Not the First and Not the Last: OneWeb and the Cycle of Delusion

People take about 15 years to forget the lessons of the past. Less than a generation. That’s why the OneWeb bankruptcy was sadly predictable, as are those that will shortly follow.

This duration is just long enough for those who learned the lessons last time around to retire or be sidelined; and just long enough for the next wave of ambitious entrepreneurs, financiers and engineers to come to the fore, free from the shackles of the past.

In the satellite communications industry, “the last time” was the decade leading up to 2003, with the rise and demise of a galaxy of satellite constellations whose supporters thought they could transform a lucrative niche into a mass market, by riding the coat-tails of a boom in mobile telephony.

ICO, Teledesic and others already forgotten jostled with Globalstar and Iridium, which are still with us only because they were bought cheap in fire sales, after being saved from extinction by the US Department of Defense.

People don’t so much forget history as filter its lessons, so the sales pitch for mega-constellations like OneWeb said that it addressed a more solid demand. This gained currency among space agencies, industry and financiers: but it rang with the sound of people convincing themselves of what they wanted to believe.

The financial services sector needs big projects that offer high risk and high reward and its decision makers tend to be either too young or too well insulated from the consequences to be reliable guides.

Investors follow a similar cycle. The losses incurred by the “Iridiots” in 2003 caused an investment famine in the space sector for a decade. But there are always trillions of dollars sitting idle in tax havens around the world, waiting to be inherited by those who have not learned the hard way. The current pandemic provides a convenient excuse for the failure to raise more capital, which should not be confused with the underlying reasons. One might term this excuse “Coronavenient” and expect to hear a lot more of it in the coming months.

Industry is always hungry for big new projects and the satellite manufacturers are particularly needful because of their high overheads. Government and space agencies seek elusive unicorns: but mostly they just end up funnelling funds to keep their industry afloat, making them jump through hoops that are hard enough to meet state-aid rules but easy enough to keep things ticking over.

Industry also suffers from the fatal allure of new technology. When Inmarsat spun off ICO, most of the staff who transferred to the new company did so because they found the challenges of Intermediate Circular Orbit much more interesting than boring old geostationary satellites. The only thing that will stop an engineer exploring something new is if you won’t give him a budget: and then he’ll probably do it anyway, in his spare time.

The technical accomplishments of OneWeb and its supply chain, like those of Iridium, were remarkable. But technical brilliance is never enough.

Entrepreneurs tend to share the engineers’ motives, but the prefix in mega-constellation has a much broader application. Ego, ambition, vision, hubris, greed, philanthropy and an inability to sit still are some of the words that fit.

So, is there really a big enough market to justify the new constellations? That’s almost irrelevant because the demand, real or illusory, is a fake justification. It’s the other things listed above that drive these projects and their supporters. 

Back in the 1990s, market research showed little demand for handheld satellite phones but this was ignored. Too much had been invested, in money, reputation and ambition. Most constellations failed not due to their huge cost but because wiser investors saw that the cashflow would stay negative for years, while the systems laboriously gained access to limited markets. Iridium and Globalstar survive as exactly the kind of niche players they had intended to sweep away.

In fairness, the new mega-constellations do aim at bigger and more needy markets. The exponential growth of data communications has created digital divides that everyone agrees should be overcome but which most terrestrial operators neither can nor want to fix, despite their protestations to the contrary.

Yet the new constellations are unlikely to succeed. A peculiarity of the space telecom business is that you have to fix many complex issues in parallel, or fail completely. You need the satellites, the coordinated frequencies, the collision avoidance and debris management, the ground segment, the regulatory access to national markets, the compact user terminals optimised for mass production, plus the distribution and maintenance networks in every geography. If any one of these things is not sorted upfront, then the whole business fails.

Many analysts see enough demand to sustain one system. A couple of smaller systems serving niche markets can also build viable businesses. Others may survive but only through fire-sales and governmental bailouts. This contrasts starkly with the dozens of projects under development: and nobody is even trying to rationalise the madness. Back in the mid-1990s, Inmarsat did briefly try; but the vileness of Motorola’s business practices made it impossible to form an alliance. In the end we gave up and joined the rest of the lemmings. The egos involved today are not any smaller, so we are going to repeat the cycle.

The failure of other mega-constellations will likely be spread over the next couple of years. Then there will be a decade of aversion from the finance sector and a changing of the guard in industry and government. By the late 2030s, if we still have a functioning high-tech society, we will be ready to do it all again. The next round will probably consist of constellations of hybrid satellites, combining earth observation, navigation and communications.

Can this distressing cycle be broken? Yes: but it requires the replacement of ego and vaunting ambition with humility and maturity. The space sector needs to grow up and stop behaving like a star-struck teenager. Our success has been built on decades of incremental advances, serving specialist markets that really need us. For the grown-ups this is a very satisfying role to fulfil. Just because we can dream of something more exciting, doesn’t mean that we have to build it.