Industry skeptical about the business case for megaconstellations

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

In sessions at the Satellite Innovation conference here, industry executives and observers expressed continued skepticism that constellations of hundreds or thousands of low Earth orbit satellites will be able to generate enough revenue to cover the cost of deploying, and later replenishing, those systems.

Carissa Christensen, chief executive of BryceTech, called ongoing deployments of systems by OneWeb and SpaceX as a “proof of concept of the business models of proliferated LEO systems” and a major inflection point for the overall industry. But that proof of concept alone was not sufficient for success, she argued.

“What we’ve seen is investment-supported deployment. That’s quite different from revenue-supported business operations,” she said during an Oct. 5 panel. “The most important inflection point that we are going to see in the next five years is the outcome of those business ventures.” That includes generating enough revenue to support operations and to raise additional capital to expand those systems.

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

At the same time, some constellation companies that have been backed by venture capital will be transitioning to public markets. “Now, the expectations from the investor community, and the risk profile, is going to start to change,” said Rizwan Parvez, senior director of the space capture team at Maxar, on the same panel.

That will affect those companies’ ability to raise money, in some cases billions of dollars, to replenish their fleets. “As you change over from a venture capital-backed company to a public market company, how easy is it going to be to get the board direction to go do another huge refresh?” he said. “Does the business revenue support it?”

Some traditional satellite operators are skeptical that the business case for constellations can close, at least as standalone ventures. “The problem with constellations is that you have to have everything out there on day one to start monetizing, then you have a short period of time to monetize,” said Samer Halawi, chief commercial officer of Intelsat, during an Oct. 6 panel. “You have to ramp up your revenues very quickly and do that before you have to replenish your constellation.”

“It’s almost impossible, especially with the sizes of investments going into those constellations,” he concluded.

Halawi and others at the conference, such as SES Chief Executive Steve Collar, promoted the concept of “multi-orbit” systems that combine GEO satellites with those in LEO or medium Earth orbit. “The same technologies being used on our MEO platform is being used in GEO and integrated with a common terrestrial network,” Collar said Oct. 5. “Linking those two together and allowing customers to roam between the two, you instantly create scale.”

“We said our vision is going to be a multi-orbit strategy, but it’s building on top of an existing customer base and revenue stream,” Halawi said.

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 that there will be LEO constellations that will have solid business cases,” he said. “Will it be all the LEO constellations that have been proposed over the last five years? No, and it remains to be seen who will be the winners in that market.”

Notably absent from the panel discussions were representatives of the major megaconstellation ventures, including OneWeb and SpaceX as well as Amazon and Telesat. Shayn Hawthorne of Amazon Web Services’ space unit said on an Oct. 6 panel he had “no dog in the fight” about constellations but cautioned it was too soon to conclude they were not economically viable.

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

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