Will Amazon Get into the LEO Constellation Business?

Connectivity service providers, at a practical level, have to define their competition as “other connectivity providers” in a tactical sense. When assessing market share, they benchmark against other firms selling the same products.

At a strategic level, few really believe their main competition is “other connectivity firms,” anymore. Instead, the key strategic challengers are big application and platform suppliers who supply the end user value enabled by networks.

But, sometimes, the strategic foes become tactical realities. So it is that Amazon plans to launch a constellation of low earth orbit satellites, which will instantly make Amazon a global internet service provider.

Project Kuiper is the code name for a “big, audacious space project” involving satellites and space-based systems. Filings made with the International Telecommunications Union provide some outlines.

The proposed constellation will feature 3,236 satellites in low Earth orbit — including 784 satellites at an altitude of 367 miles (590 kilometers); 1,296 satellites at a height of 379 miles (610 kilometers); and 1,156 satellites in 391-mile (630-kilometer) orbits.

One might question whether all the major LEO constellations will be sustainable. So far, the big ventures include SpaceX, OneWeb, Telesat and Leosat, though a few other firms, including Boeing and Facebook,  also have been talking about the possibilities.

Virtually nobody thinks the market is big enough to support all those ventures. So consolidation will happen, and some of the ventures will not launch.

Still, the point is that sometimes a strategic rival (firms generating lots of value and revenue in the ecosystem) also becomes a very-tactical rival (firms actually competing in connectivity services).

The emergence of such competition is one reason long-term revenue and profit margin prospects for connectivity providers are decaying.

Some estimate there could be a radical 85 percent reduction in tier-one and tier-two firms globally.

Consolidation lies ahead for most telcos in Asia, according to J.P. Morgan, and possibly for most telcos globally, according to Nokia Bell Labs.

Where there now are 810 telecom service providers, there will be but 105 by 2025, says Bell Labs. That consolidation of about 87 percent in seven or eight years would be beyond comprehension, for most of us, and would be an apocalypse for most in the industry.

Capgemini calls an era of massive consolidation  on a “spectacular” level. New competition from one or more global LEO constellations is just part of that basic story.