Wednesday, June 10, 2015

Global Telecom Business is Getting More Unstable

The global telecom business has been getting more competitive for decades, starting with a wave of privatizations of former government monopolies in the 1980s as well the authorization of competition in the business.

Add on the impact of the Internet, and the growing ability to provide any service over the Internet, and the challenges have grown far beyond the mere threat of competition from other telcos.

Over the past couple of decades, mobile networks have begun to take customer share as well, shifting buying towards mobile services, and away from fixed.

Now satellite services threaten to become a major factor for Internet access globally, especially in regions where the cost of traditional service is prohibitive.

Space Exploration Technologies (Space X) has asked the Federal Communications Commission for permission to create and launch a new  low earth orbit satellite constellation of thousands of satellites that would be able to provide Internet access at unprecedented speeds anywhere on the globe.

The LEO constellations now proposed would provide a key challenge to fixed or mobile facilities in the Internet service provider business, at least in terms of coverage. In principle, every inch of the earth’s surface would be covered.

The unknown issue is the business model. It isn’t clear what the retail pricing would be, or how much market share any LEO constellation might be able to obtain.

The proposed Space X constellation would change Space X from a launch company to an Internet service provider.

That illustrates both the growing instability in the broader communications business, possible in large part because there are increasing incentives for Internet ecosystem providers to enter adjacent niches.

In other words, specific application, device or infrastructure providers can find lucrative an expansion into the actual Internet service provider business.

Orbiting the earth at just an altitude of around 750 miles, the new constellation would orbit at lower than conventional communications satellites at 22,000 miles.

That has huge implications for bandwidth and latency, potentially enabling bandwidth between 50 Mbps and gigabits for any specific end user, a huge and qualitative advance over what has been possible in the past.

In a non-related development, Facebook and Google reportedly have abandoned potential plans to launch their own geosynchronous satellites for Internet access services. One might argue the upsurge in LEO plans makes geosynchronous a largely non-competitive alternative, in terms of the amount of bandwidth any single customers can get, at any specific hard-to-reach location.

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