OneWeb and the UK space sector
The decision by the UK Government to obtain a significant stake in the satellite company has divided opinion. There are still several questions to settle.
Much of the future success of the UK space industry now seems to be inextricably linked to the fate of the satellite company, OneWeb. The decision of the UK Government to purchase a major stake in OneWeb’s plans for a mega-constellation of satellites has been controversial amongst the UK space community and beyond. The sizeable investment of $500 million, decided against technical advice from the Government's own space agency, and allied to the apparent lack of wider strategic vision for UK space policy, has created significant uncertainty in the sector.
OneWeb – the story so far
Founded in 2012 (originally named WorldVu) by Greg Wyler, an American entrepreneur, OneWeb originated with the idea of providing broadband internet globally via a constellation of Low Earth Orbit (LEO) satellites. Fundraising proceeded apace, with $500m secured in 2015, followed by an additional $1bn in 2016 from the Japanese technology investor, Softbank, and a further $200m from the existing investors. Launches began in February 2019, with additional satellites launched in the first few months of 2020.
The company faced a liquidity crisis in March 2020, blaming a failure to secure new funding on the financial impact and market turbulence caused by the COVID-19 pandemic. Negotiations with existing investors, most notably Softbank, were unsuccessful and the company filed for bankruptcy, having laid off most of its employees. Separately to coronavirus concerns, OneWeb was also facing questions around costs and future revenue streams which remain pertinent, especially in light of the competition from the likes of the Starlink mega-constellation belonging to Elon Musk's SpaceX. OneWeb must solve the conundrum of the right price for its user terminals, as well as the key question of exactly what market they want to focus on. The market for providing internet in remote locations is only so big, and other key markets, such as inflight or maritime connectivity, are already well serviced.
Whilst under bankruptcy protection, OneWeb was put up for auction. In July 2020, it was announced that a consortium led by the British Government and Bharti Global had won the auction, with each party putting up $500m. Bharti Global, the vehicle of Indian billionaire Sunil Bharti Mittal, owns Bharti Airtel, the second-largest mobile network operator in the world by number of subscribers. Bharti Airtel's extensive mobile broadband networks and enterprise business will act as the testing ground for all OneWeb products, services and applications, according to OneWeb.
Recently, Softbank has re-invested a further $350m in the company, taking a 30% stake. This dilutes the stakes held by the UK Government and Mr Mittal from 42.2% to roughly the same level as Softbank. The UK Government will retain its golden share, which allows it to control access to the system. The company is still seeking a further $1bn of funding in order to deliver its initial constellation of 648 satellites by the end of 2022. OneWeb has also applied to US regulators for permission to launch around 6,400 satellites in the future, though this is a downgrade on its original plans for almost 48,000.
Why did the UK Government invest in OneWeb?
This is the $500m question. The answer is partially wrapped up in the importance of a Global Navigation Satellite System (GNSS), the ramifications of Brexit, and competing visions of the UK’s future outside the EU. For years now, the UK has had an official requirement for a “global, assured, sovereign, precision” PNT system (Position, Navigation, Timing). This is the full description of what GNSS entails, more commonly known either by the name of the US-owned system, GPS, or simply “sat-nav”.
The European equivalent of GPS is known as Galileo, and the UK lost its ‘code-level’ access to the system when it left the EU, removing the “assured” nature of Galileo for the UK and thereby causing the UK Government to withdraw from the project. OneWeb, despite its beginnings as a satellite broadband provider, was originally touted in some quarters as a way for the UK to develop its own GNSS ‘on the cheap’. In fact, the technical demands of a sovereign, global, precision PNT system would require extensive retro-fitting and expansion of the existing OneWeb infrastructure, both in orbit and on the ground. It is simply not feasible from a cost perspective.
The second reason is linked to the vision of Brexit endorsed by the former adviser to Boris Johnson, Dominic Cummings. Cummings was in favour of the UK exploiting its newfound distance from the EU to pursue an innovation-focused, technologically ambitious industrial strategy. This was typified by his desire to create a British ARPA (Advanced Research Projects Agency, now to be officially known as ARIA, or Advanced Research & Invention Agency) along the lines of DARPA, the famous American agency. Seen through these eyes, the OneWeb investment can be viewed as a high-risk, high-reward play in the increasingly important space sector, a way of projecting the UK’s strategic intent post-Brexit.
How does OneWeb fit into the UK’s space policy?
There is a lack of clarity into how OneWeb fits in, if at all, to the UK’s wider strategy and vision for the space sector. The National Space Strategy promised in the 2019 Queen’s Speech is still being worked on and is expected in the next six months. In the meantime, the UK maintains its ambition of capturing 10% of the global space market by 2030, but without a clear idea of how exactly it is going to make that ambition a reality.
OneWeb represents a major investment in the UK’s capabilities in space, but an investment decision taken separately from the development of the Integrated Review (a broad strategic review of security and foreign policy) and the National Space Strategy. Broader decisions about the future of the UK space sector and innovation pathways must now take account of the services that OneWeb may be able to provide, without knowing exactly what the technical capabilities of the mega-constellation will end up being.
The recent change in personnel at the highest levels of government has also created a new calculus surrounding the OneWeb investment. Cummings and his 'Vote Leave' contingent have largely lost the ear of the Prime Minister and new faces occupy the key advisory roles in the Johnson administration. The new Downing Street Chief of Staff, Dan Rosenfield, has a Treasury background and does not share Cummings’ fervour for high-ambition ‘moonshots’, though his role is likely to be less pronounced in the policy mix. It remains to be seen what effect the departure of one of the most enthusiastic proponents of the OneWeb investment will have on integrating the company into the UK's space policy. Many questions may be answered by a number of upcoming government publications. The planned refresh of the 2017 Industrial Strategy has now been rolled into an upcoming "plan for growth" strategy led by the Treasury, which will look at how to boost skills and investment and include sections on regulatory reform and innovation. The shift of industrial strategy policy from the Business Department (BEIS) to the Treasury suggests it has been promoted up the government's agenda, possibly due to the shock of COVID. Despite Cummings' departure, the plans for a UK ARPA/ARIA remain on the books, with the government recently announcing its aim for the agency to be fully operational by 2022.
OneWeb may yet prove to be a great bet for the UK and its burgeoning space industry but it has become a major question over broader strategy. Industry watchers should keep a close eye on the Budget in early March and on the National Space Strategy, expected in H1 2021.