What's Next in the Constellation Era?

2023 was quite a year for the companies with heavy bets in Low-Earth Orbit. Eutelsat completed its deal for OneWeb. Amazon launched its prototype satellites for Project Kuiper. Telesat swapped manufacturers to move forward with its Lightspeed network. Starlink continued to launch satellites at a dizzying rate. Add to that new players such as E-Space and Rivada are also looking to make an impact as the world seems to be going LEO.

LEO is now part of mainstream satellite services, says Cyril Dujardin, general manager of Eutelsat’s Connectivity unit. He says Eutelsat has seen the LEO market develop in B2B, community Wi-Fi in areas like Greenland, Alaska, and parts of Canada, and cellular backhaul with Add-on low latency technology.

“I think 2023 has been the start of the LEO being developed in maritime and cruise. In 2024, we really see LEO capacity being much more mainstream in maritime. Aero is a bit slower. I would say the ramp up will start to happen in Aero in LEO. We will see more of a GEO/LEO approach to some verticals,” Dujardin says.

Amy Mehlman, vice president of Global Affairs & Stakeholder Relations at E-Space adds “LEO is already mainstream, and with newer LEO advancements, we expect a greater surge in LEO connectivity service demand. Improved coverage, lower latency and expanded possibilities will continue to enable LEO operators to take center stage.”

Ronald van der Breggen, CCO of Rivada Space Networks says that LEO operators dominate the current satellite narrative and Starlink is trailblazing the market with affordable internet access. van der Breggen says that while Starlink is still a gateway-based, best-effort service, it’s become the de-facto standard.

“Consequently, it is being used for applications that over time will look for more secure, reliable, and end-to-end managed alternatives, which is where we can help,” he says. “We see the evolution in LEO as fairly traditional: limited options in the beginning, but as people start seeing the benefits of satellite, more robust and reliable solutions will enter the market, allowing more mission critical applications to enjoy the benefits of satellites’ unparalleled reach and reliability.”

Rivada could be an interesting one to watch over the next year. The company recently missed some payments to manufacturer Terran Orbital, which leads to some concerns about the company’s prospects. van der Breggen says it will be a few years before the company has the liquidity that comes with receiving cash for services rendered. He admits this puts extra tension on cash management at a time when the scale and number of financial touchpoints with investors, banks, vendors and subcontractors are at a maximum.

“It is simply naïve to expect that all cash flows will magically weave together like clockwork; hiccups have been there and will be there. In the meantime, our investors remain enthusiastic that there is a huge opportunity out there for carrier class, secure services that can beat fiber at its own game,” van der Breggen says. “We need investors to launch, but it’s the customers that will decide our success. That customer process is going beyond expectation and fills me with confidence we will power through this.”

Looking Ahead to 2024

In the coming year, Telesat CCO Glenn Katz expects the number of deals for LEO services from the existing providers to increase as the market is seeing value in LEO capabilities. As far as Telesat Lightspeed is concerned, he says the operator has already contracted backlog with Canadian federal and provincial governments for a program to help bridge the digital divide. “We are still a few years away from service but are now seeing increased activity for Telesat Lightspeed. We expect to finalize some important opportunities with strategic partners in 2024,” he adds.

In 2024, Katz expects to see more progress on constellation build-outs, including the Space Development Agency’s (SDA) proliferated LEO constellation. He also expects more GEO operators will partner with Non-Geostationary (NGSO) operators, and one or two may develop their own NGSO networks as well.

Dujardin believes overall satellite growth in 2024 will be over 15 percent. Eutelsat projects that NGSO revenues will grow 2.5 times faster than the overall market. Eutelsat closed the last quarter with more than 1 billion euros ($1.09 billion) in backlog for OneWeb, and the company expects to generate 125 million euros to 200 million euros ($147 million to $219 million) of revenue from June 2023 to June 2024.

“We are very much in a growth mode, and we think the LEO market is primed for growth,” Dujardin says. “There might be a slight bit of cannibalization from the GEO market. But, overall, there is such a demand for connectivity, but we think there will be a strong demand for LEO as well as our new GEO satellites.”

Whether or not 2024 is a breakout year depends on the impact of socioeconomic and geopolitical environments, as well as regulatory agendas that could come out of WRC-23, Mehlman says. “If anything, we’re in for an intriguing year in space.”

New Horizons, New Verticals

One of the keys to success will be the ability to strike deals in new verticals and find interest from players that previously have not invested much into satellite. Amazon and Vodafone could be one to watch out for here. With Project Kuiper on track to begin mass satellite production ahead of a full-scale deployment starting in the first half of 2024, this competitor could shake up the market over the next few years.

Rajeev Badyal, vice president of Technology for Project Kuiper tells Via Satellite, “Our mission is to deliver fast, affordable broadband to unserved and underserved communities around the world, and I’m proud of the work our team has done this year to help deliver on that commitment—unveiling our lineup of high-performance, low-cost customer terminals, breaking ground on a satellite processing facility in Cape Canaveral, signing agreements with new partners such as Vodafone, and validating our satellite and network architecture within 30 days of launching our first two prototype satellites.”

Badyal says that while there is hard work ahead, Kuiper plans to start servicing its earliest customers later next year.

Chris Daehnick, associate partner for McKinsey & Company, believes there will be new applications for NGSO communications capabilities, leveraging their continuous global presence, depending on how they are deployed. “The most obvious is the interest in the government/military markets, as evidenced by multiple comments like the recent ones by Gen. Chance Saltzman, Chief of Space Operations, United States Space Force. In other areas, the key question is: does space connectivity provide a unique or advantageous capability — better cost or performance than terrestrial alternatives?” he adds.

Mehlman is also optimistic. She expects LEO players to diversify into new markets and believes the versatility of LEO technology opens doors for innovative applications in places where traditional satellite systems have not been able to serve, marking a trend toward broader market penetration. She also expects to see more countries acquire their own sovereign capabilities.

She points to the strategic advantages of LEO – whether it’s to enhance data sharing, national security or drive economic and industrial opportunities. “These reasons alone should keep deal flow momentum positive; we expect to see additional collaborations and investments that will fuel the sector,” she adds.

The Shadow of Starlink

There is little doubt that Starlink casts a huge shadow over this sector. SpaceX is a behemoth with more than 5,000 satellites in orbit.

Despite SpaceX’s market position, competitors are confident there is enough business to support multiple players. Telesat, for example, does not believe in a winner take all situation, Katz says.

“There is a massive, addressable market for multiple companies to succeed,” he says. “The addressable market for LEO alone is expected to be in the hundreds of billions in 2025, which will require multiple LEO operators to serve the capacity requirements. The satellite industry has always been highly competitive and will continue to be so. We expect to continue cross-collaboration among the satellite operators and continue discussions with small and large telcos, MNOs, service providers and governments.”

Satellite has become a critical part of broadband connectivity, and no one wants to rely on a single source, Dujardin says. “The fact there is a dominant player in terms of image and marketing is opening the market for other players to propose alternatives and a different way of looking at the service. We think to provide a better quality of service and provide added value to our partners. We think this is important for the end customers and the overall network,” he says.

It's obvious that Starlink has a huge head start, but Daehnick says McKinsey believes that demand can support more than one LEO broadband provider. “The principal challenge to a viable business model remains cost. This is an area where SpaceX/Starlink is also far down the learning curve and has the advantages of vertical integration, so competitors will need offsetting advantages of some sort. As the only other operational constellation, OneWeb will provide an indicator of how others can compete,” he says.

Predictions for the Future

After a seismic year, what can we expect in the year ahead? Katz expects space sustainability to be an even more important issue.

“I think you could look for collaboration across the industry to only grow over the next year, and beyond,” Katz says. “We may even see the first debris-removal mission. We certainly expect there to be increased collaboration among LEO operators and astronomers in a shared mission to preserve the night sky, allowing for critical research innovation and discovery of our vast universe to flourish.”

van der Breggen adds, “With the geopolitical situation developing, we can expect governments to start playing a more active role in the proliferation and adoption of LEO services. It simply provides a suitable alternative to what is today a patchwork of space-based and terrestrial assets and their inherent performance, reliability, and security issues.”

He also expects satellite, telecom and cloud will grow closer. “The days of these verticals staying in their corner trying to carve out some business for themselves are over. The enterprise and government markets are more and more interested in integrated solutions, and we’ll see that reflected in how these traditionally very separated companies will find ways to work together, creating the solutions that customers need,” van der Breggen adds.

Dujardin looks at what is happening in Ukraine and Israel and thinks some of the constellations will be used by governments as a way to influence or to decide conflicts. “My conviction is that in 2024, constellations will surprise everyone with the diversity of uses and markets where they will become the indispensable connectivity solution. This is already a reality today, where Eutelsat OneWeb is connecting isolated communities and businesses in places such as Canada, Alaska and Greenland. We will very soon see satellites connecting first responders and healthcare providers in remote areas, allowing crews to locate patients faster, access critical clinical information and patient records at high speed, anywhere. Space connectivity is also critical for the rapid deployment of connectivity on disaster relief operations,” he says.

He believes the market is set in terms of numbers of constellations. “We see a limited number of global constellations — these include Starlink, Kuiper, Telesat, Eutelsat OneWeb, potentially Rivada, Iris² and the Chinese constellation which seems to be making progress. For regional players, the economics of a global constellation are even more challenging, since they require global operations. We don't see smaller players launching constellations on their own, independently from global operators or emerging major U.S. players.” VS