The satellite industry is a carefully structured business. With every DTH satellite costing upwards of a quarter-billion dollars to build launch (and insure) operators have to be sure of the business they expect to gather.
However, there are plans afoot for thousands of new satellites to be launched over the next 5 years. Even though these lower orbiting satellites cost considerably less than their geostationary cousins, the overall sums involved are massive.
But there’s now a growing doubt that some of these proposed mega-constellations are already in trouble. A note from respected industry analyst Tim Farrar (of TMF Associates) suggests that some of the constellation plans are deeply flawed. He argues that the satellite sector may be repeating some of the stupidities of the 1999-2000 ‘dot-com’ financial bubble.
For example, Farrar focuses on SpaceX’s plans to build and launch an initial 1584 satellites at just 55- kms high, and serve millions of users in ‘not spots’ for broadband communications. Farrar is blunt and says that Elon Musk (whom he calls the ‘poster child’ of these new developments) is suffering “increasing frantic attempts to raise money in the face of a rapid decline in launch demand, and increasing competition from Blue Origin [backed by billionaire Jeff Bezos], which doesn’t need to make a profit.”
He continues: “SpaceX’s attempts to find new sources of revenue are also proving deeply problematic because the broadband satellite constellation business now appears to be in even more dire straits than the launch business.”
Farrar says that another giant ‘would-be’ constellation builder, Greg Wyler and his proposed OneWeb service, is facing similar problems. “Recently rumours have circulated that SoftBank is looking to exit from OneWeb (before the next tranche of its $1 billion equity commitment is due after the test satellites are launched in early 2019), as the system costs increase and questions abound over the size of the market opportunity for satellite broadband. Certainly, Masayoshi Son’s attitude to the project appears to have changed dramatically in the last year, from touting satellite as an alternative to fibre, to not even mentioning satellite in a recent lengthy feature on the Vision Fund.”
Farrar adds that the first ‘dot com’ satellite-related meltdown occurred in 1999 with the financial collapse of Iridium. “And it now appears that there are several multi-billion dollar satellite projects that could suffer the same fate within the next year.”