Satellite Internet: A Connected World?
Why cable internet can’t go global and the economics of global communications
The Cable Problem:
The internet connects individuals from around the world, provides a platform for social discourse, and empowers global commerce. Yet, 35% of the world does has not used the internet in the last three months:
Why is this case? Let’s start with Western Africa as an example, where only 48% of the population is internet users. In Nigeria, 89% of the country has 2G coverage and 37% of the population has 4G coverage.
Why are 2G phone users not using the internet? Beyond device limitations, is internet usage is too expensive: in Nigeria, the average cost per GB is $2.78, much higher than most of the world and very high for a middle-income country. And the internet on a 2G plan is not super useful. Here’s a helpful illustration from an a 2010s Verizon 4G Ad:
One could argue Nigeria could try to upgrade the rest of the 2G cell-towers to be 4G but this would not solve the issues. While this would allow faster data transfer to a cell tower, the cell tower still relies on a fiber “backhaul.”
Broadband (high-speed internet), while seeming like magic, relies on long-range fiber cables:
These cables which stretch across the US, connecting server to server, allow for the rapid fast internet we all enjoy. This network is currently insufficient in Nigeria, with a substantial part of the country out of the reach of fiber:
If someone is too far from one of these “internet highways,” the latency would be too large to allow for fast internet, even if the individual could afford it. There is also the general bottleneck of a sparse intercontinental cable network, needed to connect quickly to servers in the U.S and elsewhere. This particular bottleneck is attempting to be solved with several new cable projects lead by Google and Meta.
Why is it so hard to build fiber coverage? All those miles of cable have to be put into the ground, which is expensive, and in countries with little spending power for an internet plan, it sometimes makes little sense to build it or requires raising the costs of current internet users to fund it.
Another Way:
A different approach from fiber is to have the internet signal go to a satellite and bounce it back to a ground station somewhere that’s connected to the rest of the high-speed fiber network.
How is sending a signal to a satellite ~22,000 miles away in the earth’s atmosphere a cheaper option than laying more cable? It costs at least 50 million to launch a rocket, which usually carries under a 100 satellites. The answer is scale. Where as a cable may only be useful for less than 10km around it, a satellite can cover around a third of the planet.
Extending fiber usually has a flat marginal cost, while extending satellite coverage has a declining marginal cost. This means satellite internet could be theoretically cheaper, with enough scale and users.
In practice, this scale is hard to achieve. The satellite coverage is most valuable to countries whose fiber networks are not effectively developed, which creates a hole in the business model.
Because areas lacking internet generally to not have the income to pay for high speed internet, you would want America and Europe to subsidize the roll-out within Africa and Asia. However, as America and Europe already have enough broadband coverage, that they do not have a good reason to switch to a satellite plan. As it stands, satellite internet companies are not very profitable or have reached the scale to be cheaper.
Despite these challenges, some companies are trying to make satellite internet possible:
The New Players:
Starlink
Where as legacy satellite companies like Viasat and HughesNet will use a few giant “high-capacity” satellites in high earth orbit, Elon Musk’s SpaceX is building a network of thousands of smaller satellites in low-earth orbit called Starlink. The advantage of low-earth orbit is instead of having to send a rocket to 20,000 miles up to install a satellite, one has to go less than 1,000 miles. To be able to stay in a low-earth orbit, satellites sacrifice a lower coverage area and will be out of sync with the earth’s rotation. While not cost competitive with traditional cellular options yet, SpaceX has been able to set up an impressive network of satellites, while testing flights.
SpaceX has effectively enabled this constellation approach by greatly decreasing the cost of a launch to low-earth orbit, making it potentially economically feasible.
Kupier
Amazon is deploying satellites in a similar manner to SpaceX, focusing on low-space orbits. While Amazon aims to help underserved communities, it also functions as a way to test Blue Origin launches, which while not officially an Amazon company is owned by Jeff Bezos (up to 27 of the 83 launches required may be on Blue Origin’s New Glenn Rocket) . Amazon is targeting a network of 3,236 satellites, effectively the size of SpaceX’s current network. Amazon is expected to undercut Starlink on price.
Astrantis
The start-up Astrantis is attempting to improve on the high-altitude orbit approach. Compared to a Viasat’s or HughesNet’s giant satellites, Astrantis aims to focus on a Satellite for a single country.
Backed by Andreessen Horowitz, BlackRock and Baillie Gifford and partnered with the Department of Defense. Astrantis has received 500 million funding to date, has launched in Alaska, and is planning to launch in the Phillipines and Peru.
Implications:
A decrease in space flight costs has allowed for a re-birth of Satellite internet which was before a mediocre business model. There are several big players with strong backing aiming to try new approaches to Satellite coverage. This will definitively lead to an expansion of broadband coverage, filling any coverage gaps lacking by fiber. While it is unclear if costs will be lower, this will likely add hundreds of millions of internet users in the coming decade, especially if the economics allow for the West to subsidize the new internet users.
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Sources:
Internet Usage
https://www.meltwater.com/en/blog/changing-world-of-digital
Nigeria Broadband Plan
https://ncc.gov.ng/documents/880-nigerian-national-broadband-plan-2020-2025/file
Nigeria Internet Costs
https://guardian.ng/business-services/high-internet-cost-forces-people-with-4g-network-coverage-offline/
Day in the Life with 2G
https://www.verizon.com/about/news/vzw/2014/05/a-day-in-the-life-with-2g-speed
Internet Giant Bets Big on Africa, https://www.cnn.com/2022/08/07/africa/google-equiano-subsea-internet-cable-west-africa-spc-intl/index.html
Viasat- How it Works
https://news.viasat.com/blog/satellite-internet/how-it-works-the-technology-behind-satellite-internet
Cost to Launch A Rocket
https://www.nbcnews.com/science/space/space-launch-costs-growing-business-industry-rcna23488
Viasat- Geostationary Satellites
https://www.viasat.com/space-innovation/space-systems/geo-satellites/
Starlink Map, https://satellitemap.space/
European Space Agency- Low Earth Orbit, https://www.esa.int/ESA_Multimedia/Images/2020/03/Low_Earth_orbit
Amazon- Kupier
https://www.aboutamazon.com/what-we-do/devices-services/project-kuiper
Amazon Launch Partners
https://www.aboutamazon.com/news/innovation-at-amazon/amazon-makes-historic-launch-investment-to-advance-project-kuiper
Astrantis- Tech Crunch
https://techcrunch.com/2023/05/24/astranis-novel-approach-to-internet-satellites-is-starting-to-pay-off/#:~:text=Astranis,%20a%20satellite%20internet%20startup,John%20Gedmark%20and%20Ryan%20McLinko.
Astrantis Launching in Phillipines
https://www.cnbc.com/2023/07/11/astranis-satellite-internet-coming-to-the-philippines-next-year.html
