Elon and Jeff are brilliant ! Surely THEY can solve our broadband issues.

Two dishes got married; the ceremony was meh but the reception was incredible.

Much has happened since we last visited the wacky world of low earth orbit (LEO) satellite constellations and their use in providing improved broadband service to Canada’s rural and remote users. This past Tuesday, July 21, all of Iqaluit, the capital of the Territory of Nunavut was without communication services ; no Internet, no landline, no cell service, no cable TV – simply because it was raining ! In a first world country like Canada this is unacceptable. We need better broadband service in Canada’s North NOW.

There is a rash of breathless newspaper stories in the mainstream media touting LEO service as arriving soon to resolve our remote and rural broadband issues. I wrote about it before here, that Elon Musk is not coming to save us any time soon. I also wrote about the Chapter 11 bankruptcy of the early leader to provide LEO service to the Arctic, OneWeb, here. So where do we stand now on July 27, 2020 ?

Well on July 10, the US bankruptcy court of the Southern District of New York (SDNY) approved a joint $1 billion bid for OneWeb by Britain and Bharti Airtel. The UK government and Bharti Global, an arm of Bharti Enterprises, which part owns India’s Airtel, will each have roughly 45 per cent of OneWeb. The existing secured creditors, including SoftBank of Japan, OneWeb’s former biggest shareholder, will own the balance.

But the landscape has changed from before OneWeb’s descent into Chapter 11 in the spring. OneWeb’s original mission was to “connect the unconnected “ ; ie it wanted to provide broadband service to the millions of people around the world that do not have access to the Internet. The UK has invested $500M into OneWeb for other strategic reasons, mainly to mitigate the effects of Brexit on British industry. I sure hope they realize that it is going to cost them more, much more and that $500M was just the table stakes to play in the LEO game.

After Brexit, the UK would have been locked out of the EU’s Galileo mission. Its aerospace industry would have lost work and technology to the EU and the USA and it would have fallen behind. Investing in OneWeb, and taking the “golden share” that lets it decide who gets access to the network will let it be a cornerstone of new industrial policy for Britain. Jolly good show.

But a $1 billion investment is just the starting point, OneWeb will need to raise at least $1B if not more to fully fund the company’s plans. So to mitigate, the mission will be changed from targeting unserved consumers to one targeting governments and commercial sectors to generate revenue quickly. These use cases are more in sync with what Telesat is proposing to do in selling wholesale connectivity to telcos and ISPs, starting with the Arctic. The UK also wants to develop other use cases such as a new navigation offering different from GPS or Galileo that it could then sell to its Five Eyes partners as an adjunct to GPS. That requires adapting and redesigning the satellites to the new missions.

The UK also wants to use this transaction bring more aerospace manufacturing back to Britain. The current OneWeb satellites were made in Florida in a joint venture with Airbus. Some or all of this manufacturing is expected to move to the UK.

The transaction to close the deal to buy OneWeb from Chapter 11 is expected to close in Q4 2020. Thus the former timeline of providing service in the Arctic by late 2020 is out of reach, 2021 will be too aggressive and 2022 is more realistic. All of the changes wrought by the new ownership and new mandates have created issues and decisions that need to be navigated; technical, financial as well as political which all bring delays to actually launching services.

Meanwhile, the other proposed LEO constellations have not been idle.

Amazon’s Project Kuiper has won the backing of Ajit Pai, the Chairman of the FCC who is backing approval of the venture.

SpaceX’s StarLink venture has just begun to raise more funding to continue launching service. CNBC has reported that it is in talks to raise $500M to $1B funding at a valuation of $44B (July 23) . SpaceX has also been not so quietly signing up beta customers in Canada and the USA to test trial service of its direct-to-consumer internet service late this year.

That leaves Canada’s Telesat. Telesat was also a bidder for OneWeb during its Chapter 11 bankruptcy. That bid came out of the blue, and we still don’t know what motivated Telesat to launch the bid, nor who financed the deposit. Telesat has yet to choose a manufacturer for its satellites with apparently an announcement due any moment, perhaps at their Q2 results conference call on July 30. The biggest question mark remains around the financing of the project.

In July 2019, Telesat received $85M CDN from the Federal Government’s Strategic Innovation Fund. Once the constellation is in service, they have a commitment from the Feds to purchase $600M CDN in services over 10 years. That still leaves a huge question of how Telesat plans to finance the enormous capex to launch the LEO constellation before it sees any revenue. As we saw with OneWeb, there are not many investors around that are willing to sign the large cheques needed to finance such risky ventures. Even Softbank (funders of Uber and WeWork) balked at additional funding for OneWeb while they were the largest shareholder and creditor. Such investors need to be able to keep signing large cheques to keep funding capex. (are you paying attention Boris?)

Telesat’s current shareholders are Loral Space & Communications, a NY based holding company and Canada’s Public Sector Pension investment Boards (PSP). I am not sure either are up to the task of financing such a risky venture. Loral recently paid a special dividend of $5.50/share on May 28, 2020 distributing to shareholders funds it had received from Telesat. Not the kind of action you would expect to see from a party planning to underwrite billions of capex expenditures. The PSP is a pension fund that historically prefers ventures that provide stable cash flows at predictable rates, which is what Telesat’s legacy business provided. LEO constellations are highly speculative and very risky, the exact opposite of what the pension plan for Canada’s public sector workers want to see done with their retirement funds.

From my personal perspective (ie I am guessing) I can see a strategic buyer taking control of Telesat from its current owners and funding the LEO constellation. That buyer would be Amazon and its Project Kuiper.

Amazon’s strengths are its financial muscle and long term vision. Amazon can raise funds cheaper than most nation states. Amazon may covet some of Telesat’s strategic assets such as its protected spectrum rights from the ITU and its substantial base of satellite technology and experience. Both of those would give them a significant advantage over Starlink. Telesat and Amazon have a relationship already as Telesat signed a launch contract with Blue Origin, another of Jeff Bezos’s companies for multiple launch missions in January, 2019.

Amazon could also introduce another use case for the LEO sats that no other strategic buyer could. They could use the service internally to connect their global network of AWS data centres. In essence, it could be a part of the connectivity portion of their AWS cloud. Potentially at a lower latency than some sub-sea fiber cables. That use case may be appealing on its own.

It would give Loral and PSP gracious exits and Jeff Bezos a competitive advantage against OneWeb who will be be busy sorting out their new ownership and new mandates over the next two quarters and let Project Kuiper keep pace with Elon Musk’s Starlink as it beta trials consumer service this winter.

Never underestimate the power of bragging rights between billionaires.

We shall continue to watch this sector closely. My core message remains, do not expect LEO satellite constellations to be the saviour of Canada’s remote and rural broadband issues any time soon. We must continue to expand our network of fiber optic cables, including Arctic sub-sea cables.

Elon is not coming to rescue Canada’s remote broadband

Elon Musk and StarLink
Elon Musk, CEO of SpaceX and the StarLink constellation

The telecom press in Canada has been gushing over the news that Elon Musk and his company SpaceX has visions of coming to Canada to provide super-fast Internet service to rural and remote Canadians via their StarLink LEO (low Earth orbit) satellite constellation.

Please take a step back. Pause. Take a deep breath. Just stop it.

This is not imminent, it may never happen. In fact it probably will never happen.

First off, SpaceX only applied for a BITS licence. BITS is Basic International Telecom Service. AurorA has a BITS licence (in fact I believe AurorA had the first BITS licence provided to a non-facilities based carrier). This does not provide StarLink the spectrum required to operate in Canada. OneWeb had licensed Canadian spectrum (through 1021823 B.C. Ltd.) and so does Telesat for their proposed LEO constellation. SpaceX hasn’t yet applied for a Canadian spectrum licence (as far as I know).

The model of “connecting the unconnected”, providing broadband Internet service to the 3.5 billion people in the world that don’t have it has been around for decades. I remember the old Teledesic and Skybridge proposals, ICO, Iridium and GlobalStar who all went bankrupt. Iridium emerged from Chapter 11 eventually after a huge amount of drama (see my review of a great book on Iridium). More recently OneWeb who had already launched 74 satellites went bankrupt in March (read here) and before that LEOSat last November. As an aside, even Intelsat went into Chapter 11 bankruptcy protection in May.

Elon’s SpaceX has 362 satellites in orbit, but to actually provide service their plans call for 4,000 satellites just in the first phase deployment. To do this takes money; SpaceX need billions, and soon, to satisfy its high cash burn rate. It’s not making near enough revenue launching satellites (and astronauts) from others to cover the costs of it unpaid Starlink launches. This is also why they are desperately trying to be included in the FCC’s Rural Digital Opportunity Fund auction to get a piece of up to $16B in funding, even though they cant demonstrate that they can actually provide service (and may be fudging the latency numbers, hard to prove since you cant actually test it) !

There are very few investors that can write the cheques big enough to fund an LEO sat constellation. Even large investors like Softbank balked at committing additional risk capital to a single investment like OneWeb. The history of bankrupt constellations would bear that out. COVID-19 has made raising money for risky ventures even harder. Building the business case is difficult; it costs too much money to make money, even for a SpaceX that has re-invented rockets and dropped the price of launching satellites.

LEO satellite constellations, especially using small nano satellites can provide great services for many use cases; Earth observation, low data rate iOT or M2M, remote asset tracking, weather data and even imaging. GEO sats can provide great high throughput required for TV and telecommunications, but they provide poor connectivity at Northern latitudes like Canada’s Arctic. The use case of providing broadband Internet for the unconnected is just not suited for LEO.

To connect those 3.5 billion people to the Internet requires not only the huge investment in satellites and ground infrastructure (plus legal/regulatory, and non-trivial insurance costs) but also an inexpensive antenna/receiver for the consumer to be able to plug in themselves to access the service. Given that the terminals will be in remote areas they will need to be low power usage. By definition those places are off the grid. Since the LEO sats move quickly across the sky, the tracking antenna must be sophisticated, like a electronic phased array. No one has yet to produce such a low-cost, low power terminal device.

When the constellation is finally setup, the satellites would cover the entirety of the Earth’s surface. Ninety percent of the time this would be over open water, frozen tundra, wilderness and deserts devoid of people. So a business case dependent on a use case like consumer broadband would not generate revenue 90% of the time ! In areas like Africa or the Amazon, the surface is covered by jungle. The signal won’t penetrate through thick vegetation, limiting its usefulness. Finally, how much would people actually pay to use the service ? Has Elon gone out and talked to the people in emerging markets and asked them what they need and what they can afford ? What about when that area finally gets served via a cable or fixed wireless that can provide service for an order of magnitude less ? Eventually even Nunavut will get service by one or more sub-sea fiber optic cables.

So where exactly are the customers going to come from to justify the immense capital cost of building the constellation ?

The other problem that LEO sat constellations have to solve before we actually see this service launched is the one that they create themselves by launching thousands of satellites to do so. Space debris. Low Earth orbit is already crowded with dysfunctional satellites and space debris. What happens if, no when, a StarLink satellite malfunctions or becomes derelict or collides with other satellites or space debris. The attraction of low cost sats is that they are made with commercial off-the shelf components for a fraction of what traditional GEO sats cost. But given their disposability we are going to have a huge increase in space junk.

Without strict regulatory oversight (and who would be responsible for this in space ?) and the non-zero chance of failures and malfunctions, we could see a runaway feedback loop creating tons of space debris, called the Kessler syndrome. These concerns and liabilities have still not been fully addressed for the large volume LEO constellations.

Until StarLink (or any other LEO Sat constellation) actually builds and operates a constellation without going bankrupt, solves the physics of providing low cost-low power consumer terminal equipment and can guarantee they won’t destroy low Earth orbit with space debris for succeeding generations don’t hold your breath for cheap sat based broadband service in Canada’s rural and remote areas.

Instead of waiting for Elon, Canadians should take control of their own future and build more Arctic fiber optic cables.

Because we all Internet !

The logo of the Internet Society

In February, I took the step of joining the Internet Society – Canada Chapter. It seemed like a great opportunity to meet and learn from some fellow Canadians about this wonderful thing we call the Internet that we all (well not all, and that is one issue) use every day. If it wasn’t for the Internet you wouldn’t be reading this blog post !

The Internet Society globally works for an open, globally-connected, secure, and trustworthy Internet for everyone. The Canadian chapter advocates on behalf of Canadians for an affordable, accessible, fair, open internet. Bridging the digital divide to ensure all Canadians can reap the economic and social benefits the internet can provide.

AurorA has been operating since 1994, and I’ve seen the Internet evolve dramatically over that time. My initial Internet experiences involved dial up modems, a Netscape Navigator browser and an actual written book of interesting websites ! Now it seems that all of the services that AurorA offers are related to or use the Internet in some fashion. For example, the premium voice services we offer are carried over SIP trunks on the Internet.

One of my pet peeves is the mis-conception amongst the general public that the Internet is a service from their Big Telco service provider. Big Telco is fond of claiming that it is “their” network especially when others want to inter-connect. The Internet is far from that. The global Internet consists of tens of thousands of interconnected networks run by service providers, yes, but also individual companies, universities, governments, and others. Big Telco is, at best, just a minor access ramp to the glory of the Internet.

There is no central authority that governs the Internet. This makes it possible for anyone to create content, offer services, and sell products online without requiring permission. Extending this network to rural and remote regions on Canada is also a subject that I care deeply about, as all Canadians deserve the benefits that fast and reliable Internet access can provide. The pandemic has clearly shown this as even many of our own parlimentarians were unable to connect as their Internet service was not reliable or fast enough.

The Canadian Chapter of the Internet Society has a lot of resources that I am looking forward to exploring and learning from. They also sponsor Committees, Roundtable Discussions, Conferences and Meet-ups. The meet ups are in the Ottawa area so as much as I would like to go to one, it would involve a special trip from Waterloo. Once the COVID-19 isolation restrictions are lifted, I will make the effort to get to one so that I can meet people in person in a more informal setting.

To learn more about the Internet Society you can go here, and about the Internet Society – Canadian Chapter here.