On January 1, 1983, a group of researchers at ARPA adopted the TCP/IP protocol for their ARPANET, and there began the birth of a network of networks that eventually formed into today's modern internet. In the following 36 years, over three billion people globally joined the internet.
Today we consume data at a rate 5x faster than our population growth. Mobile data traffic is expected to 7x increase by 2022 (46% CAGR). Data is being demanded faster than we can lay down new fiber, put up new cell towers, install new servers, launch new satellites, and build new data centers.
And over the next 10 years, an additional four billion people are expected to join the internet community.
Traditional approaches to connectivity require the build-out of an internet backhaul infrastructure — done traditionally by laying down fiber lines or undersea cables, then connected to cell towers for broadcast. This core infrastructure, backhaul capacity, is bought by telcos to connect cell towers to the internet, and while cell towers are cheap, building the backhaul infrastructure is a significant undertaking, and economically prohibitive without a guaranteed network of revenue-generating users ready to consume.
In the US, fiber costs an estimated $27K/mile to lay down in an urban region, and we’ve already spent over $100 billion in the US laying down fiber lines connected to IP backbones to gateways and cell towers.
In a remote or rural region, i.e. Alaska, it can cost 10x — 100x that. Terrestrial networks have not been a viable option to provide connectivity to them. 45% of the global population live in remote or rural regions.
Due to lands too large, terrain too difficult, climate conditions too severe, or rural and remote populations too dispersed, the traditional solutions that connected the first three billion will not work for the next four billion.
The $100s of billions in fiber lines to connect our IP backbones to gateways and cell towers will be out of reach for the next four billion; across both developed and emerging nations, in often rural or remote regions, starting with limited to no connectivity infrastructure, and with far less economic buying power.
The next four billion
At Venrock, we have always been interested in the infrastructure stack and services that power our everyday lives; commerce, media, communication, connectivity… As legacy systems exceed their scale and performance capabilities attempting to support existing demand, and new market participants join to further stress their capacity to serve, the markets begin to shift to embracing new solutions.
With any service, the ways we served the first three billion people, is unlikely to be the way we serve the next four billion people.
We have always believed that the ways we provided connectivity and bandwidth had to change; the infrastructure was bursting from the seams, we can’t lay down fiber fast enough, the needs of the new market participants were different from what the traditional solutions could offer, the scale and performance requirements just for the existing demand as a whole could no longer be met (5G, 8K video, continued migration of cable to streaming, etc). The connectivity infrastructure cycle was becoming incapable and left an opening for a new solution to emerge.
We evaluated all of the existing capabilities, new technologies, and emerging capabilities to determine what a solution would need to look like:
1. It needed to be accessible by both the emerging & developed markets
- Provide meaningful bandwidth and latency to access 95% of internet services
- Could hyper-target markets and regions, and augment as market needs change
- Could be affordable for the emerging market consumer
2. Would require little to no new ground infrastructure
- Rely on cheap, commodity user terminals or antennas to connect endpoints
- Would not require laying down of new ground infrastructure to connect regions together (fiber, copper, etc)
- Would not require government subsidies or eminent domain to stand up ground endpoints
3. Could augment connectivity and services into existing service networks
- Would not have to take on the complexity, operations, and capital-intensive task of building a direct-to-consumer service
- Could be sold into existing channels and networks
4. Could be capitally efficient to get to market
- Would not require massive upfront capital investments of $100Ms prior to starting service
- If satellite-based, it would not require constellations of satellites in order to minimally support a single region.
- Could show a path to positive unit economics in their first market
5. Its technical architecture was proven and could scale up
- Would not rely on complex, unproven astrophysics
- Could linearly or exponentially scale up services & capacity
- Relied on a software-defined system that could improve/optimize over time
With ground fiber out of the running, we looked to large, GEO-based satellites, LEO-based mega constellations, and atmospheric-based balloons & drones as potential solutions.
Large, GEO Satellites have traditionally been the only option to provide backhaul to power new 2G/3G/4G networks and bandwidth, with over $120B per year spent on satellite bandwidth worldwide. These very large (6500kg) and expensive ($300M) satellites are deployed into GEO (geosynchronous orbit, 35,786 km above the earth, where satellites can match the earth’s rotation) to provide continuous coverage to predefined markets.
- Offering GEO-based satellite communications is a significant undertaking; MNOs (mobile network operators) or ISPs contract with large aerospace manufacturers such as Airbus or Lockheed to deploy to pre-defined markets based on either a guaranteed network of revenue-generating users or broad enough coverage to diversify the risk of turning on new markets.
- These satellites are what are known as analog “bent pipe” payloads, meaning they simply act as repeaters, taking incoming signals and both shifting the frequencies and boosting their power before transmitting them back to the ground.
- These conventional analog payloads have rigid bandwidth and fixed coverage that are set during the design and build. Once you deploy the satellite to a region, the coverage area and bandwidth are fixed, regardless of the change in demand or market.
- While traditional satellites enable connectivity to new regions, there are many markets where the economics of traditional satellites just don’t work. Areas that are remote, rural, or distributed, as most of Africa, Latin America, Asia, and even parts of North America (i.e. Alaska, Northern Canada), simply lack the population density to justify enough satellite coverage and bandwidth to provide any meaningful connectivity or accessible bandwidth, at affordable prices.
Low Earth Mega Constellations
LEO based mega-constellations have re-emerged, with a number of attempts in the works to provide mega-constellations (remember Iridium?) consisting of a few hundred to thousands of satellites in low earth orbit. These constellations promise to provide low-cost, high-performance connectivity access, from the likes of SpaceX, Amazon, Samsung, and OneWeb.
On the surface, they sound phenomenal; global networks, independent of nation-control, with always-on connectivity, for the same price we pay for terrestrial broadband today. But pull back the curtain and you find a number of challenges. These systems:
- Cost billions of dollars to launch and replenish thousands of satellites into LEO (SpaceX estimated their Starlink constellation would cost an estimated $10B — $15B for a 12K satellite constellation and recently announced they want to add an additional 30K satellites)
- Take years to deploy and will exceed the available launch capacity globally (SpaceX Starlink at current math would take 177 Falcon 9 launches assuming 24 satellites per flight, would take 8 years at current pace).
- Spend billions more on trying to offer their service direct to consumers, and require consumers to purchase custom user terminals (antennas) to transmit the service. The latest estimates put those phased array antennas at $10K to start per household and eventually making their way down to $2K each.
- Assume physics of super-low latency laser interlinks between satellites in order to provide continuous coverage (in LEO, a satellite orbits the entire earth every 90–120 minutes) that have yet to be fully proven.
- Have challenging economics, where a simple calculation of [program cost] / [subscriber revenue — acquisition & setup cost] would price out the majority of the free world.
Atmospheric Balloons & Drones
And lastly, Atmospheric balloons & drones. Both Facebook and Google, amongst others, have experimented with in-atmosphere approaches to beam connectivity into constrained geographies for over 30 years.
- Google recently spun out the Loon project, a proposed network of stratospheric designed balloons to bring Internet connectivity to rural and remote communities, focused on partnering with mobile network operators to expand their LTE service.
- Stratospheric balloons, flying at 60,000–80,000ft altitude, only last a few months before deterioration, require sunny weather as they rely on solar for power, and require the use of radio spectrum, meaning they must rely on local regulators to grant access or rely on a unified band.
- Google has reported struggling with operational and capital costs to support and scale such solutions to their markets in ways those regions can economically sustain.
- Facebook tried something similar with their Aquila project, a solar-powered drone for use as an atmospheric satellite, intended to act as relay stations for providing internet access to remote areas. In both examples, existing relay stations must be available first to act as repeaters. Facebook most recently shut down the Aquila project as a result of the technical feasibility.
We didn’t see any of these solutions meeting the criteria needed to meet the demands of the next four billion coming online, failing on one or more of the following:
- Too expensive for the service provider and/or end user
- Left out remote or rural populations
- Provided insufficient connectivity to the needs of the region
- Relied on local governments to provide subsidies and/or land rights
- Could not scale rapidly once proven
- Lacked any path to positive unit economics
- Required unreasonable capital investments before initial service
- Contained technology risk too high or far unproven
That’s until we met John and Ryan at Astranis.
Coming out of Planet and running the Commercial Spaceflight Federation, John and Ryan deeply understood the gravity the space economy could have on the world infrastructure and how it could revolutionize critical services globally across communication, sensing, intelligence, and connectivity. They recognized that the existing infrastructure was maxed out and new solutions coming to market wouldn’t meet the needs of the emerging internet population.
The most ‘practical’ approaches had huge drawbacks as we mentioned earlier. LEO based solutions are able to micro-size (down to 150kg — 500kg range from 6000kg+) the satellites to be far more efficient to build and launch into orbit, but require constellations of them in order to provide continuous coverage and service (each satellite circles the globe every 90–120 minutes). GEO based solutions are able to provide continuous coverage with just a single spacecraft, but are massive capital expense and build-outs (recall 6500 kg, $300M costs to build and 5 years to deploy), and rely on network operators to take on the capital burdens of the spacecraft and future utilization.
When everyone was zigging to mega-constellations and huge GEO satellite spacecraft, the team at Astranis zagged, rethinking the problem from the ground up. Astranis was born from the idea that you could provide stable and continuous broadband coverage from GEO, with flexible, software-defined, micro-satellites, that were 20x — 30x smaller and cheaper than traditional satellite, to provide satellite connectivity to targeted markets, at equivalent bandwidth and capacity to traditional satellites.
This approach enables them to launch into hyper-targeted markets, such as Alaska, remote regions of Africa, Asia, far Pacifics, and more, doubling or tripling the amount of capacity now offered to its citizens, at a price that is offered at market rate. In emerging markets, that’s a significant fraction of what they pay for available capacity today.
Along the journey, they signed a landmark deal and partnership with Pacific Dataport to provide over 7.5 Gbps of capacity to roughly triple the currently available satellite capacity in Alaska while also bringing costs down by an average of three times less than current pricing for both residential and wholesale customers.
The team, technical achievements, commercial success, and approach to market met all of the dimensions we were looking for.
Their solution provides meaningful bandwidth at broadband speeds, relying on commodity antennas and terminals that require no new ground infrastructure, offering services at far more affordable prices, and targeting specific markets and regions at a significantly lower build and launch costs.
As a result, we had the privilege of leading their Series B, with our good friends joining us from Andreessen Horowitz, 50 Years, Refactor, and other funds and angels in this audacious mission.
Providing internet backhaul is the most fundamental infrastructure to bring connectivity to a region and community. Astranis’ low cost, flexible, and powerful micro-sats have the opportunity to become the new standard for how the developing world accesses and thrives on the internet for the first time.
We couldn’t be more excited to be on the journey with them. Ad Astra!