Europe searches for ways to counter the rise of Musk's Starlink

Industry Voices Simon Baker

For years much of the satellite industry has taken a wary view of Low Earth Orbit (LEO) ventures, which have been viewed as promising far more than they could actually deliver. Iridium and Globalstar both went bankrupt before surviving as relatively modest ventures. The Teledesic project of Bill Gates and mobile entrepreneur Craig McCaw folded in 2002 before it started service.

They were complicated to implement in space, needing large numbers of satellites, and complicated in use, entailing tracking antennas on the ground and signal hand-off between satellites.

So instead, the big satellite operators have mainly chosen to squeeze the most out of their existing geostationary business. Meanwhile the broadcasting gravy train has been drying up as linear TV declines and streaming grows. And satellites 36,000 kilometers away are not ideal for two-way internet traffic due to signal lag, despite advances in coverage efficiency through new high-throughput satellites.

Elon Musk and his Starlink LEO system are beginning to make those satellite operators think they could have got it wrong.

Starlink has unprecedented scale

On May 5, Reuters reported Musk as saying that his Starlink LEO system, now with nearly 1,500 satellites in orbit, had half a million preorders and saw no technical issues in meeting that demand. Download speeds across the U.S. are reported by third parties as being high, and the receivers, at $499, are reasonably affordable.

Altogether, Starlink is due to have 12,000 or more satellites. At a current production rate of 120 spacecraft a month, if SpaceX can make up time and launch them as quickly, at 60 satellites a launch and a total 200 launches, it will have that number of satellites in place in another seven years or so.

RELATED: Starlink speed competitiveness varies, as sign-ups surpass 500K

That size a satellite system is unprecedented in the space industry, so is the number of launches.

With its beta charge of $99 a month, if Starlink reaches two million users it would generate two billion dollars a year and rival the biggest satellite operators around today.

Could Musk elbow out established players in a technology push away from geostationary satellites to LEO? That question is becoming more pertinent in the satellite industry as Starlink grows in scale.

Musk has a vertically integrated LEO business, which no one may be able to match on cost. The satellites are manufactured in house and are launched on boosters which have often already earned their keep on previous flights. A recent Starlink launch used a rocket on its tenth flight.

His timing is just right in the 5G era as low latency signals become more important in broadband provisioning, and LEO can provide them just as GEO cannot.

European satellite operators have a lot to lose

No region has more to lose from the rise of Musk in space than Europe. Its Arianespace is one of the launch providers which has lost out to SpaceX. Currently, Europe is a global leader in satellite operation, as home to the headquarters of three of the major players: Eutelsat, SES and Inmarsat.

In the geostationary era, the key to satellite operation used to be either national, with big countries like the U.S., or regional, with a bent on North South coverage to maximize use of an orbital position. European operators faced little competition on home turf and even managed to set up some operations in the U.S. (and are receiving a windfall from the reallocation of U.S. C-Band frequencies as a result). With LEO satellites the coverage of each spacecraft is a narrow band around the whole world, so competition is global.

The European geostationary operators, with big investments in capacity in orbit that they can now do nothing to change, are looking vulnerable, and need to respond.

On April 27, Paris-based Eutelsat made its move and announced that it was using its half a billion dollar proceeds from the U.S. C-Band frequency auction to purchase a 24% share in OneWeb, The London-based LEO satellite venture.

RELATED: OneWeb taps former Ericsson exec as CCO

OneWeb was the only game in town for Eutelsat to move quickly and cheaply into LEO.

But it's an odd menage à trois, combining Eutelsat, minority backed by the French state, and the U.K. government and Bharti. Each can be expected to have its own aims with the venture. OneWeb's satellites are made by Airbus, which makes sense for European champion Eutelsat. But future ones may be reengineered to add a geolocation function to give the U.K. military the services it is being denied from Europe's Galileo project after the U.K. left the European Union.

OneWeb still needs to raise additional capital, but has one-third (182 spacecraft) of its initial fleet already in orbit.

The difficulties are on the ground

Despite these complications the deal does play to the one big weakness of Starlink, the rather mundane sounding but key issue of channel to market. OneWeb is pursuing a wholesale strategy and aims to sell to governments and institutions and resellers, which is just what Eutelsat is good at.

Satellite professionals like to say that with satellite operation, the space segment is the easy bit – it is on the ground that the difficulties begin. Two-way satellite services need landing and service rights in every country they operate, they need means to collect revenues and repatriate them. Countries may reject any arrangement of downlinks into the Worldwide Web, which cuts out national control over which websites the service carries.

Eutelsat has lots of partners, often telco companies, across Africa and the Middle East as well as Europe, which are used to dealing with such operational and political questions.

Another home truth in the satellite business is that while around two-fifths of the global population does not have broadband access, very few of those people can afford to get it by satellite. For any satellite venture serving rural markets, it is those in richer countries which count most. Niche industry markets like mining are also very important.

Starlink's initial aim will be America, not only easy to access, but offering U.S. government support. At the end of last year Starlink won nearly a tenth of $9.2 billion in subsidies the FCC was handing out to facilitate rural broadband access over the next decade. There are somewhere between 20-40 million Americans without broadband connectivity, depending on whose figures you take. President Biden is talking of a total budget of $100 billion for broadband infrastructure.

The record European Union reflation package agreed to in December last year will also pump money into broadband connectivity. There are various national plans around Europe to subsidize rural broadband in which satellite operators are already participating or will do. 

Spending money at home

Before Eutelsat's deal, the European Commission's reaction to Starlink had been to suggest some sort of state-backed mega-initiative for Europe to launch a mainly LEO constellation as a rival.

The heavily state-funded European space industry has a much better track record in technical competence than it does in cost efficient manufacture and rapid commercialization. Such a project could take years to materialize.

While OneWeb may not fit the bill completely, it has a claim to represent European interests, and at least it is not far off operational.

It looks as if Starlink will receive permission to operate in at least some European countries, among them it has been reported the U.K. and Germany, but being part of subsidized national rural broadband programs is another question. In the space and telecoms business, government money usually goes to local players. Out of their home market, U.S. entrepreneurs can expect to find the going harder.

Simon Baker is program director for mobile phones and consumer devices at IDC EMEA and a coordinator of IDC global forecasting for the 5G smartphone market. He is a long-time analyst in the mobile phone arena. Please contact him at [email protected]

Industry Voices are opinion columns written by outside contributors—often industry experts or analysts—who are invited to the conversation by FierceWireless staff. They do not represent the opinions of FierceWireless.