Bridging the Gap: The Business Viability of Satellite Internet
INTRODUCTION
Over the past decade, people around the world have experienced a dramatic shift towards increased usage and reliance on internet services. Further heightened by the COVID-19 pandemic, dependence on internet services has highlighted an increased need for connection accessibility in rural and urban communities around the world. In response, terrestrial internet service providers (ISPs) are working to expand their internet networks and implement new technologies such as fiber optic cables to deliver greater coverage and higher speeds to more communities. However, terrestrial broadband faces geographic limitations, and individuals living in remote areas cannot easily access ground-based internet. In fact, 27.6 million households (22.5% of total households with an average of 2.5 people per household) in the United States don’t have home internet, and 35% of rural residents in the U.S. still do not have access as of April 2021 [1]. To address this large customer market, satellite ISPs are building constellations that will provide nearly global coverage. It remains to be seen if these remote markets are robust enough to support satellite ISPs and if satellite speeds will ever be fast enough to compete with terrestrial ISPs.
GEO vs LEO
Traditionally, satellite ISPs, such as Viasat and HughesNet, have used large satellites placed in geostationary orbit (GEO) where only a few satellites are needed to provide services with near-global coverage. However, the latency and speeds that these satellites can deliver are relatively poor given their distance from the Earth’s surface (~22,300 miles). Recently though, companies such as SpaceX have been developing and deploying large constellations in low Earth orbit (LEO) to provide satellite internet services. In LEO, satellites are much closer to the surface (<1,200 miles) and can therefore deliver faster speeds and lower latencies. See Figure 1.1 for orbit comparisons. Being closer though means that significantly more satellites are needed to provide global coverage and maintain constant connections with consumers. SpaceX currently has approval for 4,408 Starlink satellites with more than 2,000 already launched and is awaiting approval for a 30,000-satellite constellation [2].
Satellite vs Terrestrial
For those areas with the necessary infrastructure (i.e., major cities), terrestrial broadband is the preferred choice given the fast speeds, low latency, affordability, and reliability it provides. Satellite ISPs are improving their services to compete with terrestrial broadband companies such as Xfinity, AT&T, Verizon, Google, and Spectrum but as of 2022, there is a large discrepancy in the highest internet speeds they offer (Figure 1.1). To compare, of the five largest terrestrial ISPs, the lowest maximum speed offered is 940 Mbps while the highest maximum speed amongst satellite ISPs is 500 Mbps (Starlink business plan). At the top end, terrestrial ISPs even offer up to 5000 Mbps (AT&T), 10 times the maximum speed offered amongst all satellite ISPs. There is some overlap in cost when looking at monthly plans (Figure 1.2) but when costs are normalized with respect to speed, terrestrial ISPs display much better costs for the speeds they offer (Figure 1.3). On top of this, the fastest satellite internet via Starlink includes a steep one-time equipment charge of $2500. This makes satellite ISPs non-competitive in terms of cost, speed, and latency in developed areas with the infrastructure to support terrestrial internet services.
