Analysis: Amazon’s Project Kuiper is a $10bn investment

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The Jeff Bezos-backed Project Kuiper will see investment topping $10 billion, says Chris Quilty, senior researcher at Florida-based Quilty Analytics, in the firm’s latest Satcom Quarterly Briefing. The end result, for broadband consumers, could be impressive.

Quilty is blunt, saying that Amazon’s involvement in the plan to launch 3236 satellites to Low Earth orbit (LEO) is a “seismic jolt for the satcoms and space industry”.

“In addition to Kuiper, we have seen in recent weeks OneWeb’s likely emergence from bankruptcy backed by Bharti of India and the UK government, SpaceX affirming it will invest $10 billion on Starlink, and SES contracting for four more O3b mPOWER satellites at $566 million. The industry has now made combined commitments to new/expanded NGSO broadband constellations exceeding $20 billion – a spectacular level of financial support for businesses that have zero revenue today except for O3b which began service in 2014,” says Quilty.

Quilty drills down into the extra costs likely over and above the initial Capital Expenditure, saying: “For each $1 billion in Capex, these systems will likely need to generate ~$600 million in ‘average peak year revenue’ to realize an attractive Return on Investment (ROI), equating to sustained revenue in the outer years of our financial model comprising ~60% of total Capex. This is based on planned satellite lifetimes and favorable OpEx assumptions (EBITDA margins). For $20 billion in Capex, the ‘average peak year revenue number’ would be ~$12 billion.”

Chris Quilty puts this sort of expenditure into context, adding: “[We] estimate the entire satcom industry generates ~$6 billion in wholesale capacity revenue supporting broadband data services – a number that has been fairly stable in recent years but is expected to decline in 2020 due to Covid-19. New LEO systems in the aggregate could face the challenge of having to triple this revenue by the end of the decade to realize an attractive ROI.”

As to the target users of all this bandwidth, Quilty says “SpaceX Starlink and Amazon’s Project Kuiper are mostly targeting Consumer Broadband. We believe their plans will be focused on competing directly with terrestrial broadband (e.g., cable) versus just pursuing rural and remote markets or customers in developing regions. If Starlink and Kuiper can match the terrestrial broadband experience and price – big commercial and technical hurdles but ones they must surmount in almost any “major success scenario” – then the rest is mostly business execution at which Amazon, in particular, has proven to be unmatched.”

However, Quilty cautions that the (current) major satellite players such as Intelsat and SES are likely to play a declining role in this new environment: “[Geostationary] operators will be bolstered by new VHTS (very high throughput satellite) capacity but are still likely to play an increasingly smaller role in broadband while remaining relevant in video distribution as linear TV viewing continues its slow decline. We believe this video assessment was a factor in Intelsat and SES’s recent order of a combined 12 C-band satellites to serve US broadcast markets and meet FCC’s C-band spectrum clearing deadlines supporting US 5G implementation.”


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