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The whole satellites-for-Internet space is like Global Crossing 2.0. I mean, business 101 is that high fixed costs + commodity business + high likelihood that t
by CapriciousCptl 7y ago
The whole satellites-for-Internet space is like Global Crossing 2.0. I mean, business 101 is that high fixed costs + commodity business + high likelihood that technology that will decrease future fixed costs + no ability to repurpose fixed assets = no profit.
Good for society. Bad for investors.
- bilbo0s 7y agoFor the very reasons you mention, I could never understand why anyone would get into this market either. Unless some deep pocketed government is going to float you for security and intelligence purposes, there is no reason this stuff makes sense right now. When the fixed costs come down, and they will, the new competitors will wipe the floor with you.
- hef19898 7y agoThe only reason I could think of is VC money. Sell the idea, get funding, use cash. Looking at you, Elon.
- gpm 7y agoOn the flip side I would argue that low marginal costs + high fixed costs = a natural monopoly, there is no room for a competitor to step in. A monopoly + lots of demand = lots of profit. It doesn't surprise me that OneWeb is going bankrupt, but that's because SpaceX is doing it better, and there is only space for one (profitable) company in this space.
- richk449 7y agoFor most of the people in the world, Internet is already available through land lines or cellular service. OneWeb has very little ability to extract monopoly rents from them. But both sides are not relevant to the article - whether the business case is solid or not in the long run, they are running out of money in the short term.
- gpm 7y agoProperties served by land lines and cellular service just aren't potential (highly profitable) customers for oneweb. That's ok, there are plenty of other customers. Ships, air planes, the military, even more remote places, backbone for remote cell towers, and so on. It is very relevant, if the business is solid they should be able to attract more investment in the short term.
- CapriciousCptl 7y agoWe're talking about the telecom industry-- if any group of competitors can stomach high fixed costs to reap future margins it's them. Launch new satellites, build new towers, lay new lines, whatever-- it's all the same Internet. Really, the story of Global Crossing's failure is instructive-- similar strategy of "low marginal cost, high fixed cost."
- gpm 7y agoThe future margins only exist if only one person succeeds in a given area, and the telecom industry is perfectly aware of this. It's the same reason why there are so many places in the US served by only one internet provider. I wouldn't expect there to be serious competition with the satellite provider for customers best served by satellites.
- shaklee3 7y agoSpaceX isn't necessarily doing better. They had more funding, but the OneWeb technology was better. You can't beat the musk reality distortion field, though.
- gpm 7y agoWhy do you say the OneWeb technology is better?
- shaklee3 7y agoThe consumer antenna I consider the most difficult part that could make or break any of these projects. OneWeb claims to have been making the most progress on this front in terms of cost. SpaceX has publicly announced there's would not be cost effective for most end users.
- gpm 7y agoI thought OneWeb wasn't even targeting consumers, and was just planning on acting as basically a backbone for cell towers in the consumer market?
- shaklee3 7y agoAll of them at one point said it was to serve underserved consumers. They changed their tune after the antennas and satellite cost was higher than they thought.
- jmcguckin 7y agoIf SpaceX had a conformal antenna, it would open a new market of bizjets and commercial aircraft for them.
- shaklee3 7y agoI'm not sure about that. Most people on planes use it for streaming media, and the current solutions are good enough for that. Also, it would take them many years to win that business and get certified.