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The business rationale for megaconstellations is being questioned by the industry

Companies who have proven the technological viability of the broadband satellite megaconstellations now confront a more difficult task: proving the commercial justification. Industry executives and spectators expressed persistent pessimism that constellations of thousands or hundreds of low-earth-orbit satellites will be able to produce enough money to cover the expense of deploying and replenishing those systems during talks at the Satellite Innovation conference. 

The continuous deployments of the systems by SpaceX and OneWeb, according to Carissa Christensen, CEO of BryceTech, are a “proof of concept of the economic models of proliferating LEO systems” and a critical inflection point for the broader sector. However, she felt that proof of concept was insufficient for success.

“What we’ve seen is a deployment that has been aided by investment. “That’s not the same as revenue-supported business activities,” she remarked during a panel discussion on October 5. “The result of those corporate initiatives will be the most significant turning point within the next five years.” This includes earning enough revenue to sustain operations as well as raising extra funds to extend such systems.

The ability to refill such constellations is also a factor. Unlike the geostationary communications satellites, which have a classic lifetime of a minimum of 15 years, LEO constellation satellites are designed for a fraction of that time, due to propulsion requirements to maintain orbits and move in much more congested surroundings, as well as a desire to update technologies. That replenishment is not free.

Simultaneously, several constellation companies with venture capital backing will be migrating to public marketplaces. On the same panel, Rizwan Parvez, who serves as the senior director in charge of the Maxar’s space capture team, said, “Now, the anticipation from the investor community, as well as the risk profile, will begin to alter.”

This will have an impact on those corporations’ capacity to generate funds to refill their fleets, which may be in the billions of dollars. “How simple is it going to be to acquire board instruction to conduct another massive refresh as you transition from the venture capital-backed firm to a public market company?” he said. “Does the money from the business justify it?”

Some conventional satellite operators are unconvinced that constellations can make a profit, at least as stand-alone businesses. During an October 6 panel, Intelsat’s chief commercial officer, Samer Halawi, said, “The challenge with constellations would be that one has to have everything out there about day one to begin monetizing, then you have a small period of time to monetize.” “You need to fast increase your revenue and do it before you have to replace your constellation.” He added, “It’s practically inconceivable, especially given the amount of the money going into those constellations.”

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