By Robert Cyran,
Published by Reuters, 16 October 2023
NEW YORK (Reuters Breakingviews) – Amazon.com’s (AMZN.O) Project Kuiper is a misguided technological marvel. The plan to build a sky-spanning network beaming down internet service from space, dreamed up when founder Jeff Bezos still ran the company, took a step forward with the launch of two prototype satellites earlier this month, which Amazon on Monday confirmed are operating as expected. But with costs set to top $10 billion and rival SpaceX’s Starlink well ahead, current chief Andy Jassy would be best served by grounding the venture.
The promise of global satellite broadband has drawn tech billionaires from Bezos to Microsoft’s (MSFT.O) Bill Gates, who backed Teledesic before it went belly-up in the 2000s, to SpaceX honcho Elon Musk. It’s a huge endeavor. To offer sufficiently speedy connections, satellites must be close to Earth. That necessitates thousands to ensure one is always overhead, hence the recent explosion in the number being shot into orbit. Starlink has roughly 5,000.
Kuiper aims for 3,200, even as Musk plans further expansion. Each new satellite increases coverage, making it easier to find a connection. That allows for simpler and cheaper terminals – the devices customers use to log on – even as service improves. SpaceX says its terminals’ cost fell from $1,300 each to under $599 since 2021.
Such first-mover advantages are why building a communications network to compete with one already in place is a recipe for incinerating cash. During the dot-com era telecom boom, entrepreneurs borrowed heavily to build millions of miles of fiber-optic cables and overlapping local systems. Poor returns drove a wave of bankruptcies, including the once-$47 billion Global Crossing.
Of course, Kuiper isn’t an existential bet for the $1.3 trillion Amazon. But $10 billion-plus in earmarked spending jars with Jassy’s cost-cutting drive. Bezos-founded rocket-maker Blue Origin is in line for $2.7 billion of that sum, which drew a shareholder lawsuit accusing Amazon of a conflict of interest.
Since low-orbit satellites need replacing every five years or so, the spending won’t stop there. Worse, competition will be fierce: Eutelsat Communications’ (ETL.PA) OneWeb has already begun putting its network into orbit; China alone plans networks comprising 25,000 satellites.
That could lead to massive overcapacity, as the fiber boom did. While those cables enabled a flourishing online economy years later, though, a floating graveyard of unused satellites poses a potential hazard. A recent U.S. government report warned that space junk from currently planned networks could start regularly falling back to Earth by 2035. Facing an uncertain payoff and the possibility that its efforts will burn up on reentry, Amazon’s best move is bowing out of a futile space race.
(The author is a Reuters Breakingviews columnist. The opinions expressed are his own. Story first published Oct. 16, 2023: republished with no changes to text on Reuters.com, Dec. 1, 2023.)
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CONTEXT NEWS
Amazon.com successfully launched two prototype satellites for its Project Kuiper initiative into orbit on Oct. 6, and confirmed they are operating as designed on Oct. 16. The $1.3 trillion technology company plans to eventually launch over 3,200 satellites into low-earth orbit to provide high-speed internet globally.
Amazon disclosed in May that it expects to pay approximately $7.4 billion for satellite launches and related services through 2028, of which $2.7 billion is set to go to space company Blue Origin, owned by Amazon founder Jeff Bezos. Total costs are expected to be at least $10 billion.
Editing by Jonathan Guilford, Sharon Lam and Aditya Sriwatsav
See: Original Article
