Can low earth orbit satellites roar? Mittal, Musk, Tatas putting in money

Last week, Sunil Mittal-owned Bharti group’s OneWeb drew closer to its commercial launch expected sometime in 2023 when it successfully deployed 36 low earth orbit (LEO) satellites from the Indian Space Research Organisation’s launch facility in Sriharikota. With 462 satellites in space, the company has launched 70 per cent of its planned satellite fleet.

OneWeb is still, however, far behind Elon Musk’s Starlink, which has launched around 2,300 satellites and has roped in over 500,000 customers across 40 countries offering internet services from Europe and Japan through New Zealand, Estonia, and Malta to Ukraine.

But it is a tough business, even with just two LEO operators in the world. Musk admits Starlink is losing money. It lost 40 satellites this year from a geomagnetic storm and the US Federal Communications Commission has reversed its decision under which Starlink secured a $885-million subsidy to expand rural broadband coverage, saying it did not meet programme requirements. Starlink is also facing regulatory challenges in the US from telcos and had to cancel its 5,000-odd bookings in India and pay back the money after the Indian government pulled it up for violating licence rules. Telcos also fear that the satellite players could offer similar mobile services given that mobile phones are being built by companies that can connect to satellites.

In India, OneWeb, which is investing $2.4 billion in the business, faces tough regulatory challenges from telcos — although the group controls Airtel, India’s second largest mobile services provider — which have lobbied the government to make satellite services buy spectrum through auctions, just as telcos do, since they provide similar services such as internet broadband. Mittal has opposed the move, saying spectrum should be given to OneWeb at an administrative price just as is done globally. But the government seems to be veering toward the auction route.

If that happens, the cost of delivering the service will go up — just as the competition is growing. In India, the Tata group has tied up with Canadian firm Telesat to offer LEO-powered satellite internet services by 2024. Amazon’s Kuiper will also join the party. Reliance Jio has received a letter of intent from the government for such services. And after many ups and downs, Starlink has also applied to the government for a licence.

So, what is the size of the market that Mittal, Musk and the others are fighting for? A OneWeb spokesperson puts it at $16 billion globally by 2030, growing at around 14 per cent per year from now. Starlink has more ambitious numbers — it expects to garner $30 billion in revenues, with $5 billion coming from its launch business, say analysts.

In India, it is more difficult to predict the size. An EY report had pegged the satellite services market (not just LEO) at $5 billion by 2025. P J Nath, managing director of Nelco (the Tata company that has tied up with Telesat) had earlier this year conservatively estimated the Indian business-to-business (B2B) market at Rs 3,000-Rs 4,000 crore in five years.

The size of the market will also depend on which customer segment the players are targeting. Starlink, for instance, is tapping the business-to-consumer (B2C) market by offering internet service directly to consumers at their homes and offices. It has also had a limited launch in the US, Europe and Australia, among others, for services within vehicles on a pay-per-use basis. It also offers a range of broadband services for businesses and has been tying up with local partners in many countries.

Bharti Airtel is collaborating with telcos. In India, for instance, it has signed a six-year distribution agreement with Hughes Network Systems, which has a stake in OneWeb, to provide the bandwidth for broadband services across India.

OneWeb is also targeting specific segments of the market. Telcos’ large backhaul requirements from tower networks is one of them. “We will bring secure solutions to various sectors — enterprises, government, telcos, airline companies and maritime customers. In many cases, we are also adding resiliency in areas that already enjoy some kind of connectivity,” a spokesperson says.

Both OneWeb and Starlink see remote rural areas in India and overseas that are not serviced by landlines or mobile telephony as a big focus area.

But is the unserved market big enough to justify the substantial investments in global satellite constellations? Many analysts say it is not big enough and satellite broadband players on LEO will have to look at a broader play, especially with their offer of better speeds and low latency. To put it in perspective, a GSM Association state of the internet report for 2022 said only 5 per cent of the world, or just 400 million, was not covered by mobile broadband. In India, government data from February 2022 shows that only 4 per cent of the country’s 597,618 inhabited villages do not have internet connectivity.

The bigger issue is that 40 per cent of the people who live within a geography where mobile broadband is available are not using them because they cannot afford to. Satellite broadband service, which even Mittal concedes will be more expensive than mobile services, does not resolve the affordability problem.

But Nelco’s Nath has a different way of looking at the market. He estimates that 30 per cent of the country lacks reliable and uninterrupted terrestrial broadband alternatives for business-critical applications. That is where satellite broadband will plug in.

Also, satellite broadband internet together with 4G could hasten the process of reaching out to the 25,000 unconnected villages. The government has cleared an over Rs 26,000-crore project for covering 4G mobile services in uncovered villages including in uninhabited areas in Rajasthan deserts and Ladakh.

OneWeb, meanwhile, can also leverage Airtel’s Africa business where many countries have poor coverage — in Nigeria, for example, only 12 per cent of the population has meaningful internet services and in Chad it is 17.2 per cent. That is a large market to connect.

So, can satellite broadband offer speeds that match 5G — which are around 1 Gbps to 150 mbps depending on the number of subscribers? A OneWeb spokesperson says it will offer 195 mbps and the network is built with terrestrial technology so that it can be 5G-ready. Starlink is offering different packages with speeds ranging from 50 mbps to 300 mbps depending on the service you buy — but is facing flak in the US and Canada for giving speeds that are far lower. All told, the business proposition is something to wait and watch.