Is in­ter­net from space the an­swer?

SpaceX, Ama­zon think so, but it’s a pricey propo­si­tion

The Morning Call - - BUSINESS CYCLE - By Tali Arbel

NEW YORK — It’s a 21stcen­tury space race: Ama­zon, SpaceX and oth­ers are com­pet­ing to get into or­bit and pro­vide in­ter­net to the Earth’s most re­mote places.

And like the last cen­tury’s bat­tle for space supremacy that was trig­gered by the Soviet Union’s launch of Sput­nik 1, this one in­volves satel­lites. Thou­sands of them.

More than a dozen com­pa­nies have asked U.S. reg­u­la­tors for per­mis­sion to op­er­ate con­stel­la­tions of satel­lites that pro­vide in­ter­net ser­vice. Not all are aimed at con­nect­ing con­sumers, but some have grand and global am­bi­tions.

“The goal here is broad­band ev­ery­where,” Ama­zon founder Jeff Be­zos said at a con­fer­ence in June.

With half the world’s pop­u­la­tion — more than 3 bil­lion peo­ple — not us­ing the in­ter­net, it’s a huge po­ten­tial mar­ket. And there’s the ob­vi­ous ben­e­fit on the ground: Not hav­ing in­ter­net ac­cess makes it dif­fi­cult or im­pos­si­ble to ap­ply for many jobs, for kids to do home­work, for peo­ple in re­mote ar­eas to get med­i­cal care, and to par­tic­i­pate in the global econ­omy.

But this new wave of spaced­based in­ter­net faces hur­dles. It is ex­pen­sive to launch, tech­no­log­i­cally com­plex and could prove too costly for the very peo­ple it hopes to reach.

And then there’s space junk. More on that in a mo­ment.

Satel­lite in­ter­net al­ready ex­ists, dom­i­nated by a hand­ful of com­pa­nies like Hugh­esNet and Vi­asat that have huge, ex­pen­sive satel­lites sit­ting 22,000 miles from Earth and cov­er­ing big ter­ri­to­ries on the ground. But the ser­vice is ex­pen­sive and lim­ited, comes with data caps and lags, and doesn’t have many users.

The new satel­lites are smaller, cheaper, and closer to Earth, so the­o­ret­i­cally sig­nals travel faster and ap­pli­ca­tions like on­line gam­ing that need in­stant re­sponses would work bet­ter. And they have some heavy­weight back­ers. In ad­di­tion to Ama­zon and SpaceX — the com­pany of ec­cen­tric bil­lion­aire and Tesla founder Elon Musk — the race has also been joined by OneWeb, which is backed by in­vestors in­clud­ing Vir­gin founder Richard Bran­son, U.S. chip­maker Qual­comm and Ja­panese tech con­glom­er­ate SoftBank.

But the in­dus­try is still in its in­fancy, and at least three years away from wide­spread com­mer­cial ser­vice, said Kerri Ca­hoy, pro­fes­sor of aero­nau­tics and as­tro­nau­tics at MIT, and even fur­ther from mak­ing any money.

“I would be sur­prised if some­thing were prof­itable in 10 years,” she said. There are also com­pet­ing ef­forts at ex­tend­ing con­nec­tiv­ity, in­clud­ing Google with its Loon bal­loons, which are so­lar­pow­ered cell tow­ers made of plas­tic sheets that float on the winds, and oth­ers work­ing on so­lar-pow­ered drones.

The satel­lite com­pa­nies need to build dishes and an­ten­nas that are more com­pli­cated and costlier than those for tra­di­tional satel­lites that don’t move. SpaceX, for ex­am­ple, has filed for per­mis­sion with U.S. reg­u­la­tors to build 1 mil­lion “earth sta­tions” that would help con­nect cus­tomers to the in­ter­net.

There’s no way to have a vi­able mass ser­vice un­less the cost of this type of equip­ment drops, said Caleb Wil­liams, eco­nomic an­a­lyst at aero­space engi­neer­ing com­pany Space­Works En­ter­prises.

Launches have al­ready been pushed back: OneWeb had once said it would be op­er­at­ing in Alaska this year. But ser­vice is now ex­pected to start in late 2020.

The lo­gis­tics of be­com­ing an in­ter­net ser­vice provider also aren’t easy. The new crop of space-in­ter­net com­pa­nies are more likely to set up ar­range­ments with ex­ist­ing tele­com com­pa­nies than try to sell in­ter­net ser­vice di­rectly, Wil­liams said, be­cause it’s eas­ier than set­ting up a sales and mar­ket­ing op­er­a­tion of their own.

Those same tele­com com­pa­nies don’t want to build in re­mote ar­eas be­cause it’s too ex­pen­sive. A Fed­eral Com­mu­ni­ca­tions Com­mis­sion of­fi­cial in 2017 es­ti­mated that ex­tend­ing fiber to the roughly 20 mil­lion U.S. homes and busi­nesses that lacked broad­band would cost $80 bil­lion. And in de­vel­op­ing coun­tries, where the un­der­ly­ing in­fras­truc­ture is worse, in­ter­net is pri­mar­ily avail­able through a cell­phone.

The new satel­lite com­pa­nies may have an in­fras­truc­ture al­ter­na­tive that’s cheaper for com­pa­nies to build than wires on the ground.

A tele­com com­pany needs to pay to build out to a hand­ful of cus­tomers in a large area, with huge per-cus­tomer costs. With satel­lite, costs can be shared out over a big­ger pool of po­ten­tial cus­tomers all over the world. A SpaceX ex­ec­u­tive in 2018 pre­dicted that it would cost $10 bil­lion to de­ploy a con­stel­la­tion of min­isatel­lites.

Be­zos pre­dicted that Ama­zon’s satel­lite-in­ter­net arm will cost “mul­ti­ple bil­lions of dol­lars” to build.

Mak­ing sure that peo­ple have ac­cess to in­ter­net is just one step to get­ting them on­line, how­ever. Peo­ple also need to be able to af­ford in­ter­net, and those in ru­ral ar­eas are more likely to be poor.

It’s not clear what the pric­ing will be but high costs swamped satel­lite phone ser­vice two decades ago. It could do so again with in­ter­net.

“If you would have to pay 20% or more of your in­come to go on the in­ter­net, in a sit­u­a­tion where you make a few dol­lars per day, you don’t, be­cause it’s too ex­pen­sive,” said Martin Schaaper, an an­a­lyst at the United Na­tions’ in­for­ma­tion and com­mu­ni­ca­tions tech­nol­ogy agency.

Then there are con­cerns about the growth of space junk, or “or­bital de­bris,” which could crash into each other and even po­ten­tially set off a chain re­ac­tion of col­li­sions that make or­bit “no longer us­able,” ac­cord­ing to NASA.

SpaceX, for one, says it’s try­ing to avoid adding to the junk layer by mov­ing satel­lites to avoid crashes and de­sign­ing them to burn up in at­mos­phere when they’re used up.

The space com­pa­nies have laid out their plans to avoid de­bris with U.S. reg­u­la­tors, but crit­ics say more needs to be done, like set­ting up an air traf­fic con­trol sys­tem for space.


A Fal­con 9 SpaceX rocket with 60 satel­lites for SpaceX’s broad­band net­work lifts off in May from Cape Canaveral.

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