AST's satellite service connects directly to cell phones on carriers' networks

Rather than making money by selling capacity, AST is establishing a revenue-sharing model with its telco partners. (AST SpaceMobile)

Rakuten Mobile has pledged to serve 100% of the Japanese population with its wireless service. But the company has come up against the stark reality that mobile operators in the U.S. have faced for years: It’s a lot more expensive to cover the last small percent of the population who live in rural areas than it is to cover the majority of the population who live in more urban areas.

But leave it to Rakuten to come up with an innovative solution. It’s working with a U.S. based satellite company called AST SpaceMobile to cover about the last 4% of the Japanese population with satellite mobile service.

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AST SpaceMobile was founded in 2017 by Abel Avellan, who is the company’s CEO. It has raised almost $600 million, and its investors include Rakuten, Vodafone, American Tower and Samsung. The Texas-based company has about 220 employees and a market cap of about $1.8 billion, according to its Chief Strategy Officer Scott Wisniewski.

The company launched its first satellite in March 2019. Wisniewski said this launch “gave us the proof that we could connect a satellite directly with a phone.”

He said the key thing that distinguishes AST from other satellite companies that are scrambling to offer broadband service is that AST’s technology “connects directly to the handset.” End customers do not have to buy any additional equipment, have any special infrastructure installed or buy any special smartphones.

Rakuten Mobile’s CTO Tareq Amin said on a recent call with media that AST’s technology is really unique because it “enables direct satellite to UE communication without any UE modification.” 

Amin said AST’s technology basically “is taking base stations into sky.” He provided the below diagram.

Rakuten chart

In AST’s partnerships with Rakuten and Vodafone, those telcos will need to provide the spectrum and the backhaul capabilities on the ground.

AST is planning to launch a half-size satellite in the fourth quarter of this year to test its connection with the ground infrastructure of its telecom partners. Then, its roadmap calls for the launch of 20 satellites in earth’s equatorial region starting in 2023.

Amin said Rakuten loves the whole concept: “You take the existing macro base station that you had on earth, put it into the sky, and it’s like an orbiting massive platform delivering on licensed radio 3GPP spectrum.”

In terms of backhaul infrastructure on the ground, Wisniewski said, “You need antennas in the V-band and a gateway — one or more of those in a country — either co-located with a telco or at a neutral facility, which is part of our relationship with American Tower. V-band is a high frequency spectrum that we have some priority rights for under ITU.”

 
AST slide new

Asked if AST is competing against other satellite players like SpaceX’s Starlink or AWS’ Project Kuiper, Wisniewski said these companies are attempting to provide home broadband, but their services don’t work on mobile phones.

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He did say that all the activity related to satellite broadband is causing launch costs to go down. “A lot of what they’re doing is driving down the economics of putting stuff in space,” he said. “The volume is helping everyone improve their economics."

Revenue sharing plan

Rather than making money by selling capacity, AST is establishing a revenue-sharing model with its telco partners. Many end customers may end up using AST’s satellite services as a supplement to their regular mobile coverage. If they travel to a locale where their provider doesn’t have coverage, they’ll receive a text asking if they want to connect to AST’s service.

Wisniewski said telcos bring the spectrum and the subscribers, and AST delivers the satellite network. The surcharge revenue is split 50/50.

In places with absolutely no regular mobile service, telcos may offer their customers recurring access to the satellite coverage.

Amin said the cost to deploy wireless coverage to rural areas of Japan was looking daunting and might have cost as much to deploy to the last small percentage of the population as it is costing “in the first phase” to the majority of the population. “Today, whatever we spend on building urban, suburban areas, to go build rural and deep rural, this is where the challenge for the industry as a whole has always been there," said Amin. "The business model for rural is very challenging. We might have had to spend a substantial amount of money had we not looked at innovative, disruptive technologies such as SpaceMobile.”