Starlink's in-flight connectivity is taking off: what is the impact and what can incumbents do to compete?

Christopher Baugh

Hello, and welcome to the Analysys Mason podcast. My name is Christopher Baugh. I am a partner at Analysys Mason and the head of our Space research practice here within the research division of Analysys Mason. Today, I'm joined by one of our programme heads, Shagun Sachdeva, who is the head of our Satellite Mobility programme within the space research practice. Welcome, Shagun.

Shagun Sachdeva

Thanks, Chris. Thanks for having me.

SpaceX and Starlink's rise

Christopher Baugh

We're going to cover a big topic today on our podcast: mobility, in-flight connectivity, and then the company making the most noise right now, which are SpaceX and Starlink in the in-flight connectivity market (IFC). They are generating a lot of buzz and winning deals, like most of the rest of space that they're doing. And they're creating a new ecosystem and dynamic relevant to what the incumbents (those that are already in the IFC space) are doing. So we're going to explore that today with Shagun and have her give some insights into the road ahead and how they got here. How did SpaceX enter? What are they doing so uniquely? And then conversely, what can those in the industry do to be part of, maintain and grow market share, relevant to whatever Starlink is doing.

So Shagun, the first question for you is, how did Starlink get to this position? Was this a surprise? Was this expected? How did they get to this position of being so successful so quickly in the IFC space?

Shagun Sachdeva

I think there's a combination of multiple factors. It's not just the brand. It's not just the vertical integration that they’ve come up with; it's not just the in-house manufacturing to lower the costs. I think it's a combination of all these factors. They've been smart in creating this whole ecosystem around them of partners, suppliers, this whole idea of the ecosystem. I think it's a combination of their technical innovation, aggressive scaling, and customer-focused strategy that has positioned them as a transformative force to in-flight connectivity.

In terms of the IFC market and how it was a surprise to us, I don't think it was a surprise. Although the pace at which they have innovated, the pace at which they have signed contracts recently - today’s news was Scandinavian Airlines, they've managed to sign them up also - that part is a little bit of a surprise. But when they announced that the LEO constellation was what they were planning to do, I think IFC was one of the markets that they were planning to go after. So it's not a huge surprise that they went for the IFC market, but the pace of it is a surprise.

Differentiators in in-flight connectivity

Christopher Baugh

Yes, and from the outside looking in, even within the space industry, the pace at which they're moving and signing new deals, this is at a never-before-seen clip that they're operating. So it's a very robust curve they're on right now. And you mentioned the Scandinavian Airlines' recent deal. But I want to get to the differentiating factors for our audience. What is it, minus the brand? Of course, they have a brand that's globally recognised, but what is it that sets them apart from the others, the Viasats and the Gogo's, others in this space that are selling in-flight connectivity, where is that differentiating piece for them?

Shagun Sachdeva

I think that could be a combination of things. LEO satellites are already a differentiator with latency. So, on the technology side, they are quite aggressive. Capturing the market pretty aggressively and signing up partners is a bit of a differentiator coming from Starlink as well. Then, that ecosystem that I was talking about of in-house manufacturing to lower the costs to provide what they can to the customers to compete with the incumbents, I think that's a big differentiator. So it's a combination of a few things. And overall, it's hard to point to one thing. I would say it's a whole combination of factors that has got Starlink to this position.

Christopher Baugh

And when you move to LEO, of course, latency reduces. Is that a differentiating factor at the moment, lower latency? I mentioned Viasat already, where we've been operating from GEO for so long, the geostationary orbit. Are airlines excited about that? Is that a big differentiating factor, does it matter to them?

Shagun Sachdeva

Definitely. Users and customers are getting used to having the same connectivity as they have on the ground. It's quite challenging to have that in the air, but they are getting used to what they have on the ground. So airlines are very interested in having that for customers, interested in having that for airlines, specifically for them, and the connection of the plane.

So latency is definitely a differentiator and airlines are quite excited about that. There are some challenges with the reliability of that connection, but latency is something that interests the airline.

Christopher Baugh

It's interesting that you mentioned something about controlling the supply chain. So from user to service and everything in between, including launch, that's where they've made their initial foray into the ‘space’ space. And that's something where you look at two of the most successful, Viasat and Hughes, as well as others, completely vertically integrated, minus lunch for the others.

Controlling cost seems to be a very important thing, as you mentioned, airlines are all cost conscious and with Wi-Fi, free Wi-Fi on planes, increasingly, it seems like it's almost the de facto thing.

But you did mention hurdles, and it's not unbridled enthusiasm for growth forever. Where are those hurdles for Starlink? Where do they start to face headwinds? Where do you think that this becomes a bit more challenging, minus the early low-hanging fruit?

Challenges for Starlink

Shagun Sachdeva

I think regulatory challenges are one thing. Starlink, like any other new airline, must secure approvals from aviation authorities and governments in every market that they plan to connect to. There are high-demand routes and densely populated regions where they could experience congestion, potentially affecting service quality. Competition with GEO in those areas where capacity limitation occurs is a potential challenge. Competition from incumbents. Incumbents are not staying quiet they are still moving, they are still doing things. We've seen a lot of news from incumbents as well, combining GEO and LEO hybrid and so on. So the competition from them is also a hurdle for Starlink.

Also, in-flight connectivity usually comes with long-term contracts, making it harder for Starlink to gain a foothold in some of these fleets. And, of course, service reliability is one of the major hurdles. At the moment, Starlink does not offer CIRs or SLAs. So, that is a bit of a challenge at the moment for Starlink.

Christopher Baugh

OK. So, there are challenges. We can get carried away with Starlink's growth stories, but you mentioned an interesting one, which is congestion. I want to put a plug in here for our non-GEO constellations toolkit that we offer. We've run simulations for Starlink. When you start to layer in mobility traffic, aeronautical or maritime, around in the oceans, layer that on top of other types of traffic that they're serving and congestion does become a problem. Starlink will continue with SpaceX to launch lots of new satellites, but when you start to think about modelling that traffic over high bandwidth or high utilisation routes like the North Atlantic, for example, it becomes an issue. So, that's a part where we are in the early days. In the non-CIR or SLA world, you have these not-guaranteed best-effort bandwidths. It's good enough, but eventually, I believe the industry will find congestion agnostically. Completely just modelling it is an issue.

Now, let's turn the tables. Let's talk about the rest of the industry that's not SpaceX. Everybody stands in awe of the pace at which they're operating, but they are still active, growing, and doing new business. So it's not just a zero-sum game, per se. How can incumbents maintain and or grow their market share amidst this aggressive increasing threat to them?

Incumbents' strategies for growth

Shagun Sachdeva

We are already seeing a lot happening there. Eutelsat OneWeb, the Intelsat and SES consolidation, hopefully, this year, Viasat, Inmarsat, Gogo, and Satcom Direct, there are plenty of examples of what they are already doing. They are not sitting quietly, as you said, it's not just a Starlink game, they are also working towards a goal and moving forward.

So, what else can they do other than having just the hybrid architecture? They can strengthen the airline partnership that they already have, provide tailored packages for different airline needs, and collaborate with airlines to co-brand connectivity services, integrating them into the airline's overall passenger experience.

Innovative pricing models, there's a lot to go into with that, but flexible pricing, ad-based revenue, loyalty integration, there's a lot in there.

Differentiating through value-added services is a big one. Providing airlines with detailed analytics on passenger behaviour, I mentioned AI before, and using that to provide this service can be very useful for airlines. Offering robust cybersecurity solutions to protect passenger and airline data. Ensuring 24-7 support for airlines. These are things that affect users directly, and these are quite differentiated services that airlines would be very happy to receive.

Then, they can invest in new markets, which is a very strategic decision and can depend on various airlines and where they are routed, but investing in new markets is something that incumbents can do. But most of all, promoting proven reliability, which we talked about a little bit before, that Starlink doesn't quite have. Promoting that for incumbents can be a big value add.

Christopher Baugh

That's an interesting one, in addition to congestion, is service reliability. Like everything today with Starlink, it's best effort, so you have to accept that it is an issue. At some point later this year, we do expect them to offer committed rates, some SLAs and guarantees, in the fixed world.

I think that the path forward is more opportunity and more growth, but I think that it hits the wall at some point and service reliability is critical.

Thinking about how those that are already in the IFC space, about the orbits. The direction of travel in the broadband space of everything moving down to LEO, non-GEO, so MEO, LEO, etc, but really LEO. Is that the future for IFC as well? Is LEO a de facto, you have to have LEO, have to have a non-GEO strategy for in-flight connectivity in the next three, five, or 10 years. Is that a critical matter for those that are not Starlink?

The future of non-GEO strategies

Shagun Sachdeva

I think having a non-GEO strategy is critical, but that doesn't mean that GEO is dying or gone. I do think that GEO still maintains relevance for applications where reliability is important. Densely populated regions could experience congestion as we talked about. So GEO still plays a big role. But that said, non-GEO, either multi-orbit or LEO only or LEO plus GEO, I think is a critical strategy to consider in the future for IFC.

Christopher Baugh

OK. You mentioned multi-orbit, and this is one of the newer terms in the space industry, whether it's the government military market even some of the broadband space and mobility too. Multi-orbit is kind of a catch-all for combining two or more orbits into some workable solution. Is that the future here, too? Do we see multi-orbit being an important factor again with antenna technology, I know it is an issue in aerospace. Do you expect multi-orbit to be taking a percentage of the market? Or do we expect a demarcation line between orbit-based LEO services and GEO services? Or do we see more of that overlap?

Multi-orbit viability

Shagun Sachdeva

I think at the moment, there are challenges with multi-orbit. Multi-orbit would be LEO, MEO, or a combination of LEO, MEO, and GEO, as you said. There are challenges in terms of ground antennas, and that's a big challenge. It's not just the technical viability, but a business case viability as well to speak to the antennas. So, if that challenge is not overcome, then obviously multi-orbit is a big problem, not really a wise strategy to have. But in the long term, I do believe that is something that can be resolved. I say that with a lot of ifs though, there's a lot of conditional things here that go with the antenna manufacturing. If that comes to an affordable price and that can be business case viable then multi-orbit will be a viable option, otherwise, non-GEO or rather LEO is a strategy that is a critical one to look forward to.

Christopher Baugh

Sure. GEO, it's not standing still. You have new opportunities with smaller payloads, the Anuvu trend of buying Astranis satellites for dedicated services in places. So it's an interesting question if you go three, five or 10 years up. There's a lot of GEO capacity still up there and that's not going anywhere and LEO is going gangbusters.

Well, this has been excellent thank you a lot of serious questions, but I have the most important question of all for you, which is, what is your favourite space movie and why?

Favourite space movie

Shagun Sachdeva

So, I will be very unpopular after this podcast because I'm not a huge movie buff and definitely not a space movie buff. So I don't like Star Wars or Star Trek, but I love Battlestar Galactica. I love watching TV shows, so Battlestar Galactica is one of my favourite TV shows, and The Expanse is my other favourite TV show. I think the reason I like them over the movies that I just mentioned is that it has a little bit more politics in there, there's character development there, there's more of a human touch, and science that I can actually relate to more than what I have seen in Star Trek or Star Wars. I'm not saying that I have watched both of them or either of them fully, so I can't comment on that completely, but I find the other two, Battlestar Galactica and Expanse, more relatable in the near future.

Christopher Baugh

Well, very polarising. Star Wars, Star Trek, you went with neither option and went a different direction completely. So we may have some feedback on that for you. But of course, all options are good options if you're talking space!

So, Shagun, it's been a pleasure. Thank you for joining the podcast and a great discussion today on Starlink and IFC.

Shagun Sachdeva

Thanks for having me, Chris.

Christopher Baugh

There is more content on this topic on the Analysys Mason website. If you go to the research page and, of course, our space practice, Shagun's Mobility programme and all of the content within it, including strategic content on both Starlink and the rest of the industry.

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