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Eventually, Earth will have an expansive network of satellites capable of providing high-speed internet services to anyone, anywhere. While we are still years away from this being a reality, it may be closer than many realize. In a recent article, we touched on how reusable rockets are helping to fast-track this goal, increasing global connectivity by the day.
With this being the case, many are now beginning to make lofty forecasts involving markets set to be transformed by the advent of widespread access to satellite broadband services. One example of this involves investment fund manager, ARK Invest, which believes that within the next decade, “satellite broadband could generate $84 billion in annual revenue,”
Manufacturers and Innovators
Before taking a closer look at where the opportunities for growth in satellite broadband services lay, here are a couple of companies playing an important role in such technologies. These are not investment recommendations, but rather meant to provide insight for investors looking to gain exposure to the sector.
When it comes to wireless technologies, Qualcomm is without a doubt a leading innovator. While it is involved in developing products which support next-gen technologies like WiFi 7, 6G, artificial intelligence, and more, it is most well-known for its line of Snapdragon processors which power the vast majority of high-end smartphones on the market.
Qualcomm Inc. was founded in 1985, and operates out of California, United States.
For years now, the world has been using a growing satellite array which provides global voice and data services. In 2019, Iridium underwent the process of decommissioning its original fleet of communication satellites by lowering their orbit, and allowing for them to burn up in the atmosphere. Upon doing so, its next generation fleet was deployed, which is currently comprised of 75 deployed (66 of which are in use), and an additional 6 which are grounded as spares.
Notably, various firms including Barclays Capital, Morgan Stanley, and more, have each listed IRDM stock as a ‘Strong Buy‘ at time of writing. Over the past 12 months, IRDM shares have risen by ~50%, with the company boasting year over year increases in revenue in its latest 5-year trend.
Iridium Communications (IRDM) was founded in 2001, and operates out of the State of Virginia, United States.
Where is the Opportunity?
So where is the future opportunity for growth that has investment funds like ARK Invest making such lofty predictions?
As can be seen in the above chart, ARK Invest is banking on households without traditional broadband access to top the list of addressable markets, accounting for roughly half of its total $84B forecast.
While this may seem outlandish to city-dwellers, the reality is that they only represent a small portion of the population. Even in developed countries like Canada, millions nationwide still do not have access to reliable high-speed internet. While this is slowly changing with services like Starlink now on offer, they often remain cost prohibitive in 2023, or impose restrictive limitations on things like bandwidth.
What about Mobile?
Another major opportunity for growth and addressable market not listed above are mobile devices. Yes, satellite phones have been around for ages, but these devices are typically bulky and expensive. Soon however, this is all set to change, as mobile chip manufacturers are bringing satellite connectivity to everyday Android devices like the CAT S75 and Motorola Defy 2.
Qualcomm for example, has already announced its ‘Snapdragon Satellite' service, which will allow for devices to access two-way communication . This service was made possible through a partnership that will see Qualcomm utilize a satellite array on offer by Iridium Communications – both of the companies previously listed for investors to learn more about.
It should be noted that at first, the service will have its limitations. Voice and video communications will be released at a later date, and to utilize two-way messaging through satellite connectivity, users must have an open sky view (meaning you will need to continue relying on WiFi and cellular service indoors). In time however, these limitations will continue to decrease as technology progresses, and accessible satellite arrays continue to grow.
How to Capitalize
Based on current accessibility and pricing of satellite internet services, it is hard to imagine capitalizing on the various areas for growth as previously noted. This is why it is important to take things like Wright's Law in to consideration.
What Wright's Law essentially boils down to is ‘the more you make something, the better you become at it'.
More specifically, Wright's Law states that production/service costs will decrease by a set percentage for every doubling in units manufactured.
With this being the case, ARK Invest anticipates that satellite bandwidth costs should continue to decline by 45% for each “doubling in gigabits per second in orbit”. It notes that, when looking back to 2004, a 7,500-fold decrease in cost has already occurred. Taking planned growth for existing and future satellite arrays, there is no reason Wright's Law should cease to be relevant.
- Reusable rockets are making it significantly cheaper to launch satellites
- More satellites launched means better, and cheaper services on offer
- Cheaper services open new doors to now viable implementations in addressable markets
With this being the case, it should be exciting for savvy investors looking towards the future to plan for and watch step 3 come to fruition.
As satellite broadband services develop, global connectivity will continue to rise. This means that more people will have access to things many already take for granted like financial services, information, and more.
Based on the continued relevance of Wright's Law and current efforts by companies like Qualcomm, Iridium, and Starlink, there is no reason to think that progress made to date will begin to wane any time soon, making the future of satellite broadband services an interesting area to watch.