Constellations recently attended the Satellite Innovation Show in Mountain View, California, where satellite industry leaders across the spectrum had an opportunity to speak about everything related to the satellite business. Katherine Gizinski, CEO of Mansat Group, moderated the opening panel discussion, The Satellite Market 2021 and Beyond. She noted that every market has inflection points, the definitive moments in time where the market shifts and the industry shifts with it. Katherine posed the question, “As you look forward over the next five years, what are the inflection points in the satellite market?”

P-LEO

Carissa Christensen, CEO and Founder of BryceTech (formerly Bryce Space and Technology) spoke about the proof-of-concept business models related to proliferated LEO systems, specifically the large LEO telecom broadband systems. In 2015 there were fewer than 1,500 active satellites on orbit. At the end of 2020, that number doubled to 3,000 with another 1,000 launched this year. That number has largely been driven by proliferated LEO systems, particularly SpaceX and Starlink. There has been growth associated with sensing companies too, but not huge numbers.

From Investment to Revenue

Christensen observed how investment has supported deployment, which is different from revenue-supported business operations. The key inflection point that we will see in the next five years is the outcome of those business ventures. Are they finding customers at scale and are they generating revenue? And will they be able to raise the capital needed to fully deploy their systems to support their visions?

This vision is framing and shaping the industry as those new satellites look very different from the satellites seen in the past. Since 2015, we’ve seen a 50% growth rate in the number of satellites deployed each year. There is also close to a 10% growth rate in the total “up-mass” each year and a 5% growth rate in the number of launches each year. The dynamics of the industry are changing, and it is driven by those small satellites.

Dynamics of Bandwidth

David Gelerman, CEO of Spacebridge, said that with the advancement of LEO and lower-cost, higher throughput, high data rate imaging is already here or coming soon. Even traditional GEO satellites are re-emerging as a new form of HTS that will provide very high capacity to connect tens of thousands of subscribers. The future will continue with the rapid development of ultra-high throughput satellites in GEO, as well as MEO and LEO. The benefit to consumers will be low-cost, end-to-end connectivity.

Mr. Gelerman remarked how business models that would not have been possible even a couple of years ago are closing. The expensive infrastructure and long production times of the past are changing and so too are the business models. He sees a future of significant cost reduction in bandwidth.

Noting the exciting times and progress being made by the industry, the CEO of Spacebridge said we are seeing investment opportunities, not just revenue opportunities, i.e., “Build it and we will come.” With the cost of remote terminals being $500 and below, price is attractive. Or in some cases it can be free like with cell phones. Satellite technology is becoming attractive and pervasive; however, there is a need to overcome one last hurdle and that is low-cost steerable antennas.

He postulated that soon, everything will need to be simple and self-installed, almost plug-and-play. Ultimately, in five to ten years, satellite terminals will require minimal human intervention and be fully automated. Artificial Intelligence will be part of the terminal, bringing simplicity, low cost and huge bandwidth. LEO will bring additional advantages over GEO, including low latency. It will have almost seamless integration with the terrestrial communications infrastructure, and we will see the emergence of terminals with seamless roaming and handover from 5G to satellite and then vice versa.

Serving the Consumer

Dr. Ward Hanson, a lecturer in Economics at Stanford University, referenced two successful examples of satellite-based business to consumers over the last 30 years: direct broadcast television, and Sirius XM for the niche auto market. To build on that, he questioned whether Starlink and competitors can be successful in producing the necessary steerable array terminals.

He mentioned how Starlink’s beta test sites in northern Wisconsin, at 45 degrees north, are perfect locations. Despite charging $500 for a terminal that would normally cost a couple of thousand dollars, which has generated great interest, people have been waiting months for service because the terminals break down and are not being fixed. The concern is whether Starlink can get the needed chips to service the terminals and support customers in northern Wisconsin and avoid being tarred and feathered like a typical cable provider. There are huge potential markets that can be addressed if the satellite industry can learn how to serve the consumer market.

Advanced Connectivity

Jeff Matthews, a Specialist Leader in the Space Industry at Deloitte Consulting said they see a major shift coming with advanced connectivity and the full stack of technologies that will be available. This could be satellite-based connectivity through terrestrial 5G, 6G, Wifi 6, and beyond. The promise of advanced connectivity has been talked about for years and we are closer to this than we have ever been. This could potentially reshape mobility, energy production, smart cities and areas that impact our daily lives.

Matthews said we must figure out what the demand signal is for a serviceable, economically viable capability. And then from a technical perspective, how do we integrate that, so that the use case is seamless to the end user. Whether that is mesh networking or integration into the full stack capability, there are things that still must be worked out to see some of that potential at least on the communication side. There is huge potential on the remote sensing side with untapped value on some of the remote sensing use cases. The next three to seven years are going to be very transformative.

Investor Expectations

Rizwan Parvez, Senior Director, Space Capture Team at Maxar, said there were two areas Maxar is interested in seeing transpire in the next five to ten years. The first area involves companies that were in the start-up phase and using money that was venture capital based. The risk profile of that money is very different from the public markets where those companies are now transitioning to. There is now an expectation from the investor community because the risk profiles are going to start to change. How are these companies that have transitioned or are in the process of transitioning to the public markets going to change and fulfill the focus on profitability or cash flow revenue or other dynamics? How will this play out?

The other aspect is the recapitalization for low earth orbit systems. The cost per unit of the satellites in LEO for many of these architectures is certainly lower cost per unit. However, the number of units required still end up resulting in a total RECAPEX refresh that is going to be in the tens, hundreds, billions of dollars for some of the larger mega constellation systems. As you change over from a venture capital backed company to a public market rated company, how easy is it going to be to get the board direction to go do another huge refresh and does the business revenue support it?

Mr. Parvez said those are the two main elements Maxar thinks are going to play out in the next five to ten years, and not just at the new mega constellation area. These are companies that have been around for the last five to seven years and have matured.

The moderator quipped, “Let’s see the rubber meet the road on some of these business cases”.