Satellite broadband: RIL's entry could mark start of another telecom battle

The satellite broadband business is heating up. A few weeks ago, Reliance Industries ended months of speculation when Jio Satellite Communications, a Reliance Jio subsidiary, applied to the Department of Telecom (DoT) for a global mobile personal communication by satellite (GMCS) licence.

The move will see Reliance locking horns with its chief rivals in the telecom sweepstakes — Sunil Mittal-backed OneWeb, which was the first to apply for the same licence and is awaiting a go-ahead. For the uninitiated, like the Unified Access Service Licence (UASL), which allows telcos to offer access for a range of terrestrial telecom services, GMCS offers satellite access services to customers. The only difference is that while UASL is given city- or “circle”-wise GMCS is given for pan-India operations.

There are many others who want to join the party — Canada’s Telesat, Google’s much-anticipated Kuiper and Elon Musk’s Starlink, the big boy of the game who is far ahead with services launched in the US and other countries. But Musk is under a bit of a cloud in India with the government directing Starlink to stop taking bookings for its satellite broadband services in the country even before it has applied, let alone received permission, for its services.

So how will Reliance strategy shape up in satellite broadband? Company insiders said it is still a work in progress beyond the broad strategy that Reliance wants to be ready if the services are required by their customers.

It has two options. It can, for instance, straddle the entire spectrum of the business as Mittal’s Bharti group has done. The group co-owns and runs satellites worldwide by acquiring substantial stakes in OneWeb, a satellite company, in partnership with the 

UK government and other stakeholders. At the second level, a subsidiary, OneWeb India, operates locally, which includes building and running ground stations, buying spectrum for uplinking and downlinking and applying for the GMCS licence. At the third level, Bharti has signed up for a joint venture (JV) with bandwidth distributors who, in turn, will sell it to the end customer. In India it has set up a JV between its Indian telco Airtel and Hughes, which is a majority shareholder with 67 per cent.

Reliance could also build a constellation from scratch as Google is doing but that would be time-consuming. Plus, the competition has already put up large numbers of satellites in space.

To follow either path would require Reliance to play in the global telecom sweepstakes. Airtel has already done so with large operations beyond India in Africa and south Asia, apart from its submarine cable operations and then with OneWeb (Reliance Jio also owns submarine fibre assets).

Analysts suggest that with its ability to launch large projects, Reliance is treading in that direction. It has announced that it wants to sell its indigenous 5G Open RAN technology and solutions to telcos across the globe and take on the big global vendors such as Ericsson-Nokia. The satellite foray could be its next move.

But setting up a satellite constellation will require large investments in a business where the global competition is acute and there is little clarity on the market potential.

Musk’s Starlink, for instance, is investing $30 billion for a constellation of 1,500 satellites while the OneWeb tab is spending $10 billion. But the market size is still difficult to project. Allied Market Research says it will be $19 billion globally by 2030 from mere $3 billion in 2020. But the service is far more expensive ($99 for a month is Starlink’s offer to customers in the US) than terrestrial broadband and its appeal is limited to remote geographies outside the reach of broadband.

The faster way to get off the ground, experts say, would be to tie up with one of the existing Low Earth Orbit (LEO) global satellite companies, buy bandwidth, and operate the Indian part of the business, as OneWeb India plans to do. Or it could just follow the OneWeb India model by signing up with partners who would in turn distribute the bandwidth to the customers.

It is important for Reliance Jio to have a toehold in this business because it is the undisputed leader in the broadband sweepstakes — with a 54 per cent share of the broadband wire and wireless subscriber market. This is despite the aggression from Airtel, which leads the fibre-to-the-home space with over 4.34 million customers. And with Reliance Jio planning to enter 5G with the more advanced standalone technology (where the core as well as radios are 5G) unlike its competitors, it is poised to be a dominant player in the high-speed mobile and fixed 5G broadband, too.

So logically there is no reason for Reliance to concede the market in satellite broadband to the Bharti group. And what makes it more attractive is the huge margins one can make unlike in terrestrial broadband because of lower operating costs.

From the regulatory play, too, one can get indications of Reliance’s strategy. Jio has opposed Airtel and Mittal’s move to reserve 1GZ (28.5 to 29.5 GHZ) in the millimetre band for satellite players and at an administered price without auction so that the latter can uplink to its satellite network. If this is offered, Jio could be at a cost disadvantage as it would be paying for spectrum based on high auction prices to offer broadband.

Instead Jio has asked for three things — assign the band through auctions just as it has done for the entire millimetre band earmarked for 5G and ensure a level playing field; two, to allow its mixed usage both for terrestrial 5G and satellite broadband leaving the decision to the operator; and also, freedom to sub-lease this part at any place for the gateway operations of a satellite operator.

In many ways, the regulator’s decision will determine the price of it to customers as well as Reliance’s strategy. Whatever route it chooses, telecom will become another battlefield again.