“I’m personally not yet convinced in the value of the return on investment”
Experts have raised questions about the UK’s £400 million purchase of the bankrupt OneWeb Satellite company, saying the controversial deal may not offer value in the long-term — and using the technology for defence and navigation services likely to require significant investment for what is short-lived hardware.
The UK is set take a “significant” stake in low-earth orbit (LEO) satellite firm OneWeb, which is based in London, with Indian telco Bharti Global committing a similar sum.
OneWeb filed for bankruptcy in March, citing the financial impact of Covid-19. It had raised over $3.4 billion — including from SoftBank Group Corp., Qualcomm and the UK Space Agency — to launch a constellation of 650 satellites providing space-based internet connectivity (500mb/s with a latency under 50ms) but so far only 74 units are in orbit.
UK’s OneWeb Buyout: What Now?
But at a meeting of Parliament’s Business, Energy and Industrial Strategy (BEIS) committee, looking at the UK satellite strategy against the backdrop of the deal, witnesses cast doubt on the versatility of OneWeb’s technology and said they were “yet to be convinced” it would offer a significant return on investment.
When the deal was announced in July, the government said its rescue package would allow OneWeb “to complete construction of a global satellite constellation that will provide enhanced broadband and other services to countries around the world.
“The deal also offers the UK strategic opportunities across a wide range of other applications, working with our international allies.”
It hopes the acquisition of the company will help establish the UK as a major player in the space industry, and go some way towards making up for the loss of access to the EU’s Galileo system after Brexit. But critics have questioned the speed at which the deal was concluded, without consulting either the MoD or the Government’s Chief Scientific Advisor.
A Paradigm Shift in Satellite Production
So what is the UK taxpayer getting for its cash?
Not everyone was a staunch critic. Marek Ziebart, Professor of Space Geodesy at UCL, said OneWeb’s production methods have the potential to be transformative.
“Traditionally in satellites you would design a satellite, put loads of often novel instruments in it, then test it in a clean room to make sure it would work in space,” he said.
“But if you’re building your constellation of satellites that are very similar, you can build and extensively test one then mass produce the rest. That’s a new paradigm in satellite product and OneWeb has done well to solve a lot of the challenges.
“They have a production line where they can produce one to two satellites a day, much like SpaceX do. That contrasts to one satellite every couple of months normally, so for the UK to get a slice of that and an understanding of those processes is going to be a good thing.”
Although the company is London-based, production of OneWeb satellites takes place in the US, and there are no plans for this to change as a result of the deal.
A Big Broadband Opportunity (With a Few Catches)
OneWeb says its satellite network could offer connectivity of up to 500 mbps, which would be handy for parts of the world that conventional broadband can’t reach.
“There is significant ongoing growth in the demand for broadband capability, and one of the challenges is the price competitiveness of broadband providers,” said Carissa Christensen, CEO and founder of Bryce Space and Technology, an analytics and engineering firm working in the sector.
“For space systems to achieve services that are comparable with terrestrial and offer them at a competitive price is a significant business challenge. There are currently satellite operators who offer broadband using a different type of architecture to that contemplated by OneWeb, and those systems serve people who cannot get a terrestrial alternative. But they can be costly and have challenges in achieving speeds comparable to terrestrial.”
Prof Zeibart added: “A number of people in the world don’t have internet connectivity and that is viewed as an opportunity by people like Elon Musk. He will tell you four billion people around the world don’t have straightforward access to the internet, so much of his driver for launching the starling constellation is the enormous opportunity he sees to offer these people broadband connectivity.
“There is a market opportunity there, and to a certain extent OneWeb should be seen in that context as they were ahead of that race at one point in time.”
What About Other Applications?
The Government announcement suggested OneWeb’s system might be useful in other areas, such as defence and navigation, but Professor Zeibart said adapting a LEO system to offer position, navigation and timing (PNT) guidance services similar to GPS could be problematic.
“If you’re on the Earth and want to do communications, you just need to be able to see one satellite,” he explained. “To do PNT you need to be able to see four simultaneously, which means your visibility to the satellites becomes a much more demanding process.
“The repurposing of a subset of the OneWeb satellites for PNT looked at 70 or so satellites. Contrast that with operating at medium earth orbit (MEO), where you can use 24 satellites rather than 70. In terms of life expectancy, MEO satellites last 10-15 years, and LEO satellites only last about three years, so you have to replace them at a much more regular frequency with additional cost.”
He added that PNT requires the use of a lot of expensive atomic clocks, which have to be installed in ground equipment as well as the satellites themselves. These cost $1-$2 million a pop, so equipping 70 OneWeb satellites could leave the Government with a hefty horological bill.
“The technical challenges are substantive, but that’s not to say it couldn’t be done,” he added. “It’s essentially an R&D project, not something that is just going to be brought off the shelf. It will cost a lot of time and money and it might not work at the end of it.”
“I’m not completely against the idea, but if we’re going to have it as the thing we rely on for PNT I think that’s very risky.”
OneWeb Satellite Deal: High Risk, Potentially High Reward?
Christensen said adapting satellite systems for new purposes can be tricky.
“There are some systems that provide multiple services, so there’s a pathway towards hybrid satellite activities but it’s not typical because of the complexity of satellite systems and the need to optimise the equipment and design of the system for the particular,” she said.
“I would say generally it is an open question as to the extent to which this system design in the near-term is suitable for navigation, whether it could evolve to be suitable in the long term, and how that effects the economics of the system from a commercial standpoint.
“There is a widespread view that large LEO constellations have the potential to be transformative. There are risks and challenges associated with this area, so it depends if the intent [of the investment] is a predictable commercial investment or is it access to transformative technology with recognition of the potential for change and evolution in future.”
Prof Zeibart said the competition in the space (sorry) should not be under-estimated.
“At one time OneWeb was doing very well in terms of its launches and mass production of satellites –it was ahead of the game,” he said.
“Now you have someone like Elon Musk entering the race, and his launch technology is now superior – he’s demonstrated launching 60 satellites very reliably in one go and returning the launch vehicle to earth so it can be used again. The industrial and technological might of SpaceX is very hard to compete against if you’re OneWeb.
“That’s not to say the race is over, but it’s a costly race. The initial investment by the UK is £400m, and if the UK Government and the Indian company are the major funders of this operation then those costs are going to continue to rise. I’m personally not yet convinced in the value of the return on investment.”
What Happens Next?
The committee intends to call the UK Space Agency, business secretary Alok Sharma, and OneWeb themselves to give evidence in the near future, so expect to hear more about this ahead of the deal’s scheduled completion towards the end of the year.
Computer Business Review has approached OneWeb for comment.
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