Everyday there is a news story about SpaceX, Blue Origin or Virgin Galactic. We are fascinated by the hubris of billionaires Bezos, Musk and Branson to expand humanity off of Earth and out into space. The more I delve into the NewSpace industry , the more I am astounded by how much it reminds me of my industry, telecom. Let me explain.
The late 1980’s and the 1990’s were a time of disruption and change in telecommunications around the world . Deregulation and liberalization were in vogue as competition was introduced into previous monopoly markets. It started with upstart competitors like MCI and Sprint trying to break into AT&T’s long distance monopoly in the USA. Then the Telecommunications Act of 1996 in the US creating a whole new batch of mini-Bells.
The UK similarly saw the privatization of government owned British Telecom in 1984 and its monopoly was challenged by Mercury, a subsidiary of Cable and Wireless communications . Other countries , Canada, Australia, New Zealand, the Netherlands followed suit. It spread globally.
Governments worldwide embraced privatization of their former telco monopolies (PTT’s or Postal Telegraph & Telephone) to become publicly listed commercial entities and introduced competition into these markets.
Simultaneously we saw the rise of the worldwide Web and consumers were introduced to the Internet. Dial-up modems provided access at first, but were quickly replaced by broadband connections. To feed the growing demand for bandwidth for competitive telecom and the Internet there was a flood of new fiber optic cables laid. According to KMR Research about 80 million miles of optical fiber was installed between 1996 and 2001 in the USA alone. New submarine fiber cable routes between continents were planned and laid. The forecasts were that Internet traffic would double, every year, so we needed MORE.
Telecom was the new Wild West, the new Klondike gold rush. Capital markets paid attention and newly minted companies that had telecom, broadband or Internet in the name got funded to operate in this new environment of explosive growth. The stock markets in Canada, the USA and Europe were filled with telecom and broadband backbone providers, submarine cable companies , hardware vendors. It was as big if not bigger than the dot com boom.
My own career has been imbued by this zeitgeist . After engineering school at Waterloo I started at CNCP, which was owned by CP and CN the two giant Canadian railways. It operated the Telex network across Canada and provided the main competition to the incumbent provincial telephone monopolies. When long distance was finally deregulated in Canada I was part of the management team of ACC TeleEnterprises which we grew and took public on the Toronto and Montreal exchanges. At ACC we also had the worlds first trans-Atlantic private line that hooked up to the public phone network connecting London, UK with switches in Toronto, Montreal and Vancouver. After ACC, I started AurorA, which provided international telecom services, both voice termination and bandwidth to the competitive industry in Canada, the USA and telcos around the world.
So why do I write today about this ancient history ? Because the nascent NewSpace industry reminds me very much of those days in telecom. The parallels are tremendous.
Access to space used to be limited to governments, specifically those of the United States, Russia and China. The “Space Race” in the 1960’s between the Soviet Union and the Americans during the Mercury, Gemini and Apollo programs could only be funded by national governments . Government contractors built the rockets and other equipment and they were typically subsidiaries of the defence industry. Those contracts were for cost-plus and programs were large, expensive, bureaucratic and slow.
About the time of the go-go telecom years we saw the beginnings of a commercial space sector.. The race to the moon had given way to government cutbacks to NASA; the focus in the ’90s became the Space Shuttle program and the International Space Station (ISS). Telecom dreamers wanted to put up broadband in space, a way to “connect the unconnected”. This led to ideas like Iridium, Teledesic and GlobalStar that were able to access the public markets during the telecom boom to fund their dreams. There were also startups backed by legacy aerospace companies like Boeing, Lockheed and Alcatel. They all sadly failed and went bankrupt. (I wrote a review on a great book on the history if Iridium here).
Then came SpaceX. Through the vision of Elon Musk, his newly minted fortune from PayPal and the incredible fortitude of a young team of talented engineers, SpaceX was able to challenge and disrupt the Space industry in the early 2000’s. They were able to provide a new way to build rockets, using the agile, iterative approach of Silicon Valley. Their unlikely success revitalized a commercial space sector by dramatically lowering the cost of launch.
Thus was born the NewSpace industry. There have probably been about 1000 start-up space companies in the last 6 to 8 years. It was hard for them to get funding initially as many are very capital intensive and there really were no space focussed Venture capital firms until the last few years. Running a space company meant always looking for funding to keep the company alive.
Then came SPACs. Richard Branson’s Virgin Galactic needed more funding and he was able to get it in 2019 by going public via a SPAC deal with Social Capital Hedosophia run by Chamath Palihapitiya (who among other things is a UWaterloo engineer also !) to become the world’s first publicly traded commercial human spaceflight company.
Other space companies have since taken the opportunity to go public also via the SPAC route such as AST Science, Momentus, RocketLab, Astra, Spire Global, BlackSky, Redwire and Arqit Ltd. SPAC funding typically provides a space company with enough capital to fully fund their business plan so they can focus on execution. Today the space sector is worth about $400B but Morgan Stanley predicts it will be trillion dollar industry by 2030. That is probably conservative given the pace of change.
This is why I get excited about the NewSpace industry. What started off as a government monopoly became a competitive commercial industry fueled by the public stock market. Disrupted by new ideas, new processes and new technology. The new mantra is “You can’t spell space without SPAC” !
My final observation, is that even though launching satellites, hardware and humans into space does take a rocket scientist, in the end much of the applications really boil down to this being a telco in space. Whether it is providing broadband internet like Starlink or OneWeb (there is that same “connect the unconnected” dream), or Internet of Things (IoT) capabilities like Swarm or Kepler, Cellular or 5G from space like AST, Lynk or OmniSpace or any of the Earth Observation platforms (visual, SAR, RF or thermal) that connect their data stream to hyper provider clouds like AWS, Azure or GCP it all comes down to moving bits around, just like a telco. We’re just extending the tower up a little higher.
Ad Astra (Latin for “To the Stars”)
