Amazon Takes On SpaceX in Battle for Space Internet – The Journal.

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Ryan Knutson: Amazon is best known for its massive e-commerce business, but it also has its hands in a lot of different industries. Here’s our colleague, Micah Maidenberg.

Micah Maidenberg: Amazon recently bought MGM. They create television programming. Now, they have this big movie studio. Whole Foods, that’s another business unit of Amazon. Whole Foods, grocery. They have a cloud computing operation that has grown really rapidly over the last few years.

Ryan Knutson: And now?

Micah Maidenberg: Amazon wants to sell internet services, internet connections.

Ryan Knutson: They want to sell internet connections from space. Earlier this month, Amazon announced what it called the biggest rocket launch deal in commercial space history. To provide internet services, it needs those rockets to send satellites to space.

Micah Maidenberg: And they said that they had signed deals with three different rocket launch providers to conduct, over a five-year period, up to 83 different launches. It’s a big deal because Amazon’s a big deal. They’re a powerful company that have transformed, I think it’s fair to say, a number of different industries they’ve gotten involved in, in the past. The question is, can they do it for satellite-based internet services?

Ryan Knutson: Welcome to The Journal, our show about money, business and power. I’m Ryan Knutson. It’s Monday, April 18th. Coming up on the show, Amazon’s ambitious plans to sell internet connections from space and the big competitor it’s up against.
Accessing the internet to do things like stream YouTube or download this podcast might seem like it’s wireless, but there are actually a lot of wires involved. Your wifi at home plugs into the wall, which runs a wire out to the street. Even your cellular connection, over LTE or 5G, is coming from a cell tower which, in most cases, is plugged into a wire. Installing all those wires everywhere is really expensive and time consuming, and there are a lot of places on Earth where it’s really difficult to do, like in rural areas or in the mountains, which means there are millions of Americans and billions of people around the world who don’t have reliable access to the internet. And for a long time, tech companies have been dreaming about a way to solve this problem and get internet access to more people. Facebook wanted to do it with solar-powered drones.

Speaker 3: The plane, named Aquila, is designed to fly for 90 days above weather systems, bringing in connectivity to remote regions where cell towers or fiber-optic cable may be difficult to deploy.

Ryan Knutson: And Google had something called Project Loon, which tried to deliver high-speed internet using helium balloons.

Speaker 4: Loon is a network of free-floating, stratospheric balloons. And each Loon balloon has an antenna that provides the internet, kind of as you can imagine this cone of coverage on the ground.

Ryan Knutson: Neither of those projects came to fruition, but the tech industry hasn’t given up. And in 2019, Amazon announced an internet project of its own.
Project Kuiper?

Micah Maidenberg: Kuiper.

Ryan Knutson: Kuiper?Kuiper?

Micah Maidenberg: Yeah.

Ryan Knutson: K-U-I-P-E-R. I have no idea how to pronounce that.

Micah Maidenberg: Yeah, Kuiper. Project Kuiper.

Ryan Knutson: The project gets its name from a 20th century Dutch astronomer. Here’s how Amazon describes the mission in a promotional video.

Speaker 5: Project Kuiper is setting out to extend high-quality broadband internet access by implementing a constellation of satellites in low earth orbit, 3,236 satellites.

Ryan Knutson: The idea is that by putting thousands of satellites into low earth orbit, you can deliver high-speed internet to basically anyone on earth without having to lay wires all over the planet.

Micah Maidenberg: The concept is basically, all you really need is a satellite dish and the ability to orient it toward the sky and connect with this fleet of satellites that are orbiting around you. You don’t need on-the-ground infrastructure that traditional telecom providers would have to build out.

Ryan Knutson: And if Amazon can make it work, there’s potential to make lots of money.

Micah Maidenberg: It’s an attractive idea because you can sign up millions of people who are paying a monthly subscription for you, presumably, to get internet that’s very fast and very reliable. If you have this network of satellites that are floating around in orbit, you could provide access to people in Alaska, in India and the south Pacific and people on mountaintops and remote, rural areas. The potential subscriber base expands dramatically. In theory, the size of the market for global broadband from consumers, from businesses, from government agencies, is enormous.

Ryan Knutson: Amazon’s idea of delivering the internet using thousands of satellites isn’t exactly new. Companies have been using satellites to deliver the internet for years, though historically the speeds haven’t been very fast, and Elon Musk’s company SpaceX has been working on it since 2015 with a service called Starlink.

Micah Maidenberg: SpaceX rolled out Starlink in 2015, announcing that they are going to build this satellite-based internet service.

Ryan Knutson: SpaceX hopes that Starlink will be a big money maker, one that’ll help fund its ultimate ambition of sending humans to Mars.

Micah Maidenberg: SpaceX had been around for a while and had been concentrating on building rockets, launch vehicles to transport cargo and people, ultimately, into space. But the size of that market, just in terms of the potential revenue you can glean from it in any given year, is much, much smaller than what you can imagine the global demand for high-speed internet is.

Ryan Knutson: Mm-hmm (affirmative). If you can get tens of millions, or maybe even hundreds of millions, of customers paying you every month for their internet service, that could be like a good stream of cash.

Micah Maidenberg: SpaceX has imagined that Starlink essentially could be the revenue generator to help it finance its goal of sending people to Mars because again, the idea is the size of the launch market in and of itself is not big enough to generate the kinds of funds to make what would be obviously a historic, interplanetary trip possible.

Ryan Knutson: Mm-hmm (affirmative). I imagine going to Mars is not cheap.

Micah Maidenberg: Yeah. I think that is a safe assumption you could make, Ryan.

Ryan Knutson: If Elon hopes Starlink will help fund its mission to Mars, what’s the business case for Amazon to do it?

Micah Maidenberg: It’s sort of like asking the question of, “Well, why did Amazon buy Whole Foods? And how does Amazon Web Services fit into an e-commerce company?” Amazon, as we’ve seen over time, has chosen to make these bets on different kinds of businesses, whether it’s selling salad greens at the grocery store or tablet that you can read a book on or creating a logistics network that can deliver a T-shirt to your door within one day. The company says that Project Kuiper is going to provide high-speed, low-latency broadband to places where they don’t have reliable connectivity right now.

Ryan Knutson: I suppose if you’re Amazon, a company that depends on people being able to access the internet in order to buy things on Amazon, the more internet access people have, the better it is for your business.

Micah Maidenberg: Yeah. That’s a good point.

Ryan Knutson: When Amazon announced it was getting into the space internet game, Elon Musk didn’t give the company a warm welcome. He tweeted at Jeff Bezos the word copy followed by a cat emoji. The dig was just the latest in a long-running fight between Musk and Bezos. The two have been sparring over their space ambitions for years.

Micah Maidenberg: It happens in a couple of different ways. In one lane, SpaceX is competing with Blue Origin. That’s the space company that Jeff Bezos owns. In another way, SpaceX through Starlink is competing with Amazon, which of course wants to build a its own internet-based satellite system. And of course, Jeff Bezos was the founder, long-time CEO of Amazon and is still on their board. So for example, in 2021, Blue Origin sued the federal government over NASA’s decision to award SpaceX a contracted build, a vehicle to take astronauts down to the surface of the moon.

Ryan Knutson: At a conference last year, Musk took a jab Bezos over the lawsuit.

Elon Musk: I think he should put more of his energy into getting to orbit than lawsuits. You cannot sue your way to the moon.

Micah Maidenberg: You can’t sue your way to the moon. Musk has also tweeted lewd comments about Blue Origin’s projects in space related to the moon lander. Musk said, basically, that Bezos “can’t get it up to orbit LOL” in a tweet about Bezos.

Ryan Knutson: Real mature. Did Bezos tweet back?

Micah Maidenberg: I don’t believe he did.

Ryan Knutson: But is this business of delivering the internet from space even worth fighting over? That’s after the break.
In the race between Elon Musk’s Starlink and Amazon’s Project Kuiper, Starlink is way ahead. It’s launched more than 2200 satellites into space, and it already has 250,000 customers.

Micah Maidenberg: Starlink is out to a big lead in providing internet services through this fleet of satellites that are already on orbit, and they’ve got rocket vehicles that they can use to send those satellites and send more of them up. And so Amazon has not launched anything to orbit yet. That gives you a sense of how Starlink is in the pole position right now, in terms of satellite-based internet services.

Ryan Knutson: There’s also the fact that SpaceX happens to be a space company.

Micah Maidenberg: One difference between SpaceX and Amazon, of course, is that SpaceX has its own in-house rocket technology, its own launch vehicles that it can use to send satellites to space and Amazon, as big as it is, does not. So Amazon has to go out to the market and hire rocket companies to provide those transportation services.

Ryan Knutson: But earlier this month?

Micah Maidenberg: Amazon made a big splash into the launch market and they said that they had signed deals with three different rocket launch providers to conduct, over a five-year period, up to 83 different launches. That might not sound like that many if you think about how many flights take off from a busy airport every day, but space launches are still relatively rare, so 83 over a five-year period is a pretty big play in the launch market. They’re going to be sending up a lot of satellites in the coming years.

Ryan Knutson: But even though these companies are marching forward, Micah says there are still lots of questions about whether this whole idea will really even work. For one, putting satellites into space can be technologically difficult and very expensive.

Micah Maidenberg: Part of the challenge technically is simply developing a satellite model, manufacturing it at scale, thousands of them, and then getting those satellites into orbit and then being able to continually replace those satellites with newer versions. It’s not that building infrastructure in space, so to speak, is without major costs either. Amazon, for example, has talked about spending 10 billion dollars on Project Kuiper. Elon Musk has talked about spending up to 10 billion dollars on Starlink before it fully starts generating cash, and then there’s going to be ongoing investments following that.

Ryan Knutson: Then there are the regulatory hurdles.

Micah Maidenberg: Just because you have a fleet of satellites that in theory can provide high-speed internet around the world doesn’t mean you can just start selling internet services immediately.

Ryan Knutson: The companies need permission from each country’s government where they hope to sell service.

Micah Maidenberg: The Federal Communications Commission, the US regulator, has permitted part of the fleet that Starlink wants to build out and has allowed Amazon to send up around 3,200 satellites, but the FCC only lets you provide high-speed internet services in the United States. If you’re a company offering this service and you want to offer satellite-based broadband in in Brazil or India or Australia or Tunisia or wherever it may be, it’s not automatic. And that can be a time-consuming process, and you have the risk that the regulator will say no.

Ryan Knutson: Then there’s the issue of space clutter. If Starlink, Project Kuiper and other companies start sending thousands of satellites into space, there’s a real risk that they could start crashing into each other.

Micah Maidenberg: I mean, there’s a lot of concerns about what it means to send (inaudible) hundreds of thousands of relatively small satellites into the lower bands of orbit around earth. How do you make sure that they all have space and don’t run into each other, creating debris? How do you avoid that scenario where you have crashes which create more debris, which potentially creates more crashes and so on and so forth? So there’s a lot of academics and government officials and company analysts trying to figure out what the capacity for having assets in space may be.

Ryan Knutson: Amazon and SpaceX have both said they’ll do what they can to minimize space debris. And then there’s perhaps the biggest question. Will enough people be able to pay for it?
Right now, Starlink charges nearly 600 dollars for the equipment customers need to get the service up and running. And after that, it’s 110 dollars a month. Amazon hasn’t said how much it’ll charge customers for Project Kuiper.

Micah Maidenberg: I remember I had one analyst tell me last summer that if you look around the world at where customers are who can afford to pay around a hundred dollars a month for high-speed internet service, it’s the US. And big parts of the US are already relatively well served by high-speed internet.
Now, I don’t want to say that it’s everywhere, that you can get great, high-speed internet everywhere, but analysts have asked me, “Look, the idea that you can go to relatively poorer countries and charge a hundred dollars or 110 dollars a month for internet service is a challenging one.”

Ryan Knutson: Given all these challenges, why do you think two major companies are still trying to pursue this?

Micah Maidenberg: I mean, Jeff Bezos himself has said, “I can’t tell you that Kuiper will generate returns on the capital that we’re investing in it.” He said he believes it will, and they’re working hard to make sure that’s the case, but it’s a risk.
Again, part of the calculus is this ambition, this hope and dream that you can have tens of millions, maybe even more, people signed up, paying you that monthly charge, using your technology to get their internet. The returns are, in theory, very lucrative.

Ryan Knutson: There’s huge potential, but the companies still have a long way to go.

Micah Maidenberg: SpaceX said a few years ago that they imagined that Starlink would have more than 40 million subscribers by 2025. I mean, it’s not 2025 yet, but they have roughly 250,000 subscribers at present. Could they meet that earlier goal? I don’t know. I mean, they have, in theory, a couple years, about three years left, to try to do that. But whether they can build these businesses that have never been built before is an open question.

Ryan Knutson: That’s all for today, Monday, April 18th. The Journal is a co-production of Gimlet and the Wall Street Journal. Additional reporting in this episode by Drew FitzGerald. Thanks for listening. See you tomorrow.

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