Over the past few years whilst the COVID-19 pandemic has rendered ambitious high scale projects largely redundant, one notable sub-sector of the communications market has seen a glut of announcements suggesting that an increased appetite for data services amongst global populations is fuelling a rise in satellite services (a manufacturing market in which the UK has a significant presence, providing over 25% of the world’s big telecoms spacecraft).
By way of recent example in April 2021 the London-based satellite operator OneWeb (a joint venture between the UK Government and India’s Bharti Global) announced it had just launched its sixth batch of broadband internet spacecraft from a site in East Russia and, in July 2021, Quantum (another UK based technology company) also announced that it had launched a “next generation” communications satellite on behalf Eutelsat to provide services to North African and Middle Eastern economies from a site in French Guiana.
The use of satellite technology to provide broadband access and other services to both developed and developing economies has long been an aim of the producers of such technology and the importance (especially) of data services in driving diversified service economies has led to an undoubted uptake in engagement, driven (in part) by the needs of hyperscalers to provide localised geographic data services in economies not overly reliant on the more traditional submarine cable market and fibre interconnections provide by local communications providers. OneWeb has announced it is on track to offer full global coverage in 2022 with a constellation of 648 low-earth orbit (LEO) satellites. Likewise Amazon’s “Project Kuiper” announced in 2019 that it would invest $ 10 Billion in providing a constellation of 3,236 LEO satellites over the next decade following approval from the US Federal Communication Commission.
The providers of this satellite communications technology are very confident that their investment will be worthwhile with the Euroconsult financial, social and economic health study of 2019 predicting the Eutelsat/ Quantum project would have €20 of general return for each euro invested.
This optimism however needs to be weighed against the legal and regulatory issues that the provision of such services could be met with in a number of large/ growing economies, particularly in the Middle East, Asia and Africa, where a technology, being global by design, is met by regulations that are (save in certain circumstances) distinctly local in implementation.
It is fair to say that the costs of licensing, the availability and utilisation of spectrum and national security concerns all present significant barriers to entry in certain growing economies. There are also clear tensions being seen in the entrance of (inter alia) OneWeb, Amazon and Elon Musk’s Starlink (already with 1600 satellites in orbit) to provide data services in economies previously dominated by traditional communication providers. It would be wrong to attempt to characterise too broadly trends that may affect the growth of the satellite broadband, as each government and/or regulator and/or market will have its own unique issues and approaches to the technology. The current example of India (a market with some 600 million internet subscribers) is a useful microcosm of how licensing and spectrum utilisation could underline a growing tension between the new generation of satellite providers and the traditional single-market communications providers.
Whilst Amazon has not announced specific plans for market entry into India, OneWeb has announced plans to offer services in India from May 2022 and the recent Indian government’s consultation showed a clear divide between how communications providers and satellite entrants viewed policy concerns over spectrum and licensing, with the latter demanding light touch regulation and the free availability of spectrum (delineating between “terrestrial spectrum” and “satellite spectrum”) and the former believing that only via a spectrum auction could a scarce national resource be protected and an even playing field at the national level be maintained.
The spectrum issue is, of course, just one likely battleground between communications licensees and the satellite providers: in most jurisdictions communications licensees are also subject to onerous obligations relating to national security, universal service and the provision of internal information (including accounting information) on request to regulators that are unlikely to sit well with global enterprises with complex revenue streams and limited in jurisdiction presence. A further potential issue is the payment of License fees within certain jurisdictions (particularly in Africa) where high initial licence fees are a prerequisite to establishing market entrance and others (particularly the Middle East states) with lower initial fees but requiring a percentage of the profits derived from licensed services within the jurisdiction to be paid to regulators (which would create a complex legal argument as to where a satellite provider would actually “provide” its service to a customer, regardless of the location of that customer). To some degree the recent EU Commission considerations from 2019/2020 over its “Google Tax”, and how to bring historic laws and regulations in line with the digital age, may give some indications as to the types of legal and regulatory issues likely to be precipitated by the rise of the satellite broadband providers and those that regulators and governments are having to balance and decide upon as the world emerges into a post-pandemic economy.
With Fortune Insights predicting that the global satellite communications market is expected to hit $46.5 billion by 2028 (from a projected $25.33 billion in 2021) the scramble to win the “new space race” will require regulators and governments to decide how these issues should be addressed, weighing the benefits of global connection as against the needs of “local” providers and populations.
A telecommunications satellite has gone into orbit that UK industry hopes will help maintain its global leadership in the sector.