High Times…

Posted in Broadband, Operators, Regulatory, Services, SpaceX, Spectrum at 9:43 am by timfarrar

Last week, on hearing the news of Amazon’s Project Kuiper LEO constellation plans, my immediate reaction was that it looked like “a good way to make it even harder for SpaceX to raise their next funding round”. Unsurprisingly, that turns out to be exactly the situation, because I’m told that Elon Musk held a lengthy conference call with SpaceX investors last week to seek additional funding for Starlink, ahead of the next launch (which has now been announced to be “no earlier than May”).

SpaceX is seeking to complete a near term equity raise (apparently limited to existing investors) at a valuation of $32B, and has made some outlandish claims about the potential for Starlink, similar to (if not even more exaggerated than) the widely ridiculed business plan published in the Wall St Journal back in January 2017, with many tens or even hundreds of millions of subscribers relying on the constellation. Jumping onboard with others, but exaggerating further, Starlink’s flat panel terminal is claimed to be capable of 100Mbps, but will cost only $500 at launch, falling to $150 over time. Moreover, the cost of the 4000+ satellites is said to be around half a million dollars each, including launch, implying total capex of less than $3B.

Meanwhile, Amazon continues to troll SpaceX, hiring the former leaders of Starlink, who Musk fired for wanting “more iterations of test satellites” rather than “cheaper and simpler satellites, sooner” and posting over 70 jobs in Bellevue, WA in an attempt to lure away additional engineers from Starlink facility in nearby Redmond.

So can Bezos derail SpaceX’s satellite internet plans, which may be the last avenue left to raise money for SpaceX, as the demand for launches continues to decline and its backlog nears exhaustion? Are people starting to doubt Elon Musk’s claims? Or does Musk still have enough believers amongst the existing SpaceX investors, including Google, which may have many reasons of its own to push back against Amazon?

UPDATE (4/19): The WSJ reported on SpaceX’s new funding round on April 15, noting that Gwynne Shotwell had expressed doubts over the prospects for Starlink in a February interview (although the outlandish claims I noted above were of course made by Elon Musk in the first week of April, not by Shotwell). It then emerged in an April 17 SEC filing that initial fundraising attempts had been largely unsuccessful, with only $44M out of $400M raised to date, suggesting that SpaceX’s approach, described to me as “you’ve got 24 hours to wire us the money or we’ll get it from someone else”, appears to have backfired.

So that makes me wonder quite how much financial pressure SpaceX is now under. Certainly SpaceX is putting considerable pressure on others, notably the FCC, where it filed on April 5 for Special Temporary Authority to operate its initial tranche of Starlink satellites. SpaceX claims these satellites will be launched in “early May”, despite it not having received approval for the revised constellation plan that was filed in November 2018 and not even specifying how many satellites will be in this “initial tranche”.

Given the complexities inherent in assessing SpaceX’s “iterative design” which will initially “use only Ku-band spectrum” and subsequently “phase the Ka-band antennas back into subsequent generations”, it is hardly surprising that it has taken the FCC some time to make a decision on whether to grant a license modification (indeed the FCC is only now proposing to grant a license for Theia’s NGSO system that was filed back in November 2016). Moreover, the mess that resulted from Swarm’s unapproved launch in 2018, led the FCC to caution satellite launch providers such as SpaceX that “a satellite integrated into a launch vehicle or deployment device without a current FCC authorization may need to be removed from that vehicle or deployment device if the satellite operator’s application for an FCC authorization is not acted upon favorably, or for various reasons cannot be granted within a time frame consistent with the launch schedule.”

So will the FCC bend under the pressure that SpaceX is exerting? Even then, would the launch of a few more demo satellites persuade investors that it’s now worth putting more money into SpaceX to fund a questionable (some would say non-existent) Starlink business plan? Or is this going to end badly, with SpaceX running out of cash to fund both Starlink and its new Starship development projects? Certainly the idea that “the decision to open a second $500M funding round just months after the first also bodes well for demand” (as opposed to indicating that SpaceX is experiencing a cash crunch) seems about as plausible as Musk’s recent suggestion that Starship should be fitted with “giant stainless steel dragon wings”. High times indeed!