Managing Director, New York
I am sure many of you read about, if not actually witnessed, the substantial damage caused by tropical storm Isaias to the Mid-Atlantic states in early August. An estimated 2.2 million homes and businesses lost power, and tens of thousands of people were still without electricity for several days afterward. The storm also wreaked havoc on internet and telecommunications services in the area for days. People without power and internet connectivity lined up at public places hoping to charge their devices and get online.
I live in a suburb of New York City and was without power and Wi-Fi for 55 hours. Cell phone service was extremely intermittent. The day after the storm, I had a cell phone call with a client drop six times in thirty minutes before we could complete our agenda. Of course, with no high-speed internet and spotty cell phone coverage, there was no possibility of my usual daily set of Teams, Zoom, Skype, or other online meetings on my laptop.
This storm is just the latest in highlighting a real vulnerability in our infrastructure, especially at this crucial time when the COVID-19 pandemic has pushed many people to work from home. A recent study showed slightly more than a third of all American workers who were employed before the outbreak were now working from home. Together with the 15% of workers who were already working from home previously, this means half of all workers in the US are currently telecommuting and need home internet or other telecommunication services in order to do their jobs. Before COVID, most of these workers relied on internet services at their workplace, where many companies have invested in backup resiliency. Obviously, most people working from home cannot afford the same communication infrastructure. As a result, storms like Isaias have the potential for seriously interrupting businesses much more than in pre-COVID times, when most workers commuted.
With increased work-from-home setups likely to become a permanent fixture, stable and reliable residential telecommunications infrastructure will be critical going forward.
This is where satellite technology comes in as Low Earth Orbit (LEO) satellite constellation telecommunication networks have the promise of low latency and global coverage. LEO projects have been around for decades. The first wave included Iridium, Globalstar, Orbcomm, and Teledesic. Iridium is currently the only constellation that has appreciably survived, although not without going through bankruptcy. Currently, a whole new wave of LEO constellations is planned or being deployed. OneWeb has launched 74 satellites out of a planned 650 and recently asked for permission to launch up to 48,000, Starlink has launched 595 out of up to 12,000, and Telesat and Project Kuiper have 298 and 3,236 planned, respectively.
But even with the increased demand from people working at home, the business case for LEO satellite telecommunications constellations is challenging. The main issue is that LEO satellites do not stay in one place over the earth, requiring constellations of tens, if not hundreds or even thousands, of satellites to provide uninterrupted service. With 90% of the world’s population living in only 10% of the globe, this means at any one time, 90% of any LEO constellation will be over sparsely populated areas. True, LEO constellations can also help improve the connectivity of passenger aircraft and cruise ships, but air travel and cruise ship travel may be down for a long time due to the pandemic and increased online meetings.
On the other hand, terrestrial telecommunications providers can serve high volume areas with fiber optic or other infrastructure at a fraction of the cost. They can be extremely flexible in their network investments and only expand to areas with sufficient demand. It is very difficult for LEO constellations to focus their widely spread capacity to high demand areas. In addition, while bandwidth demand is rising, the Average Revenue per User remains stubbornly flat. In other words, while people want more bandwidth, they essentially act as if they have a set total telecom budget per month and will pay for the highest bandwidth they can get within that budget. This holds down overall growth even as bandwidth has improved. There are obviously many more details to LEO constellation business cases, but these are the main factors.
Indeed, out of the first wave, Iridium, Globalstar, and Orbcomm have all filed for bankruptcy. From the current wave, OneWeb recently filed, and it is hard to imagine every one of the other constellations will be financially successful in the end.
So how do COVID-19, Isaias, and potential financial struggles of LEO constellations all fit together? Perhaps it is time to consider LEO satellite communication as critical infrastructure. This would be analogous to most roads and highways or the US Postal Service (USPS), both of which provide a means for the majority of homes and businesses to connect to one another. An analogy from the space industry would be GPS, operated by the US Air Force, which people and businesses use every day for location services. And keep in mind that Iridium’s largest current customer is the Department of Defense.
If LEO satellite communication costs cannot be reduced to competitive levels with terrestrial technology, perhaps the US government can invest in one or more of these constellations. A US government-supported LEO constellation could serve as a last-resort internet connectivity option for customers who are too expensive for commercial terrestrial providers to serve. It could also act as a backup in cases of hurricanes or other events that knock out terrestrial services in populated areas. The critical capability facilitated would be internet connectivity, analogous to the physical connectivity supported by the government through highways and the USPS.
A potential existing example of this is the UK government investing in OneWeb in part to provide internet services to more remote citizens across its geographically dispersed territories. In another example, the Federal Communications Commission is managing the Rural Digital Opportunity Fund to bring high-speed internet to rural areas originally intended for fiber and fixed wireless. SpaceX is arguing to get a piece of that for Starlink.
Facilitating and ensuring telecommunications connectivity will pay dividends in economic growth. After all, as my teenage daughter says, the five necessities of life are air, water, food, shelter, and Wi-Fi – and not necessarily in that order.
What do you think about the viability of government-supported LEO satellite programs? Is there another way to make LEO constellations profitable?
(Visit Eric's LinkedIn profile to see the original article and participate in the conversation.)