<h1 class="pgc-h-arrow-right" data-track="22" > failed satellite communications project --- Iridium</h1>
The original investors in satellite communications were sure to laugh when they first saw the lethal weapon. A brief scene from a 1987 film shows Danny Glover using the Nokia Mobira Talkman, the ancestor of today's cellular phones, as a mobile phone connected to a portable radio box. This is obviously not designed to fit in a jacket pocket, as this box resembles a carry-on suitcase for cheap flights and weighs about 11 kilograms.
When satellites seem to be a game changer...
Around this time, three motorola engineers, Bary Bertiger, Ray Leopold, and Ken Peterson, began working on satellite-based systems that they hoped would revolutionize the status quo of human communications systems. The aim is to provide a mobile connectivity service that anyone in the world can use using a relatively lightweight mobile phone. Iridium, as the project was eventually named, will make the Nokia Mobira Talkman as anachronistic as a steam engine.
By the late 1990s, footage of lethal weapons did look ridiculous, but not because of Iridium. Cellular technology has rapidly improved, and the phone is no longer a tool or unusual accessory for exercising. Instead, it makes Iridium devices look bulky and expensive. Given the exorbitant cost of developing satellites and sending them into space, Iridium is doomed to failure. By 1999, it had filed for bankruptcy.
But the industry's obsession with satellites continues. Iridium was soon revived, although its form had been weakened. Today, there may be more satellite companies than ever before. Almost everyone is filling a gap that cellular can't, providing connectivity at sea or in remote areas. However, there are still some investors whose brains seem to be in low Earth orbit forever. One of the funniest is undoubtedly Elon Musk.
Tesla mounts a satellite receiver
<h1 class="pgc-h-arrow-right" data-track="5" > star chasing</h1>
The quirky billionaire behind Tesla and SpaceX has already launched 1,500 satellites into space under his Starlink project. Musk's grand plan is to use satellites to provide broadband connectivity in areas that cannot be economically covered by cellular or fixed-line communications technologies. Last week, he estimated that the entire program could cost as much as $30 billion. "The first step is not to go bankrupt," he told everyone at the Mobile World Congress industry trade show.
Judging by the numbers he shared at the time, bankruptcy seemed to be beckoning to us. According to Musk, Starlink targets 3 to 5 percent of the world's population, giving it a potential market of about 233 million to 388 million people. However, only a fraction of them can afford a $100-a-month service fee, let alone a $500 satellite dish. In addition, Starlink will also face fierce market competition.
Today, Starlink has only 70,000 customers, and Musk's most optimistic prediction is that by this time next year, it will have 500,000. He set the total investment required for the system at between $20 billion and $30 billion. In addition, Starlink is losing money on customer premises equipment (CPEs), which cost $1,000 per device. "Point-of-sale at half-price is not very noticeable in terms of scale," he said last week.
Even if Starlink does have 500,000 subscribers by mid-2022, it will only generate $600 million in annual services revenue, of which $250 million will be needed to break even on CPE hardware in the first year alone. Starlink expects to provide global coverage (excluding the Arctic and Antarctic) by August this year, which means potential customers don't have to wait past that date to get service. If service fees or hardware costs don't fall dramatically, or unless internet-addicted millionaires suddenly flock to the rainforest and retreat to mountaintops far from land cover, customer growth looks set to slow by this time next year.
Musk is confident that Starlink will be able to cut prices to around $250 or $300 in the future, which means he expects manufacturing costs to be lower. But even if Starlink could attract 1 million customers, it would only generate $1.2 billion in services revenue per year. Breaking even on a $20 billion investment could take years.
Of course, not all investments are upfront. Musk believes Starlink will be able to generate positive cash flow after investing $5 billion to $10 billion. But Musk acknowledges that it's still an astronomical number, and Starlink will have to keep spending to stay ahead of its competitors. "After that you'll continue to invest so that Starlink doesn't become irrelevant due to the continuous improvement of cellular or low-cost geostationary satellites."
<h1 class="pgc-h-arrow-right" data-track="23" > improve the fate of humanity</h1>
How does he expect success when many others have failed? That's partly because by ensuring that his low-Earth orbit satellite technology is more advanced than his predecessors or competitors. According to Musk, even the U.S. military doesn't have a phased array system that can achieve Starlink's capabilities. "You can switch from one satellite to another in microseconds and you can't tell when the system will switch — the delay or jitter doesn't cause a change that can be felt."
SpaceX launches the Starlink satellite
Starlink can also — literally — power Musk's rocket company and Starlink's parent company, SpaceX. Musk said the reusable booster it developed to launch rockets into space meant "the launch cost of going into orbit is the lowest ever." These boosters allow Starlink to recoup about 70 percent of the launch cost, and Musk thinks it can do better. Starship is a SpaceX project that promises to provide a fully reusable launch system fueled by low-cost methane.
None of this seems to have changed Musk's estimate that Starlink's investment could reach $30 billion, nor will they affect the size of the target market or even the willingness to pay for Starlink services. One potential opportunity to increase revenue is to offer Starlink to mobile operators as a "backhaul" service that provides connectivity between 5G base stations and core networks. Musk has claimed two such deals.
If Starlink can attract customers in areas where 5G or fiber is already available, effectively entice users away from mainstream telecom technologies, it could also thrive. To do this, however, it needs to beat these techniques in performance, lower than them in price, or both. Starlink advertises at speeds between 50 Mbit/s and 150 Mbit/s, and the "beta" service that is already available sounds competitive in many markets. A service fee of $100 per month may seem less important.
Earlier reports suggested that Starlink could eventually generate around $30 billion in services revenue per year, making it roughly the same size as BT, the UK's largest operator. But realize that achieving $30 billion in service revenue at today's prices would require as many as 25 million customers, depending on the number of wholesale operations. That's a big increase from Musk's target of 500,000 people next year.
Table 1: Starlink's data
Aside from what he disclosed at MWC and before, Starlink's business case is largely hidden because SpaceX is not publicly available. However, it can rely on some deep-pocketed investors, including Google, as well as some lucrative space contracts with the U.S. government.
Arguably, Musk didn't even think about economics. He was first and foremost an inventor and a visionary who, in his own words, had the desire to "maximize the possibilities of achieving a better future". A man dreaming of colonizing Mars seems unlikely to have the same considerations as the typical investor. In his view, StarLink is to solve the long-term problems of human beings, not for market returns.
Elon Musk, CEO of Space Exploration Technologies
Anyone working on satellite communications will be advised to reflect on the Iridium communication system. For more than 20 years, the company, which is committed to revolutionizing the way humans communicate, is now valued at just $5.2 billion. Last year, it had revenues of about $463 million and a loss of $56 million. Sublime satellite programs have the habit of crashing back into Earth.
(Source: lightreading)