The iPhone 14 to be unveiled September 7 is rumored to include satellite connectivity; T-Mobile and Space X recently announced a partnership to deliver a similar feature next year. What impact will this have on the mobile consumer market?
The iPhone 14 to be announced September 7 is rumored to include satellite connectivity capabilities, while T-Mobile and Elon Musk’s Space X recently announced a partnership to deliver a similar feature to T-Mobile customers next year. The goal to deliver ubiquitous connectivity will resonate well with customers and is set to stir the mobile market landscape in the coming years.
Dead zones are few but a concern for all
Putting aside the technological challenges and the typically high cost associated with satellite mobile services, the use case is clear. As T-Mobile’s CEO Mike Sievert rightly pointed out, everyone with a mobile phone has experienced anxiety associated with being in a dead zone. The ability to send a message out in any circumstance is a very powerful feature in a world that is increasingly reliant on connectivity and worried about losing it.
However, the marketing message expressed in T-Mobile’s promo video is what you might expect from a mobile satellite service. It is targeted at the adventurous customer sailing across oceans, hiking in remote forests and mountain peaks, herding cattle in deserted plains, and motorboating in vast crocodile-infested swamps. This is a niche market.
Apple is more likely to expand satellite’s appeal to a wider audience. Its marketing campaigns are typically much more impactful and directed at the mass market. How Apple markets the iPhone 14 satellite capabilities will potentially have a tremendous impact on that market. Already, the fact that the announcement event is entitled “Far Out” tells us that it will feature prominently.
Don’t expect it to go global anytime soon
The way the technology works is essentially by putting a base station on a satellite approximately 500km from the earth’s surface and moving at more than 20 times the speed of sound. The challenge is that the base station, mostly the antenna, needs to be very large, or there needs to be a significant number of satellites in place. According to Space X, the resulting limitation is that only 2–4Mbps can be delivered and shared between users in a very large cell area, therefore only the ability to deliver messaging services can be offered at first.
Other hurdles are regulation and spectrum. The technology may use midband spectrum already owned by mobile operators (e.g., PCS 1.9Ghz spectrum from T-Mobile) or satellite spectrum already approved for telecommunications services (e.g., Globalstar and Apple). The former will be compatible with existing handsets, while the latter will likely need a new compatible handset, limiting initial adoption. But overall, this means that Apple will be very unlikely to launch the service globally anytime soon. In the case of Space X and T-Mobile, the satellites have yet to be launched into space as part of Starlink’s Gen 2 program and are unlikely to be operational before next year at the earliest.
Satellite revenue opportunities will remain small for service providers
Ultimately, what is important is what impact Apple will have on consumers’ awareness of and appetite for such a service. Although the short-term impact will be minimal, a positive response will create a mass-market demand for satellite services. This could present some opportunities for service providers around the world to develop a similar proposition using various partnerships with low Earth orbit (LEO) satellite operators such as OneWeb and Telesat. However, satellite mobile messaging services to be offered by Apple and T-Mobile will be initially bundled in with the purchase of a new handset or a new contract, limiting revenue opportunities. More advanced services such as web browsing and video calling/streaming will be offered at a premium at a later stage, but the use case for those will remain niche.
Ronan de Renesse, Senior Research Director, Service Provider Markets