China made headlines by launching an experimental satellite in low earth orbit to test 6G terahertz technology. This has the merit of elevating the 5G race debate to a higher level: 6G and space Internet. It comes at a time when several trends are taking shape, such as the evolution of 6G and the emergence of LEO satellites to provide broadband connectivity.
While some may dismiss this as a test satellite developed in part by universities and research institutes, it would be a mistake to discount China’s influence in the global satellite communication industry. It is correct that China today has a small share of that market, but I believe this could change quickly as China moves to exploit the opportunities that LEO opens up. With all eyes focused on SpaceX and Kuiper, China could easily change the game with its satellite initiatives, with some advancing at a rapid pace. In fact, China lacks nothing to up-end the game for the big players.
The LEO Challenge
Providing Internet connectivity from low-earth orbit satellites is an extremely challenging business proposition. “Guess how many LEO constellations didn’t go bankrupt” said Elon Musk earlier in the year at Satellite 2020, “zero!”. This includes Bill Gates’ Teledesic and many others, such as Iridium and Globalstar, that were planned in the 1990s, leading to OneWeb earlier this year.
Today, we count multiple constellation in planning or launch stages. SpaceX/Starlink, AWS/Kuiper, OneWeb, Telesat, and China’s GW, Hongyan and Hongyun constellations are only a few. More than a dozen others focusing on broadband, 5G and IoT, are at different stages of design, testing or launch. A fair question to ask is what is different this time around to lead to the success of these constellations. This is a vast topic with many aspects, but it comes down to the business case.
The business case of LEO constellations involves high capital investments in satellites, launches and ground stations. But affordability of the service is what ensures that customers will come after building these constellations. One aspect of affordability is the cost of the user terminal.
The User Terminal Cost Equation
LEO user terminals need to track multiple satellites as they move in space. There are effectively two ways of doing this. One technique is with multiple mechanically steerable antennas. This is used today for enterprise application with MEO satellites such as O3B/SES mPower. However, this is not very practical for consumer applications.
The second technique is using phased array antenna. Electronically steerable beams remove complexities related to antenna installation and provides a small form factor suitable for consumer applications. But these antennas are expensive. Integration in silicon helps to reduce the cost, but spinning ASICs is expensive; and the cost of the user terminal can only come down the cost curve at large volumes.
The user terminal presents a chicken or egg problem that plagued LEO constellations. The industry and investor community has often underestimated this challenge. For instance, integrating 5G mmWave in mobile handsets benefits from established economies of scale available in the smartphone market. It also benefits from low power requirements – a fraction of a Watt. However, this is not the case with LEO satellites where no established ecosystem exist; and where technical requirements are more demanding, for instance a few Watts of output power.
Breaking the Circle
I would argue that China has the pre-requisites and is well positioned to solve the user terminal challenge. The user terminal is a hardware play where volume matters most: a game that China knows how to play well. Aside from their own internal market, China’s investments in Asia and Africa will come into play.
Moreover, one needs to look at LEO constellations from a global perspective to achieve economies of scale. Here, one can argue that a concentration of US-based LEO constellations would not align with the interests of different countries around the world. These countries – such as in Africa and Asia – would seek diversification of supply. In a multi-polar world, I would not discount a Chinese constellation from becoming world-leading along with related friction that this could cause.
Concluding Thoughts
LEO is one tool in a complex telecom service kit that includes GEO satellites, mobile, fixed wireless access, FTTx, wholesale and submarine. Not all LEO constellations are similar – in fact, they vary widely in design and target markets. For instance, some address broadband connectivity, while other address transport, enterprise or IoT services. The success of LEO will impact different sectors along multiple dimensions. While LEO can be competitive with some services, it is also complementary in many aspects. What is certain is that the global dimension of LEO is unique; no one can ignore this fact with a narrow focus on a specific market or sector.
The experimental satellite launch by China intersects with two fundamental topics that will play a big role in defining the future of the Internet: 5G and its evolution towards 6G, and LEO satellites. This is the new battleground for next generation space Internet. Topics, we will be discussing in our upcoming global LEO satellites workshop on December 15th. Click here to register. [See here for our February workshop for reference.]