Global Eagle Entertainment’s former chief executive officer, Dave Davis, spoke to APEX Media to give his unfiltered thoughts on the current state of satellite services and in-flight connectivity and what he thinks will happen in the near and distant future.
Why did you decide to leave Global Eagle Entertainment?
Let me go back in time a little bit. So, I was at Global Eagle from the beginning of when it existed. We put a deal together, which basically merged Row 44, a content company based in Germany, and Global Eagle Acquisition company. We then did a series of eight acquisitions between January 2013 and January 2016 that I led. I think by the beginning of the year, the board made the determination that we didn’t want to add much more scale to the business and the time was right to focus on integration and not as much M&A. We all sort of agreed that Jeff Leddy was the best guy to lead that from an experience standpoint. I was there, scaled the business, we grew it a lot and I think it was time for a change. I was a consultant there, full time for three months and that just ended on May 20th.
Do you think consolidation is inevitable for the satellite industry?
Having seen the business now for almost five years, I think there are too many players in the satellite services space and maybe even in the satellite operators space. I’m not just talking about aviation, but service providers for mobility. So that’s aviation and maritime. I think you’re seeing consolidation already. Global Eagle bought EMC last year, Panasonic bought ITC, Speedcast bought Harris Caprock. There’s been consolidation that’s been happening not as much on the aero side yet, but it’s inevitable. I think the business models are pretty challenging. People are investing a lot of money in this space and they’re having a hard time generating positive returns and cash flow. I think in an environment like that, you inevitably see some form of consolidation. That takes place both horizontally among service providers and ultimately there is going to be some vertical consolidation with satellite owners and operators trying to get closer to the customer and integrating vertically. I don’t know about the exact timing and there are company-specific reasons for why some things haven’t happened, but I think it’s got to happen.
Could companies outside the satellite operators be involved in the vertical integration process?
Maybe. You haven’t seen it yet, but would manufacturers ultimately get into the service providing game? I don’t know, possibly. I think what’s interesting, and I’ve been spending more time on this lately, is the emergence of these LEO constellations and this disruption that I think is happening in the satellite space. It’s akin to mainframe computers, going to PCs and microcomputers. It’s driven by microelectronics, by the lower cost of launch, and you’re going to see smaller and smaller, less expensive satellites doing some of the work that has traditionally been done by big GEO satellites. I think there’s just a disruption coming in that whole space. Could I see some of these small satellite operators providing services all the way done to the end user? Yeah, absolutely. The cost of the networks, the cost of the satellites and the launch is so much lower so that people who provide the service could possibly afford to launch their own constellation. There’s just a whole bunch of exciting stuff happening in this space for the years ahead.
Why are Silicon Valley names entering the satellite space?
You’ve had OneWeb, Facebook who’ve been testing these drones, SpaceX has talked about a constellation, I think Apple said a few things and hired someone recently, so I just think this plays into the same trend; It’s low-cost satellites that are low-earth orbit and low latency with very high capacity, where you can bring Internet traffic to areas that don’t have it today or even offload terrestrial traffic via satellite. Often these things get announced or they get talked about and then they never really happen, but I think some of the stuff is inevitable in the years ahead.
Could micro satellites disrupt the connectivity industry
Absolutely, yes, but it’s going to take some time. The reason is because you have a significantly more complicated problem to track multiple moving satellites at the same time. Everybody basically uses GEO satellites, whether it’s Ku or Ka, fixed point in space, the antenna has to lock on to one satellite and just keep itself locked on it. When you’re looking at constellations of satellites in low-earth orbit that are moving, they have to have antenna technology that’s capable of tracking multiple satellites at the same time, switching between beams very quickly. Some companies are in the process of developing this antenna technology, but it hasn’t really been tested or certified for aero use yet. Given the long lead times to put anything on an airplane, such as certification, tests, finalization of design, those things realistically are three to five years out at the earliest before you an impact from these low-earth orbit constellations. But, what they can offer once the technology is installed is lower latency, much higher capacity, much faster speeds, at dramatically lower costs. The cost per Megahertz that you can buy bandwidth for has been dropping steadily over the last two or three years. I think it’s in for another major step change down when some of these LEO constellations are in orbit, or even when some of these super high capacity GEO satellites go up such as VisSat-3.