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Why the future of satellite internet might be decided in rural Alaska

Service in the rural areas of the state is abysmal, which makes it the perfect place to test next-generation satellite internet.
February 14, 2019
Aerial photo of Juneau, Alaska
Aerial photo of Juneau, AlaskaAssociated press

Eleven months out of the year, you can catch Christine O’Connor working at the Alaska Telecom Association in Anchorage. She’s the executive director of the trade group, which fights for better internet service for all Alaskans.

The service is fine in her office: she shares a speedy 100-megabit-per-second connection with the rest of her building. But every July, O’Connor works as a commercial fisherman in Ekuk, an unincorporated territory with a recorded population of two. Here she is reminded, yet again, about the dire situation in many of the state’s rural areas.

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On her roof sits a two-generation-old satellite dish pointed almost directly at the horizon to catch the service from her closest HughesNet internet satellite. She bought it secondhand, because the newer versions can’t pick up a signal where she lives. That dish gets her 2 Mbps download speeds, with an 800 Mb daily cap, for $199.99 a month. For comparison, the average US broadband download speed in 2017 was 64.17 Mbps, with an average cost of about $67. But she’s not complaining. “I’m grateful to have it at all,” says O’Connor.

O'Connor standing in the entrance to a utility tunnel in Utqiagvik, Alaska.
Courtesy of Christine O'Connor

Anywhere from 15% to 39% of Alaskans are underserved by internet providers (meaning they have access to none or only one). Satellite internet is the only option to get service to these people: running a fiber line into a rural area with a small population isn’t worth the investment.

That’s why satellite internet companies are now eyeing Alaska as the perfect proving ground for their new tech, including constellations of low Earth orbit (LEO) satellites. Companies such as OneWeb, SpaceX, Telesat, and LeoSat are planning to use vast numbers of lower-capacity LEO satellites to provide broadband internet connections to the globe. Thousands of the satellites will circle the Earth and beam internet to the surface from an altitude of around 1,200 miles (2,000 kilometers). That is much closer than large geostationary satellites, the established method for providing space-based internet, which orbit the equator at about 22,200 miles up.

This is all good news for Alaskans, of course. But the sudden focus on getting a relatively wealthy—if remote—state online stands in contrast with what a lot of companies once promised for LEO technology. Originally, the rhetoric around these new satellites focused on promises of connecting the unconnected world—the “other three or four billion.” While this seems like a noble cause, the awkward fact is that making money from these regions is tough, says MIT graduate researcher Matt Graydon: “One executive flat-out said there’s no business in providing access to people who make $1 a day.”

Greg Wyler, the founder of OneWeb, previously started O3B, named for its ambition of connecting the “other 3 billion.” “What transpired over the last decade or so is their core market is islands and cruise ships,” says Manny Shar, UK head of analytics at Bryce Space and Technology. “It’s kind of interesting to see how they moved away from their target. It’s been more like the other three billionaires.”

But Alaska serves as a good middle ground. There is an underserved population that fits the corporate mission of connecting the unconnected but also has the money to support a service like this. It’s a remote, low-density American state that desperately wants better and cheaper connections .

There might also be another possible financial incentive. Alaska’s location near the North Pole is one of the reasons its internet service is so poor. Current geostationary satellites orbiting along the equator struggle to get service up to higher latitudes because of the steep angle needed to send the signal. Providing a decent service to the Arctic could open up a hugely profitable market with shipping lines and other business enterprises.

"The geostrategic significance of the Arctic can’t be understated.”

“I think satellite service providers will implement a strategy called price skimming, going after the high-end customers,” says Karen Jones, senior project leader for The Aerospace Corporation's Center for Space Policy and Strategy. “I think that’ll be airlines, cruise ships, and places with inelastic demand like the Arctic. The geostrategic significance of the Arctic can’t be understated.”

OneWeb is the largest new LEO startup eyeing Alaska. As Wyler said back in 2017, “We’re looking to do Alaska as one of the early locations because it has a really challenging broadband problem, and if we can solve Alaska, it’s a great demonstration of what can be done everywhere else.” O’Connor says that of all the new companies, OneWeb is the one she has seen on the ground the most, involved in local meetings and talking to the key players in Alaska. Wyler reaffirmed the company’s plans in The Economist last month, saying it’ll begin offering service in northern areas in 2019. But the company has reportedly been facing money difficulties, including higher prices for its satellites than originally quoted. After numerous delays, OneWeb’s first satellites are slated to launch on February 22.

Not far behind, another startup, Astranis, plans to launch its first scaled-down geostationary satellite to provide internet to Alaska by 2020. The satellites it’s deploying are cheaper than the typical geostationary satellite and a tenth to a 20th the size.

 “Alaska is our first customer,” says Astranis CEO John Gedmark. “It should be a wake-up call to people. We looked around the world, and the best place we found [to target] was actually right here in the United States.” And while “best” might mean an area with a strong need, it also means areas that offer a strong chance for making some money.

Last month Astranis signed a deal with internet provider Pacific Dataport to deliver service to Alaskans. Astranis is selling the service wholesale to the local company, promising it income from the launch.

Some longtime players in the Alaskan satellite industry can’t be counted out. Broadband satellite service company Hughes, which provides O’Connor’s internet, currently has 1.2 million subscribers on its satellite system in the Americas. According to Paul Gaske, general manager of Hughes North America, the company plans to continue investing in geostationary rather than LEO satellites. Its Jupiter 3 satellite is on track to launch in 2021. That should triple the company’s capacity in the US. Gaske doesn’t think LEO satellites can provide the capacity required to service a large population of customers. “We see the LEO and GEO as complementary," he says. “[LEO's] advantage is reach, rather than a density of capacity."

In Alaska, companies like OneWeb, Astranis, and LeoSat will either have to undercut these existing providers or use that advantage of reach to bring service to those with no access at all. And they must do that while proving themselves to local partners. “I don’t see it as an experiment,” says Mark Ayers, vice president of architecture and planning for Alaskan internet provider GCI. “They would need to demonstrate technical capability prior to commissioning.” As if on cue, the first LEO demonstrations could start soon. OneWeb’s Wyler tweeted last week, “I am hoping in just a few months we will start running some traffic demonstrations for our friends in Alaska!”

One other issue might be that the population of the state just isn’t that big, and there are a lot of new players looking to carve out their slice of the pie. Elsewhere, increased competition has hurt some existing companies. Bangkok-based Thaicom, a longtime player in geostationary-satellite internet, saw 10.2% less revenue last year, its second straight year of declining revenue, citing “fierce competition” as the cause.

While the various players maneuver for position—and try to see if they can make the numbers add up—the Alaskans themselves are desperate for the technology to work. “I’m eager for better, cheaper internet options for remote Alaska, and I’m curious about how quickly they will arrive,” says O’Connor. “Right now we’re just waiting.”

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