By Blaine Curcio

With many LEO constellations in early phases of deployment, it is looking increasingly likely that there will be multiple LEO constellations offering communications services sometime in the next decade. This is supported by the fact that, if one constellation—say, a western constellation—were to be successful, and to prove a strategically important technology, countries such as China would likely ramp up investment into their own LEO constellations (something that is already happening), leading to multiple LEO constellations from multiple countries. This would lead to a number of significant impacts on the LEO constellation industry.

A War Over Landing Rights

If LEO constellations are to fulfill their promise of providing internet access anywhere in the world at anytime, then having both an American and a Chinese constellation would indeed be very interesting. At a time when tech visionaries are already predicting a splitting of the terrestrial internet, the same could be envisioned to happen in LEO.

LEO constellations, by their very nature, have global coverage. As such, a constellation launched by China would not be aiming to serve only China. The most logical markets for a Chinese constellation might include various Central, South, and Southeast Asian countries, Sub-Saharan Africa, and generally any other “Belt and Road” countries. In fact, when looking at the unconnected billions that OneWeb, StarLink, and others hope to connect via their LEO constellations, the majority would live in developing countries that are disproportionately friendly towards China. For example it would be difficult to envision Pakistan giving landing rights to OneWeb or StarLink over a Hongyan or similar, given the degree of economic integration, investment, and general political goodwill between China and Pakistan, especially relative to the relationship between the United States and Pakistan.

This could lead to a sort of land rush for landing rights, particularly if most individual countries do decide to only allow one LEO constellation to have landing rights. Such a scenario could lead to some very interesting outcomes—countries that play it smart might hope to monetize their citizen’s data or otherwise use market access as a bargaining chip with the incoming LEO constellations. Overall, with at least one LEO communications constellation launching from the west, and at least one from China, landing rights will be a precious resource that the constellations must collect in order to have any chance of profitability. 

Division of Demand

Extending on the war over landing rights will likely be a bifurcation of demand. Simply put, if companies like airlines, telcos, and service providers—companies that would oftentimes have international demand, and would be nationally strategic to some extent.

In the future, if airlines were to start using LEO constellations, it is hard to imagine Air China, China Southern, or others choosing a western LEO constellation, if there is a viable Chinese alternative. This is particularly true given that at the end of the day, these companies would have the same ultimate owner, the State-Owned Assets Supervision and Administration Commission (SASAC).

This demand bifurcation could be exacerbated to differing degrees based on which Chinese LEOs—if any—do come to fruition. Galaxy Space—potentially the most well-funded private LEO constellation in China—has received funding from Shunwei Capital, and endorsement from the CEO of Xiaomi. Potential IoT demand from Xiaomi and other Chinese tech companies would likely be served by Chinese LEO constellations, with the same to be said about Chinese telcos, shipping companies, etc. This would open the door to demand bifurcation, a phenomenon separate, but also distinct from the war over landing rights. At an even more long-term timeline, verticals such as autonomous drones or self-driving cars would also be candidates for demand bifurcation, given the strategic implications of these industries.

At the end of the day, this will impact the ROI and business case for LEO constellations, as it implicitly limits the market to a certain slice of the global market, albeit a potentially big slice.

Spectrum Crunch

The variety of LEO constellations are, for the most part, competing for the same or similar spectrum. This will lead to complications, given that spectrum is a limited resource, and coordination issues will become significantly more complex when the number of satellites increases to hundreds or thousands, and when these satellites are using many GHz of spectrum.

Inevitably, constellations will need to start moving towards Q-band and/or V-band, with some satellite operators having already started to experiment with this part of the spectrum. Satellites will also become more sophisticated in terms of the type of communications performed, including incorporating inter-satellite links and more complex communication algorithms. On the whole, should LEOs start to create new business opportunities, a spectrum gold rush would inevitably occur.

Conclusions

The return of LEO constellations has attracted billions of dollars in funding in several different markets, with over a dozen constellations under various levels of planning. While still too early to name winners in this LEO constellation race, it is increasingly clear that at least one western company, and at least one Chinese company, will launch a LEO constellation.

This will likely lead to a land rush for landing rights, a degree of demand bifurcation, and increased pressure on spectrum, particularly if several constellations were to launch.