SERIES ON NEW SPACE, EPISODE 4
Big Tech, The New Space Invaders
Internet giants are quietly entering the New Space sector, bringing their weight and brutal methods. Expect casualties. This is episode 4 of our series on New Space.
Amazon, Microsoft, Google, Facebook, and others are looking up to the vast potential of space exploitation. Quietly but surely, they are sharpening their tools to acquire strategic positions in this New Space. On the ground, about 10,000 companies (5,000 in the United States) of the sector are waiting to see whether this will turn out to be a threat or an opportunity. It might be both, actually.
On its space services-related website, Amazon already gives a taste of what’s ahead (emphasis mine):
AWS Ground Station is a fully managed service that lets you control satellite communications, process data, and scale your operations without having to worry about building or managing your own ground station infrastructure. Satellites are used for a wide variety of use cases, including weather forecasting, surface imaging, communications, and video broadcasts. Ground stations form the core of global satellite networks. (…) You can save up to 80% on the cost of your ground station operations by paying only for the actual antenna time used and relying on the global footprint of ground stations to download data when and where you need it. There are no long-term commitments, and you gain the ability to rapidly scale your satellite communications on-demand when your business needs it.
Currently, thousands of Low Earth Orbit satellites beam data to Earth thanks to a vast network of ground stations scattered all over the world, especially in remote areas like the Arctic circle or the Antarctic. They need to be on the orbiting path of satellites coasting on polar orbits, which allows a periodic 10-minute window to capture their bursts of data. Hence the necessity of increasing the density of ground stations as the global throughput of data rises. The networks are operated by companies such as RBC Signals or its Norwegian counterpart KSat. I asked a satellite operator what the entry of Big Tech into the field means for these companies. “It means they are dead, eventually,” he said
KSat, however, has already made a proactive move by striking a deal with Microsoft Azure Orbital that intends to rival AWS in the Space-as-a-Service business. In September 2020, the Norwegian owner of 23 ground stations, announced the deal which is aimed at “providing integrated, global support for transporting, processing, and storing space-based data,” according to its CEO Rolf Skatteboe. The arrangement might lead to the long-term survival of the company. Unlike Amazon, Microsoft doesn’t seem interested in building its own network of ground stations but rather piggybacking on existing infrastructure. Hence the deals with KSat, or Luxembourg-based SES, which operates 70 Low and Medium Earth Orbit satellites and its own cluster of gateway stations. For what it is bringing to the space industry, Azure Orbital has partnered at various levels with a number of space companies, including SpaceX, by outfitting them with modular data centers wherever they are required. And to facilitate mission preparations, Microsoft has also developed Azure Orbital Emulator, which simulates digital space environments.
So far, Google’s space strategy has been limited to a deal with SpaceX under which data centers will be linked up with Starlink’s ground stations to inject data directly in the search giant’s infrastructure.
But for the three internet behemoths, space has become an inescapable part of their core business of data collection, transfer and processing, with multiple layers of applications, including a growing demand for AI processing.
For the consumers of satellite images and signals — insurance companies, defense, agritech sector, financial services — working in Amazon, Microsoft or Google Cloud environments is almost the natural thing to do as the tools are de facto standards.
“Already, many European companies access data from [EU Space Agency program ] Copernicus through AWS”, explains William Ricard, senior manager at PwC Space Practice. “Amazon played it quite well by offering to the US Geological Survey and NASA to process the huge volume of data generated by its Landsat program. They did it for free in exchange for bulk access to the data. That was meant to be mutually beneficial.”.
It was particularly beneficial to Amazon Web Services which is now the standard gateway to access and process satellite data. AWS provides unparalleled storage and computing power with dozens of easy to use applications dedicated to spatial analysis, refined and trained by Landsat’s trove of data. As a result, AWS has been able to capture most of the space-related data processing market with a palette of services that are cheaper than the competition. It was a remarkable market strategy that very few saw coming — as always, European regulators interested in antitrust failed to look in the right direction (see a recent Monday Note on EU regulators plagued by politics).
More broadly, like in other tech segments, the “Amazonification” of the space sector could lead to serious imbalances in the fragile New Space ecosystem. Big Tech players like Amazon have the means and resolve to spend as much as needed until they acquire market power. Their overwhelming weight will also distort the perspective for startups and their backers, who will seek a Big Tech acquisition as a tempting exit.
“Tech giants can dominate the entire industry in less than ten years”, anticipates Antoine de Chassy, co-founder of Loft Orbital, a Low Earth Orbit satellite operator based in San Francisco and Toulouse, France (see the first episode of this series). De Chassy sees tech and space converging in three areas, the first of which is reducing costs through industrialization. “SpaceX is doing just that: it carries the DNA of the best performing tech companies, without the burden of the legacy space industry. The second area is the absolute mastery of globalization by these companies, which are able to adapt their product to any market and organize the most complex supply chain ever — the perfect example being Apple. The third factor is the huge cash reserves that allow these giants to consider any acquisition or long term loss necessary to achieve dominance in a market or annihilate the competition.” Altogether the cash hoards of Amazon, Microsoft, and Google amount to about $340 billion, which is… 37 times the amount raised in 2020 by the New Space sector.
No doubt the Federal Trade Commission is monitoring closely how Big Tech’s involvement will play out in the New Space. For now, a regulatory move focused on space seems quite unlikely as fierce competition is developing between Amazon, which is willing to go alone, and a coalition that mixes SpaceX, Microsoft, and Google.
But another twist might unfold. American tech giants are now facing imminent and widespread action from antitrust authorities, both at home and in Europe. Hence one idea gaining ground is that their incursion in the New Space sector might have other motives than simply maintaining a steady stream of activity for their cloud businesses.
Several people I have spoken with for this series outlined what they see as a likely scheme on behalf of Amazon, Google, and Microsoft: by entering the sensitive field of space, the three companies are positioning themselves as a strategic asset for the security of the United States. They will showcase their role as a key rampart against the Chinese BATX, which are getting increasingly involved in Beijing’s space program. Big Tech’s new role in the space ecosystem could then be used as an argument to contain the perimeter of the regulatory offensive.
frederic.filloux@mondaynote.com
Next episode: How European politics might drown its space industry
Previous episodes:
01: Creating an AWS in Orbit. Nothing Less.
Loft Orbital wants to develop a space infrastructure that will have the flexibility of ground-based cloud services. Last Wednesday, the US-French startup put its two first satellites in orbit.
02: The Delicate Politics of New Space Nations
Space is more accessible than ever. Any country can now consider having its own program. But strategies vary widely from one nation to another, as ego, politics, and nationalism get in the way.
03:What Makes Elon Musk Move So Fast
SpaceX is assembling its giant Starship rocket at an incredible pace. Here are some clues on how it does it.
