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Connected Homes October 2020 Viewpoints

Technology Analyst: David Strachan-Olson

New Horizons for Satellite Broadband

Why is this topic significant?

Constellations of small satellites in low-Earth orbit could improve broadband connections significantly for many residents in rural areas. Such services could eventually compete with traditional ISPs—even in suburban areas.

Description

The majority of connected homes connect to internet services through wired technologies, such as DSL (digital subscriber line), cable, or fiber optic. For rural and remote customers, a handful of companies offer internet services via satellite, albeit with worse performance characteristics in comparison with wired connections. New entrants to the home-internet-service market are exploring options to provide internet services via large constellations of satellites in low-Earth orbit.

SpaceX, a relatively young aerospace company, is now leveraging its success as a launch provider to develop Starlink—a constellation of internet-providing satellites. SpaceX has already launched more than 500 Starlink satellites and has approval from the US Federal Communications Commission (FCC) to launch nearly 12,000 satellites in total. During summer 2020, SpaceX began beta testing its initial satellites; the demonstration reportedly showed downlink data throughput at more than 100 megabits per second and less than 20 milliseconds of latency. However, third-party results through SpaceX's network varied. Amazon.com is also interested in offering broadband services through a satellite constellation and has stated that it will spend $10 billion on the project. The company recently received approval from the FCC to launch more than 3,000 satellites. OneWeb, another satellite-based ISP, which is currently amid a bankruptcy and pending sale, has approval from the FCC for 2,000 satellites.

Implications

Although satellite-internet services existed previously, this new generation of satellite constellations should offer much improved services. Older satellites have inadequate capacity to service tens or hundreds of millions of users, and they have high latency because they typically orbit far from Earth's surface. Existing providers of satellite-internet service offer plans with higher prices and much lower data caps than internet-service providers (ISPs) with wired equipment. Next-generation satellite services are targeting numerous markets—including aviation and maritime operations—but will also provide services to rural and remote households. Once established, satellite services might begin to challenge traditional ISPs in other markets. However, in urban and suburban markets, satellite services might face competition not just from traditional ISPs but also from cellular providers that offer 5G wireless broadband for households (see "5G Wireless Home Broadband" in the May 2019 Viewpoints for more information).

Impacts/Disruptions

Satellite and 5G wireless broadband could pose a formidable threat to traditional ISPs in the coming decade. Many existing ISPs in the United States operate as regional monopolies or duopolies because of competitors' limited access to utility infrastructure, which insulates them from direct competition. Satellite and 5G wireless broadband would bypass these infrastructure limitations. Some ISPs that also offer media packages such as cable television also face falling revenue as customers "cut the cord" on multichannel television subscriptions in favor of streaming services. Various major technology companies have a strong interest in providing telecommunication services to extend the reach of their own products and services. Google, Microsoft, Facebook, and now Amazon have explored various plans to provide cellular or home broadband services through fiber-optic networks, high-flying drones, balloons, and electromagnetic white space and may likewise want to pursue or partner with satellite-internet companies in the future.

Scale of Impact

  • Low
  • Medium
  • High
The scale of impact for this topic is: High

Time of Impact

  • Now
  • 5 Years
  • 10 Years
  • 15 Years
The time of impact for this topic is: 5 Years to 10 Years

Opportunities in the following industry areas:

Internet services, over-the-top services, aerospace technologies, phased-array antennas

Relevant to the following Explorer Technology Areas:

Key Areas to Monitor

Why is this topic significant?

Stakeholders should monitor key issues and uncertainties that could have an outsize impact on how companies commercialize connected-home technology.

Strategic Strongholds

The market for connected-home devices and services is very competitive, so companies often seek to create and leverage strategic strongholds through supply chains, value networks, content libraries, and user touch points. Companies hope to leverage these strategic strongholds as a means to maintain business advantages and expand their reach. For example, Amazon.com has transformed its Prime subscription from a flat annual fee covering e-commerce shipping into a multipronged connected-home service that ties in to Amazon's other endeavors in the home. However, leveraging strategic strongholds often ends in failure. Microsoft tried to position its Xbox One game console as a multimedia entertainment and computing system for the living room but ultimately failed. Business strategies that create and leverage strategic strongholds are difficult to develop and execute well but can seem trivially obvious in retrospect.

For some organizations, questions about strategic points of leverage and potential for sustainable business advantage sometimes devolve to the simple question of who will dominate. Dominant innovators become part of the business rules for other stakeholders, new and mature, that seek to establish their own strongholds.

What to watch for:

  • Dominant players continuing to leverage their unique strategic strongholds into more aspects of the connected home, which will likely lead to more clashes between companies
  • New ways for new entrants and smaller players in the connected-home market to gain strategic footholds through innovative products and services no others offer
  • Companies that are successful in other industries and markets, such as retail, portable electronics, and automotive, to enter the connected-home market by leveraging their unique strategic strongholds

Islands of Incompatibility

Home networks are like snowflakes: Each one is unique. Thus, making elements work together consumes effort and resources. The emergence of Amazon, Apple, and Google as platform leaders has fostered collections of mutually incompatible equipment in households, supplied by partner brands—including LG Electronics, Google Nest, Philips, Samsung, and Whirlpool. Many other connections and misconnections contribute to compatibility problems in households, such as those among security sensors, climate controls, smart meters, energy-storage devices, garage doors, and key fobs. Adopters of a solution become allied with a business ecosystem that may exclude another brand's gear. Homes may have multiple islands of incompatibility, as in the case of a Google Chromecast input for a TV and an Alexa voice assistant in an Amazon Echo; limited support is available for integration of the two device ecosystems.

What to watch for:

  • Continuing polarization among platforms, extending to entire connected-home ecosystems
  • Coordination among platforms to develop common standards to ease integration with connected devices
  • Regulation that requires connected-home companies to improve compatibility between devices and ecosystems

Scale of Impact

  • Low
  • Medium
  • High
The scale of impact for this topic is: Medium to High

Time of Impact

  • Now
  • 5 Years
  • 10 Years
  • 15 Years
The time of impact for this topic is: Now to 15 Years

Opportunities in the following industry areas:

Portable electronics, entertainment devices, home networking, home automation, digital media, digital services, e-commerce

Relevant to the following Explorer Technology Areas: