Deep Dive Launch & Satellites

The fourth session of the Course on “The Business and Economics of Space” was on Monday, Nov 15. This session was a Deep Dive into the launch and satellite markets. You can find my earlier posts on the first three sessions here, here and here.

The key takeaways were in the following areas
– Launch is hard . Only a handful of NewSpace companies have successfully launched to orbit
– Launch is a Supply Chain Driven market that is highly competitive
– Satellite market is driven by Demand Side
– Satellite use cases like EO are not (yet) scalable and do not follow SaaS investment models

Launch is always the sexy part of space. Who doesn’t get a thrill watching a rocket blast off into space ! We are seeing to two forms of Disruption happening concurrently in the NewSpace model;

  • Businesses that are taking on the activities that NASA used to do
  • Businesses that are taking on the activities that the primes are currently doing

Launch is a good example of the second form.

Boeing is the poster child of the Prime that lost its way. A storied engineering and manufacturing company that after a leadership change ended up being run by MBAs and financial types who were more focussed on cost optimization. They decided to farm out all hardware, components, parts, assemblies and sub-systems to suppliers as a financial decision. Their focus was just on the system level integration. The number of companies manufacturing those 100,000 precision parts declined through consolidation led by Precision Castparts. PCC realized that these niche manufacturers had little competition. They could buy them and raise prices, and new entrants would be kept at bay by quality and regulatory barriers.

Old Space launch prices rose to the point the US government begged to use EU and Russian launch vehicles. Lockheed and Boeing convinced the government to bless a merger called United Launch Alliance (ULA) to reverse their losses. The government could maintain American launch capability (at far above market prices) for national security launches and ULA wold keep both the Atlas and Delta families of rockets. It was a bloated system with no innovation and high costs, all at the expense of the American taxpayer.

Boeing and Lockheed have both kept their in-house space businesses that feasted on cost-plus government contracts. Their lack of competitiveness became exposed in the new environment of fixed cost contracts in the COTS environment. The Boeing Space Launch System (SLS) is a good example of this. It is years overdue and billions over budget.

Competition to the primes is coming from NewSpace Launch providers, like SpaceX. SpaceX decided early on to vertically integrate. They make as many of the parts and components in-house as possible to be able to control the total supply chain. It not only reduces the costs dramatically, it also means the process is resilient and robust. Rockets can be classified by their Payload Capacity to LEO. The chart below shows the differences between four classes of rockets with examples such as SpaceX Falcon 9 and RocketLab’s Electron.

Vertical Integration is one factor but what if you could also horizontally integrate ? What if you not only provide launch services but can control your own launch manifest and cadence by increasing demand with your own satellites ? Let’s look at the demand side for launches, which mainly come from the satellite industry.

Satellites are classified by the orbit that they operate in. Geosynchronous orbit (GEO) is 36,000 km above the surface of the Earth. At this altitude a satellite appears stationary to someone looking up from Earth. This is where legacy communications satellites used to be parked. You could cover the whole surface of the Earth (outside of the polar regions) with only 3 sats. It is a great spot to beam down TV signals from, but it has drawbacks for communications purposes (ever try to talk over a satellite connection and experience the delay ?). Lower orbits like Medium (MEO) and Low-Earth Orbit (LEO) take a lot more satellites to provide global coverage, but have a lot of advantages as outlined in the chart below.

Often in NewSpace S1 documents filed with the SEC before they go public, you read a variation on this quote; “Over the past decade, launch costs have been lowered by an order of magnitude, thus laying the foundation for the emergence of a new, expansive space economy. But is it true ?

On average the real cost to launch to GEO has dropped by 30% in the last 3 decades, while the price to launch to LEO has dropped by 50% in the same time period. The rollout of the SpaceX Falcon 9 and its aggressive pricing policy has been responsible for most of this decline. But has cheaper prices led to a boom in demand ? That issue is still being debated by economists since much of the increase in satellites being launched have come from SpaceX Starlink satellites ; the aforementioned horizontal integration. They are creating their own demand, with almost weekly launches in the first half of 2021.

That demand is being led by consumers, the classic “serving the underserved” or “connecting the unconnected” business case. This is the market that Starlink and OneWeb are trying to serve. It is also one that has historically led to bankruptcy for those that tried it (Teledesic, Globalstar & Iridium back 20 years ago, LeoSat and even OneWeb last March !) It is not because of lower launch prices.

If we look at the next biggest use case for satellite constellations, Earth Observation (EO), it is still difficult to see a business case. The commercial demand for EO is not nearly as robust as for SatCom. The government and lettered agencies (NASA, NOAA, DoD, CIA, etc) are the primary market for EO data still. We are waiting for clear commercial customer demand to emerge. Typical EO is not yet scalable and doesn’t follow the SaaS investment model, regardless of what their SPAC investment decks purport !

The speakers for the second half were Josh Brost, VP of Relativity Space and Rei Goffer, Co-Founder of . Both had interesting comments and insights into the launch and satellite markets respectively.

Private Sector Space

Really Big !

The second session of the Course on “The Business and Economics of Space” was on Tuesday, Nov 9. This time the topic was the Private Sector of the Space Industry, as distinct from the government, civil or military side. You can find my earlier posts on the first session here, as well as my remarks from pre-school here and here.

The key takeaways were trying to answer three basic questions.
– How big IS the Space Economy ?
– What does the Industry Supply and Demand look like ?
– What are the current industry dynamics ?

There is no easy answer to the question of measuring the size of the Space economy. Different people and organizations come up with different estimates as there is disagreement about how it should be measured. We know that some reports, such as a very busy industry map from SpaceTech Analytics, grossly overestimate who is a space company. Estimates from reliable sources like Euroconsult and Bryce Tech would put the range from $290B to $370B

Image from Bryce Tech 2020 Sat Industry Stats

One of my personal favourite sources is the Space Foundation and their quarterly Space Report. They estimated the Global Space Economy in 2020 as $446.88 B

Image from the Space Foundation 2021 Q2 Space Report

The breakdowns are interesting for people outside of the space bubble. Roughly just over a third of the revenues are from Ground equipment and just under a third from Satellite services. Government Space Budgets (including Human Spaceflight) are about 27% of the total with the USA by far the biggest of that. Sat manufacturing (3%) and the sexy launch sector (only 1.5% or $5.3B) round it out. Launch gets a lot of attention but it is not a large amount of the total.

How fast is this growing ? Well, the average CAGR is about 4.3 % per annum but that hides a lot of variation within sub sectors. One of the biggest satellite service sectors is TV, particularly Direct-to-Home (DTH) service like Dish & DirectTV or Bell & Shaw Sat TV in Canada. Streaming services like Netflix and Amazon Prime have caused a lot of cord cutting, not only of cable connections but also Satellite TV connections. Hence it is declining by about 8% annually.

Yet, there are industry forecasts that are regularly touted that space will grow tremendously in the next decade. Most famously there is the Morgan Stanley forecast (here) that says Space Sector will be a $1Trillion industry by 2040. Bank of America (here) expects the space economy to triple in the next decade to $1.4 trillion. The U.S. Chamber of Commerce estimates the space economy will grow from approximately $385B in 2017 to $1.5 trillion by 2040.

Where is this forecasted explosive growth going to come from ? Especially if cash cows lie DTH TV are declining. That is the trillion dollar question. That is why we are taking this course !

Where is the demand for space economy services coming from? Historically it was governments, and specifically the U.S. government and its lettered agencies (NOAA, NRO, DOD etc). Currently the public sector still dominates the demand side outside of Satellite Communications (SatCom). The key would be to see more space services migrate to a model where the government as just an anchor tenant and then eventually to be just one customer among many to a private venture. That is the holy grail.

Who are the space sector actors trying to solve this riddle, pursuing this holy grail ? Some are household names now due to their famous billionaire founders ; Musk’s SpaceX & Starlink, Bezos’s Blue Origin & Project Kuiper and Branson’s Virgin Galactic & Virgin Orbit. But there are hosts of companies, as shown in this industry map by Seraphim Capital, the largest Space VC and now a publicly traded investment trust in London, U.K.

Image from Seraphim Capital SpaceTech Map 2020

The next session will be on Space Financing. Really looking forward to this session ! Expecting to learn more about IPO’s, SPACs and Valuations. Stay tuned for my synopsis on that session next.


SpaceX Falcon Heavy Launch

The first session of the course on “The Business and Economics of the Space” was last night, Monday Nov 8. The topic was the History of Space and the Contemporary Space Agency. My key takeaway from the session was the rise of the NewSpace industry.

Earlier this summer I wrote about “Space; the final telco frontier” here. Much of the subject matter of the history of space is covered there. I did get a great comment on my post from Charles Miller, the CEO of Lynk who was also co-founder of NanoRacks and founder of ProSpace, a non-profit that lobbied to space policy legislation on Capital Hill including passage of the Commercial Space Act of 1998. He went on the be Senior Advisor for Commercial Space at NASA. He told me that he was part of the movement to jump start the industry and helped coin the term “NewSpace” in the early ’00s.

Access to space used to be limited to governments, specifically those of the United States, Russia and China. The “Space Race” in the 1960’s between the Soviet Union and the Americans during the Mercury, Gemini and Apollo programs could only be funded by national governments . Government contractors built the rockets and other equipment and they were typically subsidiaries of the defence industry. Those contracts were for cost-plus and programs were large, expensive, bureaucratic and slow.

There was a commercial space industry in SatCom after the USA passed the 1962 Communications Satellite Act that enabled private companies to own and operate satellites. We saw the launch of the Telstar satellites , Intelsat and our course Canada’s own Anik 1. The world could relay television, telephone and high speed data communications across the oceans ! It was an application of space that was private and commercial and not tied to civil, defence or the military.

NewSpace accelerated the move to privatization and commercialization of space beyond just SatCom. Through those early efforts of people like Charles, NASA and other space agencies expanded the playing field beyond Prime Contractors and Cost Plus programs. They moved to Build-to-Order and Public-Private Partnerships which was a game changer for the space industry. Contracts based on competition, performance and fixed price milestones moved more of the risk from governments and space agencies to the private sector.

With New Space we have witnessed the emergence of novel actors, primarily private and their ventures and implications for the global space sector. Some names are known widely like SpaceX, Blue Origin, Virgin. There have been billions invested in startup ventures, not only by VC’s and private equity, but also by the public markets. A dozen NewSpace startups have gone public, or are in the process of going public, using SPACs. The space industry is ready to explode with opportunities that have been unleashed by entrepreneurs.

I am looking forward to the rest of the sessions in the course as we dive deeper now into those opportunities and ventures.

Ad Astra

Back to School

Some of you may have noticed that I write on here about more than just international telecom. There are book reviews, conferences that I attend, the fight against telecom fraud and space. On my twitter feed and LinkedIn there is also more and more about space. Why is that ?

The NewSpace industry is one that has captured my attention and interest. There are so many parallels between what is happening in space right now and where we were in telecom back in the go-go days of liberalization and deregulation in the ’80s and ’90s. From a telecom perspective, there is over a petabyte of data coming down daily just from the Earth Observation satellites. The amount of bandwidth available for providing broadband from space is about to increase 30x ! Telecom edge computing is not just migrating from the data centre to the hyperscalers (AWS, Azure and GCS) but also 1000 km up into Low Earth Orbit (LEO )

Need less to say I am excited about the opportunities. So I am going back to school ; I am lucky enough to have been accepted into the cohort for a live course on the Business and Economics of Space.

The instructor is the brilliant Sinead O’Sullivan. Sinead is a global expert in space economics and early-stage space businesses. Currently at Harvard Business School, she works with governmental space agencies, CEOs and investors to understand space market dynamics, identify sector opportunities, create strategies for growth and execute in challenging environments within the aerospace & defense sector

Beginning her career as an aerospace engineer, she project-managed human spaceflight missions at NASA and the Jet Propulsion Laboratory, designed a satellite constellation with the Brazilian Space Agency and worked on astronaut training for long-duration missions at the European Space Agency.

Now working in the business and economics of space, she works with emerging national space agencies to develop local space economies within the private, startup sectors. She sits on the Board and Advisory Board of over $1 billion of early-stage space investment funds. She advises and invests in several startups from the earliest pre-seed stage right through to IPO. She is in space-specific leadership positions within prestigious organizations such as Sainsbury Management Fellows, Royal Aeronautical Society, the International Astronautical Federation, the US Center for Climate and Security and the Harvard Rock Center for Entrepreneurship.

The course is aimed at Aspiring Founders, Investors and those seeking a career in space related startups or enterprises. There will be guest speakers and cohort members from all aspects of the space industry including SpaceX, NASA, LeoLabs, Virgin Galactic, Axiom Space , RocketLab, Varda, Lux and Founders Fund. The chance to work and build a network of space business leaders is invaluable.

The sessions will cover topics like
1 – The History of Space and the Contemporary Space Agency
2 – Private Sector Space
3 – Space Financing
4 – A Deep Dive into Launch and Satellites
5 – A Deep Dive in Space Tourism and Exploration
6 – Space Law and Geopolitics
7 – Case Study ; Varda Space and In-Orbit Manufacturing
8 – Case Study – Hadrian and On-Earth Manufacturing

This will be vary exciting but also a huge challenge ! I will still be operating AurorA and Amitel, doing my Movember fundraiser by doing 200 Kettlebell swings a day and taking these courses all throughout November. Plus making sure everyone in the family gets a good breakfast and that we eat together at dinner. Nothing I cant handle !

If you are interested you can find more details on this course here

If I find the time, I will try to post an occasional summary on here of what we are learning.

Space; the final telco frontier

Reach out, reach out and touch someone

Everyday there is a news story about SpaceX, Blue Origin or Virgin Galactic. We are fascinated by the hubris of billionaires Bezos, Musk and Branson to expand humanity off of Earth and out into space. The more I delve into the NewSpace industry , the more I am astounded by how much it reminds me of my industry, telecom. Let me explain.

The late 1980’s and the 1990’s were a time of disruption and change in telecommunications around the world . Deregulation and liberalization were in vogue as competition was introduced into previous monopoly markets. It started with upstart competitors like MCI and Sprint trying to break into AT&T’s long distance monopoly in the USA. Then the Telecommunications Act of 1996 in the US creating a whole new batch of mini-Bells.

The UK similarly saw the privatization of government owned British Telecom in 1984 and its monopoly was challenged by Mercury, a subsidiary of Cable and Wireless communications . Other countries , Canada, Australia, New Zealand, the Netherlands followed suit. It spread globally.

Governments worldwide embraced privatization of their former telco monopolies (PTT’s or Postal Telegraph & Telephone) to become publicly listed commercial entities and introduced competition into these markets.

Simultaneously we saw the rise of the worldwide Web and consumers were introduced to the Internet. Dial-up modems provided access at first, but were quickly replaced by broadband connections. To feed the growing demand for bandwidth for competitive telecom and the Internet there was a flood of new fiber optic cables laid. According to KMR Research about 80 million miles of optical fiber was installed between 1996 and 2001 in the USA alone. New submarine fiber cable routes between continents were planned and laid. The forecasts were that Internet traffic would double, every year, so we needed MORE.

Telecom was the new Wild West, the new Klondike gold rush. Capital markets paid attention and newly minted companies that had telecom, broadband or Internet in the name got funded to operate in this new environment of explosive growth. The stock markets in Canada, the USA and Europe were filled with telecom and broadband backbone providers, submarine cable companies , hardware vendors. It was as big if not bigger than the dot com boom.

My own career has been imbued by this zeitgeist . After engineering school at Waterloo I started at CNCP, which was owned by CP and CN the two giant Canadian railways. It operated the Telex network across Canada and provided the main competition to the incumbent provincial telephone monopolies. When long distance was finally deregulated in Canada I was part of the management team of ACC TeleEnterprises which we grew and took public on the Toronto and Montreal exchanges. At ACC we also had the worlds first trans-Atlantic private line that hooked up to the public phone network connecting London, UK with switches in Toronto, Montreal and Vancouver. After ACC, I started AurorA, which provided international telecom services, both voice termination and bandwidth to the competitive industry in Canada, the USA and telcos around the world.

So why do I write today about this ancient history ? Because the nascent NewSpace industry reminds me very much of those days in telecom. The parallels are tremendous.

Access to space used to be limited to governments, specifically those of the United States, Russia and China. The “Space Race” in the 1960’s between the Soviet Union and the Americans during the Mercury, Gemini and Apollo programs could only be funded by national governments . Government contractors built the rockets and other equipment and they were typically subsidiaries of the defence industry. Those contracts were for cost-plus and programs were large, expensive, bureaucratic and slow.

About the time of the go-go telecom years we saw the beginnings of a commercial space sector.. The race to the moon had given way to government cutbacks to NASA; the focus in the ’90s became the Space Shuttle program and the International Space Station (ISS). Telecom dreamers wanted to put up broadband in space, a way to “connect the unconnected”. This led to ideas like Iridium, Teledesic and GlobalStar that were able to access the public markets during the telecom boom to fund their dreams. There were also startups backed by legacy aerospace companies like Boeing, Lockheed and Alcatel. They all sadly failed and went bankrupt. (I wrote a review on a great book on the history if Iridium here).

Then came SpaceX. Through the vision of Elon Musk, his newly minted fortune from PayPal and the incredible fortitude of a young team of talented engineers, SpaceX was able to challenge and disrupt the Space industry in the early 2000’s. They were able to provide a new way to build rockets, using the agile, iterative approach of Silicon Valley. Their unlikely success revitalized a commercial space sector by dramatically lowering the cost of launch.

Thus was born the NewSpace industry. There have probably been about 1000 start-up space companies in the last 6 to 8 years. It was hard for them to get funding initially as many are very capital intensive and there really were no space focussed Venture capital firms until the last few years. Running a space company meant always looking for funding to keep the company alive.

Then came SPACs. Richard Branson’s Virgin Galactic needed more funding and he was able to get it in 2019 by going public via a SPAC deal with Social Capital Hedosophia run by Chamath Palihapitiya (who among other things is a UWaterloo engineer also !) to become the world’s first publicly traded commercial human spaceflight company.

Other space companies have since taken the opportunity to go public also via the SPAC route such as AST Science, Momentus, RocketLab, Astra, Spire Global, BlackSky, Redwire and Arqit Ltd. SPAC funding typically provides a space company with enough capital to fully fund their business plan so they can focus on execution. Today the space sector is worth about $400B but Morgan Stanley predicts it will be trillion dollar industry by 2030. That is probably conservative given the pace of change.

This is why I get excited about the NewSpace industry. What started off as a government monopoly became a competitive commercial industry fueled by the public stock market. Disrupted by new ideas, new processes and new technology. The new mantra is “You can’t spell space without SPAC” !

My final observation, is that even though launching satellites, hardware and humans into space does take a rocket scientist, in the end much of the applications really boil down to this being a telco in space. Whether it is providing broadband internet like Starlink or OneWeb (there is that same “connect the unconnected” dream), or Internet of Things (IoT) capabilities like Swarm or Kepler, Cellular or 5G from space like AST, Lynk or OmniSpace or any of the Earth Observation platforms (visual, SAR, RF or thermal) that connect their data stream to hyper provider clouds like AWS, Azure or GCP it all comes down to moving bits around, just like a telco. We’re just extending the tower up a little higher.

Ad Astra (Latin for “To the Stars”)

MVNO – Provide Exceptional Customer Experience

cheerful multiethnic women browsing smartphone in park
Photo by Charlotte May on

In early January this year, Toronto-based Data On Tap received CRTC approval for its carrier brand “dotmobile” to become Canada’s first full Mobile Virtual Network Operator (MVNO).

From their press release on Jan 8 dotmobile notes the following

Generally speaking, a Full MVNO operates essentially the same technology as a mobile network operator, but without owning the radio access network (ie. cell towers). Instead, the Full MVNO’s core network connects to one or more existing radio access networks owned by other network operators, similar to how that same mobile network operator roams on other networks.

To better understand how similar they are, let’s look at the big three in Canada. They all provide nationwide coverage with their networks. The big guys do this by sharing their networks. For example, Bell and Telus each have cell towers that cover only half of the country, but they share them with each other so that their customers get national coverage. Each of them also operates multiple brands on their networks, which means Bell, Virgin, Lucky, Telus, Koodo, and Public Mobile all connect to the same network.

So since Full MVNOs operate a core network just like everyone else, and everyone else is already sharing networks, the difference really just boils down to whether you own any of your own towers or not.

A wireless provider’s core network is responsible for almost everything other than how many bars of signal your phone gets. It takes care of the basics like routing calls, text messages, voicemail, and connecting you to the internet. They can also do a lot more. Modern core networks that are built primarily as software can better prevent spam calls, seamlessly switch calls from a phone to a laptop and back again, support worldwide High Definition calling over Wi-Fi and LTE, or even integrate your AI assistant into a call. That’s just scratching the surface.

One of the key things that any new MVNO will need is the ability to terminate their customer’s international voice calls. Since all the calls originated on a cellphone are compressed by its codec, it is imperative that only premium quality voice routing be used to terminate the calls, especially when they are calling overseas. An MVNO wants the best-in-class solution to transport their calls over high quality routes with minimal trans-coding so that their customers receive the highest quality of experience.

We expect a decision from the CRTC in early 2021 to grant MVNOs in Canada mandated access to the networks of the big guys. When this access is granted we will see dotmobile and other carriers approved to become full MVNOs enter the Canadian mobile services marketplace. AurorA will be there to cheer them on and also to provide them with their premium quality international termination, as well as any other international telecom services that they may need.

Competition is good for consumers and Canadian businesses, especially when they can be provided with premium quality services. I look forward to the future that mandated MVNO access will bring to Canada.