These Companies Are Leading the Charge in Satellite Internet

Is satellite internet the connectivity solution of the future? In this segment of Backstage Pass, recorded on Nov. 5, Fool contributors Toby Bordelon, Vicki Hutchison, and Rachel Warren discuss the advent of "space internet" and the companies leading the way in this emerging market. 

Toby Bordelon: So this was fun. This was something fun we found new in the space race. Learned today, the FCC has received a lot of requests, a lot of applications to launch broadband satellites, like 38,000 of them apparently have been applied for permits to launch these things. Among the companies that are doing this, there's several of them. Some names you will be familiar with. Amazon (AMZN -2.51%), almost 8,000 satellites they want to launch. Astra (ASTR 0.28%) over 13,620, Boeing (BA -0.53%), wants to do almost 6,000.

Inmarsat under 98. Intelsat (INTE.Q), a pretty big satellite company, only 216. Hughes, 1,440. OneWeb 6,000. SpinLaunch a company I've actually never heard of 1,200. Telesat (TSAT 1.57%) 1,300, and of course we're not even talking about SpaceX in this number, who has already launched a bunch of satellites. Their Starlink service is up and running, although there is a long waiting list and they're having some issues with that, from what I can tell.

So let me ask you this question, let's have fun with this, are you excited about satellite internet? Would you ditch your current provider for satellite internet? As a general matter, do you think this new way of internet service delivery satellite internet is going to benefit us, and so how? And is there one company on this list that I mentioned that you trust most to give you, you can even include SpaceX in there, that you trust to give you internet or is there one company that's like, I really don't want to be part of this, I would rather keep my current provider.

We'll start with Vicki, what do you think? What's your thoughts on satellite internet?

Vicki Hutchison: Satellite internet is not fast. These are low earth orbit satellites. They're still a really really long ways away. The signal has to go up and come back and not have any kind of interference. It's slow. It's going to be an expensive. It is useful for regions of the world where you don't have coverage. My husband actually went onto backpacking trip with his brothers up in the Cascades in Washington, and they had a Garmin (GRMN -0.55%) satellite telephone that they used. But they really just used it to send a text message a couple of times a day.

It was super expensive. It was also super useful because my husband ended up breaking his foot and leaving early and he needed a ride. So it was good to be able to communicate that, but it wasn't something where you called and you talked to somebody. It was really a slow speed, not very reliable, but yes, the message did get there eventually kind of a service.

So, I think that for areas of the world where there isn't coverage today, sure, this is good, but I don't think for anybody who lives in or near a city, that this is going to be a very good option. Just my idea.

Rachel Warren: This is all very technical for me, but I do think it sounds really interesting. I think that there are so many parts of the world where there is very limited coverage still, and I think that could be really beneficial. I think it's a cool idea and I love the idea, of course of bringing internet connectivity to places that are lacking in this.

I think it's a driver behind some of these companies' efforts, and obviously there's a pretty big market here. There's a lot of money to be made here for these companies.

So from a business perspective and from a potential investor perspective, this could be a real growth driver for a well-diversified business. I would say of the companies on this list, I'd have to go with Amazon.

I'm an Amazon shareholder, and as a shareholder, I've really enjoyed seeing their success and whatever new industry they choose to disrupt next, they generally seem to have a lot of success in whatever area that may be. I would not be surprised if this was an area over the next 5, 10, 15 years that you're seeing a lot of growth from. I'm not sure I would ditch my current provider, although that changes sometimes depending on where I am in the world. But I do feel like it could be of real value to people.

It's interesting because I was trying to read a little bit about this. What are some of the problems that satellite internet solves, and obviously, global high-speed coverage, that makes communications great. Not just for people that are living in low coverage areas, but maybe you have businesses that are operating, they have operations overseas, whatever that might be, and that can be very helpful as well.

One of the interesting things I read was it can take a lot of time to deploy the fibers for terrestrial internet service. For this reason, the satellite internet doesn't need a complex infrastructure for its operation, so it actually can reduce the costs that you have with something like ground connectivity.

It's interesting, I feel like this is making sense in the way our world is changing. Things are more digital, and of course, now, we're venturing more into things that you do with space. This could be cool, I think it's an interesting development to watch for sure. If there is one of these companies that you're invested in and they're getting into this, it's definitely something to pay attention to, I think.

Toby Bordelon: Yeah, it's definitely an interesting development I think. I think Verizon (VZ -0.73%) actually, there was some news last week, two weeks ago maybe about this, Verizon is partnering with Amazon. Verizon wants to  use Amazon's satellite system that they're deploying now, they have not yet done, to expand their rural broadband access.

Rachel Warren: Wow. 

Toby Bordelon: It feeds in that idea, in areas where it's difficult to build the infrastructure, maybe it's not even worthwhile because you don't have the density of the population, you can't justify it. But if you have satellites, maybe you can.

Maybe you can access those areas. I know for the longest time in the United States if you're in the rural areas sometimes your only option was HughesNet, which is really slow [laughs] and ridiculously expensive compared to some of the other stuff. Maybe with all of these companies trying to do this, we're going to see the prices come down a little bit and we get some higher speeds. Starlink seems to be pretty good at least in some cases.

I saw questions about, say, if you're a hardcore gamer, whether the delay in the lag is going to work. I expect not. I suspect you're not going to want to do that, at least initially. There's a lot to be done here. In terms of the companies involved, the one I would really say that I have questions about is Boeing because they seem to have issues with their space program right now in a lot of ways.

I'm not sure I would necessarily trust them to get up and running anytime soon. The other thing too, which is interesting, it was actually delivered today, the latest update in the new Amazon ring alarm system, which integrates cellular internet into the box.

The idea here is that if your broadband goes down, it will automatically switch over to the cellular temporarily. But not just to service the alarm, to actually let you use the internet. They're letting you use their cellular system to access the internet and continue streaming Netflix (NFLX 1.42%) potentially, continue working if your broadband goes down. Maybe that's where we're headed.

We're going to have a hybrid system. Maybe you operate primarily on cable or fiber if you have that. But you've got a cellular or even a satellite secondary switchover in case something goes down. So you still have that backup. That can be really interesting and I can see satellite being really useful for that. Maybe not your day-to-day stuff, but a really useful thing for continued coverage in the case of an emergency. There's a lot of possibility there.

We'll see how this develops. It was interesting though. I had no idea that so many people were trying to get these things up in the air, and definitely a lot going on now, also bodes well for companies, potentially like SpaceX who launch things into orbit. Because apparently there's a lot of people who want to do that. So that's something to watch for too.