The 2026 trade show season, which spanned PTC in Honolulu, MWC in Barcelona, and Satellite 2026 in Washington, made it abundantly clear that the telecom industry revolves around AI as both a user and an infrastructure enabler. Current investment patterns reveal a fundamental re-orientation. Terrestrial infrastructure increasingly gears itself toward servicing AI workloads, while traditional personal access connectivity moves to space via LEO constellations.
I wonder if this marks the end of the connectivity for all era as a terrestrial priority and the beginning of a high-performance, intelligence-first era?
Besides AI, sovereignty and vertical integration emerged as critical factors impacting revenue generation, cost, and profitability. These trends are detailed in our Xona Partners Digital Infrastructure Outlook 2026, which you can download here. In this post, I want to highlight the specific points that support this thesis.
Terrestrial Infrastructure: Serving the AI User
Terrestrial networks, particularly subsea and fiber, are undergoing a complete re-engineering to support the massive demands of AI training and inference. We are no longer building just for consumer traffic; we are building for the hyperscale AI user.
- Hyperscaler-Driven Deployment: Hyperscalers now largely dictate subsea fiber expansion. They build for path diversity, resiliency, and data-center-to-data-center connectivity to sustain AI workloads.
- The Subsea-to-Edge Continuum: While long-haul fiber moves bulk training data, operators deploy edge sites terrestrially to handle latency-sensitive AI inference.
- The Techno Evolution: Operators are exploring ways to move up the value chain by offering GPU-as-a-Service, hosting Sovereign AI clouds, or providing services at the application layer.
Access Connectivity: The Migration to LEO
As terrestrial investment consolidates around AI-centric infrastructure, the personal communications layer rapidly ascends to orbit. The NTN revolution has reached commercial readiness, and direct-to-cell connectivity now represents the new frontier for personal access.
- Mainstream NTN: Mobile-satellite convergence is no longer a niche concept following major spectrum acquisitions by SpaceX and AST SpaceMobile. The intent of SpaceX to participate in the FCC AWS-3 auction serves as a clear indication of this shift.
- LEO Economics: The scaling of Starlink and Amazon Kuiper reshapes competition by making capacity abundant and lowering prices. This creates significant revenue challenges for traditional rural terrestrial operators and GEO satellite operators alike.
- Hybrid Architectures: Industry leaders increasingly view LEO constellations as the primary method for extending terrestrial service coverage and ensuring resilience. These constellations act as a complementary layer to subsea fiber.
The Spectrum Premium: MSS as the New Strategic Asset
The acceleration of the NTN revolution has fundamentally changed the valuation of satellite assets. MSS spectrum has become the ultimate friction remover for the satellite ecosystem. MSS spectrum holders have become prime acquisition targets for hyperscale actors looking to secure a global footprint. The rumors circling a potential acquisition of Globalstar by Amazon provide a perfect example. Satellite is no longer a niche in the connectivity market; it is an integral part of a hierarchical network with a global footprint.
Navigating Disparate Market Forces: Sovereignty and Integration
Establishing a new market equilibrium requires navigating several distinct and often conflicting forces. While these trends happen simultaneously, they represent independent shifts in technology, regulation, and business modeling.
- Sovereignty as a Fragmentation Catalyst: Rising pressure for digital autonomy increasingly segments the global market into geopolitical blocs. Unlike the globalized models of the past, these sovereignty requirements drive tangible adverse effects, including duplicated infrastructure and fragmented markets. This creates a friction point where national security interests often run counter to the basic economics of global scale. We see this impact clearly in subsea fiber and LEO satellites, which are global ventures by definition.
- The Agility of Vertical Integration: In a separate development, capital is concentrating around vertically integrated models that bypass traditional industry silos. This is most visible in the satellite and subsea sectors where new-mover players control the entire value chain, from manufacturing to launch or deployment. This model allows for a development cadence that is materially faster than traditional, consortium-driven industry standards. LEO satellites present the most poignant example, especially when contrasting their path with that of GEO operators.
AI as the Enablement Axis
While AI uses the network, it will also manage it. The shift toward Agentic AI—autonomous systems capable of reasoning and acting across complex networks—represents the industry’s response to the operational complexity of these new hybrid architectures. From predictive fault detection to autonomous network slicing, AI serves as the foundational design principle that makes this re-oriented infrastructure viable. While widespread implementation remains a work in progress, production-grade pilots are already demonstrating the transition.
The Bottom Line for 2026
The industry’s center of gravity is shifting. On the ground, we build for intelligence; in the sky, we connect the person. For strategic players and investors, the challenge lies in navigating this trend. Terrestrial transport is becoming a specialized utility for AI, while the mass-market access layer is increasingly being won in space.
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