Investment bank BNP Paribas hosted a low Earth orbiting ‘expert event’ with Dr Tim Farrar, an acknowledged expert on the satellite sector and Direct-to-Device (D2D) services in particular.

Farrar argued that Elon Musk’s SpaceX/Starlink service, although embryonic today, are some “18 months ahead of competitors on D2D and that by the end of the year they should have texting and data capability”.

Farrar believes Verizon and AT&T chose to partner with (a rival to Starlink) AST simply to drive competition in the D2D market (fear of Starlink being a monopoly). Farrar cautioned however that voice is harder to deliver for D2D Satellite, due to handoff challenges between satellites. More broadly he sees D2D as being “forever a relatively niche solution for rural areas. Technology/physics and limited spectrum should limit the capacity of the technology.”

“Starlink does not care about ROI. Today Starlink are closing in on 2 million US broadband subs in the US, 200-300k of which came from substituting traditional terrestrial broadband. At present the service costs $120/month and usage is 300-400GB. They have enough capacity for 5 million US subscribers by 2028, but he thinks they will have to cut price to get there (and that they will). Worryingly he does not think ROI is a key metric for Starlink, and what matters more is the ability to keep the satellite story going. But positively (for incumbent operators) the economics of manufacturing and launching costs of satellites, plus relatively high maintenance costs (replacement every 5-7 years) means he thinks it will hard for them to compete in a price war with traditional wireline. In our view, the additional Satellite capacity is only a negative for the incumbent wireline operators in the US (Cable) and given the US market is adding c. 2m subscribers p.a. at present, if Starlink add c. 3m by 2028 then this would imply a 35-40 per cent share of industry growth. We continue to believe consensus is overoptimistic on a return to cable subscriber growth,” said the report.

There’s also the prospects of a new C-band bonus for the main geostationary satellite operators. The bank’s report to clients said: “The new FCC chair Brendan Carr revealed recently that the agency will vote on opening up additional portions of C-band spectrum for use, ranging from 3.98 to 4.2 GHz. Since a gap between spectrum is needed to avoid interference with terrestrial operations, Farrar expects that c. 100 MHz will be freed up for auction, and assuming same economics as last auction, this could cost c. $30 billion. While SpaceX could be a competitor in the auction (and might try to get it for free…), he believes that the upper part of the band is not very valuable to SpaceX (too high a frequency for D2D and too low a frequency for broadband). In our view this is somewhat good news for T-Mobile US, as with just 100MHz potentially available it doesn’t create enough for AT&T and Verizon to be able to catch up on mid-band 5G holdings and is not enough spectrum for Cable to be able to acquire and build a robust 5G network. On spectrum Farrar also noted that D2D networks can use either terrestrial (0.6-2.7 GHz) or MSS satellite spectrum (1.5-2.5 GHz). While terrestrial spectrum permits higher power limits, rules and regulations around it are stricter to avoid interference. MSS satellite spectrum thus becomes a good alternative as it’s globally harmonized with market access already established in most countries. Within the MSS spectrum, the last place to go where an LEO provider doesn’t already have a claim on MSS spectrum is EchoStar’s 2GHz band. He believes satellite industry participants have been negotiating with EchoStar’s Charlie Ergen on the spectrum over time, but notes no partnership/deals have been reached to yet, but it’s reasonable to expect some sort of agreements on that band in the future.”

Other posts by Chris Forrester:

1. Eutelsat suffers a 71% reduction by bank
2. Eutelsat: “What a mess”
3. AST SpaceMobile trims satellite demand
4. Amazon’s Kuiper-1 launch brought forward
5. SES and Eutelsat possibly in line for C-band $bn bonus
6. Consultant: “European satellite mergers are failing”
7. Ligado attempts to unravel Inmarsat L-band agreement
8. SpaceX complains over South Africa investment rules
9. Vodafone, AST test video call game changer

Categories: Blogs, Broadband, Inside Satellite, Satellite

Tags: BNP Paribas, Echostar, spectrum, starlink, Verizon