If the two form a partnership to provide broadband access via thousands of satellites, it could transform how you – and the machines that surround your life – will connect to the internet.
Boeing already has a plan to develop, launch and operate a constellation of 3,000 satellites in low Earth orbit. Apple is reportedly in talks with Boeing to be an investor-partner in the project. With Apple on board, hundred-year-old Boeing could beat out the likes of Facebook (FB), Alphabet‘s (GOOGL) Google and Tesla (TSLA) co-founder Elon Musk’s SpaceX in the race to create a new internet in space and capture hundreds of billions of dollars. In the process, Boeing also could disrupt the telecom market and enable emerging technologies, ranging from smart devices to self-driving cars, that are expected to send the appetite for spectrum soaring.
“We are seeing an almost insatiable demand for commercial communication bandwidth,” Boeing CEO Dennis Muilenburg said at a conference earlier this month.
At first glance, the satellite business may seem like a stretch for Apple. But consider that the company has sold more than a billion iPhones globally, sometimes with troublesome connections, and is looking at opportunities further afield such as mobile payments and autonomous driving, which will rely on access to robust, widespread wireless capabilities.
Meanwhile, Boeing has been in the business of building and launching satellites for decades, but isn’t in the mass-market consumer game and is seeing slowing demand for its commercial jets and military planes. Boeing won’t comment on a possible Apple collaboration, but Bloomberg reported in April that Apple hired two Google satellite executives for a new hardware team.
Josh Sullivan, director and senior equity analyst at Seaport Global Securities, doubts that Boeing would work directly with consumers or that Apple would develop rocket technology.
“The most likely arrangement would be for Boeing to supply the satellite delivery and operation expertise and for Apple to handle some of the satellite hardware but more focused on the consumer side,” he said.
Hardware is needed on the ground as well as in space.
The maker of iPhones and iPads would not only provide mass-market expertise, but could offer know-how on miniaturizing technology so that personal gadgets can connect to satellites without bulky equipment. Technology would also be required to prevent data links from rapidly draining the charge from devices that fit in pockets and bags.
“The Large Prize”
Even if an Apple partnership fails to materialize, Boeing will forge ahead with its satellite plans. It has a sprawling factory in Southern California that produces satellites and is retooling it to churn them out faster. Also, Boeing already makes broadband satellites, and last month launched a fourth Boeing-made Inmarsat-5 satellite for Inmarsat’s Global Xpress mobile-broadband network.
Last year, Boeing applied for a Federal Communications Commission license that would help the aerospace giant “contribute to the public interest by injecting new competition and expanded capabilities into the broadband satellite services industry.” Boeing also said in a filing that new satellites would “foster the widespread availability of broadband services, including to unserved and underserved regions and populations.”
Sullivan said Boeing has been reluctant to say how much it will invest in the project and is looking for investors like Apple to keep its research-and-development spending profile low.
But Boeing isn’t the only company that sees the market potential.
Satellite-internet company OneWeb is looking to build a network for global broadband access and is working with Boeing’s European rival Airbus (EADSY) to develop satellites that cost less than $1 million each. That compares with the $130 million price tag for a fifth Inmarsat satellite, which is being built by Europe’s Thales Alenia Space. OneWeb plans to launch the first of its 700 satellites next year and start providing broadband access a year later.
Another rival looming is SpaceX. After disrupting the rocket market, in which Boeing is a dominant player, Musk’s company has plans to build its own constellation of satellites with launches expected to start in 2019.
In November, the company filed a request with the FCC to launch 800 satellites to create a system “designed to provide a wide range of broadband and communications services for residential, commercial, institutional, government and professional users worldwide.” Eventually, SpaceX plans to have more than 4,400 satellites in orbit and has put the price tag at up to $15 billion.
“The only reason you would pursue it would be if there was the large prize of the global communications industry in your sights worth hundreds of billions,” Sullivan said.
In fact, Musk sees so much revenue potential from the business that he said in a video leaked to the Wall Street Journal earlier this year that he wants to use the money from satellites to fund the development of a city on Mars.
Silicon Valley Blasts Off
While existing satellite-based connections are often slower than land-based ones, Boeing, SpaceX and others plan to offer improved speeds by putting satellites at altitudes of less than 1,000 miles vs. more than 20,000, and create overlapping coverage with their massive fleets. Musk wants to capture more than half of long-distance internet traffic.
“Connectivity will evolve away from terrestrial-based connectivity to satellite-based connectivity,” said Ivan Feinseth, chief investment officer for Tigress Financial Partners, noting a satellite constellation’s ability to cover more areas with high speeds.
So far, telecoms like AT&T and Verizon have been quiet on the subject of satellites, while Silicon Valley has taken steps to enter the space.
Eventually tech firms will want to provide their own wireless services, Feinseth said, pointing out that tech giants have plenty of cash on hand and could use it to further their business models by increasing connectivity and access to their products online.
Facebook built its AMOS-6 Satellite with France’s Eutelsat Communications to help bring the internet to remote locations. But it was destroyed last year in a launch accident involving a SpaceX rocket. And while not a satellite effort, Google’s Project Loon uses balloons to expand internet coverage to rural areas across the globe. Google has also invested in SpaceX’s venture.
“The providers of connectivity aren’t even looking at alternative sources of connectivity, but the ones that use the connectivity are,” Feinseth said.
The challenge from the tech sector is also coming on the launch side. After seeing Musk succeed with SpaceX, his billionaire peers are jumping in too.
Microsoft (MSFT) co-founder Paul Allen’s Stratolaunch and Orbital ATK (OA) have partnered to build the world’s largest plane, with a wingspan of 385 feet and six engines, designed to carry rockets to the edge of space that will deliver 1,000-pound satellites into orbit.
Blue Origin, Amazon.com (AMZN) founder Jeff Bezos’ space company, is building its own New Glenn launch vehicle to deliver satellites for OneWeb.
Not to be outdone, Boeing is working with the Pentagon’s secretive Defense Advanced Research Projects Agency to build the XS-1 Phantom Express, an experimental reusable space plane that would be able to launch satellites. The plane is expected to fly five to 10 times the speed of sound.
How To Connect 20 Billion ‘Things’
To be sure, the explosive growth in the Internet of Things will likely leave plenty of demand, especially in local traffic, for land-based providers of internet connections, which may have to form a hybrid network with satellites to accommodate the sheer volume of data. OneWeb even plans to partner with land-based providers.
Market-tracker Gartner estimated earlier this year that the number of connected “things” will jump by 31% this year vs. 2016, to 8.4 billion, then more than double to 20.4 billion by 2020.
Automotive systems, smart TVs and digital set-top boxes are driving the consumer side, while smart electric meters and commercial security cameras are driving business demand, Gartner said in February.
“Connectivity services and consumer services will grow at a faster pace,” said Denise Rueb, research director at Gartner, in a statement. “Consumer IoT services are newer and growing off a small base. Similarly, connectivity services are growing robustly as costs drop, and new applications emerge.”
In addition to finding cheaper ways to launch satellites, the costs of the satellites themselves must come down. One way is to mass produce satellites the size of a golf cart rather than custom build a satellite the size of a bus.
Boeing, which has streamlined its satellite operations, is looking at 3D printing and automated testing to optimize manufacturing and follow methods already used in making small satellites, according to the Wall Street Journal.
While the segment that includes satellites accounted for just 7% of Boeing’s total revenue last year, CEO Muilenburg said in April that the satellite business is a “growth area” that “thrives on industrial partnerships.”
Moreover, it could be key to Boeing’s long-term future as the era of the space-based internet approaches and looks to eclipse the land-based internet.
“The large industrials have to change their business models,” Sullivan said. “They’ve been around for 100 years and their business models had evolved slowly, but now they need to evolve more quickly.”
Source: Investor’s Business Daily News