to the U.S. Federal Communications Commission in November 2021 alone. While not all these proposed constellations will move forward, the ones that do and all future constellations will still need to find space in orbit and available spectrum to communicate (which also constrains orbital capacity).
The three satellite operators with the most commercial maturity are Starlink, OneWeb and Telesat. All three have launched satellites using the Ku and Ka band, though some are also considering using the V band. These high-frequency bands enable higher data throughput, higher bandwidth, smaller antennas, narrower beams and greater security than traditional satellite bands (below 12GHz). However, they are also more susceptible to weather damage and rain fade, though exposure can be reduced by amending the ground station design and signal modulation.
LEO satellites orbit 160–2000km above the surface of the Earth and are currently being developed at an unprecedented rate. They are attracting interest from mobile operators to deliver broadband connectivity to remote areas due to their low latency compared to that of other types of satellite (as low as 20ms) and high bandwidth per user compared to that from cable, copper and pre-5G fixed-wireless services. Indeed, one of the major downsides of geosynchronous equatorial orbit (GEO) satellites is their high latency because they orbit at least 35,786 km above the surface of the Earth.
Recently, OneWeb, a LEO satellite communications operator co-owned by the Bharti group and the UK government, launched another batch of 36 satellites by Arianespace from the Baikonur cosmodrome in Kazakhstan. The latest launch, and the 9th since December 2020, takes OneWeb’s total in-orbit constellation to 394 satellites, representing 60% of OneWeb’s planned 648 LEO satellite fleet that will deliver high-speed, low-latency global connectivity.
Telecom operators are partnering with LEO satellite providers to supply mobile broadband in areas where the deployment of fixed-line broadband or terrestrial wireless is uneconomical or unreachable. However, such alliances bring risks as well as potential new revenue. Connectivity is provided by LEO satellite constellations. A single constellation must be formed of thousands of satellites to give worldwide coverage. For example, Starlink has 1800 satellites in orbit as of October 2021 and has coverage in 20 countries.
According to a report by Analsys Mason, the ‘big three’ are pulling away from the large pool of smaller satellite providers, even though they are still in the early stages of deployment. Mobile operators must therefore quickly decide which partnerships to form. The risk associated with partnering with one of the ‘big three’ satellite providers is that the operator is placed low down on the partnership priority list. These satellite providers also pose a threat to telecom operators that are looking to provide terrestrial broadband because they are directly competing for the same customers. A potential resolution is to form operator–satellite provider partnerships.
However, the uncertain financial viability of LEO satellite models means that operators should be cautious about forming partnerships. Indeed, OneWeb filed for Chapter 11 bankruptcy in 2020 after failing to secure sufficient funding from investors (though it has subsequently received new financing). The pandemic has boosted the demand for internet connectivity, and LEO satellites are an attractive solution for accelerating the deployment of new connectivity infrastructure. Operators themselves are investing in satellite companies, and this is another way for them to improve the balance of power in partnerships.