Last year, I spent a couple of articles analyzing the business models and underlying infrastructure tied to low earth orbit satellite connectivity. In my first contribution on the topic, I focused on evaluating the differences between Starlink’s and AST SpaceMobile’s approaches, ultimately calling the latter my winner based on the strength of its architecture and of its business model for facilitating direct-to-smartphone connectivity. My follow-up contribution late last summer focused on AST SpaceMobile exclusively, based on my visit veiled in secrecy as the first outside person to tour its facilities in Midland, Texas. That experience cemented the findings from both my initial evaluation and the subsequent news about AST SpaceMobile’s progress in moving from proof of concept to production readiness.
Recently, more big news broke about AST SpaceMobile’s funding by Google and two of the largest mobile network operators in the world—AT&T and Vodafone. I purposely waited for the dust to settle before weighing in with my thoughts. That's an essential consideration within my line of work as a technology analyst so I can maintain objectivity and balance all the facts. Additionally, a lot has changed recently in terms of the competition among LEO satellite service providers. Let's examine some of the top players, then dive deeper into the recent AST SpaceMobile funding news and what it means for this market segment.
(Note that AST SpaceMobile is not a client of Moor Insights & Strategy. We do have client relationships with Amazon, AT&T, Google and T-Mobile, but this article reflects my independent viewpoint as an analyst.)
LEO Is Becoming A Crowded Space
You could rightly state that LEO satellite services are becoming a crowded space—pun intended. Amazon has been quickly advancing its Project Kuiper initiative to provide a fixed wireless access service with more than 3,000 LEO satellites to compete with Starlink. It’s promising, especially because it marries satellites to the power of AWS cloud services for resiliency and scale, but the service also requires incremental equipment similar to Starlink’s core offering.
Meanwhile, OneWeb, which was one of the first emerging LEO services, has been fraught with starts and stops. After emerging from bankruptcy in 2020 with investments from Softbank, Hughes and Bharti—and more recently a merger with Eutelsat Group—OneWeb is now beginning to make progress. With that said, it’s been a painfully slow ramp that might create doubt about the company’s long-term viability, especially given its past execution miscues. Honorable mentions in this market include geostationary satellite orbit service provider Intelsat in partnership with OneWeb, Lynk Global’s recent collaboration with Rogers and narrowband IoT LEO service provider Sateliot. These round out a broad field of companies all vying for a piece of the LEO satellite service pie with a combination of FWA, IoT and direct-to-smartphone offerings.
This raises two million-dollar questions: is the number of LEO satellite service providers unsustainable, and are concerns about cluttering the sky warranted? The answers are yes and yes. I expect next month's Mobile World Congress Barcelona event to continue the drumbeat for many of the companies I have just mentioned. However, in practical terms, leadership in this field has narrowed down to two players that have the potential to truly bridge the global digital divide: Starlink and AST SpaceMobile.
Starlink And AST SpaceMobile Direct-To-Smartphone Progress
Starlink first announced its intended launch plans with T-Mobile on August 25, 2022. In true Musk overpromise-and-underdeliver fashion, it took SpaceX nearly 18 months to launch its first set of Starlink satellites that are designed for standard smartphone interoperability; the company began testing of its newly minted “Direct to Cell” capabilities only this month. During that time, Starlink also signed agreements with five other operators, most notably KDDI in Japan and Rogers in Canada. So Starlink is making tangible progress in its promise to bring satellite connectivity to standard, unmodified terrestrial handsets and devices, but, again, this testing is only beginning.
By contrast, AST SpaceMobile has been in the test phase of its LEO satellite direct-to-smartphone service since the successful deployment of its BlueWalker 3 prototype satellite on November 10, 2022. Since then, the company has achieved critical milestones, most notably the first 4G LTE voice call in June of last year, followed by a 5G voice call last September. It is also worth pointing out that AST SpaceMobile has more than 40 signed agreements and understandings with mobile network operators worldwide that represent a combined 2.4 billion subscribers. That footprint is substantially greater than Starlink’s, likely because AST SpaceMobile is not competing with carriers for home broadband services. The latter is an important point to highlight, given that FWA service has emerged as the first killer use case for 5G, as evidenced by its adoption as a prime alternative to cable and in regions underserved by fiber.
AST SpaceMobile’s Recent Funding
The recent funding announcement represents a watershed event for AST SpaceMobile. It validates the company's viability from the standpoints of testing and the maturity of its architecture and business model. My take is that Google’s investment aims to ensure that its Android device platform works flawlessly with LEO services. This is likely a defensive strategy to compete with Apple’s support of satellite-to-smartphone text service for the latest generation of iPhones. Apple’s traditional closed ecosystem may slow its progress with satellite communications in comparison to Google’s more open Android OS and the partnership with AST SpaceMobile.
As a new investor, AT&T is finally putting real money behind its partnership with AST SpaceMobile, which by my estimation has existed twice as long as the collaboration between Starlink and T-Mobile. This investment could accelerate AT&T's time-to-market and the eventual monetization tied to satellite-to-terrestrial connectivity. I also expect AT&T to lean into its deep security capabilities as part of this venture. Combining that with AST SpaceMobile's connectivity middleware could birth some attractive service delivery models for large enterprises operating in remote regions.
Finally, through this new round of funding, Vodafone Group cements its opportunities to extend coverage in Europe, Asia, Oceania and Africa. Countries such as Australia that have large, remote expanses of land will benefit tremendously from LEO satellite coverage—and will do so without needing costly incremental equipment that would be a tough sell in many developing market regions such as Africa.
Wrapping Up
I believe 2024 will be the year of LEO satellite service. It's decidedly a crowded space right now, and consolidation will likely occur over time as the players move from testing into production service delivery. As of today, I stick by my initial assessment that AST SpaceMobile maintains a decided edge in this market, given its continued technical progress and the recent round of funding. Google is a tech behemoth that brings an accomplished engineering team to further AST SpaceMobile’s efforts. On top of that, with AT&T and Vodafone as strategic investors, AST SpaceMobile is partnered with two of the largest mobile network operators globally. All of that lays a solid foundation for AST SpaceMobile to reach its commercial services objective in the first calendar quarter of 2024.
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January 27, 2024 at 01:50AM
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Is 2024 The Year Of Low Earth Orbit Satellite Services? - Forbes
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