Space as a Service (SPaaS) the Next Great Frontier

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Monetize space?

Well, yes – many believe that space as a service (SPaaS) is the next great business frontier.

On Thursday February 10th, four tiny NASA-funded satellites were lost on their way to space. These small experimental devices, called cube-sats, had been launched to cheers, especially by employees of Astra Space, whose craft flung the satellites towards the sunlit silence.

But as the rocket’s second stage booster, expected to propel the cube-sats even deeper into orbit, began to spin out of control Astra’s stock price experienced its own gyrations: The share price contraction of this $500 million Special Purpose Acquisition Corporation (SPACE) was so pronounced that the New York Stock Exchange immediately halted trading.

By the end of the week, Astra’s market capitalization had been effectively halved.

Next Great Frontier, or far fetched?

Astra’s recent travails show just how difficult it is to join the club of launch start-ups jockeying to offer cheaper methods of lofting objects into the heavens. These include more established players in the field like:

SpaceX;

Rocket Lab, which has completed two dozen launches from New Zealand since 2018;

Virgin Orbit, the company founded by Richard Branson that drops a rocket from a modified Boeing 747 jumbo jet to reach orbit;

Relativity Space, which will rely on a small 3D-printed rocket called Terran 1.

Many more companies like Astra are aiming to reach orbit and kick off their own commercial satellite launch businesses, and Thursday’s botched trip to the sanctity of space – compounded with the loss of 40 new SpaceX satellites to solar flares just a day or two earlier – highlights the efforts’ daunting challenges.

Yet focusing on Astra’s failure overlooks how far the business of space has come. For decades most things having to do with space revolved around product sales. Of late, new business models have evolved. We are tracking several of these new verticals including Space Data as a Service, Satellite as a Service, and Ground Station(s) as a Service.

All of these promise the benefits of space without the demands of one-off satellite manufacturing, government regulation, launch integration, or space data delivery. Let’s refer to all of these categories under the broader header of SPaaS.

SAAS leads to SPaaS

In practical terms, based on the success of the Software as a Service (SAAS) transformation in the computer sector decades ago (where users could access software through subscriptions from companies that hosted it online rather than installing on their own computers), the platform mentality has finally hit the space industry.

SAAS was first made possible by massive server networks and later extended by cloud infrastructure. Falling prices for satellites and satellite launches, the proliferation of ground stations, and satellite tracking radars have combined to clear the way for SPaaS’ emergence. We stand on the cusp of a new day.

Anticipated benefits of the service model for space companies include scale, negating the expensive and time-consuming process of launching a space satellite. Infrastructure costs can be spread across a large customer base, since data feeds can be sold multiple times to multiple clients.

Even defense and intelligence agencies with their own satellite fleets are realizing SPaaS’ benefits, turning to commercial data services to shift the cost of research and development. Risk is shifted, but there are schedule benefits as well: The US Government, for example, doesn’t operate at the pace of a Silicon Valley start up!

There will always be a combination of products and services like in the tech world where people who rely on cloud services still buy their own computers, but there are great values to startups not needing to build their own data processing and storage infrastructure(s) when it comes to SPaaS.

Even Amazon, whose Kuiper project will develop vast networks of thousands of internet-beaming satellites, will not be going it alone.

While we are still in the early days of this revolution, Iridium (IRDM:NASD) has operated in this space putting up satellites to support its communication infrastructure for over two decades. SPaaS, in many ways, is about communication and all roads lead to the next generation of the internet, among other things.

IRDM’s Aireon subsidiary uses its satellites to track commercial aviation flights as they travel over oceans. Shockingly, most Federal Aviation Administrations the world over use World War II era, land-based radar to track flights along the coasts of continents.

By using satellites, travelers will benefit from quicker flights (shorter distances, since they don’t need to be land-linked, also yield fuel benefits) and real-time tracking: Never another Malaysia Airlines Flight 370, lost over open ocean and never found.

It’s important that the satellite primes (Lockheed, etc.) have sub-contractors they can rely on – much like the decades-old legacy automobile OEM ecosystem. Many view the importance of Space as a greenfield communication landscape.  Most startups in this sector will likely have domain-specific expertise in helping communication in space.

The next generation of the internet is the corner of the SPaaS market that, as we continue to climb sunward, may have the most potential.

By Randy Baron, lead portfolio manager at Pinnacle Associates, Ltd. Pinnacle Associates.

The complete article can be found on the Family Office Network’s website.

 

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By Randy Baron, lead portfolio manager at Pinnacle Associates, Ltd. Pinnacle Associates.

The complete article can be found on the Family Office Network’s website.

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