The Evolution of the Satellite Economy

0:00Space is really not for the faint of heart, but this is sort of hard squared. The monol needed zone GPS system. You're on the lunar servers, you want to know where you are. Same thing is on the earth, you want to build this blob, you know, Google Maps. Now we get back to your later base. So people used to talk about the other three billion that don't have access to the internet when, you know, the internet was first really taking off. Now is the other four billion. The problem actually got worse. You know, we just figured, okay, there's got to be a way to do this better. It's like when you see that magnitude of opportunity and no one is doing it, you know, you just got to go and figure out why no one else is doing it.

0:41One thing we love to talk about here on the A16C podcast is Exponential Trends. And one such trend that is approaching exponential is the price of shipping a kilogram to orbit. Significant declines in cost have resulted in an absolute renaissance of activity. In fact, 2022 was a record year for the space sector with 186 successful rocket launches. That was 41 more than 2021. So what are all these rockets bringing to orbit? And who is on the other side of that market? What entities, public or private are buying the capabilities up there? And how might this increasingly diverse computing shell around the Earth of Vulp.

1:26If you know anything about exponential trends, then the idea of mining asteroids or manufacturing drugs in space actually no longer sounds crazy. And that is why we bring you this mini -series on the satellite economy. Together with the founders of two companies trying to participate, Astronis and Stoke Space. Here in part one, John Gedmark from Astronis joins us after a few decades in the industry, from forming the Commercial Space Light Federation in 2006 to Astronauts' very own launch in May. And as John now builds his own satellites, he reflects on the transition from the government shuttle era where satellites were literally the size of school buses and lasted for decades to something much different.

2:14Here, we discuss why Astronauts is tackling Geo instead of Leo. what government and non -government buyers are looking for and how competition and cost are shaping up. Astronauts, by the way, is trying to bring connectivity to the mind -boggling four billion people that still do not have internet access. And they're doing that by partnering with customers, ranging from Alaska's Pacific Data Port to a Peruvian telecommunications provider and also an In -flight connectivity company. So naturally, I had to ask why In -flight Wi -Fi is so bad, so make sure you tune in for that. But also, be sure to join us for part two where we discuss the unique engineering challenge of reusable rockets.

2:58All right, prepare for liftoff.

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3:35So you've been in space for a while. I think what was it? In 2006, you helped found the commercial space flag Federation. Why don't we start there? What caused you to want to be a part of that way back then? Like what did you see at the time? Oh sure. I mean that was back when this new industry was just getting off the ground. Right. People were figuring out that they could with private dollars go and start a new space -goatting and actually do something useful with sort of a non -giant government blank check amount of money. So I wanted to find basically the place where the actual was happening.

4:12And I was very lucky, I was pretty fresh out of school, and I started as an intern at the Express Foundation. And so, you know, Express at the time It's this nonprofit organization that develops these prizes for technological breakters. And it's just this phenomenal organization at the time the big prize was this $10 million prize for a private company to launch people in the space. And I'm going to add to that technology ended up becoming what is now perigialactic still today, right? So like that really kicked off this new wave of activity in the space industry. And I was very lucky to just be there and be a part of it and be right in the middle of it.

4:52So one of the products that I worked on was this new industry group, the commercial space -like variation, and that you have these industry groups that try to decide as an industry, what are the important policies, what are things we want, you know, whether it's industry standards that cut across, you know, all these companies, or it's public policy. And all the organizations at the time were basically run by the major aerospace and defense companies. Right? So really the basic idea was just like let's have our own organization, you know, no big defense contractors allowed and figure out what policies make the most sense for this new emerging set of companies.

5:33Maybe you can speak to that transition because really for a few decades it really was the government that was the primary home and you also mentioned this in these large contractors, but those were the entities driving space forward, right? And now in 2023, things look pretty different. We've gone from the shuttle model to something where the lot more startups, a lot more readiness, innovation, probably more failures along the way, but also it's just a totally different environment that went from the government now also to something, you know, these private companies. It really is. I mean, there were basically three eras of spaceflight, right?

6:13There was the initial Apollo era where we were in. It was this massive, almost monolithic government program, and everything was huge and epic in scale by design, because we were trying to compete against the Soviet Union and show that we could do things better and faster and land a person on the moon before they could. Then we entered into this era in the 80s, basically with the space shuttle and with a lot of other space programs, defense programs, where these things got very entrenched with these costless contracts. And the major aerospace defense contractors were basically able to lock in these programs at a cost of billions of dollars and they were just not going anywhere.

7:01It was like, you know, the space shuttle flew for almost three decades. And the craziest thing about the space shuttle is that it was basically a government ride to space that was owned and operated by the government, but private companies sometimes had no choice but to fly their satellites up on a space shuttle to get into space. And so it'd be like if there was some government owned and operated fleet of cargo containerships that would take your cargo, you know, that you wanted it to point to. that you could take. Yes, there were certainly companies that tried over the course of those decades to come up with new private vehicles on the 90s that was actually a huge number of startups that tried to do new rockets, basically.

7:47But they were, in effect, competing with this government monopoly. I'm not sure that the conditions were really right until we got into the end of that era, which I would do market as like the retirement of the space shuttle. And that retirement, it took to many years for the retirement to actually happen, but it started with the Columbia disaster. And that was finally when people said, okay, you know, I've been flying this thing for almost 25 years. It's time to retire it. And then it took several more years after that. So you really had all these ingredients of number basically private individuals who have made enough money in the dot com boom and had this passion for space to go and take a run at it.

8:27And then you also add, on the government side, you're the retirement and special coming up on the horizon as this basically is huge opportunity that those companies could then step into. Yeah, were there any other changes that have really brought us to like this, what feels like a golden age of space innovation? Is it like regulatory changes? Is it technological innovation that's unlocked? So the other one was just the technologies that were starting to become available, right? So for small satellites to be possible, you really needed this combination of technologies to all come together. One of them was actually just lithium ion batteries.

9:07So the old satellites used to have lead acid batteries that were absolutely these massive heavy things. So that leap to lithium ion batteries, we all know about the benefits of that here on Earth because we have one of those of green device that we carry, but it actually also made a huge deal and beat us being able to shrink the size of satellites. And then there's also new chips that we can available at a lower cost, but it's just more on action. There were some things that just got to the point where there was enough compute for a loan of price that it made sense. And then also some advances on the propulsion side.

9:41So there's really like a whole basket of technologies that started to come together and let companies is like one of the first ones with a sky box, go and say, hey, we can, at actually surprisingly low cost, build a small satellite that will do this very useful thing, have a lot of capability in a small package in a way that just would have never been capable for it, before it would have taken a huge satellite besides the School of Us, and be able to raise vitro capital dollars on that. And so that was a pretty big change. Can you just kind of help us get a sense of size here? So you said like the old satellites were maybe as big as a school bus.

10:21Yes, we're talking about these small satellites. I hope you give a difference that we're talking about. Yeah, so when we talk about small satellites, you know, it could be anything from the CubeSat which is like a bread box up to You know something the size of a large home appliance, right? So like a kitchen range or a mini fridge, right? Our satellites are a little bit larger than that similar class, you know, what we call micro satellites. The big satellites that historically cost several hundred million dollars each, you know, they are the size of a school bus if not like a double -decker, you know, big red, London double -decker bus.

10:59So it's a huge difference. It's kind of fascinating because it's just as mind -bending to imagine like this massive school bus throttling around orbit, but it's also kind of just as crazy to imagine like a tiny little toaster. But you know on that note we'll get to the future of the satellite economy and all the different implications opportunities. Tell us a little bit about why specifically you've chosen to tackle the unique domain and land that you have on these like smaller geo stationary orbit satellites. Totally. I wanted to go and you know do say really disruptive in space. I knew that there was, and there still is, just massive amounts of value to be had in doing things with these new approaches from small satellites.

11:46The thing about geo and so these other higher orbits is they are hard to operate in and they're harder to get to. So it makes sense that when all those different technologies came together that allow people to build small satellites really for the first time, that they must start in in lower -thorbiting Leo, right? That perfectly makes sense. But historically, GEO is actually the most valuable orbit. Okay. That is where the bulk of money has been spent to put satellites into orbit. I mean, it's hard to know the exact numbers because a lot of it is classified. So these are like multiple billions of dollars per satellite, but personal days classified satellites, right?

12:29It could be in the hundreds of billions of dollars. We know it knows exactly what it is. But it is a big number that has been spent putting satellites up in a geo and it's been to enormous economic benefit. I want the biggest money makers in the history of all of space was broadcast satellite TV and that was all done with these large very expensive geo satellites, right? So you know there's a enormous amount of value up there and this real estate, which is this felt that surround the earth at Geo. And, you know, we just figured, okay, there's going to be a way to do this better. It's like, when you see that magnitude of opportunity and no one is doing it, you know, you just got to go and figure out why no one else is doing it and take a stab at it.

13:14But I mean to that point, there's a lot of people when they hear that they're like, there must be a reason, like there must be a reason that this hasn't been tackled or that for several decades it's only been done this one way where there's just massive satellites mostly shot up there from the government that stay up there for what is it years or four decades as well. And so I guess kind of two questions there one why was no one giving this and probably related to this like tell us a little bit more about the difference between low or lower bit which is where a lot of different companies are now launching satellites into and a geo which is where you've chosen to go.

13:53What is the difference there? And again, why was no one else doing this? Yeah, totally. So the reason no one else was doing it is that it's hard, right? It is up at this high orbit where you're actually right in the thick of what we call the Van Allen radiation belts. So the satellites are just swimming in this sea of radiation all the time. These belts have basically trapped all of this radiation that's come in from space. This is actually why Earth is such a pleasant place to live because we have this magnetic field that then basically being Earth's deflector shields. So that's very beneficial for all of us on Earth.

14:29A very convenient, thankfully. But it traps any of these particles that are ionized, they get trapped there like a magnetic bottle. And so there's just this soup of radiation and the design -based particles that satellites up in these five -overdce are just swimming in. So it is hard. I mean, it is the radiation effects that we have to design to, and they made it to design all our electronics to qualify them, you know, really make sure that they were going to work in this radiation environment. It's just a massive additional challenge on top of all the normal challenges of building small satellites and building something that will work in space.

15:11Which is already, you know, that's already hard. like anything in space is really not for the faint of heart, but this is sort of hard and squared. You're electronic sensitivity. All the normal, huge temperature ranges, it's of the most extreme to get imagined, because when you're in with eclipse, you're in total darkness, and then you're in the deepest cold of space. And then when you're in direct sunlight, then you get super hot, because you don't have, If there was atmosphere, we do to buffer that. You see these huge temperature swings. It's your electronic stuff. It's not only to handle just sitting at one and then sitting at the other, but also these fairly rapid changes between them.

15:54Then on top of that, we have this radiation challenge. But, clearly, it just is worth it. Once you're up, any asset you can get up in that high orbit is just becomes this incredibly valuable thing. because you can park it over a country or part of the world and provide a service with just that one satellite. So it ends up being this structurally very low cost approach to covering an area, like an entire country with broadband internet. Each individual satellite is only overhead for about five minutes. Then you use do the math of how many satellites need to be up there to have 24 -7 coverage. And typically you'll need two or three then you can talk to it in time because there might I've been trees in the way that might be other things you need to build, so to switch back and forth.

16:39So you just need to large number satellites. Once you get that number of satellites up and are able to sustain them with further launches, then there's a lot of great capability there for sure, right? I mean, we are huge fans of everything that people are doing in lower orbit. But there's just clearly this massive value to be had up in these higher orbits and geocetial orbit, so make sure you go after it. Yeah. What gave you the confidence that the technology was there, because you said space was hard already. And then now you're taking it to this M -squared, let's say. And so was there any of these per se that you were like, oh, I do see how certain technologies are dancing even further, or what can be the confidence to say?

17:21And we can actually make the smaller, cheaper, more iterative. I would say there was a little bit, maybe, of hubers there. I would, this is sort of a classic case of we, you know, we didn't know what we didn't know when we started coming back in 2015, yeah, in my apartment, myself and my co -founder Ryan, you know, it was a brilliant engineer, old friend of mine, and you know, we basically looked at how quickly and, you know, sort of simply, could we pull together all the right pieces for, you know, what is that? And certainly at first blush, you could go and go out to this great space economy that we have now of suppliers and vendors for building components for different things.

18:05I think what we didn't realize was really the magnitude of that gap between Leo and Geo, especially on the radiation environment. A lot of the components that you could buy were really designed for Leo satellites. And once we dug into it, it would just not work for us in Geo. And that's not through any fault of the vendors is just designed for a different thing. So it ended up being a lot more work to find either the right component that we can use or we ended up having to design our own because there's nothing out there that would work. It definitely appeared a lot easier when we were starting out than ended up being.

18:47So I want to get to who's buying the satellites, the business, the economics of all this, but to your point, like you have to some extent made it to the other side. you had your first launch earlier this year and you have another one coming later this year. You're dedicated, Falcon 9 launch. That's pretty awesome. Does it feel that way? I just want as a person who spent the last eight years on this with maybe not full certainty that it would work out. How did it feel? I watched that YouTube video that will link in the show notes of that first launch in your team watching this go up and I was like getting a emotional during it because I was like, and I read the comments and other people are like, why am I cheering up?

19:29And it's like, I guess it's because it is like quite the feat. Does it feel that way on your hand as well? Yes. Yeah. No, there's no question. You know, had SIGA Rocket go out that has, you know, satellite on, especially, you know, spent years getting to that point as something special. The next one will be next level because, you know, with the dedicated launch, the the Estrana logo on that bracket, right? Yeah. And just knowing that bracket is going up just for us. So that's a pretty big, yeah, that's going to be a pretty big moment. Pretty big moment. OK, so let's talk about some of those satellites, including the one that's already up there.

20:09You've chosen specifically again to be in geo and to have these smaller satellites that provide internet to folks in specific regions. Yes. Why that of all the different functionalities that satellites can offer. And then also, you just like tell me a little bit more about this question of just how many people on earth actually don't have access to that. So, to be clear, I think this is the most valuable thing that we can do in space. There are a lot of things you can only do in space, just from having this vanish part of being that high and looking down and seeing, you know, good chunk of the earth or, you know, basically this whole earth view.

20:48but getting people connected is just of such enormous value. It really changes people's lives. They don't have access to healthcare information, being able to get education, educate themselves. When you get access to internet, you're getting access to the sum total of the world's knowledge in one, you know, it doesn't get lost now in the, you know, the Instagram era. But if you had nothing and no access to internet, And you were just a smart people person who wanted to improve your life. Having then that door opened, suddenly having access to the entire world's knowledge on any topic you could imagine, right?

21:29I mean, talk about massive enabler for people to improve their lives, you know, economic growth, all the rest is a huge deal. I think the place we're at with connectivity today around the world. I think we have essentially reached the people we're going to reach with fiber. Laying fiber is enormously expensive and difficult, right? In a lot of countries, it's done by trenching. There's just the labor costs of doing that. And then there's all these other, you know, complicated factors, rates of way, like you're going through someone's land. And especially in a world where people are mobile first, right?

22:08It's even more challenging because what you really want is you want to sell towers just everywhere, right? Because people want connectivity everywhere they're going to go all the time. A lot of the challenge with cell towers and providing people with cellular connectivity is connecting that cell tower to the internet. It's actually not building cell tower. Building cell towers is just a little metal tower. And there's some electronics on it that do the job of connecting to your cell phone. But those electronics have been mass produced to the largest scale you could imagine right I mean thing about how many cell towers are around the world.

22:41Building the cell towers relatively cheap compared to the value it's going to create of getting those people in that area connected right very cheap. That's what we call the backhaul problem. And so that is what we realized was this key problem to go and solve. And so we have found a set of customers in countries around the world that are either telcos who you know of these tokens that build these cell towers and open these networks, or service providers for those telecoms who help them manage their cell towers, that basically they're buying this capacity in large quantities so they want big pipes of dedicated connections, and these are big trunk lines to connect these cell towers to the internet.

23:27So it's not just the cell towers, right? It's also enterprise customers who need connectivity for anything from, that could be like hospitals and schools to mining installations or you know things like oil and gas or you know there's sort of a hole in the game up there. Obviously you put up a bunch of capacity but you're charging these very high prices where it just doesn't make any sense no one's gonna buy it. On the other end of the spectrum if you put it up at a loan of price then the demand becomes almost effectively unlimited. I mean at a loan of price point And people will consume all the internet bandwidth that is available and then come back asking for more.

24:07And I think we are there. I think the economics are there. Correct, yes. With the satellites that we have designed and begun building, I think we are at that inflection point, right? And I think we'll continue to get the price down and even get some number of percentage there's the unconnected population of the world online and we'll get up to scale because we're gonna massively scale what we're doing and build hundreds of these satellites. We'll be able to get that economy to scale and get those prices down even lower and get even more people. So people used to talk about the other three billion that don't have access to the internet when the internet was first really taking off.

24:49Now is the other four billion. The problem actually got worse. That's the last one. I know, yes, how is that possible? It doesn't seem right. It seems actually quite a sounding bit. Somehow we've not only failed to solve the problem, and the problem actually got worse over time, not better. There's a limit to where it being sent to run fiber, or it's even physically possible to run fiber. Fair remote places, around islands, deserts, and I mean, there's a very sizable percentage of planet Earth. So those populations have been growing over time, but we have failed to expand the range of our fiber demos to meet that.

25:25So, yeah, I think it is on us in the space industry to solve this problem. I do not see any other means solving it. I mean, people looked at balloons and drones that stay up for days at a time and are trying to beam down the internet. And those things are just pretty tough. There's high operations costs. So, you know, these things that, you know, you have to like deal with the weather and they have to be refueled and you bring them down and, you know, you manage this giant sort of fleet of things they could fall this guy and, you know, fall somebody's house. There's possibly some solution there that could work.

26:03I would love to see it. But I really do think it's on us in the space business to solve this problem and, you know, we figure out how to do that. We're talking about one of the world's most epic problems here. So it's on the order of scale, of solving the world's energy problems, selling the world's food problems. It's just going to take a basket of solutions to be able to solve. Yeah, maybe you can share a little bit more about who the buyers are on the other side, right? Because all of these companies that are shipping satellites into orbit, that costs a lot of money and to recoup that money to really have functional business, as we're no longer talking about the government.