Project Kuiper

Project Kuiper

Similar to Elon Musk’s Starlink, Amazon’s Project Kuiper aims to supply internet services via satellite transmission. Project Kuiper hopes to expand its reach across the world and bring internet connection to underserved or unserved communities, which are more prevalent than you might imagine. According to estimates, a startling 1 in 3 people worldwide have never used the internet.

Project Kuiper has long appeared much more appealing on paper than in practice. But it appears things will soon change. In order to place its 3,236 satellite constellation in orbit within a five-year timeframe, Amazon has declared that it will conduct 83 launches. There are significant immediate costs associated with this project. Here, we’ll discuss our viewpoint on how investors ought to evaluate Project Kuiper’s work.

While Project Kuiper definitely has the potential to tap into a massive untapped market, it also has a lot of social appeal. The addressable market (TAM) for global broadband is $1 trillion, according to SpaceX’s president and COO Gwynne Shotwell. In fact, SpaceX anticipates that by2025, its Starlink system will generate more than 85% of all of the company’s revenue. By extension, we might conclude that Project Kuiper has the same market expansion potential as Starlink and vice versa. Additionally, given that Elon Musk’s business has only just begun to seize a significant portion of its addressable market, it’s likely that Bezos’ behemoth will actually challenge Starlink’s dominion.

It goes without saying that deploying a satellite constellation is more difficult than running a supermarket or adding movies to a streaming library. For instance, Elon Musk’s business recently claimed that “silicon shortages” had resulted in production delays for its satellites, which in turn had slowed the growth of Starlink’s user base. The same supply chain problems might affect Kuiper.

The potential for inaccurate estimates is another danger. According to a scenario presented in The Wall Street Journal in2017, 25 million customers will bring in $30 billion in income for Starlink’s coffers by 2025 at an operating margin of 60%.However, Elon Musk noted in February 2022 that the system would not be able to sustain as many users as earlier forecasts had suggested, which would obviously have an impact on his earlier revenue projections.

There is a good chance that Project Kuiper will face the same dangers as Starlink. However, Starlink is also more likely to have to deal with those issues first, so by the time Kuiper becomes a significant participant in the market, it may have a plan in place to avoid problems.

At this time, it doesn’t appear likely that Project Kuiper will have any impact on Amazon stock performance given the return horizon and all the associated risks. Therefore, based on the potential of Project Kuiper, buying or selling the shares is more of a gamble than an investment. The project is still in its early phases and behind rival Starlink by around four years.

Despite this, we must admit that Project Kuiper and Amazon’s core businesses have a lot in common. Project Kuiper might boost Amazon’s profitability and enable it to take advantage of the expansion of its streaming, cloud computing, advertising, and underserved demographic populations around the world.

The satellites are anticipated to employ an orbit that is between 590 and 630 kilometers in height (370 and 390 mi). Amazon’s vast network of 12 satellite ground station facilities (the “AWS Ground Station unit”), which was first disclosed in November2018, and Kuiper are intended to cooperate. Amazon disclosed that Kuiper Systems LLC, a fully owned company with headquarters in Seattle, Washington, intends to install the satellite constellation in communications license applications submitted to the FCC by Amazon in July 2019. The Kuiper System is expected to have 3,236 satellites operating in 98 orbital planes in three orbital shells by April2021, one at a distance of 630 km (390 mi), 610 km (380 mi), and 590 km (370 km).

Rajeev Badyal, a former chairman of SpaceX’s Starlink satellite internet constellation who was fired in2018, is the president of Kuiper Systems. Amazon revealed in December 2019 that the group would be moving to a larger R&D campus in Redmond, Washington, in 2020. An update on the final move, however, is still awaited.

Amazon’s Project Kuiper will receive assistance from Blue Origin, Arianespace, and United Launch Alliance (ULA) for the placement of its satellites into earth orbit. Each business is getting ready for the project with its heavy-lift launch vehicle: New Glenn, the Ariane6, and the Vulcan Centaur will be launched by ULA, Arianespace, and Blue Origin (Jeff Bezos’ firm), respectively.

Up to 400 Mbps5 of download speed will be provided via Project Kuiper satellite internet, with plans to eventually provide greater download speeds. That’s already quicker than what Viasat or HughesNet provide, and 400 Mbps would compete favorably with Starlink’s lightning-fast internet service. Of course, bandwidth and download speed alone aren’t everything. Speed is significantly impacted by latency, which makes using the internet slower. Since they will be closer to Earth to begin with than Starlink’s satellites, Project Kuiper’s LEO satellites should also help reduce that. But we’ll also need to monitor Kuiper’s system upkeep following launch.

Future consumers’ costs for Project Kuiper’s satellite internet service are still unknown. However, the corporation has managed to produce orbiting satellites and low-cost consumer terminals, which are simply the home satellite dishes that users would use. In order to compete with rivals like Starlink, Amazon will probably pass these savings along to its customers as that is one of its typical marketing strategies. Although we can’t be certain, it’s possible that Amazon’s Project Kuiper wants to intentionally compete with Starlink’s up-front equipment expenses, which can range from $599 to$2,500, with its less expensive equipment. Of course, we’ll have to wait and see.

Recommendation

We don’t advise utilizing Project Kuiper as soon as it becomes available, despite the fact that it appears to be promising and may have cheaper equipment prices and satellite constellation coverage that might compete with Starlink, Viasat, and HughesNet. Reasons being that:

• You should give Amazon time to iron out any bugs. Once a new service is released, it encounters unforeseen issues. While you still (hopefully) have access to a dependable satellite service like Viasat or Starlink, let the firm figure things out.
• Project Kuiper may be owned by Amazon, but that doesn’t guarantee its success. While most of the ventures Amazon has entered into in the past have been profitable, not all of them have. We are encouraged by Amazon’s massive investment in Project Kuiper, but the proof will not be in the pudding until it is ready. I believe that is the saying.