Project Kuiper is off the ground…
Literally.
Yesterday was an important day, as Amazon’s first 27 Project Kuiper production satellites successfully made it to low Earth orbit (LEO). They traveled on board a United Launch Alliance (ULA) AltasV rocket.
ULA AtlasV | Source: Andy Jassy
As a reminder, Project Kuiper is Amazon’s answer to SpaceX’s Starlink constellation of satellites – providing high-speed, low-latency, space-based internet services to planet Earth.
We know this project well at The Bleeding Edge as we’ve been closely tracking progress since it was first announced in 2019. Project Kuiper satellites were originally planned to begin deployment in 2021. But obviously, Amazon has experienced some significant delays.
In October 2023, Amazon successfully launched two prototype satellites for testing, but it wasn’t until yesterday that the first batch of production satellites was placed into low Earth orbit.
Oddly, there’s a lot of excitement in the media right now about the news…
But there’s some important context to understand about the deployment of these kinds of space-based services in LEO (as opposed to geostationary orbit).
In 2020, Amazon received approval from the U.S. Federal Communications Commission (FCC) to deploy a constellation of 3,236 satellites in LEO.
These satellites will be deployed between 590 and 630 kilometers in orbital altitude, which means they’ll be traveling about 25,000 kilometers an hour as they orbit Earth.
Because of that, Amazon needs a much larger configuration than 27 satellites before it can begin to offer internet services over a specific geographic region. Internet services will be launched in limited geographies once 578 satellites are in orbit.
For comparison, SpaceX currently has 7,135 Starlink satellites in LEO. It is by far the largest satellite constellation in history, and it literally blankets the entire planet.
Starlink satellite map | Source: www.starlinkmap.org
Said another way, Amazon has a lot of catching up to do.
But it won’t be too much longer before Amazon can begin to offer internet services – at least in the U.S. At 27 satellites per launch, Amazon can reach 578 satellites in about 20 more launches, which can be achieved before the end of this year, and Amazon has already secured its launch services to make it happen.
Launching the service in the U.S. is important because any company that receives authorization from the FCC to deploy a constellation and use radio frequency spectrum to deliver services is required to do so within a stated period. Otherwise, the company will lose that license to do so.
And that’s great news for consumers and businesses alike. Project Kuiper will present a competitive offering to Starlink, and I suspect that Amazon will price a bit below Starlink in hopes of increasing its subscribers.
After all, Starlink has almost 6 million subscribers now, and the service is now available in 125 countries. This is an incredible head start that will not be overcome.
And SpaceX clearly has no intentions of giving Amazon any advantages.
Very intentionally, SpaceX Starlink just announced yesterday – the day of Amazon’s first launch – that consumers can receive a Starlink system for free, with a 12-month residential service plan commitment.
Source: Starlink
Not surprisingly, Starlink and Amazon’s Kuiper systems use very similar technologies. Because both satellite systems are in low Earth orbit, the physics of these systems is the same. Therefore, satellite and consumer terminal designs are similar.
Project Kuiper Terminal | Source: Amazon
The terminal shown above, which is the combined antenna, transmitter, and receiver components, is entirely a solid-state design (i.e., no moving parts) with three different models: standard, compact, and pro versions.
This is the primary difference between the Starlink terminals, which have a limited number of motorized components for automatic alignment. There are some advantages to Starlink’s approach, but its terminals definitely cost more to manufacture.
Amazon’s terminals will almost certainly be less expensive to manufacture than Starlink’s terminals, but that’s only at scale, which Amazon doesn’t have yet. And the reality is that manufacturing cost won’t drive the business models.
As we saw earlier, Starlink is now willing to give away the terminals for free, as long as there is a 12-month commitment. This is the same kind of subsidized model used by the wireless industry with smartphones.
Amazon is claiming that the Kuiper service will be higher performance compared to Starlink, delivering 400 megabits per second on its standard terminal and up to 1 gigabit per second (Gbps) on its Pro version, all at lower latencies than Starlink.
This has yet to be proven, but technically, it is possible. But the truth is that it doesn’t matter at all. Price, performance, and incentives will all be used for marketing purposes. In practice, actual user experience will primarily be dictated by how many users are utilizing a single Kuiper satellite at any given time. Just like any wireless network, congestion slows things down.
But all this talk of space-based broadband internet access anywhere on the planet is just window dressing to the real battle…
And the real reason that Amazon launched Project Kuiper…
The real business opportunity here is to build a literal, space-based World Wide Web. We should think about this as internet infrastructure in space. And SpaceX is dominating right now.
Amazon completely dropped the ball.
After all, Amazon’s Amazon Web Services controls one-third of the global cloud services market while Google has only about 10%.
As a reminder, Google was the dominant internet services company in the aftermath of the dot-com bubble. It was profitable, with incredible gross margins, and generating free cash flow.
And it fell asleep at the wheel.
Of all the companies that should have aggressively invested in and launched a cloud services business, Google should have been the one. But it was the scrappy, super low-margin e-commerce company – Amazon – that stepped up and caught Google completely off-guard.
Amazon’s early entry and leadership in cloud services have given Amazon Web Services a dominant position in global, ground-based internet infrastructure.
Again, of all the companies that would have been most likely to extend that “global” internet infrastructure into space, it should have been Amazon. After all, Amazon did it to Google once before – in a brilliant move.
But then Amazon became complacent, just like Google.
The new “scrappy” startup, SpaceX, has stepped up with Starlink and caught Amazon off guard.
The parallels are uncanny. Amazon Web Services (AWS), which launched in 2006, became the cash cow for Amazon, providing the free cash flow that Amazon needed to invest in its logistics infrastructure for its e-commerce business. Without AWS – a high-gross-margin business – Amazon’s e-commerce business would not have been able to grow so fast.
The same exact dynamic applies to Starlink.
Starlink quickly became the cash cow for SpaceX, gushing free cash flow, which SpaceX desperately needed for billions of dollars of continued investment to innovate, iterate, and build the new Starship spacecraft. And to eventually fund two missions to Mars, scheduled for the end of next year.
Without the Starlink-generated free cash flow, SpaceX wouldn’t be able to move as quickly as it is, dominating the global launch industry.
SpaceX is in an even more dominant position in aerospace than Amazon is in global internet infrastructure.
SpaceX already has 87% of the total mass launched into orbit, a number that will almost certainly exceed 90% before the end of this year.
The real race here is about building space-based internet infrastructure, including container-sized data centers in space.
Both Starlink and Kuiper use optical inter-satellite link technology, which is a powerful laser-based system capable of beaming data between satellites at 100 Gbps and at distances measured in thousands of kilometers.
SpaceX is dominating and Amazon is playing catch-up… just like Google is still chasing Amazon Web Services. And after that? There’s no one else in the race.
Legacy space-based internet providers like Viasat (VSAT), Hughesnet, and OneWeb – which use geostationary satellites to deliver internet services – are in trouble. Their services are grossly inferior to Starlink and Kuiper, and they have no path towards competing on space-based internet infrastructure.
The industry has been upended. The incumbents have been completely disrupted.
And aside from SpaceX, it’s the consumers, businesses, and governments around the world that will win. We all win by having access to low-cost, high-performance, space-based communications anywhere on planet Earth.
But of course, it’s not just about Earth, is it…
If the plan is to establish a lunar outpost and to eventually colonize Mars, won’t we need a lunar and Martian web too?
All systems are nominal, let’s go!
Jeff
The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
