Great observatories views of the Milky Way. Photo: NASA

In this new round-up, Via Satellite looks at recent research reports in the space and telecommunications arena. This installment features a look at the economics of the Starlink terminal, space investment activity in 2020, and In-Flight Connectivity (IFC) prospects. 

NSR Questions Economics of Starlink User Terminal 

In a recent research article, NSR analyst Lluc Palerm dug into the user terminal cost for SpaceX’s Starlink Low-Earth Orbit (LEO) constellation, and what it means for the economics of Starlink compared to a Geostationary (GEO) broadband terminal. 

A typical GEO consumer broadband terminal costs about $350 and contributes to only 14% of the total cost of ownership (TCO) for the system over three years. NSR puts the margin for GEO operators in the 35-40% range. 

For Starlink, NSR used a low-range consensus estimate cost of $2,000 for the terminal, and estimates that the terminal is a substantially more 25% of the total cost of ownership for the system over three years. SpaceX will receive $885.5 million U.S. government subsidy for the first phase of the Rural Digital Opportunity Fund (RDOF), but even with government subsidies, NSR estimates Starlink would operate at a low 20% margin. “Even with theoretically lower capacity prices and government subsidies, the still expensive LEO terminals challenge the economic feasibility of serving households from NGSO constellations,” Palerm writes. 

NSR acknowledges that we don’t know the cost of the Starlink terminals, or how SpaceX will subsidize it for users (the cost in the beta program is $500), but the business case is challenging. In conclusion: “SpaceX would need to rely on really high-end, bandwidth-hungry subscribers with significantly lower churn rates than the rest of the industry to amortize the cost of the terminal.”

Seraphim Tracked Record Deal Values in Second Half of 2020

Seraphim Capital, one of the leading venture capital firms focused on space, reports in its Q4 SpaceTech Venture Capital Index for 2020 that deal volume remained level in 2020, but deal values spiked in the second half of the year, driven by mega deals like Relativity Space and OneWeb. Overall, Seraphim reports that 221 deals closed in 2020 compared to 219 in 2019. But the average deal size was $45 million, up from $27 million in 2019. The surge in mega deals drove up average deal sizes

In terms of geography for 2020, there was not much change over previous years. North America saw a modest increase in deals, and there were slight decreases in Asia and Europe. The United Kingdom is the primary market in Europe and accounts for 42% of all European deals. 

Seraphim also pointed to the special purpose acquisition companies (SPACs) announced for Momentus and Seraphim portfolio company AST & Science at the end of the year. The firm expects to see many more SPACs over the coming year — which has already begun to prove true with Rocket Lab, Spire, and BlackSky that have announced over the past two weeks. 

“We expect 2021 to shape up to be yet another record year, albeit this will likely be driven in part by public markets given $1.34 billion of investment in space-related SPAC transactions has already been announced,” the report says. 

Valour Predicts Slow IFC Growth Over Next Two Years

Valour Consultancy, which tracks the In-Flight Connectivity (IFC) market, has released a recent report in which it forecasts the number of aircraft installed with IFC will double from 9,026 at the end of 2020, to approximately 18,500 in 2029. These figures factor in the full impact of COVID-19, including the cancellation of retrofit projects and delayed deliveries of new aircraft.

Over the next two years, Valour predicts the installed base will grow slowly, by around 800 aircraft, marking a 70% decrease in net new installs across the period compared to pre-COVID-19 estimates. 

“The pandemic is driving change in the passenger experience and many airlines are using this period to revisit their digital strategies. It’s clear we’re going to see a greater emphasis placed on contactless interactions, customer reassurance and the seamlessly digital journey. IFC can, at the very least, enhance many applications linked to these areas and, as a result, will become more integral to airlines than before the pandemic hit,” Daniel Welch, co-founder of Valour Consultancy wrote.

Mark Holmes contributed to this article