5G vs Satellite: Telecom’s Old Darling Battles its New Fling

As profits from 5G continue to disappoint, will predictions for the profitability of satellite messaging pan out? 

5G was expected to be a transformational trend in wireless, but so far that transformation (and the associated profits) largely have yet to materialize — to the point where one of the largest topics of conversation around 5G is finding a path to profitability. Meanwhile, the already hot telecom space race has continued to ramp up as carriers and OEMs place big bets on the future of direct-to-device (D2D) satellite messaging. 

But will this prove to be another case of new-technology enthusiasm not living up to the economic reality?

Major players have mixed opinions about the current utility of satellite messaging.

Apple made waves at last year’s iPhone launch event when they announced the iPhone 14 and 14 Pro would support emergency messaging via satellite. However, at Samsung’s recent Unpacked event, the rival manufacturer announced that the upcoming Galaxy S23 wouldn’t support emergency satellite messaging, saying that existing satellite messaging functionality is too limited – though they left the door open to implementing it in future models if the technology continues to mature.

One thing Samsung may be waiting for is standardization. As it stands, the lack of standardization means that OEMs can only provide compatibility with a single satellite vendor – though eventually the 3GPP standards released at the end of 2022 will enable handsets to ​“roam” between satellite services.

However, another factor behind Samsung’s lack of apparent enthusiasm may be the still-very-uncertain economics of satellite messaging in a market still in its infancy. Speaking in an online forum last month, Greg Felton — CTO of Iridium Satellite Communications — predicted that most D2D satellite companies currently hitting the market will fail.

Felton said, ​“Right now there’s a lot of investment and a lot of different ideas being tried out and most of them will fail. Most will eventually run out of money because they won’t be able to generate enough cash flow to keep getting investments. With the cost of capital going up we’ll probably see that sooner rather than later.”

D2D’s other major barrier to success? Regulatory deadlock and the brewing fight over spectrum.

In addition to the difficulty of financing, the nascent D2D industry will also need to overcome challenging regulatory barriers. In recent testimony before a US House of Representatives subcommittee, SpaceX exec David Goldman testified that the current average processing time for FCC authorization of new satellite launches is 2.5 years, with that figure currently trending upward.

It’s no surprise that the FCC has found itself increasingly unable to keep up with the current state of affairs, given that Biden’s pick for new head of the FCC — Gigi Sohn — has officially withdrawn from the nomination process after 16 months of approval limbo, citing ​“blatant lies” from ​“legions” of lobbyists. In her statement to the Washington Post, which was released the day before International Women’s Day, Sohn warned that ​“the American people are the real losers here. The FCC deadlock, now over two years long, will remain so for a long time.”

This reverses the optimism felt by some financial analysts, who predicted that a possible January approval of the regulation could finally lead to movement in the dispute between satellite operators and terrestrial 5G operators over usage rights to the 12Ghz spectrum — which satellite companies like SpaceX’s Starlink are using in their expanding low-earth-orbit satellite operations. However, 5G operators, ever hungry for more spectrum, want to see the FCC allow terrestrial 5G signals in at least part of that band. 

What’s more, even within the 5G faction there is significant in-fighting between Dish Network, which already owns terrestrial rights to large sections to the 12Ghz band, and US telcos like AT&T and T-Mobile, which want to see frequencies opened up for auction.

Neither possibility is something that satellite operators are prepared to take lying down. In February’s subcommittee hearing, Peter Davidson — a VP with Intelsat — testified that further loss of spectrum posed an existential threat to ​“the space economy”. He added, ​“the continued erosion of spectrum allocated to satellite services for decades now will significantly impede the ability of the US to lead in this critical sector.”

Unfortunately, with the search for a new FCC head back to square one, it appears that any resolution to this disagreement may be a long time coming.