Bloomberg Businessweek September 21, 2020 pp20-22 |Technology| “Where Others Have Gone Before and Failed” “To conquer global broadband, Elon Musk wants to put 40,000 satellites in low-earth orbit”. THE BOTTOM LINE “It’s hard to bet against the billionaire founder of Tesla, but space is a perilous battlefield, and the history of the satellite business is full of failures.”
LEO satellites being assembled AKA nanosatellites or cube satellites weight as little as four pounds. (Image source NASA.GOV)
SpaceX is valued at $50 billion based 80% on the future value of Space Communications, (SP) and 20% on its space-launch capabilities. SpaceX SP marketing plan calls to compete in delivering highly-redundant broadband to military, shipping, commercial aircraft and retail customers using a large network consisting of tens of thousands of low-Earth orbit (LEO) satellites dubbed Starlight. The U.S. military already has demand for broadband internet from these relatively inexpensive, fast-moving (18,000 mph) small satellites that orbit at 340 miles. While not the largest potential market, the military need may be sustaining for Space X, in part because the retail sector faces extensive competition from cable companies and other SP providers using traditional geosynchronous (GEO) satellites. GEO is slower because they orbit at 22,000 miles yet they are currently sufficient for rural, airline WIFI and shipping uses. From a military perspective GEO are like a “sitting duck” that can easily be taken out while knocking out a handful of LEO would have little impact on a network of 40,000.
Some warn of significant challenges to the Starlight plan. First, as they race across the planet, to maintain broadband they must constantly switch between ground antenna without dropping the signal. Those received signals are then delivered to end-user antenna/receiver units. Because they are in low-earth-orbit transit time is faster creating broadband speeds that rival current terrestrial speeds of 100 BPS (capable of downloading multiple HD movies at once). Sounds great but some doubt that the “drop-less” switching technology is currently operable. In contrast to critics, “Space X engineer Kate Tice announced that the network was already achieving download speeds great than 100 megabits per second…” Second concern is ultimate cost of each end-user receiver. Starlight is designing these desktop-receivers that could cost as much as $1000-$2000. By comparison a “clunky metal” disk costs about $50 but requires a technician to install. Third concern is that on a MBS/Dollar basis, LEO may be much more expensive that GEO. Lastly, to fully reach the potential of such a system, SpaceX’s Starlink must cover the earth including polar regions, oceans and inhospitable regions. It’s unclear whether China and Russia, as examples, will cooperate as they likely will protect their national communications and might wish to antagonize America.
In the pursuit of LEO like Starlight, there are other competitors. Jeff Bezos for one with Project Kuiper but SpaceX is clearly the frontrunner and has the additional advantage of owing launch capability. To succeed in the retail market Starlight and similar systems must overcome cable coverage that is widely-available, highly capable and innovating at a rapid pace. Entrepreneur, Greg Wyler, believes for reasons stated above, that LEO is “dead on arrival” versus cable. Elon Musk (SpaceX/Starlight), believes the timing is right as costs are falling-for computing power, -LEO satellites and there are more standardized processes and more parts available.
SP investors hope this will not be another unfulfilled promise.