No, it’s not nap time. Anything but.
Facing the massive disruptions Starlink and the other mega-constellations are driving in the space industry, many are focusing on the impact vertical integration has as a driver of at least part of Starlink’s success.
With one or two exceptions, companies in our industry have historically specialized in sectors: satellite manufacturers, launch, operators and ground systems. The ecosystem starts there with sectors supporting each other. Vertical integration is when a company takes on developing solutions in or across more than one sector, perhaps even all of the supply chain. Doing so brings certain scale advantages, especially as the number of satellites in a constellation increases.
Starlink has changed our world. The company is playing a different game from traditional satellite operators, building a worldwide communications infrastructure in space that targets scale and delivery costs competitive with fiber. Traditional satellite operators have never designed systems for this type of scale or at the price points that this level of scale enables.
If that’s so, how to compete? No single simple solution, of course, but a key piece of the puzzle will be to counter going vertical by going horizontal. That means, at least in part, open standards, especially 3GPP and DIFI. And it’s for a reason often overlooked in such discussions: standards widen the available solution pool for integration, applications and partners. Their downstream effect is to spur innovation, speed to market and flexible solutions. Think IBM PC vs. Apple in the 80’s. Apple maintained control, but PCs had tens of thousands of times the available software.
Vertical integration allows a company to milk cost out of the manufacturing process, which contributes to lower prices, but like anything else there are trade-offs. At a recent APSCC conference covered by Constellations content partner Space Intel Report, Intelsat’s Asia-Pacific director, Robert Suber, commented that 3GPP’s integration of satellite capacity for 5G and beyond will be a problem for vertically integrated operators.
“The vertically integrated players are going to be on the outside,” Suber said. “If 5G will be a form of standardization for GEO operators, we will be horizontally integrating with those businesses. Proprietary technology will keep us in cottage-industry mode. We need to come together to be part of a greater ecosystem.”
The road ahead for the traditional satellite industry is not an easy one. It is being disrupted by scale in several dimensions, potentially at levels we have not dealt with in the past. The responses lie in finding ways to either achieve similar scale or to plug into scale through better integration with global network players.
