Last week, Amazon subsidiary Project Kuiper announced plans to launch the first 27 satellites in its 3000-plus planned low-Earth orbit constellation from Cape Canaveral Space Force Station in Florida on April 9. The launch brings long-promised competition in the satellite broadband space for Elon Musk’s 5000-plus Starlink system, which, up to now, has enjoyed considerable worldwide market power in retail broadband services provided by these satellites (noting that Canadian rival Telesat Lightspeed’s satellite network focuses on supplying commercial and government enterprises rather than retail broadband consumers.)
Undoubtedly, low-Earth orbit satellites have revolutionized broadband provision in remote, sparsely populated, and rural regions. Constellations of satellites orbiting at altitudes between 160 and 2000 kilometers synchronize to relay data between themselves and ground stations to provide fast, low-latency broadband to both fixed-location and mobile terrestrial users (e.g. ships and vehicles). The speeds possible—up to 1 Gbps—rival those typically obtained from fixed optical fiber or 5G mobile connections, rendering the use of applications requiring real-time connectivity possible in remote regions—something not conceivable using earlier-generation geostationary-orbit satellite broadband with latencies ten to one hundred times greater. Moreover, the services are cost-competitive with fixed mobile and provide connectivity where costs and feasibility preclude the provision of terrestrial-based services (such as in mountainous areas, where the need for line-of-sight from a tower or very low population densities render terrestrial services uneconomical.)
While Project Kuiper brings much-welcomed competition in satellite broadband markets, a potentially more interesting development lies in the extension of satellite providers into the provision of mainstream communications services once considered the domain of the traditional telecommunications providers (and vice-versa.)
At the simplest level, satellites provide yet another “last mile” infrastructure competing with mobile, fiber, and cable broadband connections to connect people to the digital world. Yet, like all last mile infrastructures, their connection to the rest of the internet ecosystem comes by way of terrestrial links: fiber backhaul connections from terrestrial landing stations to internet interconnection points, just as cell towers connect with the rest of the internet via fiber connections. The low latency possible on satellite connections occurs not because the satellites operate an internet in the sky, but because they optimize the use of a network of terrestrial links (landing stations) to efficiently move and process data. These links can be provided by third parties, but they can also be provided by telecommunications operators—the firms that satellite providers are competing with at the margins to supply internet connectivity to end consumers.
In these circumstances, it would not be surprising to see contractual collaborations, if not vertical integration of satellite and telecommunications operations. For example, satellite landing stations and cell towers could co-locate to share backhaul capacity. Providers might also bundle cellphone and satellite services to the same customers, or collaborate to develop and deliver new products and services with shared hardware.
The latter is already evident in the commercial delivery of satellite texting services using mobile handsets. These handsets effectively “roam” between cell towers and satellites to enable end users to send and receive text messages across the footprints of both networks. It takes a bit longer (up to two minutes or so) for the text message to be sent or received when the “last mile” is satellite rather than the cell tower. However, from the user’s perspective, the service is seamless, as the same handset is used regardless of the transmission technology. While not the full internet service available to someone with a satellite terminal, it provides essential connectivity for end users outside the traditional mobile coverage areas.
While such innovation is to be welcomed, it comes with a caution about the implications for competition. Already, collaborative networks are forming based on the identity of the satellite network providing the services. For example, Starlink has partnered with Telstra in Australia, Rogers in Canada, T-Mobile in the US, KDDI in Japan, and OneNZ in New Zealand to supply this service. If collaboration extends to ownership stakes—particularly by the internationally powerful satellite providers into local terrestrial infrastructure (which may include data centers and telcoms)—then local competition and rivalry may become more limited.
There are some difficult trade-offs to be considered here. There is already much debate about reduced competition as mobile operators merge to maintain viability. From a local perspective, collaboration with international satellite providers (vertical integration) may initially seem less threatening than (horizontal) mergers between rival telcos. But the same calculus may not prevail internationally. Project Kuiper’s entry into the satellite marketplace could prove just as important in mobile market competition as in satellite broadband.
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