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Google's $1 billion satellite plan: the beginning of the Google carrier network?

Posted: , by Michael H.

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Google's $1 billion satellite plan: the beginning of the Google carrier network?
On Monday, there was a bit of news that we put off to the side, because it needed a bit more thought, and also because we feared that it would get lost in the tsunami of iOS 8 coverage. The Wall Street Journal reported that Google was planning to spend at least $1 billion on an array of Internet satellites that would bring connectivity to more remote areas of the globe. This could potentially be huge.

The announcement of this deal feels like the culmination of a number of events that I have been following for the past few years. A lot of the topics are ones that became a hope for what Google might do with Motorola. The TL:DR for that idea was that emerging markets were the obvious future of the mobile space, and Google had already been investing in those markets with various projects in Africa, and by investing in O3b, a company working to bring Internet access to remote areas via satellite. I thought that Google might use Motorola to target those emerging markets with ultra-low cost handsets. Motorola has been inching towards that with the Moto G and the Moto E, but never quite got to the ultra-low cost level before Google sold Moto to Lenovo. 

Google's satellite network


However, the work with O3b continued, and the man who is said to spearhead Google's satellite venture is O3b's founder Greg Wyler, who was recently hired by Google along with O3b's former chief technology officer. As mentioned, the aim of O3b has been to use satellites to bring Internet access to the "other 3 billion" people on Earth who don't have access (hence the name). O3b had limited success, but Google is taking up the baton. Google's project will reportedly cost anywhere from $1 billion to $3 billion on a fleet of satellites, starting with 180 smaller satellites orbiting at low altitudes, and expanding from there. 

The smaller size of the satellites would allow for lower orbits, and the lower orbits would cut down latency issues which usually plague satellite Internet. Google is hoping to get latency down to about 150ms. Traditional Internet satellites usually have a latency over 600ms, while terrestrial broadband is often in the 30ms range. But, that would put Google's network about on par for the latency average that we see with 3G wireless networks here in the US. LTE networks tend to have latency in the 90ms range. So, Google would theoretically be able to have acceptable performance on its satellite network. 

Wyler will apparently be running a team of anywhere from 10 to 20 people at Google for this project. The first 180 satellites could be launched for as little as $600 million, but the ultimate goal is much bigger than that. Sources are saying that Google wants to use satellites that weigh as little as 250 pounds to cover large swaths of the globe. These satellites would be markedly smaller than the 1,500 pound satellites that O3b has been putting in orbit. The final design of the network isn't complete yet, so the number of satellites and total cost is hard to estimate. 

A good first step


So far, the reports are only talking about the plans in terms of bringing Internet access to unserved regions, but it is a very short step from offering Internet access to offering phone service as well. Remember, there have already been rumors recently about Google wanting to create its own wireless carrier using data networks alone and not traditional voice networks. Google had toyed with the idea of setting up its own carrier back in 2012, but gave up because of how much red tape was involved. Of course, that's a problem in the US, but in remote regions that don't have any access yet, there may not be so much red tape involved. 

It might not have been much of a coincidence that the same day that The Wall Street Journal reported Google's satellite plans, it also ran a story about how sub-Saharan Africa's mobile subscriber base will grow from 551 million, at of the end of 2013, to 930 million by the end of 2019. That is basically saying that mobile penetration will likely jump from about 70% to close to 100% in the region in five years. Even more telling is that mobile data usage in sub-Saharan Africa doubled from 2012 to 2013, and is expected to double every year for the next six years up to almost 800 petabytes per month by 2019 (for reference, 1 petabyte is equal to 1 million gigabytes). To put that in perspective, Cisco has estimated that the total global data usage for 2012 was 820 petabytes per month, and in 2013 that rose to was 1.7 exabytes per month (1700 petabytes). 

Google's $1 billion satellite plan: the beginning of the Google carrier network?

The point is that data networks are far more important to the future of mobile than anything else; and, the only two things limiting the adoption of mobile are the availability of networks, and cost for access. There is potential for Google to spend upwards of $3 billion on building its fleet of satellites, but that is actually quite a reasonable amount to build its own wireless network in regions where there is little to no real competition. Remember, the plan here for Google is to bring Internet access either to areas where there is none at all, or to regions where antiquated 2G cellular networks are the only option. 

A long-term business play


Of course, it is unclear whether Google actually plans on making money off of this project. Google CEO Larry Page has frequently talked about his desire to change the world, and how the plans to truly change the world don't always need to be business ventures. Google makes huge amounts of money from ads and to a much smaller extent from the Google Play Store, and that revenue has been enough to fund plenty of other projects where Google gave services away for free (or ad-supported). Despite the large cost for this satellite project, you might not expect there to be much in terms of revenue opportunity, at least not in the near future. 

One reason why there is an opportunity for Google to bring Internet access to regions where it doesn't exist is because other companies would need to see profit potential in the endeavor. Emerging markets often equate to areas of low-income, which means customers can't afford much in terms of more advanced mobile hardware, or higher-tier wireless plans. But, Google doesn't have to worry about all of that, because Google is an advertising company, and the future looks incredibly bright for advertising in emerging markets. 

According to S&P Capital IQ Equity Research, over the next 15 years emerging markets are going to add $200 billion to the global ad spending. Quite a lot of that is destined to be on the Internet, and Google obviously wants to be in on the ground floor. Just take a look at the graphic below. Google has already become one of the wealthiest companies in the world through serving ads on the Internet, but web-based advertising is still just a fraction of the global marketing ecosystem. That is going to continue to change, and Google intends not only to grow with the web, but to be a force behind the growth of the Internet. Emerging markets are a huge part of that.

Google's $1 billion satellite plan: the beginning of the Google carrier network?

And, that is just to start. It has been proven in many regions that Internet access and mobile connectivity are huge boosts to economies, especially when talking about the most basic economies which rely on farming and tradesmen. As of late 2012, it was estimated that adding 10 mobile phones per 100 people can raise the overall GDP by 0.5%, which is not an insignificant amount, especially when aggregated on a larger scale. The initial phase of the plan could very well require Google to offer something - either the device or the connectivity - for free or almost free, but the potential revenue from advertising alone will make the plan worth while. 

Ultimately, it will be a long-term play by Google, and potentially a bit too dependent on advertising. There would be no real revenue generated through the Google Play Store, and as stated before, there may not be much potential to recoup any costs through subscription fees or device sales. If you're looking at the near future, at best, Google might be looking at a scenario where it sinks the building costs, and makes a bit towards maintaining and running the network. But, if the network can gain steam, the advertising revenue would be inevitable. 

Disruption to kickstart innovation (aka the Google Fiber ploy)


The other possibility is that Google doesn't intend to make money at all, but rather to be the instigator that leads other companies to put more effort into these areas. One curious part of this plan is in where Google plans to deploy these satellites. There are plenty of regions of the globe that rely solely on antiquated cellular networks for Internet connections, and those areas would certainly be a prime target. There would be a bit of competition from established networks, but it could very easily turn into a Google Fiber scenario. That is to say, Google would come in offering better service at a lower price than the competition, and it would force the established networks to improve their offerings quickly. 

That's the most disruptive thing about Google's plans: it doesn't need to make money directly. All Google needs to do is be the catalyst that brings more and more people to the Internet. As we've seen with Google Fiber, Google only had to make it work in one market and suddenly broadband providers began to scramble to beat Google to market in other areas. That initial fleet of 180 satellites could very well be all that Google needs to get other companies to start building up their networks simply out of fear that Google is coming. 

Google's $1 billion satellite plan: the beginning of the Google carrier network?

Once people are getting better and better connections to the Internet, often through mobile devices, it opens the opportunity for Google to push low cost smartphones, because regions like those tend to be where mobile phones aren't just the primary way to access the web, but possibly the only way. Google has already prepped Android itself to run better on low-spec devices, meaning low cost handsets are getting better and better. Google is now working towards building a satellite network, and it would make the most sense for that network to eventually become a data-only wireless carrier network. Motorola is obviously working towards building cheaper and cheaper devices, and devices like the Moto E could complete the plan. The one wrench in that last part would be Nokia, which already has brand recognition in most of these areas, and that alone could bring its Nokia X line more users. Google wants users on Android, because it has the easiest path to Google-served ads.

Of course, all of this is still far off in the distance. Google is just now getting under way with its satellite plans, and there are plenty of things that could go wrong in the process. But, Google has very deep pockets, which will help in overcoming those obstacles, and Greg Wyler has quite a lot of experience with this kind of project. This is certainly a moonshot (almost literally this time), but the worst case scenario with this plan seems to be that Google would force other companies to invest more in areas that need better infrastructure, and then Google would reap the benefits of the growing advertising market in the emerging world. That's a solid starting point. As far as the best case scenario for Google's satellites? As with any moonshot, it could very well change the world.

25 Comments
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posted on 05 Jun 2014, 15:20 14

1. james1 (Posts: 60; Member since: 16 Mar 2013)


Google has more than enough resources to start a mobile company, I think they should despite those who fear privacy invasion. Google will be a strong competitor and everyone knows competition is always good for the customers.

posted on 05 Jun 2014, 15:31 3

6. akki20892 (Posts: 3296; Member since: 04 Feb 2013)


I guess Google should keep up good work in this work.... It's really good and will be affordable.

Google we all with u, just bring it on. We want your internet and carrier soon.

posted on 05 Jun 2014, 15:51 8

8. Sauce (unregistered)


IDGAF who the hell starts or has a mobile network. As long as it is reliably fast and cheaper than the competition, thats all the matters in my eyes.

If Google does do this, they should realize that they'll take a boat load of customers from all carriers if they supply great connectivity and speed at a low price. Todays mobile industry and their "plans" are a complete scam and is highway robbery.

posted on 05 Jun 2014, 15:22 4

2. wilsong17 (Posts: 782; Member since: 10 Mar 2013)


Sweet keep it up Google show the innovation

posted on 05 Jun 2014, 15:28 1

3. ArtSim98 (Posts: 2416; Member since: 21 Dec 2012)


It's hard to believe how one company can get so big.

posted on 05 Jun 2014, 18:54 1

22. kryme (Posts: 136; Member since: 24 Oct 2013)


soon i dont think we can call google just a company....

posted on 05 Jun 2014, 15:29

4. galanoth (Posts: 302; Member since: 26 Nov 2011)


Satellite internet has too much latency though right?

posted on 05 Jun 2014, 16:19 10

13. MichaelHeller (Posts: 2657; Member since: 26 May 2011)


That's why Google is planning the satellites to be small and orbit much lower than most satellites. Doing that could bring latency down to about 150ms.

Aaand, all of that info should have been in the article. Off to edit!

posted on 06 Jun 2014, 20:44

25. MAXXtreme007 (Posts: 22; Member since: 28 Jun 2012)


Once again, an informative, well written, and balanced article. You are a superb and phenomenal writer Michael! I always love reading your articles regardless of the topic because I know they will be great!

posted on 05 Jun 2014, 15:30 8

5. Ninetysix (Posts: 1458; Member since: 08 Oct 2012)


Skynet incoming....

posted on 05 Jun 2014, 18:20

20. bucky (Posts: 1326; Member since: 30 Sep 2009)


That exactly what I was thinking.

posted on 05 Jun 2014, 23:53

23. corporateJP (Posts: 1548; Member since: 28 Nov 2009)


Will go well with Softbank's Cylon robots...

posted on 05 Jun 2014, 15:35 5

7. Berzerk000 (Posts: 3935; Member since: 26 Jun 2011)


I would switch to Google's carrier instantly. Bring it on!

posted on 05 Jun 2014, 16:02 2

9. 12Danny123 (Posts: 86; Member since: 18 Aug 2012)


I doubt it'll go through since Google is under HEAVY antitrust issues right now.

posted on 05 Jun 2014, 16:17

12. wilsong17 (Posts: 782; Member since: 10 Mar 2013)


Source or are you talking bs

posted on 05 Jun 2014, 16:19 2

15. MichaelHeller (Posts: 2657; Member since: 26 May 2011)


Antitrust issues are in the US and Europe, these satellites wouldn't go anywhere near those regions.

posted on 05 Jun 2014, 16:08 4

10. mobi_user (Posts: 105; Member since: 18 Jun 2013)


This is just another step in evolution of Skynet.

posted on 05 Jun 2014, 16:16 3

11. jibraihimi (Posts: 667; Member since: 29 Nov 2011)


Another great article by Michael H...........

posted on 05 Jun 2014, 17:50

19. Arte-8800 (limited) (Posts: 4039; Member since: 13 Mar 2014)


Always

I would like to also know is Michael Heller American?

The rest of the editors are foreign American with non American ascent!

I believe Alan F is American?

posted on 05 Jun 2014, 16:19 1

14. dontneedtoknow (Posts: 146; Member since: 17 Feb 2014)


I think goggle is like really innovative company like self ddriving cars, Google glass and trying to get Internet everywhere even with that Ballon that hit power lines in Washington. With that being said, I hope they don't turn too much of a big company that it will be hard for little companies to compete.

posted on 05 Jun 2014, 17:43

18. wilsong17 (Posts: 782; Member since: 10 Mar 2013)


What are you talking about are you afraid they become too good people choose the best and cheap services

posted on 05 Jun 2014, 16:43 1

16. HTCOE (Posts: 421; Member since: 20 Nov 2011)


it's actually for their maps and satellite radio project

posted on 05 Jun 2014, 16:53 1

17. Edward_bly (Posts: 185; Member since: 11 Dec 2013)


If they do, I'm joining Google!

posted on 05 Jun 2014, 18:43 1

21. darkvadervip (Posts: 292; Member since: 08 Dec 2010)


Big brother going into full effect. They already tracking everything you do!

posted on 05 Jun 2014, 23:55 1

24. corporateJP (Posts: 1548; Member since: 28 Nov 2009)


You know why?

ALIENS!

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