Globalstar CEO David Kagan details the company’s massive deal to support Apple’s emergency messaging service via satellite.
The path that satellite constellation operator Globalstar took to signing Apple as its largest customer in history this past summer started with a crisis that happened 15 years ago. After launching the first generation of its SPOT satellites, the company experienced technical issues that rendered the intended SPOT two-way service into a one-way service.
In the following interview with Via Satellite, Globalstar CEO David Kagan explains how the company transformed this crisis into the start of a lucrative business relationship with Apple, which now uses a massive supply of Globalstar capacity to enable emergency SOS messaging outside the reach of cellular networks for the iPhone 14. The deal’s importance to Globalstar is illustrated in the fact that the operator is allocating 85 percent of its current and future network capacity to support the contract with Apple, which in turn, agreed to pay for 95 percent of the capital expenditures associated with a new satellite constellation.
Kagan details the world of possibilities now open to the operator following the company’s crowning achievement, as well as opportunities for the satellite industry as a whole, now that the world’s largest wireless carriers and enterprise customers are paying attention to what’s happening in space.
Kagan: My background is in finance. It was clear to me that we either had to invest in a next generation handset and next generation ground infrastructure, which would cost us a lot of money — a $30 million dollar-plus three-year investment. I saw that that wasn't really the right thing to do from a financial perspective, because the market was moving away from satellite phones. New services had to be introduced to the market. So, we embarked on what became IoT at a much lower ARPU [average revenue per user]. But the investment, especially from a ground station, base station perspective, was pretty much the same infrastructure needed for the SPOT business. So, it became a matter of capitalizing on the assets that we had in place, and aligning with what we were hearing from customers in the market. I remember when I first got to Globalstar, IoT was called M2M or machine-to-machine, or SCADA [supervisory control and data acquisition]. The business for M2M/SCADA was faltering, and I didn’t see any clear reason why that was the case. These applications are what satellites were designed for. My thinking was, let's really invest in people and products to exploit our satellites’ strengths.
Kagan: We're at 24 now and we can cover our global market with those satellites – from orbits ranging from 70 degrees North to 70 degrees South. We provide a truly global service other than China and India, where we don't have licenses. We contracted MDA for 17 more satellites with an option for another seven. Our current constellation is made up of second-generation satellites launched between 2010 and 2013. These have 15-year design lives. So, by 2025, we have to start deploying the new satellites. While the current satellites were designed by a great manufacturer in Thales, and I’m sure they’re going to live well beyond their expected lifespan, I still don't want to see the current satellites start dying off before we send the new ones to space.
Kagan: It's interesting, right? Apple is our largest customer. That’s the legal definition of the relationship. In the redacted version of our agreement that was released, Apple refers to themselves as a partner. People would say it's a partnership, because we are working together. But we’re solely making the satellite network work for them. We have nothing to do with the iPhone product or its features, or when Apple launches services and other features in the future. We have nothing to do with that. We're just focused on providing a great satellite network for them.
Kagan: Jay Monroe sent a letter to them and said, “Hey, we think we could work together on an emergency one-way messaging system.” That’s pretty much how it started. And since then, we’ve spent a long time proving ourselves and proving that we could deliver for them. There were many, many milestones we had to meet along the way before they would accept us as their satellite provider.
Kagan: The sheer size of Apple means this service is going to grow and develop very quickly. The SPOT product line has saved 8,600 lives over the last 15 years. With 250,000 subscribers, we save 1.6 lives per day on average. To me, that’s great. Saving one life makes it worth it. But, if you compare Apple’s scale to ours, we’re looking at saving up to 1,500 lives per day, after the first year. Can you imagine impacting that many lives in a positive way? It’s not only the person you saved, but that person's whole family, and that person's whole future family. Is there a better mission out there for satellites? I’d rather be in the life-saving business than investing in giving people access to toxic social media platforms. That’s for sure.
Kagan: We're pretty much done. We built everything we’ve had to build over the past three-and-a-half years. We built 10 new gateways around the world, all during COVID, which was an amazing feat, given our deadlines. We refurbished and enhanced all of our other existing 19 gateways. Those had to be upgraded with a new complement of high-power antennas. We worked with Cobham on that. That's all been done. There are some incremental things we have to do, but nothing that we have to build. Nothing major. We’re now ready to go with a launch service.
Kagan: I don't know. I don't think it is going to be settled in courtrooms. The FCC has jurisdiction over our U.S. assets. Additionally, our second constellation is registered in France where it was manufactured. With all the precedents that have been set in the history of the ITU [International Telecommunication Union], this is going to remain a regulatory issue. There are regulatory procedures that need to be adhered to. Just because you're a new entrant that has a lot of power doesn't mean you can centrally skip the line. That’s our perspective. It may not be the ultimate perspective that prevails. We obviously hope it will, but there is a process that one has to go by and go through to gain access to those frequencies.
Kagan: Yes. Clearly. Five years ago, you couldn't even think of some of the applications that we're now seeing, especially the ones happening now on an enormous scale. Right now, we're going after a cattle tracking application with a partner in Australia. There's no infrastructure needed on the ranches to do what we want to do. There are 1.2 billion free-range cattle in the world, even outside of the United States. Farmers can lose cattle, or they get stolen. In Australia, they've been washed up in flooding and farmers don’t they don't know where the cattle are, or where they’ve been. They need to have this information to prevent disease outbreaks. This data has enormous financial impact to the ranchers. This is just one example of where smart agriculture satellite applications are going. We've been working with a company that wants to monitor moisture in grain silos and silo bags to maintain efficiencies and improve yields. Again, this requires no new infrastructure on the ground. It's already up in space. You just have to create a great product. The smallest bits of information can make the biggest differences to people’s lives. The opportunities are endless.
Kagan: One of the biggest growth areas we have now is actually using SPOT in a B2B setting for operations like an open mining company. They want to provide safety services to protect the lives of their employees. They want to build emergency devices right into the crews’ uniforms. One of these companies built a pocket for our fourth generation SPOT device, so that it can be slid right into the workers uniform.
Kagan: I agree. I think the relationship we have with Apple, along with some of the other partnerships that have been announced with wireless carriers have dramatically increased the credibility of satellite in the telco market. We’ve seen that by working with them through our Band 53 initiative [referring to Globalstar’s S-band spectrum — Band 53 in the 2.4GHz spectrum range] to be approved for use as an anchor channel for carrier aggregation and licensed assisted access in cellular networks.
Wireless companies are starting to see both the innovative and financial value of teaming with satellite companies. We call this complimentary convergence. They’re starting to see that satellites complement what they do. It's not either us or them. Satellites add value to what wireless carriers are doing, whether it’s connecting people in rural areas or saving lives with a push of a button in a car.
Kagan: The satellite industry is a heavy CapEx. Heavy initial CapEx, and little to no incremental CapEx for the incremental subscriber. That's why all the EBITDA margins of satellite companies are so high — because we make all this massive investment upfront. It takes a lot more capital to go after consumers. And, you know, I give people like Matt Desch [CEO of Iridium] a lot of credit for making this business model work. They have done an amazing job and are very, very successful at what they do. Like Iridium, we have experience in running constellations, in procuring the right satellites for the right mission, and understanding what the markets are and what they are not. We’ve also learned from mistakes – sometimes massive mistakes. We don’t repeat the mistakes that most new entrants are going to make. The question is, will the leaders of these new entrants be able to adapt in the same way we did, when we knew a lot less about consumers than we do today? VS
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