Countering the Evolving Threat to the NewSpace Industry: Rise of the Pessimistic Publications (A Satcom Perspective)

Ever since the commercial small-satellite operators started entering the space industry, the voice against LEO based small-satellite missions have been growing. Historically, small-satellites have been downplayed as not the best suited for commercial for-profit business models and it was corroborated by the fact that, besides the military users, ham radio enthusiasts and research groups were the ones utilizing small-satellite technology. However, those days are long gone and in today’s time, we have thousands of small-satellites in orbit across applications such that a minimum of thousand small-satellites get launched over a calendar year (disregarding the impact of Covid-19 which had delayed some missions). This is only growing and the market is observing new startups entering to support new customer groups using new use cases across applications.

Since the communication domain has fewer players (operators) with many satellites each, the pessimism about NewSpace capabilities is the strongest with respect to satcom. It is obvious that these NewSpace participants are not directly competing with existing GEO based established incumbents. However, their downstream service is very similar to that of the established incumbents and therefore at some point in future, the NewSpace services are going to make an overlap post which the price competition will grow stronger ending up favoring the NewSpace participants more than anyone else. While critique is absolutely required, the basis of it and its tone needs to be analyzed before taking them onboard for any interpretation or response, especially on topics that aim at concluding if and when the NewSpace capabilities will succeed in the downstream market. The fact is that the NewSpace capabilities are here and are delivering value to new and existing customers. While we are preparing ourselves to rationalize with the fact, we might as well go over the key concerns which are presented as the causation for the weakness (or potential failure over the long term) of the NewSpace capabilities.

Low Altitude Limits Addressability

Low altitude means the satellite moves relatively faster and that means the constellation needs to have enough number of satellites across multiple orbital planes such that no location is left unattended. The last time I ran a STK simulation of a 720 satellite constellation (1200km altitude), I noticed that at any given time a ground terminal had visibility of 4-8 satellites. This to me indicates sufficient redundancy. It is true that the ground terminal must transition from satellite to satellite more quickly.

However, it is a downstream terminal’s operational constraint and has nothing to do with addressability. If the beam is wider, the coverage per satellite remains larger and smaller if otherwise. That is, if anything, is merely relevant to the extent of imposing the minimum number of satellites required in the constellation to ensure the overall mission does not leave any area unserved.

As long as the downstream terminal hardware seamlessly transitions between satellites, the end-user will never know how many satellites are being used to support their operations (unless they do an investigation to find that data point). The end-users are anyways focused on their operations and as long as they have uninterrupted connectivity delivering sufficient bandwidth, they do not bother what the mission does and does not. The question of addressability is insignificant from that perspective. Any particular point on earth’s surface needs to be serviced by a set of satellites. As long as that happens, which is what constellations are designed to do, areas not being addressed is an impossibility.

Supply Deployed Where Demand is Non-existent

Yes, LEO based constellations aim at covering the entire earth and not all locations on earth have the same density of end-users for such connectivity solutions. However, the objective of any constellation mission is to make capacity available over all regions irrespective of the quantum of demand. LEO constellations are utilizing multi-orbit missions to ensure rare-yet-repetitive constraint scenarios are addressed so the exceptions do not end up rendering the mission ineffective.

Not many end-users are on the ocean surface but it is a variable over time. Besides, most connectivity challenges are faced while the end-users operate in such remote locations which are outside the reach of line-of-sight connectivity solutions. The whole point of having a LEO constellation is to ensure every user in every possible remote location has at least one option of accessing reliable satcom. End-users beyond the urban terrain keep moving and their density does not remain a constant. This can never be a reason to ignore delivering relevant capacity to those regions. This sense of inclusiveness is why the NewSpace market has grown and delivering to every insignificant corner irrespective of how many are there permanently, is the fundamental differentiator that NewSpace relies on. It is there by design.

If a mission realizes a certain region has more demand than the current capacity supplied, it can always launch a few more satellites evolving the mission to have additional satellites in the relevant orbits so the high demand areas get additional supply. LEO constellations are designed to accommodate such expansion moves and that’s what makes them more sustainable over the long run. When the funding for a few hundred satellites is available, launching a handful more than the initial plan is not impossible. All LEO missions do include the concept or in-orbit and on-ground spares for the purpose. How much each constellation ends up utilizing varies from mission to mission.

Interference with GEO Services

The signal interference concern is live and growing. There is no denying that. However, interference materializes when multiple aspects of separate satcom services match each other. LEO based constellations need not transmit at the same power as that of the GEO based services. ITU oversees the spectrum allocation and associated definitions of operational constraints that all operators have to abide by for a fair market to exist. In the odd circumstances where interference does happen, subsequent investigations are conducted to confirm the source of the interference and next steps are decided. There have been cases where LEO based constellations have been used to investigate such complaints of interference. LEO missions have evolved to accommodate the intermittent switching off of relevant payloads during the phase when they are expected to interfere with an existing satcom service. Mission design software developers have evolved solutions to help the LEO mission operators keep track of potential interference scenarios so their mission operations could include those variables to eventually avoid such unforeseen incidents. The same solution developers along with the space situational awareness service providers also offer capabilities that can help LEO operators investigate potential collision course scenarios where their satellite could be at risk of flying into an existing debris cloud or another satellite (including those from other operators). The risk of LEO satellites interfering physically into other operations are also avoided this way. It is true that sustainable space operations is a process that requires continuous input from all those concerned. However, it is unfair to assume non-compliance from the NewSpace operators, who have consciously stepped forward to democratize space while not compromising their competitive advantages.

The one interference which is unavoidable, is the eventual overlap the LEO based services are going to have on GEO based services moving forward, owing to sheer similarity in capability while differing vastly in price. At that point, the GEO based services will lose some customers to the new services from NewSpace. The sooner we rationalize with this, the better it is for everyone. There is always an opportunity to partner with NewSpace participants. The focus then, must be on integration rather than on interference.

Low Telecom ARPU

Telecom revenues are largely dependent on what the service providers demand and yes it comes down with increasing competition. Irrespective of reducing price owing to competition, the ability of the operator to offer any price largely is dependent on how much it costs the operator to install the necessary assets that are going to deliver the service. At any given time, a LEO based small-satellite constellation is going to cost a lot less than a GEO mission featuring large monolith satellites. Just like GEO based services, LEO based service is very different ball game and it has its eyes on a specific set of customers besides those who are currently relying on GEO based services. The overall investment required for a LEO mission will include many aspects besides the cost of installing the minimum assets for reliable downstream service. In anyway, LEO missions can easily afford to offer lower prices and still break even relatively quickly. With downstream telecom operators partnering with them, this only becomes more feasible from a financial standpoint. The fact that both non-space investors and government agencies are investing in such LEO based services corroborates this.

Like any startup, the NewSpace downstream services are going to take some time to settle down once they are operational. However, when they do, their growth will remain steady irrespective of how slow it is. They are focusing on new customer groups through new use cases. These are the very areas the established incumbents ignored for many years in the past. The NewSpace blue oceans are going to remain blue for some time and that is going to ensure the financial sustainability in the long run while they battle it out with existing services in the red oceans. The SpaceX moment in the connectivity domain is here and it is only going to remain. Cheaper services are unavoidable, and it doesn’t matter how much revenue the business generates per user. The ones that stay in the game long enough will emerge winners and NewSpace is not going to be an exception.

Reduced Sustainability When Flying Over Equator

There are LEO based missions (some are narrow band) exclusively aiming at equatorial regions. Nano-satellite missions have enabled financial transactions and they already have established working relationships with downstream participants across telecom and related markets. As the constellation grows, the location of the ground terminal will remain insignificant. The NewSpace services are aiming to serve anyone anywhere in the cheapest way possible. May be the prices remain a bit high initially but when the market goes into the growth phase, the price reduction (service as well as ground terminal) is going to grow and new customers are going to enter the market. The LEO constellations will anyway be fielding more satellites than what they actually need to ensure their service is supported with sufficient redundancy. When the global constellation is going to be symmetric (in more than one way), every point on earth is going to be treated the same way by the system and the question of sustainability will cease to exist.

Unviable Direct-to-Customer Approach Due to High Priced Ground Terminal

Serial production is becoming a norm across the space industry and the prices are expected to come down as the production volumes go up. However, even at the initial stages, end-users are able to access LEO based connectivity for $499 (approx.) as the initial cost and $99 (approx.) per month for the service. These prices are only going to reduce over time. Many end-users who rely on satcom are not businesses and therefore do not have the budget for a enterprise-grade satcom solution offered by the GEO based service providers. Their obvious choice has to be NewSpace services. I am sure you’ve watched the YouTube unboxing/testing videos of such solutions. Direct-to-customer works and will only improve on its efficiency over time. Yes, providing service support is critical but that is a wait and watch as the NewSpace services are just getting started. Besides, until all the satellites of the constellation are deployed, the downstream service is going to have disruptions. Once fully installed, the focus will be on maintaining uninterrupted services by providing sufficient support. There aren’t many NewSpace choices and the customers who choose these are not going to consider expensive GEO based services. This idea of terminal cost being a restraint is already a mirage and even this will fade away once the facts become apparent.

In my view, the above concerns are often presented as potential reasons for NewSpace services (LEO based satcom services) to fail or not deliver against their promises. However, my observations and discussions with stakeholders in the market tell a very different story. The NewSpace market participants could counter the rising pessimistic views about their capabilities by merely educating the audience on how their services are designed to be reliable, safe, sustainable and cheaper.

For the most part, LEO services are more complementary with GEO services than being competitive. Integration of LEO in the mix could deliver enhanced value. However, integration of LEO based services does impose the need for sufficient downstream hardware infrastructure upgrade. Besides the possible complementary aspect, LEO based services have a competitive side which might not be visibly threatening right now. The day is not too far when it will show up more distinctly, and that is when the satcom services market will go through some surprising changes. GEO based services can either investigate it and plan for it or wait for the NewSpace services to fail and miss the boat on a good opportunity. Some of them have started to recognize their small-sat partners but a significant portion of the industry remains ignorant, banking on concerns such as those discussed above. If your victory relies on your opponent’s failure, you’ve already lost the game.

NewSpace is here and it will only grow irrespective of the challenges it will face. NewSpace market is as vulnerable as any other market and yes, it is going to lose some ground. However, the territory that it wins will remain with it forever. The next set of winners will also be NewSpace operators fielding better LEO based small-satellite constellations. This is the era when the previously rejected science projects evolve into the established incumbents of the future. For sustainable growth opportunities, every space participant could be a part of the evolving NewSpace market. The question for them is: To be or not to be?

What do you think?