Commercial Investment and the OneWeb Conundrum

4th Dec 2020
Oneweb

Until recently, investing in the space industry was considered the domain of governments. Due to the volume of investment required and the intricacy of the subject, a headline such as “Japan has invested into space” sounded normal. Over time, private enterprise has become a player in the field in several forms, and the genie is out of the bottle with the rise of private launch capacity. However, the lines between government and private funding are often blurred in the SpaceTech sector, which can be an asset given the specifics of the field, but sometimes runs to the detriment of transparency and the free flow of information. Moreover, these fuzzy lines seem to befuddle decision makers, to the detriment of the industry and non-governmental investors.

First, the good news. Space Capital, an investment company focused on SpaceTech, reports that in 3Q 2020, investment into the industry rebounded from the lows seen during the 2Q adjustment to coronavirus. Overall, 2020 is set to break records for SpaceTech investment despite the lull, and in some sectors such as infrastructure, new investment highs were registered before 4Q even started. 

Launch 

Worldwide,  SpaceTech equity investment reached $17.5 billion per year to date, and $5.5 billion invested in the Launch segment with the majority of that going to more mature projects, largely in Infrastructure, at $3.6 billion, and within that, in the heavy lift segment ($2.9 billion) in particular. Space Capital notes that Infrastructure recorded its strongest quarter yet in investment share, with 73% of the industry’s total 3Q investments.

Major deals include SpaceX gaining the lion’s share of the investments due to its $1.9 billion Series N round of funding. Jeff Bezos is expected to use $1 billion of the $3 billion in Amazon stock he sold this past August to fund his Blue Origin’s Human Landing System.  

According to the Bryce Start-Up Space 2020 report, the UK was among the front runners in terms of non-US Space Tech startups in 2019, with 24 companies. 

Cumulative investment into space infrastructure is quite high overall at $5.9 billion, or 21% of the cumulative $28.1 billion invested into space infrastructure since 2009. Only the US has garnered more on a cumulative basis, with 62%, or $17.42 billion, invested. In comparison, China and France had attracted 6% and 5% of space infrastructure investment since 2009. British firms did not make the league table of investments in Q3, though this is not a reflection of the British presence in the sector, as only one Chinese firm managed to join the American companies in the Top-10 of investment recipients.

Applications sector

Despite the Applications sector receiving 80% of Space Tech investment since 2009, the UK has gained relatively little of it. Compared to the US, with 45% , or $60.25 billion, of Applications investment and China with 31%, the UK has seen only 2%, or roughly $2.6 billion. 

The nature of the Applications sector has a lot to do with the relative paucity of equity investment in the UK. The overwhelming majority of Applications investment has been concentrated in the Positioning, Navigation, Timing (PNT) segment since a tremendous surge in 2014 that has continued to this day: 79% of Applications sector equity investment was directed toward PNT in 3Q20. 

With Brexit, Britain gained the opportunity to dramatically increase its share of PNT investment. This increase in public sector investment would depend, at least in one case, on the manner in which the government decides to implement its vision for positioning services. However, the process thus far has not been promising. 

No Applications, Nothing to Launch

The debacle to date stands like this: The UK government understood clearly the strategic necessity of having its own high-precision Global Navigation Satellite System (GNSS) after Brexit and the publicly announced departure from the EU-oriented secured service part of the European Space Agency’s GNSS project, Galileo. In fact, the government understood the issue well enough to announce in 2018 that a home-grown replacement for Galileo would be created. 

Meanwhile, London-based OneWeb’s attempt to cover the planet with Low Earth Orbiting (LEO) satellites and thus provide relatively inexpensive Internet service to remote areas such as Siberia,  encountered financial difficulties after launching 74 of the 648 satellites intended. Despite assurances from an initial backer, Softbank that funding to the tune of $1 billion would be available, cost-cutting measures by the Japanese firm led to the closure of all its endeavours that were not making money. Web’s eventual bankruptcy totaled a round $1 billion. India’s telecoms giant Bharti Global and the UK would eventually fork over £400 million each for 42.2% shares of the company. Softbank is to retain a 12.3% stake in the firm. 

Under normal circumstances, it is not unusual for companies to approach governments for approvals and clarifications before investments are made. Conversely, governments reach out to industry, but often have in-house expertise upon which to rely. In this case, the government was advised to acquire a stake in OneWeb by National Security Strategic Investment Fund, a venture capital fund set up by the government to invest into advanced technologies related to, amongst others, security. UK Space, the country’s space agency, doubted that OneWeb could be repurposed to fit the government’s needs. Moreover, relevant experts ranging from the government’s top science advisor to MoD were left out of the considerations, and the result is more than just bad blood between government institutions. The UK’s Space industry companies, already set to suffer from the collapse of OneWeb, may see their losses compounded by missed opportunities and the waste of government budget funds. 

For example, Richard Branson’s Virgin Orbit, which had a contract with OneWeb for horizontal launch services. Virgin Orbit is now suing OneWeb in court for $46.3 million due to the breach of contract. 

In September 2020, the Johnson government threw in the towel and announced that it was abandoning the attempt to build its own GNSS. Expectations now are that the UK will have to rejoin the Galileo project, with shadow science minister Chi Onwurah calling for an investigation.

The lost opportunity of OneWeb 

The possibility that it can be used for its original purpose, Internet coverage for remote areas, still exists. Keeping OneWeb as a rural-area telecoms provider has gotten even more difficult given that the joint venture with a subsidiary of Russia’s Roscosmos, JSC Satellite System Gonets, has been terminated as well due to the UK government’s purchase, on top of Russian government security concerns, the Telegraph reports. The  closure effectively blocks OneWeb from servicing one-sixth of the planet’s surface, and in particular a sixth that generally lacks the services OneWeb could provide. 

There would have been issues to resolve in making OneWeb’s LEO satellites capable of working in the more demanding GNSS profile than their original telecoms remit had required. First and foremost is the issue of ground terminal antenna technology. Currently, the electrically steerable antennas required are too expensive, though OneWeb founder Greg Webb claimed in early 2019 that he had created as a side project an antenna that would cost about $15 to make, which would place the entire terminal in the $200-300 range. Other sticking points include the clocks needed on board the satellites – which comprise a constellation of problems of their own in terms of quantity and quality. Also, the prospect of replacing LEO satellites more often than the current MEO GNSS systems do would raise running costs from both a launch perspective and a construction one as GNSS requires much more accurate (and expensive and harder to source) clocks than telecoms devices. 

But what if, instead of throwing in the towel, or mindlessly doubling down (which it did not, in the end), the Johnson government had attempted to spur development, say, by offering a prize similar to the Ansari X Prize, for antenna or terminal development? Perhaps, finding a way to foster the development of cheaper atomic clocks would have stood the government in good stead. The government has missed an opportunity to engage private industry with moves that are less forward than spending £400 million on a company that does not immediately fit the announced purpose (despite later attempts to backtrack). Moreover, the further launch of hundreds of satellites (at USD 1mn each) before 2024, and all 648 by 2027, will be required in order to maintain OneWeb’s coveted primary radio frequency allocations, according to US FCC regulations. 

Unless the government is looking to eventually flip OneWeb to Amazon another company that would like access to the radio spectrum OneWeb has garnered primary access, considering the company to be a loss-leader but an anchor while other parts of the UK Space industry take advantage of an assured platform and build around it from satellite construction to launch would actually create the Space Industry that was dreamt of when A UK Space Innovation and Growth Strategy 2010 to 2030 was published.

Private industry has stepped up, with Seraphim Capital, backed by major corporate and space agency partners, launching in 2018 its Space Camp Accelerator – the first such undertaking in Britain. The accelerator was designed to address pressing issues and foster value-creating startups in the space industry itself or in space-informed industries. Having spent this much just to get its foot in the door, the government could leverage the very same determination that led to turning the UK’s space industry on its head in a good way, and direct the experts it failed to utilize previously to build a development infrastructure. Other good efforts, such as the joint UK-US International Space Pitch Day, seem a world away from OneWeb.

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