How big the market could be for connecting satellites directly to standard smartphones remains up for debate even as initial services get underway for the space industry’s new poster child.
Some see the capability — the confluence of evolving telecoms standards and increasingly capable and cheaper spacecraft — as the largest ever business opportunity for satellite communications.
Others point to the potential for spectrum interference, regulatory challenges, uncertain customer demand, and the need to fund and deploy constellations capable of voice and other high-bandwidth services as progress-stalling roadblocks.
Despite an uncertain outlook, satellite operators, terrestrial telcos, handset makers, and chip developers are marching ahead with early services on their way to realizing the true potential for direct-to-device (D2D), a term encompassing everything from smartphones to tablets and other mass-market connectivity devices.
Lynk Global launched initial services in June from a constellation aiming to use spectrum from terrestrial cellular partners to reach the billions of smartphones already in consumer pockets.
With just three of a proposed network of 5,000 Lynk Global satellites in low Earth orbit (LEO), the startup is now enabling up to three texts to be sent and received daily in part of the Pacific island nation of Palau, in partnership with a local telco.
The service has started on three islands where Palau National Communications Corp. (PNCC) customers previously relied on VHF radios popular with boaters.
As Lynk grows its constellation, it expects to improve latency and expand satellite-enabled coverage over two more islands before the end of 2023 and then across Palau’s more than 300 islands and surrounding waters by March.
While the startup is starting with text services, it expects to add voice and other capabilities as it densifies its planned global network.
Using satellites to reroute terrestrial wireless signals from phones already in circulation is just one of many strategies being taken to build out a D2D business.
Some companies are developing D2D businesses using their existing satellite spectrum to connect upgraded smartphone models. Examples include Globalstar, the operator behind the space-enabled SOS services Apple launched on its latest iPhone models in November.
In February, British ruggedized handset maker Bullitt launched satellite-enabled Android smartphones capable of sending and receiving texts outside cellular coverage, facilitated by Silicon Valley startup Skylo and its partnerships with Inmarsat and other geostationary operators.
AST SpaceMobile, the only DTD startup to be listed publicly following its 2021 merger with a special purpose acquisition company (SPAC), announced June 21 its engineers had achieved 4G LTE download speeds during tests that month with BlueWalker 3, its prototype in LEO. The venture, which made its first voice call in April with a standard smartphone using BlueWalker 3, plans to start deploying commercial satellites next year.
Many more D2D ventures are also on their way toward commercial services, including industry titan SpaceX, which plans to leverage its Starlink constellation with spectrum from terrestrial telcos, starting with T-Mobile in the U.S., Switzerland-based Salt, and One New Zealand.
Space-based D2D players have struck multiple partnerships with terrestrial telcos keen to fill their network’s coverage gaps. D2D advocates are quick to highlight how these partnerships would help them tap into the trillion-dollar-plus telecoms market, which easily eclipses the $464 billion that the global space industry made in 2022, according to analysts at Euroconsult.
However, even Iridium Communications, which hopes to enable D2D services on new Android phones this year, is quick to temper hype around this emerging market.
“The market could be worth hundreds of millions or hundreds of billions, but no one really knows yet,” Iridium CEO Matt Desch said.
“There are too many key questions that need answers before anyone can really provide an answer.”
The size of the market depends on what it costs the customer and what it costs to provide, he said, but even more important is the consumer experience — how well it works for them and where it works.
Will these services be regional or global? Would they only be available outdoors, confined to SOS services, work with any app, and would they provide consistent data speeds?
“All these questions and others will need answers before really knowing what the actual total market could be,” said Desch, who also expects D2D to be an industry that will take 15 years to roll out.
What market?
Space-focused research Bryce Tech has yet to put a figure on the potential size of the D2D market because of the multitude of question marks still hanging over it, its director of analytics Carie Mullins said.
There are a lot of different factors that could go either way, she said, namely those around the technology hurdles left to clear.
“The reason I think you’re hearing so many diverging opinions on how big it is [is because] there’s still a lot of technology challenges to get over,” she said.
Some of the newer companies are also still working on ensuring they have the funds to overcome these technical hurdles.
“But I think the sign that all of these cell companies want to partner with satellites certainly suggests that they see the possibilities here, too,” she added.
Other analysis firms have dared to weigh in on D2D’s potential revenue opportunity, including space-focused Northern Sky Research (NSR), Quilty Space, and the research arm of the terrestrial wireless industry trade group GSMA.
Last year, GSMA Intelligence released research suggesting a total incremental connectivity revenue opportunity of more than $30 billion by 2035.
NSR’s D2D forecasts only look out to 2031, when it expects revenues in the region of $25 billion to $30 billion annually.
And Quilty Space recently released research showing an addressable D2D market of up to $168 billion if every potential customer paid for the service, with a market penetration rate between 5-15% seen as attainable in the near term.
Quilty Space cautioned that market penetration would remain a fraction of the potential addressable market, and that these revenues would be further split between satellite operators and their telco and equipment partners.
“Affordability, service quality, and success in integrating with the large, existing terrestrial wireless ecosystem will influence D2D adoption rates,” the firm added.
Early adopters
Emergency services are seen as an early revenue opportunity for D2D, not just because simple SOS alerts don’t need a lot of bandwidth but also because the use case is more straightforward.
While Apple is helping to test the waters here with consumers looking to improve their own safety when outside cellular coverage, D2D players also see a big opportunity to serve the emergency crews themselves.
“It has incredible potential,” said Jaume Sanpera, CEO of D2D startup Sateliot, who said the technology could help connect tiny tracking devices embedded on life jackets to “enormously facilitate the work of emergency crews” saving lives from a sinking ship.
“The sat-to-phone network is going to be in some ways vastly better than the current emergencies system we have today,” according to Lynk CEO Charles Miller.
A space-based overlay could ensure phone connectivity immediately after a natural disaster takes out terrestrial networks, he said. Government agencies could use satellites to push mass texts to areas needing emergency information, such as weather alerts, the location of shelters, and whether borders are open or about to close.
“We believe emergency crews could potentially benefit from this service in many situations, any time they are out of coverage, in remote areas, on the water, or in the case of natural disasters,” said Scott Wisniewski, chief strategy officer for AST SpaceMobile.
AST SpaceMobile has partnered in the United States with AT&T, which operates the country’s FirstNet communications network for emergency responders.
AT&T has access to deployable cell towers for when natural disasters knock out terrestrial wireless systems; however, these take time to deploy.
In extremely rural areas of the United States where FirstNet cannot reach, first responders currently use low-bandwidth wireless services, including VHF radios and bulky, specialized satellite-enabled handsets.
More bandwidth from a dedicated D2D constellation could enable more situational awareness for emergency crews, including the capability to share video reports from a remote operation.
In March, a House Energy and Commerce subcommittee advanced a bill mandating that satellite-based systems be allowed access to spectrum to provide emergency services in the United States. And in another sign of the maturation of D2D technologies and businesses, the Federal Communications Commission recently unveiled a proposed framework for regulating the use of terrestrial wireless spectrum from space.
Although Miller said Lynk has been conducting early tests with the government amid “deep interest” in the potential for D2D, he does not see it as a major source of funding for the industry in the near term.
“If we waited around for funding from the government to develop some of this, we wouldn’t get anywhere,” he said.
Some analysts also doubt emergency crews would be big customers for D2D, including Armand Musey, founder of advisory firm Summit Ridge Group.
“The real advantage of direct-to-handset is that it fits into a cell phone form factor, almost unnoticed,” Musey said. “This is not as important to most first responders.”
The big bucks
The total addressable D2D market for basic SOS and emergency services alone is $45 billion per year in the developed world, according to the Quilty Space report.
However, a D2D market also featuring voice and data services in these countries could be worth more than three times as much at $148 billion per year.
Rural consumers, frequent travelers, and those involved in outdoor and offshore activities would be among the first adopters, Quilty Space said, assuming the quality of D2D services is sufficient.
The firm put the addressable D2D market among consumers in the developing world at $20 billion, although regulatory, distribution, and other prerequisites are a bigger threat to progress here.
According to Sateliot’s Sanpera, current D2D estimates are usually limited because they are based on existing satellite technology.
“However, we are seeing groundbreaking changes month by month,” he said via email.
“Now that the implementation of the standard set by the [global terrestrial wireless body] 3GPP is around the corner many legacy companies will struggle to adapt to the new times, and newcomers from the “new space” will grow incredibly fast, invalidating past predictions.”
Pace of change
Starting with limited SOS and texting services, D2D services could include voice in the next two years or so, shortly followed by data, according to NSR principal analyst Lluc Palerm-Serra.
“As the supply grows, the constellations densify, and technology progresses, we expect to see [Internet of Things] services very soon as well,” he said.
“They may be a bit intermittent at the beginning and very basic services, but growing with time, and then eventually, maybe around 2026, 2027, [we will start] to see some wideband kind of service — let’s say five to 10 megabits per second.”
Upwards of three to five megabits per second is sufficient for video streaming.
Still, the costs of these bits would be higher than terrestrial services, meaning they would likely come with data caps and other limitations.
“At the end of the day, it’s the willingness of the end user to pay that will dictate the use case,” Palerm-Serra added.
But while there are still many questions around how D2D will perform, how fast these companies can ramp up, and how much supply there will be to serve the market, he and other analysts are convinced it remains a massive opportunity for the satellite industry.
Historically, standards and the cost of terminals have been significant growth barriers for satellite connectivity. With D2D, satellite operators can go through mobile operators to reach their large subscriber base, and the terminal is a sunk cost for people who already own a mobile phone.
This article originally appeared in the July 2023 issue of SpaceNews magazine.