Market Potential of Direct-to-Device Service Hotly Debated
Both Iridium and Lynk target the direct-to-handset universe, but they're seemingly worlds apart on their appraisal of potential market size for the service, with CEOs of the two companies frequently disagreeing during a panel Monday at Satellite 2023. The scant mobile network operator (MNO) investment in such supplemental coverage from space (SCS), and almost no one from the wireless industry attending the panel, is telling, Iridium CEO Matt Desch said.
"We are way overblown in terms of expectations," Desch said. He said legions of questions about SCS remain unanswered, such as what the user experience will be like; whether it will be a regional service or if there's a global, paying customer base; and the speed of the data service that will surely come.
Largely agreeing with Desch, Don Claussen, ST Engineering iDirect CEO, said SCS is "probably not" a billions of dollars potential market.
Lynk CEO Charles Miller disagreed. SCS "is going to grow to be the biggest category in satellite" with revenue potential of hundreds of billions, given the billions of mobile devices and the billions of people worldwide wanting better service, Miller said. He said a system like Lynk's, designed from the outset for handset service, is vastly more affordable and readily profitable. "There is no unobtanium" in Lynk's business plan, he said: "The financials make sense."
SCS can be divided into three separate classes of device-centric, MNO-centric and satcom network-centric, Desch said. The first class involves operators like Iridium and Globalstar, and will be in many phones in the next year or two, he said. Device-makers are investing heavily, he said. The second, reusing terrestrial mobile spectrum, requires many regulatory approvals, with "a lot" of lawsuits as satellite use of terrestrial spectrum interferes with other operators, he said. He said those legal and regulatory fights will be a big governor of the service rollout's pace. The third tranche would see holders of L- or S-band spectrum building networks in space specifically for SCS coverage. That won't face major regulatory challenges and is the most efficient user of spectrum, but not much money has been committed so far to that approach and such service is likely at least five to 10 years away, Desch said.
Miller said scaling up to provide service to billions of devices, "where the biggest prize is," requires being fast to market and having particularly inexpensive satellites. He said Lynk is starting with the MNO-centric approach, with 27 commercial contracts with MNOs in 41 countries and service to start this year. Miller said Lynk in the future is looking to expand to S, L and C bands and to globally scaled service.
Total MNO industry investment in satellite service and tech has probably been less than $50 million, Desch said. He said SCS service will take 15 years to fully roll out and its scope will depend on both that investment level and investors' patience.
MNOs "are very conservative," Miller acknowledged, but added other investment routes are available.
Desch said the market will start with higher-end users, who are “willing to pay a little bit more.” But widespread use globally faces difficulties in poorer nations, he said.
Miller disagreed the service will be inherently unaffordable for many consumers. He said partnering with MNOs lets them set affordable pricing, and Lynk will start generating revenue this year from some markets. He said interference is possible when sublicensing MNO spectrum, but Lynk is starting with areas where the geography helps. Citing more-difficult regions like Europe, he said, "We won't start there."
Jonathan Hofeller, SpaceX vice president-Starlink and commercial sales, said SpaceX will start testing data service later this year. He declined to say when voice service will likely become available. Noting SpaceX earlier this month announced partnering with Swiss telco Salt to supplement its mobile coverage, he said SpaceX is in talks with a variety of others.
Satellite interests said that, aside from their customer bases and spectrum, MNOs also need to put marketing heft behind SCS service. Claussen said they also can help change what has long been a siloed satcom culture and help bring about more standards-centric interoperability.