Unlocking the Sky: Harnessing the Full Potential of LEO Satellites
By Thibault Werlé, Faisal Hamady, Hamza Najmi, Raed Saab, Faisal AlSayed, and Rami Suleiman
Low Earth Orbit (LEO) satellites have emerged as pivotal players in the modern connectivity landscape. Situated approximately 500 to 2,000 kilometers above the Earth’s surface, these satellites offer several advantages that compliment Geostationary Earth Orbit (GEO) and non-Geostationary Orbit (NGSO) counterparts — the reduced distance from Earth allows LEOs to provide lower latency and higher-speed communication. This technological leap goes hand-in-hand with GEO/NGSO capabilities to enable hybrid satellite communication that transforms various industries with truly-global and advanced connectivity.
Enabling Ubiquitous Connectivity
Despite initial explorations into the technology taking place as far back as the 1950s, the scale of the LEO satellite communications industry has remained relatively nascent. However, the industry is currently witnessing substantial growth. The global satellite communications market is on track to reach $40 billion by 2030, and LEOs are expected to contribute a significant portion of this growth, accounting for approximately 40% of the satcom market. This rapid expansion is primarily driven by two pioneering GEN 1 constellations, Starlink and Eutelsat-OneWeb, which together have deployed more than 4,500 satellites. Nonetheless, the satellite communications is poised to grow in a hybrid manner, with LEO & GEO markets being deeply intertwined.
Looking ahead, the industry is preparing for the deployment of GEN 2 and potentially GEN 3 constellations. These next-generation networks, backed by major players like Amazon Kuiper and Telesat, alongside Starlink and Eutelsat-OneWeb, plan to launch over 45,000 new LEO satellites in total. This massive expansion will enable a broad spectrum of terrestrial use cases, estimated to be more than 35 across 15 primary sectors, incrementally driving between $16–20 billion of market value by 2030.
Moreover, these advancements are not merely about numbers. The upcoming era is expected to see a significant portion of the Total Addressable Market (TAM) being unlocked. In the near term (next 2–3 years) GEN1 satellites, where 35% of TAM is concentrated, are expected to enable at least 10 use cases. In the longer term (5–10 years), more than 25 use cases enabled by GEN2 and GEN3 satellites will come into play, enhancing the industry’s scope and impact.
Thus, at its full potential, LEO satellite communication can power a breadth of use cases across both the consumer (B2C/ direct-to-consumer) and the business (B2B/B2G) domains.
LEO satellites are set to become a cornerstone in the quest for ubiquitous global connectivity. By complementing existing technologies such as 5G, fiber optics, and the forthcoming HAPS and 6G networks, LEOs have the potential to fill gaps in coverage and offer high-speed, low-latency connections even in the most remote locations. This convergence of technologies is crucial for realizing the vision of a fully connected world, where seamless communication and data transfer are available everywhere on the planet.
Today, the LEO satellite industry stands at a pivotal point, with its current achievements setting the foundation for a future of expansive growth and transformative impact across various sector. However, specific requirements and challenges need to be addressed to fully realize the potential of LEO satellites, encompassing technology advancements, regulatory frameworks, and necessary investments.
The Next Frontier: technology enhancements to unlock the potential of LEO satcom
The Low Earth Orbit (LEO) satellite industry is on the cusp of a significant evolution with the advent of GEN2 and GEN3 constellations, which are set to overcome the limitations of the current GEN1 systems. GEN1 constellations, which provide speeds of 25–150Mbps and latencies around 40–60 milliseconds in best case scenario, are adequate for a range of applications. However, to cater to more than 25 emerging use-cases, more than doubling the speed and quadrupling the improvement in latency is essential.
GEN2 satellites are engineered to deliver service quality that far exceeds their predecessors, with expected speeds approximately five times faster and latencies twice as low. This upgrade is vital for data-intensive applications such as high-definition video streaming, which are rapidly becoming commonplace in both direct-to-consumer (D2C) and business-to-consumer (B2C) markets.
A pivotal advancement with GEN2 constellations is the incorporation of inter-satellite links (ISL) via laser communication technology. This innovation not only provides flexibility to locate ground stations, leading to expanding connectivity to remote areas like the North Pole, but also enhances satellite utilization. Furthermore, inter-satellite link offers a significant speed advantage, being roughly 40% faster than terrestrial fiber connections due to the higher speed of light in vacuum than in glass (used in fiberoptics). This capability can enhance ground station utilization as well, as sat-to-sat communication can be coupled with ground station transmission towards end-user terminals to achieve minimal latency — enabling new use cases. ISL capabilities are not only transformative for Earth-bound communications but also open up possibilities for new types of orbital services, including communication with spacecraft.
Despite the clear benefits, the deployment of GEN2 satellites has encountered setbacks. Their considerable size — being five times larger than GEN1 satellites — necessitates bigger spacecraft for launch, causing delays. A full constellation rollout is now anticipated to follow the de-orbiting of GEN1 satellites, and is expected to span the next five years.
Beyond GEN2, the development of GEN3 satellites will be critical for enabling high-bandwidth D2C services. While D2C has already been pioneered (e.g., for SOS services on iPhones), GEN2 satellites are currently tailored to support basic text messaging services. GEN3 satellites will be required to facilitate more advanced applications, including D2C live video streaming. To support such capabilities, GEN3 satellites will be equipped with substantially larger and more sophisticated antennas — more than four times the size of those used in GEN1.
The enhancements will need to extend to user devices as well. Smartphones will need to undergo significant upgrades to accommodate the new satellite frequencies in the Ku (10–13 GHz) and Ka (20–40 GHz) bands. This includes bolstering battery power to support the greater energy demands of transmitting signals over the increased distances to LEO satellites and addressing any potential health concerns associated with exposure to the higher-frequency KU and KA bands.
The commercial sector, covering both business-to-business (B2B) and business-to-government (B2G) markets, stands to benefit greatly from the integration of LEO with multi-orbit constellations. The inherent nature of LEO satellites, which are utilized only about 20% of the time due to their continuous movement, contrasts with GEO satellites that can operate at 80% efficiency by concentrating on high-traffic areas. By combining the strengths of LEO, Medium Earth Orbit (MEO), and GEO satellites, a more reliable and stable connectivity solution can be achieved. GEO and MEO satellites offer consistent connectivity in densely populated areas, while the LEO satellites provide the advantage of significantly lower latencies due to their proximity to Earth. This approach allows for the use of network slicing, where operators can direct low latency applications to LEO satellites and allocate applications requiring more stable connections to GEO/MEO satellites. This capability is crucial as the future of seamless connectivity is ultimately through hybrid LEO/GEO satellite communication networks.
The mass adoption of multi-orbit user terminals is essential to realize this vision. These terminals, currently in the prototyping phase, are testing advanced antennas and modems, including software-defined radios. The cost of such multi-orbit terminals is presently estimated to be higher than standard terminals, ranging from $10,000 to $15,000. The industry’s challenge is to bring these user terminals to market affordably through subsidization, continued research and development, and ultimately, economies of scale achieved through widespread adoption.
Regulatory Lift-off: Reforms Propelling LEO Satcom Forward
While technological advancements are paving the way for faster, more reliable connectivity, regulatory and investment hurdles should be navigated to fully unlock this potential. The successful deployment of next-generation satellites and the establishment of a supportive regulatory and funding environment will be crucial in realizing the vision of a globally connected world powered by LEO technology
The current regulatory landscape requires satcom operators to navigate a complex web of national and international regulations to secure essential regulatory licenses including landing rights, service licenses, ground equipment, and ground station gateway licenses from individual regulators across the globe. Due to the complex regulatory landscape, only two LEO players have managed to obtain service licenses across different countries at a global scale: Starlink & Eutelsat-OneWeb. By signing individual MoUs with nations and unions (e.g., EU), the players have been able to navigate regulatory demands. However, certain countries remain wary of granting service licenses due to concerns on sovereignty and cybersecurity.
Going forward, two pivotal topics could significantly propel the LEO satcom industry towards realizing its full potential — Spectrum allocation and global unification.
- Spectrum Allocation and Frequency Sharing
The increasing number of satellites in LEO orbit necessitates a rethinking of spectrum allocation. To realize the required frequency sharing, ITU and the various national/regional regulators would need to come together to establish standards, in line with healthy competitive dynamics and to mitigate interference risk. Regulatory cooperation could also encourage entities to innovate their radio technologies and tap into available spectrum bands like the KV bands. Naturally, these discussions form the cornerstone of various international forums — for e.g., the World Radiocommunication Conference (WRC) in 2023, where, the agenda included discussions for improvements to international regulatory framework regarding geostationary and non-geostationary orbit satellites.
Additionally, the practice of spectrum warehousing, where satcom operators reserve spectrum without immediate plans for active use to block competitors or save it for future potential projects, should be mitigated to ensure efficient use of a limited resource. While the ITU has already implemented regulations to curb this practice, further coordination across national/regional regulatory bodies could help enforce these regulations and encourage the use of underutilized spectrum bands.
- Globally Unified Regulations
A unified global regulatory framework is essential to streamline market access, support a maturing and competitive LEO market, and encourage mass adoption of satcom services. Such a framework could address key issues, such as:
- Space debris management
By 2040 and beyond, the number of obsolete LEO satellites is projected to exceed 100,000. Managing space debris is becoming a critical concern, but falls outside the current mandate of the ITU, with only national regulators covering this topic. Individual regulators have started taking steps, for example, the mandate in 2022 for de-orbiting of LEO satellites in 5 years post-mission. However, international collaboration under a clear regulatory body may further ensure responsible satellite de-orbiting and minimize the risks associated with space debris.
- Data sovereignty
Currently, each country or economic zone has its unique data sovereignty regulations, for instance the EU’s General Data Protection Regulations (GDPRs), the US’s Patriot Act etc. This fragmented landscape of regulations has been the subject of discussions at gatherings such as the 2023 ENISA Telecom & Digital Infrastructure Security Forum. However, more needs to be done on the security of LEO data sovereignty and the de-complication of data sharing, which hinders potential satcom use cases (such as enabling in-flight payments for long haul international flights without authentication).
- Public health
Emerging satcom technologies, such as multiorbital and D2C phone terminals, employ high-frequency bands which carry potential health implications for users. Unified regulations and certifications are required to protect the interests of private consumers as well as businesses.
The Need for a Long-term Investment Outlook
The growth and success of the LEO satcom market are contingent upon a far-sighted investment strategy. In the decade ahead, it is projected that the operators will need up to four times the current investments, potentially reaching $100 billion, to deliver on the expansion of the industry. This escalation in funding is not without its challenges, given that the immediate returns on LEO satcom investments do not typically promise short-term profitability.
This investment landscape requires backers with a long-term vision. Governments, recognizing the strategic national sovereignty importance of space dominance, and private entities with substantial capital reserves have so far led the charge. The British government’s investment in OneWeb (prior to merger with Eutelsat), underscores the strategic calculus that space capabilities are not just about economic returns but also about asserting national presence and influence — key elements of soft power in the geopolitical arena.
As the LEO industry advances, the declining costs of technology development are anticipated to boost the business case for LEO satellites. This may draw the attention of private equity (PE), especially as GEN3 satellites come online with their promise of high-margin direct-to-consumer (D2C) applications. These advanced constellations, with their potential for cost-effective deployment and operation, will expand the realm of possibilities for satellite services.
In contrast to government-led initiatives, smaller satcom startups face starkly different financial realities. Key space startups, though backed by heavyweight VCs, have struggled to maintain liquidity and were forced to undergo workforce reductions. These setbacks illustrate the volatile nature of the industry and the inherent risks associated with groundbreaking ventures.
However, the tide is expected to turn over the next 5 to 10 years as the industry matures, making LEO satcom a more compelling case for investment. With anticipated reductions in launch and manufacturing costs, the financial dynamics of satcom are poised for a positive shift. Enhanced speeds, reduced latencies, and broader coverage will unlock new use cases and revenue streams, transitioning subscriber counts from the millions to the billions. However, it remains to be seen if satcom competitors’ business cases will appeal to VC investors.
As cost efficiencies improve and the subscriber base expands, revenues are forecasted to surge, setting the stage for satcom to emerge as an attractive investment opportunity, particularly with the advanced capabilities of GEN 3 satellites. This transformation holds the promise of propelling the LEO satcom sector into a profitable future, where it could offer lucrative returns for investors who have the foresight to navigate its complex and evolving landscape. Nonetheless, this profit potential hinges on players shifting from capacity wholesalers to value-added connectivity solution providers — an attractive premium to their business model.
Embracing the Future of LEO Satellites
As we look towards a future where these satellites play an increasingly central role in global connectivity, several key takeaways emerge from the current landscape and the anticipated developments.
- Technological innovation is crucial: The advancement from GEN1 to GEN2 and GEN3 constellations marks a significant step forward in satellite technology. Higher speeds, lower latencies, and innovations like inter-satellite links (ISL) and network slicing are set to revolutionize the capabilities of LEO satellites. These technological leaps are essential for unlocking a wide array of use cases, ultimately enabling a future with seamlessly hybrid LEO/GEO/NGSO satcom networks.
- Regulatory harmonization is needed: As the number of LEO satellites increases, the need for a unified global regulatory framework becomes more pressing. This framework should facilitate efficient spectrum allocation, promote frequency sharing, and address challenges like space debris management and data sovereignty. International cooperation and harmonization of regulations will be key to supporting the growth and sustainability of the LEO satellite industry.
- Investment dynamics are shifting: The LEO satellite communications industry requires substantial capital investment, particularly in the short to medium term. This financial commitment is currently dominated by government entities and large corporations capable of sustaining long-term investments. However, as the technology matures and the business case for LEO satcom potentially becomes more favorable, we may see increased interest and investment.
- Sustainable practices need to be incorporated: With the increasing number of satellites, sustainability in space becomes a critical issue. Practices such as responsible satellite de-orbiting and space debris management are essential to prevent the overcrowding of Earth’s orbit. These practices not only ensure the long-term viability of LEO satellite operations but also reflect a commitment to preserving space as a resource for future generations.
- Focus on global connectivity goals needs to be paramount: LEO satellites are not standalone solutions but integral components of the broader connectivity ecosystem. Their role in complementing technologies like 5G, fiber optics, and 6G is crucial for achieving ubiquitous global connectivity. This integration is vital for closing the digital divide and providing seamless communication capabilities worldwide.
The LEO satellite communications industry is at an inflexion point of a connectivity revolution. Its success hinges on a confluence of technological advancements, regulatory support, and strategic investments. By addressing these critical areas, the industry can unlock a future where LEO satellites are integral to a globally connected, technologically advanced world. The next decade will be pivotal in shaping this future, as we witness the deployment of next-generation constellations and the realization of their immense potential across various sectors and applications.
