Wall Street Grills Fleet Operators Over Mega-Constellation Threat
PARIS — Wall Street analysts are peppering established satellite fleet operators with questions about how they plan to survive after the likes of Google, SpaceX, Facebook and OneWeb have launched hundreds or thousands of satellites, drones, balloons and other Internet-delivery platforms.
Demonstrating a penchant for staying ahead of a curve that may or may not exist, some analysts take it as a given that these companies will raise the billions of dollars of infrastructure costs, clear regulatory hurdles and bring platforms into service before the end of the decade.
The three largest commercial satellite fleet operators – SES, Intelsat and Eutelsat – have all told investors they welcome big-name interest in global connectivity but question whether stratospheric balloons or mega-constellations of low-orbiting satellites is economically feasible.
Here is the latest response, from Luxembourg- and McLean, Virginia-based Intelsat, during their Feb. 18 investor call:
“We’re seeing the interest from these big players that are trying to grow the market,” said Intelsat Deputy Chief Executive Stephen Spengler, who assumes the company’s leadership in April. “There are issues at [low Earth orbit] and inherent inefficiencies to overcome. We think there is a place for [geostationary orbit, where Intelsat’s satellites are located] in these new applications, because only a few require low latency.”
Google recently confirmed it has invested $900 million in SpaceX of Hawthorne, California, which is building a satellite-manufacturing plant in Seattle, which company Chief Executive Elon Musk said is for a constellation of several thousand satellites.
Google is also pursuing its Project Loon, which would use stratospheric balloons as a substitute for satellites. Google’s SpaceX investment apparently has not slowed Loon.
“We’re in commercial discussion with various telecommunications companies about integrating Loon into other networks,” Astrao Teller, the head of Google’s Google X research division, said in a Feb. 16 interview with The New York Times. “Without getting into specifics, I assure you we are looking at very substantial opportunities for Loon – Google-scale opportunities.”
Intelsat Chief Executive David McGlade said the Silicon Valley-stimulated global Internet projects appear, for the most part, to be more of a public service than an actual business.
“The real point of these constellations is to access the two-plus billion people in the world that either had very limited connectivity or no connectivity,” McGlade said during the company’s investor call. “It allows these providers to hopefully do good things for the world, and maybe make some money along the way. We have the ability to access the developing world and have been doing it for years.”
Facebook Chief Executive Mark Zuckerberg said his company’s interest in assuring worldwide Internet connectivity — through drones, satellites, lasers or microwave technologies – should not be viewed as a way to make money.
In its Jan. 29 filing with the U.S. Securities and Exchange Commission, Facebook told its investors to expect continued spending “in countries and/or projects where we will not have a clear path to monetization, such as the Internet.org initiative to increase global Internet access.”
In a Feb. 19 interview with BloombergBusiness, Zuckerberg made clear that while providing free Internet access to everyone in the world ultimately could generate revenue for Facebook, it would take decades and in any event was not the reason for doing it.
“We’ll probably lose a bunch of money,” Zuckerberg said. “But there’s this mission belief that connecting the world is really important, and that’s something we want to do.”
Zuckerberg said Internet.org starts by offering free access to basic health, financial and other services that require little bandwidth. As people come on line, many will decide to add paying services to their smartphone data plans, providing revenue to international telecommunications operators. “That’s how you make this sustainable,” he said.
In a remark that might suggest Zuckerberg is not about to pour billions into Internet delivery infrastructure, he said the biggest problem in connecting the world’s unconnected is not technical. Some 85 percent of those without Internet have locally available Internet service available to them, he said.
Affordability of Internet access is a bigger issue, he said, but even that is not the biggest problem.
“The majority of people who aren’t connected are actually within range of a network and can afford it, but they don’t know what they would want to use Internet for,” Zuckerberg said in the BloombergBusiness interview. “