09.28.18

Fake it till you make it?

Posted in Broadband, Financials, Operators, Regulatory, Services, SpaceX, Spectrum at 1:03 pm by timfarrar

As students of history and those who were there at the time (such as FCC International Bureau chief Jose Albuquerque) know only too well, sometimes a dud satellite can be just as good as a real one for promoters of a new broadband LEO system. Back in February 1998, the Teledesic BATSAT apparently never worked properly (some say not at all), but the launch was instrumental in causing Prince Alwaleed to invest $200M in the company in April and more importantly in persuading Motorola to abandon its own Celestri LEO system and join forces with Teledesic in May 1998, investing $750M for a 26% stake.

So the question now is whether SpaceX is in the same position with Starlink? After all, when basking in the glow of apparent back-to-back successes with Falcon Heavy and Starlink during February 2018, followed by receipt of its constellation license from the FCC, SpaceX raised $500M the following month at a reported valuation as high as $27B, supposedly to develop the Starlink constellation.

And subsequently, SpaceX has been positioning itself to play a role in DARPA’s Blackjack satellite constellation program, which will provide total funding of up to $117.5M to be split between several bidders. Notably, SpaceX filed a new experimental application with the FCC in August 2018 “to reflect additional test activities undertaken with the federal government” and add “two new types of earth stations, one of which will transmit uplink signals to the Microsat satellites first from the ground and later from a moving aircraft”. In that application, SpaceX told the FCC that:

“These experimental engineering verification vehicles are currently engaged in the test regimen as authorized, in order to enable the company to assess the satellite bus and related subsystems, as well as the operation of space-based and ground-based phased array technologies.”

As he looks to secure both DARPA funding (which should be announced in the next couple of weeks) and FCC approval of the new experimental license application, Elon Musk is certainly extraordinarily sensitive to any suggestion that there might be a problem with Starlink. Notably, within a few hours after my previous blog post appeared on September 18, it seems he planted a (rather bizarre) question on Twitter so that he could state that “Starlink should be active by then [2023]“. Indeed, he was so keen to get this assertion out there that the same question was posted twice.

And if we look back to Elon’s previous tweet about the status of Starlink, its hard to believe it was purely a coincidence that this information was released the day after DARPA’s Blackjack solicitation.

But the reality is that the Starlink satellites have not performed in accordance with the plan that SpaceX presented to the FCC as recently as February 1, 2018, when Patricia Cooper told the FCC that:

“As set out in the original application, after system checkouts are performed and the system is evaluated as ready to proceed, SpaceX will engage in orbit-raising maneuvers until the spacecraft reach a circular orbit at an altitude of 1,125km.”

And the original application stated that:

“After system checkouts are performed and the system is evaluated as ready to proceed, the orbit-raising phase of the mission will commence. This segment will last approximately half a year depending on system performance.”

But what has actually happened? Both satellites have remained around the launch altitude of 514km, with TinTin A not showing any meaningful evidence of propulsion since at least early March, and TinTin B not experiencing any significant change in altitude after attempting a few orbital maneuvers. So it seems all but certain that there has been a major issue with the propulsion system onboard both of the Starlink satellites.

When confronted with the rumors of a satellite failure by SpaceIntelReport, SpaceX stated that the satellites “were delivered to their intended orbit, communicated with ground stations, continue to communicate with ground stations, and remain in operation today.” That may all be true, but says nothing about whether the propulsion system has failed.

Unsurprisingly such a failure would put SpaceX in a very awkward position, when there were already many questions about whether Starlink would go forward, not least because the satellites may not reach the correct orbit to bring SpaceX’s ITU filing into use, and the FCC’s experimental authorization was based on the assumption that mission operations would be conducted at 1125km. And if SpaceX cannot build satellites with a reliable propulsion system, that would reinforce concerns expressed by FCC Commissioner Rosenworcel in SpaceX’s license grant that “the FCC has to tackle the growing challenge posed by orbital debris.”

09.18.18

420,000 km. Funding secured!

Posted in Broadband, Financials, Operators, Regulatory, Services, SpaceX, Spectrum at 7:32 am by timfarrar

Yes I know it’s only 384,000 km to the Moon, but just like Elon, I decided to round up. After all, it’s apparently “better karma”!

Last night’s SpaceX event raised a lot of questions for many observers, not least because it “caught some SpaceX employees off guard” and was rushed out so fast that some of the promotional imagery was incorrect. However, I suspect that the reason for this surprise announcement was to distract from impending bad news about the Starlink project, namely that the project has for all intents and purposes been put on hold.

We already knew that there was a significant reduction in hiring in early July, but I’m told the cutbacks went much deeper, with a significant fraction of the Starlink team departing. SpaceX was also looking to develop a more concrete business plan for the project in Q2, but I believe it proved impossible to come up with anything remotely close to the ludicrous forecasts from 2016 reported by the Wall St Journal that suggested the project would have over 40M subscribers and $30B in annual revenues by 2025.

Ironically enough, the principal mention of Starlink last night was as a source of funding for the BFR development. It makes no sense whatsoever to think that Starlink will generate profits to fund a $5B+ BFR development between now and 2023, so the only logical conclusion is that money raised for Starlink will now be diverted to the BFR. Another hint that Starlink is going away was the statement that BFR is expected to consume the majority of engineering resources after the commercial crew development has been completed for NASA next year, despite Starlink supposedly costing more to develop than BFR ($10B+ compared to ~$5B) over the next 5 years.

However, without Starlink to support the business plan, SpaceX will face significant challenges in sustaining its reported $27B valuation, as it grapples with an expected reduction from 28 to 18 launches next year, which will very likely cause overall revenues to decline in 2019. It’s also notable that when Viasat decided to contract with ULA (seeking a US launch provider so as to support its upcoming expected request for Ex-Im Bank funding), it reportedly did not even invite SpaceX to bid, presumably because of a lack of confidence in the future of Falcon Heavy (since the upgraded Falcon 9 Block 5 will now suffice for most GEO satellites).

It’s only natural that SpaceX would look for a replacement market that can be projected to generate billions of dollars of profitable revenue, and the company now appears to have settled on space tourism, as previewed by Gwynne Shotwell last week, when she suggested that it “will probably be the majority of our business in the future, flying people” with “7 billion potential payloads“.

However, the critical question is whether investors will remain sanguine about such a dramatic transformation in where over 80% of SpaceX’s future revenues are supposed to come from. Do investors that thought they were investing in the future of connectivity, really want to invest in taking rich people to space? And does the checkered track record of space tourism give them confidence that Elon’s promises will actually be realized, especially as it will take 5+ years and $5B+ of additional investment (even by Elon’s optimistic estimates) before the BFR is ready to transport passengers to the Moon?