Industry is skeptical of the business case for mega-stellations

MOUNTAIN VIEW, Calif .– Companies that have demonstrated the technical viability of broadband satellite mega-stellations now face a bigger challenge: closing the business case.

During the Satellite Innovation conference sessions here, industry leaders and observers have expressed their continued skepticism that constellations of hundreds or thousands of satellites in low Earth orbit will be able to generate enough revenue for them. cover the cost of deployment and subsequent replenishment of these systems.

Carissa Christensen, managing director of BryceTech, called the ongoing system deployments by OneWeb and SpaceX “a proof of concept of proliferating LEO systems business models” and a major inflection point for the entire industry. But that proof of concept alone was not enough to be successful, she argued.

“What we have seen is deployment supported by investment. It’s quite different from revenue-funded business operations, ”she said during a panel on Oct. 5. “The most important inflection point that we are going to see over the next five years is the outcome of these business ventures.” This includes generating sufficient income to support operations and to raise additional capital to expand these systems.

Another factor is the ability to replenish these constellations. Unlike geostationary telecommunications satellites, which have a typical lifespan of at least 15 years, LEO constellation satellites are designed for a fraction of that lifespan, driven by the propulsion requirements to maintain their orbits and maneuver in a more cluttered environment, as well as a desire to refresh technologies. This replenishment comes at a cost.

At the same time, some companies in the constellation that have been backed by venture capital will be making the transition to public procurement. “Now the expectations of the investment community and the risk profile will start to change,” said Rizwan Parvez, senior director of the space capture team at Maxar, on the same panel.

This will affect the ability of these companies to raise funds, in some cases billions of dollars, to replenish their fleets. “As you move from a venture-backed company to a public market company, will it be easy to ask the board to do another big refresh? ” he said. “Does the company’s income support it?” “

Some traditional satellite operators are skeptical about the conclusion of the constellation business case, at least as stand-alone businesses. “The problem with constellations is that you have to have it all on day one to start monetizing, and then you have a short period of time to monetize,” Samer Halawi, Intelsat commercial director, said at a panel on October 6. “You need to increase your income very quickly and do it before you have to rebuild your constellation.”

“It is almost impossible, especially with the importance of investments in these constellations,” he concluded.

Halawi and other conference participants, such as SES CEO Steve Collar, promoted the concept of “multi-orbital” systems that combine GEO satellites with those in LEO or medium orbit. “The same technologies used on our MEO platform are used in GEO and integrated into a common terrestrial network,” Collar said on October 5. “By connecting these two together and allowing customers to move between the two, you instantly create a ladder.”

“We said our vision was going to be a multi-orbit strategy, but it would build on an existing customer base and revenue stream,” said Halawi.

Mike Pigott, executive vice president of connectivity at Anuvu, a company developing a fleet of small GEO satellites, also endorsed a multi-orbit approach, but was more optimistic about the future of LEO constellations. “We believe there will be LEO constellations that have solid business cases,” he said. “Will these be all of the LEO constellations that have been proposed in the past five years?” No, and it remains to be seen who will be the winners in this market.

Representatives of major mega-constellation companies, including OneWeb and SpaceX as well as Amazon and Telesat, were particularly absent from the roundtables. Shayn Hawthorne, of Amazon Web Services’ Space Unit, told an Oct. 6 panel that he had “no dog in combat” about the constellations, but warned he was too early to conclude that they were not economically viable.

“Sometimes when we think about closing the business case, we look at it through the lens of what we know instead of what’s to come, and all the amazing new value that’s going to be added. to the world by having this new capability it will then drive the business case to work, ”he said. “I think the jury is out.”


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