Focus: Canada's Telesat takes on Musk and Bezos in space race to provide fast broadband

Telesat

11/04/2021 14:00

By Steve Scherer
    OTTAWA, April 11 (Reuters) - Canada's Telesat is racing to
launch a low-earth-orbit (LEO) satellite constellation to
provide high-speed global broadband from space, pitting the
satellite communications firm founded in 1969 against two
trailblazing billionaires, Elon Musk and Jeff Bezos.
    Musk, the Tesla Inc  TSLA.O  CEO who was only a year old
when Telesat launched its first satellite, is putting the
so-called Starlink LEO into orbit with his company SpaceX, and
Amazon.com Inc  AMZN.O , which Bezos founded, is planning a LEO
called Project Kuiper. Bezos also owns Blue Origin, which builds
rockets.
    Despite the competition, Dan Goldberg, Telesat's chief
executive officer, voices confidence when he calls Telesat's LEO
constellation "the Holy Grail" for his shareholders - "a
sustainable competitive advantage in global broadband delivery."
    Telesat's LEO has a much lighter price tag than SpaceX and
Amazon's, and the company has been in satellite services decades
longer. In addition, instead of focusing on the consumer market
like SpaceX and Amazon, Telesat seeks deep-pocketed business
clients.
    Goldberg said he was literally losing sleep six years ago
when he realized the company's business model was in peril as
Netflix  NFLX.O  and video streaming took off and fiber optics
guaranteed lightning-fast internet connectivity.    
    Telesat's 15 geostationary (GEO) satellites provide services
mainly to TV broadcasters, internet service providers and
government networks, all of whom were growing increasingly
worried about the latency, or time delay, of bouncing signals
off orbiters more than 35,000 km (22,200 miles) above earth.    
    Then in 2015 on a flight home from a Paris industry
conference where latency was a constant theme, Goldberg wrote
down his initial ideas for a LEO constellation on an Air Canada
napkin. 
    Those ideas eventually led to Telesat's LEO constellation,
dubbed Lightspeed, which will orbit about 35 times closer to
earth than GEO satellites, and will provide internet
connectivity at a speed akin to fiber optics.
    Telesat's first launch is planned in early 2023, while there
are already some 1,200 of Musk's Starlink satellites in orbit.
    "Starlink is going to be in service much sooner ... and that
gives SpaceX the opportunity to win customers," said Caleb
Henry, a senior analyst at Quilty Analytics.
    Starlink's "first mover" advantage is at most 24 months and
"no one's going to lock this whole market up in that amount of
time," Goldberg said.
    Telesat in 2019 signed a launch deal with Bezos' aerospace
company Blue Origin. Discussions are ongoing with three others,
said David Wendling, Telesat's chief technical officer. 
    They are Japan's Mitsubishi Heavy Industries Ltd  7011.T ,
Europe's ArianeGroup , and Musk's SpaceX, which launches the
Starlink satellites. Wendling said a decision would be taken in
a matter of months.
    Telesat aims to launch its first batch of 298 satellites
being built by Thales Alenia Space in early 2023, with partial
service in higher latitudes later that same year, and full
global service in 2024.  urn:newsml:reuters.com:*:nL1N2KF1J2
    
    'SWEET SPOT'
    The Lightspeed constellation is estimated to cost half as
much as the $10 billion SpaceX and Amazon projects.
    "We think we're in the sweet spot," Goldberg said. "When we
look at some of these other constellations, we don't get it."
    Analyst Henry said Telesat's focus on business clients is
the right one.
    "You have two heavyweight players, SpaceX and Amazon, that
are already pledging to spend $10 billion on satellite
constellations optimized for the consumer market," he said. "If
Telesat can spend half that amount creating a high-performance
system for businesses, then yeah, they stand to be very
competitive."
    Telesat's industry experience may also provide an edge.
    "We've worked with many of these customers for decades ...
That's going to give us a real advantage," Goldberg said.
    Telesat "is a satellite operator, has been a satellite
operator, and has both the advantage of expertise and experience
in that business," said Carissa Christensen, chief executive
officer of the research firm BryceTech, adding, however, that
she sees only two to three LEO constellations surviving. 
    Telesat is nailing down financing - one-third equity and
two-thirds debt - and will become publicly traded on the Nasdaq
sometime this summer, and it could also list on the Toronto
exchange after that. Currently, Canada's Public Sector Pension
Investment Board and Loral Space & Communications Inc  LORL.O 
are the company's main shareholders.
    France and Canada's export credit agencies, BPI and EDC
respectively, are expected to be the main lenders, Goldberg
said. Quebec's provincial government is lending C$400 million
($317 million), and Canada's federal government has promised
C$600 million to be a preferred customer. The company also
posted C$246 million in net income in 2020.
    Executing the LEO plan is what keeps Goldberg up at night
now, he said.
    "When we decided to go down this path, the two richest
people in the universe weren't focused on their own LEO
constellations." 
 ($1 = 1.2622 Canadian dollars)

 (Reporting by Steve Scherer in Ottawa
Editing by Matthew Lewis)
 ((steve.scherer@thomsonreuters.com; +1-647-480-7889;))