Perspectives on the Satellite Industry

The satellite industry is undergoing a transformation under pressure from different fundamental trends. Below are some of my observations after I attended Satellite 2024 in Washington, DC last week. The topics discussed at the event, the products on display on the exhibition floor, and the type and background of attendees provide some clues on major trends.

The macro view

Many speak of the satellite industry in terms of “old space” – referring primarily GEO satellite operators – and “new space” which refers to newer trends. These newer trends trace back to the entry of SpaceX into the industry and the innovations it brought in both launch services and LEO satellite design, manufacturing and operation. However, there are factors that equally impact both old space and new space. This includes geopolitics and financing in the first order, followed by regulations among other factors.

On the financing side, there are delays in investments in new projects. The capex-heavy and debt-laden satellite industry is highly susceptible to the vagaries of a high-interest rate environment. Moreover, there is no shortage of capacity in the industry which increases competition among the service providers. This helps to drive prices and profitability lower, and will force greater consolidation in the industry.

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MWC 2024: Navigating Opportunities and Challenges in the Telecom and Digital Infrastructure Landscape

MWC 2024: Navigating Opportunities and Challenges in the Telecom and Digital Infrastructure Landscape

Once a year, at this time, we release our update on the telecom and digital infrastructure sectors. Mobile World Congress (MWC 2024) serves as a catalyst, helping us validate our market assumptions and gain new insights. This year, our primary observation is that these sectors are undergoing a transformative period characterized by divestments and consolidation. Companies and financial investors in these sectors now have a unique opportunity to capitalize on attractive valuations. In this post, I’ll highlight some key trends briefly. For the complete write-up, you can download our Insight Note below.

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Access Licensing Spectrum Framework for Rural and Remote Areas

Access licensing is a new spectrum licensing mechanism that enables a party to obtain a license for spectrum that is not utilized by the incumbent license holder. Canada recently released the framework that governs access licensing. It identified the Cellular 800 MHz and PCS 1800 MHz bands for this licensing framework in designated rural and remote Tier 5 service areas.

The purpose of access licensing is to increase the utilization of spectrum in rural and remote areas. Incumbent spectrum holders, often large mobile network operators, have acquired spectrum over the years but did not find it profitable to serve rural areas with low population density. This led to idle spectrum spread across different geographies. Access licensing seeks to make this spectrum available to third parties who are in a better position to develop a positive business case for services in rural and remote areas. The framework is not a new: In 2019 the UK introduced Local Access license. Both the Canadian and UK schemes have the same intent and share a few similarities (e.g. a 3-year license term).

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Dish AWS Spectrum: The Whole Is Greater Than The Sum Of Its Parts

Dish AWS Spectrum

The recent reorganization of the Dish Networks corporate structure raised interest in Dish’s spectrum portfolio. Analysts sought to understand the value of this portfolio in potential asset divestment or as collateral for new debt (see here). In a our new Insight Note, we take a deep dive into the AWS band spectrum holdings of Dish. These holdings combine three bands which include AWS-3, AWS-4 and the H Block spectrum. Dish acquired this spectrum over the course of several years in the early to mid 2010’s, and had to work with the FCC and 3GPP to make it suitable for mobile services. The Insight Note, which you can download below, shows that the spectrum holdings of Dish in each of these bands standing alone is of low value for use in mobile communications. However, the value of the spectrum is significantly higher when combined. In effect, Dish combined low value, low cost spectrum into a more productive asset that has greater utility and value.

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Emergency Roaming: Mitigating the Adverse Impact of Mobile Network Failures

A spate of recent telecom network failures has emphasized the importance of accessing emergency services, including 911 calling and texting, during network outages. Emergency or disaster roaming enables access to emergency services during such network outages. Most emergency calls are made from cell phones, which in some markets could reach as high as 95% of all emergency calls. Headlines of persons unable to call emergency services because of network failures have raised the attention of regulators to this issue. In a few countries, regulators attempted to cajole mobile network operators to implement emergency roaming. MNOs for their part are hesitant due to the cost and complexity of implementing emergency roaming. However, it is hard for them to maintain their objections to emergency roaming after their networks suffer from a catastrophic outage.

In our newly published Insight Note “Emergency Roaming: Mitigating the Adverse Impact of Mobile Network Failures” we provide an overview of this topic.

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The Trials and Tribulations of Neutral Hosts

Two weeks ago, we published an Insight Note to our clients on the neutral host business using Crown Castle (CCI) as an example to highlight the challenges of the small cell hosting model. In our Note, which you can download below, we detailed the most critical challenges associated with small cell deployments. We also answered the question of why market forecasts have been wrong about small cell deployments. The Note comes at a time when Verizon has reportedly reversed its stance on deploying more millimeter wave small cells. Verizon is the world’s largest operator of millimeter wave small cells with some 40,000 units in its network [1]. This sends a clear signal on the future of the small cell market.

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Recap of the Canadian 3800 MHz C-band Spectrum Auction

The 3800 MHz spectrum auction in Canada concluded with total proceeds of C$2.158 billion (US$1.6 billion) for a nationwide allocation of 250 MHz (link to results on ISED web site). To put this result in perspective, the 3500 MHz auction, which concluded in July 2021, raised C$8.91 billion for a nationwide average of 111 MHz.  The 3800 MHz spectrum fetched less than a quarter of the price, for more than twice the amount of spectrum (or more than 9x!).

Spending by service provider in the 3800 MHz auction
Spending by service providers in the 3800 MHz spectrum auction.
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Highlights of Canada’s New NCL Spectrum Licensing Framework

Canada became the latest country to make spectrum available for enterprise private wireless networks (see here for the global market). Using a 80 MHz slice of C-band spectrum between 3900 MHz – 3980 MHz, enterprises and service providers will be able to apply for a spectrum license under the Non-Competitive Local Licensing Framework (NCL). NCL aims to cater to different types of use cases: aside from enterprise private wireless, it seeks to address rural area connectivity among other use cases. Since different applications have different requirements, it raises the question of whether NCL will meet the needs of different market segments. As it stands, it runs the risk of pleasing no one.

Band plan for the 3900-3980 MHz band. [Source: ISED]

The Highlights

NCL licenses are available for local areas based on a vector that defines the boundaries of the service area. Licenses are for a one-year term with an option – or high expectation – to renew on an annual basis. Licensees have to demonstrate their deployment through site data uploads to maintain their license.

Two type of licenses type will be available: low and medium power. Low power licenses have a 15 km2 area limit and are available in all geographies (~2.5 km cell radius). Medium power licenses are available in rural and remote areas only to cover a minimum area of 75 km2 and a maximum area of 165 km2 (between ~5 – ~8 km cell radius).

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A Look Under The Hood Of The FCC National Broadband Map

FCC Broadband Map - BEAD Funding

The FCC recently released version 2 of the National Broadband Map. It’s an ambitious project that aims to provide information on the available connectivity services at every location in the US. The NTIA plans to use the map to identify unserved and underserved communities to provide funding under the Broadband Equity, Access, and Deployment (BEAD) program. I was very intrigued by the project and spent some time to explore what the underlying data says. With millions of data points, I thought I could do some statistical analysis to answer questions on the broadband market in general. Here are some observations.

The Who and What

The first thing I did was to understand what exactly are the different parameters in the database are. Then I progressively un-layered the data to distill some information. I looked at licensed fixed wireless access first. This is how the service providers explain the data they provided the FCC to develop the map:

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Telecom Cloud Platforms: A White Knight or Trojan Horse?

Telecom Cloud Platforms: A White Knight or Trojan Horse?

The extension of the public cloud to telecom networks is one of the most important technology trends with far reaching consequences for both cloud providers and telcos. Cloud providers are making an aggressive bid for telcos to host their network infrastructure on the public cloud. They argue that this will help telcos cut their costs, evolve their service offering and satisfy the requirements of their investors and shareholders, pitching it as a win-win for telcos and cloud providers. The pitch should not be simply viewed as such, but rather one must look at it from the perspective of integrating public clouds with telecom networks, which comes with a variety of fundamental trade-offs to assess. In the process, the telco network would be subsumed by the cloud where the cloud provider stack operates at different locations along the core-edge-access continuum, and the telecom network provides the connectivity plumbing between the disparate parts. This end-vision will take many years to play out – if it does at all. For the time-being, telecom executives face a myriad of complex options and decisions on how to evolve their networks, while facing stringent cost optimization constraints and deadlines to execute on these decisions.

To read the full article download the Insight Note here:

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Enabling Direct-to-Handset Satellite Connectivity: Highlights from the Proposed FCC Regulations

Direct-to-handset satellite services proposed by the likes of Lynk Global, AST SpaceMobile and SpaceX are bold commercial endeavours that lack the appropriate regulatory framework for sharing spectrum between mobile network operators and satellite service providers. The FCC is proposing a framework to govern the use of mobile spectrum by satellite operators, which it calls Supplementary Coverage from Space (SCS). In our latest Insight Note, we distill the key elements of the FCC proposal and project the highlights onto a global scale since low-earth orbit (LEO) constellations are commercial projects that cannot survive by relying on revenue from a single market/country.

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Industry Update – MWC2023: Velocity or Suspended Animation?

Mobile World Congress 2023 - MWC 2023

Mobile World Congress 2023 is back to its old glory as the top telecom/Internet event, with attendees rushing to physically meet post the Covid era. It launched under the “Velocity” theme to highlight the speed at which technology was accelerating. This contrasted against a backdrop of market and financial challenges plaguing the mobile industry ecosystem which were evident in keynotes and in conversations with colleagues and clients on the exhibition floor. Such economic headwinds, at a time when most operators who have the means to launch 5G already did, leaves the market in a state of suspended animation, which I feel is an appropriate description of the state of the industry today.

Download the complete Insight Note:

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Edge Computing: Has The Edge Turned Dull?

It did not go unnoticed the downturn in activities revolving around edge computing. Several analysts and industry sites have reported on it more than a year ago, like Lightreading. In the latest Xona Partners Insight Note, we provide our insights on this market segment(download below). The Edge computing is one of these foggy concepts that has in it something for everyone: cloud service providers (CSPs), telcos, and enterprises just to mention a few categories of players in a vast ecosystem. Our note highlights some of the fundamental aspects of the edge computing market in oder to assess how it can evolve in the future. We also include a few tips on what’s important in technical and commercial due diligence for edge data centres.

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Millimeter Wave Has Failed. Or Has It Really?

Proponents of millimeter wave (mmWave) access technology loud its success by citing the number of completed auctions. Looking at the quality of these auctions reveals a contrasting conclusion: mmWave is struggling to gain the interest of mobile network operators. Except the United States and Australia, the demand for mmWave licenses is low; and operators are not willing to pay much beyond the reserve price. In one occasion – in Hong Kong – a free license was declined. A few regulators have delayed or scrapped auctioning mmWave. For detailed information download our report on the State of Millimeter Wave:

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Direct-to Handset Satellites: Are They Doing it Wrong?

Direct-to Handset Satellites: Are They Doing it Wrong?

Direct-to-handset (DTH) satellite service is better off using millimeter wave spectrum than mobile spectrum. The three models prevailing today – spectrum infill, spectrum slice, and over-the-top – have inherent challenges that limit market access (see my previous post). In this post, I share a perspective on how to improve the commercial viability of DTH constellations using mmWave spectrum.

Shortcomings of current models

For DTH constellations to be commercially successful, they need to solve difficult technical challenges while removing barriers to market access that limit the revenue potential. Some of the inherent shortcomings in the current approaches are:

  • Spectrum infill: The satellite operator is at the whims of MNOs who, in part, see satellite operators as competitors. Moreover, this approach leads to a complex and costly technical solution. Therefore, this approach is very risky.
  • Spectrum slice: Dedicating a slice of spectrum for DTH services implies an opportunity cost: spectrum could be used for more profitable services. This steers the MNOs to allocate small bandwidth leading to low throughput and/or capacity service. The satellite operator is still at the whim of MNOs. Also, both the spectrum infill and slice models are national or regional models: they are limited to agreements with MNOs for specific areas; therefore, they are not global in nature.
  • Over-the-top spectrum: This model is proprietary to a single handset manufacturer – Apple. It’s a sound approach for Apple to increase the appeal of new iPhones, but that does not help the wider market. (See here for Apple & Globalstar’s approach.)
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