AST SpaceMobile this week is set to launch its first five BlueBird satellites into low-Earth orbit (LEO) that will eventually power broadband services for investors like AT&T and Verizon, though the launch comes as analysts begin to question the market’s current dynamics.

The AST SpaceMobile plans will see the nascent satellite broadband provider rocket those five BlueBird satellites into orbit from a Florida launchpad. Once in space, those five satellites will be able to provide network voice, data, and video services using traditional cellular spectrum in the 850 MHz band in a direct-to-cellular device model.

AST SpaceMobile is also working on its next satellite iterations that will include larger antennas in support of greater network coverage per satellite and higher data speeds. The company has filed requests with the Federal Communications Commission (FCC) for an additional 243 satellites that it can put into orbit.

AST SpaceMobile has been trialing services using its BlueWalker 3 satellite that it put into orbit in 2022. That satellite has produced downlink speeds at up to 14 Mb/s using 5G technology based on 3GPP Release 16 specifications.

The speed mark is significant as it expands the broadband capabilities of satellite-based connections, especially as they are being looked at to support bridging the digital divide and supporting high-throughput enterprise applications like SD-WAN services. It also further opens up the possibility of traditional cellular operators tapping satellite systems to expand their 5G coverage.

Those network capabilities have drawn interest from dozens of telecom operators interested in expanding the reach of their terrestrial broadband services. This includes financial investments from domestic telecom operators AT&T and Verizon, which have each pumped millions of dollars and valuable spectrum resources into the satellite provider.

“By entering into this agreement with AST, we will now be able to use our spectrum in conjunction with AST’s satellite network to provide essential connectivity in remote corners of the U.S. where cellular signals are unreachable through traditional land-based infrastructure,” Srini Kalapala, SVP of technology and product development at Verizon, said in a statement tied to the telecom operator’s investment.

Verizon more recently ramped its satellite connectivity efforts through an agreement with Skylo that is aimed at support lower-speed use cases like IoT.

Verizon and AT&T rival T-Mobile US also remains a hot competitor in the market. The carrier was one of the first to tag onto SpaceX’s Starlink service, which now counts thousands of satellites in orbit.

T-Mobile US this week also announced it had completed the first successful test of a wireless emergency alert (WEA) using Starlink satellites equipped with satellite-to-smartphone capabilities.

These efforts also don’t take into account the numerous satellite communication ambitions from firms like Amazon Web Services (AWS) Project Kuiper and Iridium’s Project Stardust.

This rush by operators in reaching for the stars to expand the reach and scope of their networks does have sound financial incentives.

ABI Research predicts the direct-to-cellular market will generate $11.6 billion in revenues by 2030, with the IoT space itself generating $4 billion in revenues. More broadly, the analyst firm sees nearly $125 billion in revenue opportunities for the space by 2030, citing market opportunities like IoT, backhaul, commercial broadband, and mobile satellite services.

“We are seeing that the market is evolving quickly, and many services are finding enhanced deployment through strategic alliances and from increased bandwidth supply in LEO,” Jake Saunders, VP of Asia Pacific at ABI Research, wrote. “With satellites becoming smaller, more affordable, and reaching closer orbits, the barriers to entry have been lowered, fostering innovation and expanding the scope of satellite-based services and applications. The market is revealing new development paths that will influence the terrestrial and non-terrestrial connectivity markets and shape enterprise opportunities throughout the telecommunications value chain.”

A recent report from industry trade group GSA “identified 77 publicly announced partnerships between operators and satellite vendors across 43 countries and territories.” That number included 50 operators in 37 countries and territories that “have planned satellite services,” nine operators in nine countries and territories “currently evaluating, testing or trialing these,” and 10 operators in 10 countries and territories having “commercially launched satellite services.”

Are there too many satellite telecom providers? However, analysts have also started to question the ability for the market to support several satellite-based service options, especially if they try to compete on a level-playing field with already established terrestrial-based telecommunication providers.

Analysys Mason in a new report wrote that the satellite communication industry is quickly moving from a legacy of limited capacity to one of abundance, which will produce new challenges.

“For an industry that has been defined by niche markets and scarcity economics, the shift to abundance is a new paradigm; with its own challenges and opportunities,” Analysys Mason’s Christopher Baugh wrote. “A broadening industry scope could fuel revenue growth for years, which could benefit several satellite players. In addition, some players may be required to make risky strategy decisions and not all will succeed.”

Those strategy decisions will need to straddle a thin operational and partner line.

“Looking at these market opportunities, a thought may arise whether satellite operators are trying to disrupt the traditional telecom market. But the reality is that telcos will continue to be the primary service provider for wireless access,” MTN Consulting’s Arun Menon wrote in a report last year. “Telcos are also going to benefit from partnerships with satellite operators as they will aid in providing an enhanced experience for telco customers, reinforced by ubiquitous coverage. For satellite operators, though, navigating the regulatory hurdles and ensuring constant capital flow are key concerns; several players from the current herd will vanish in the next three to five years.”

Telecom operators will also be challenged These changes will also impact telecom operator efforts.

AT&T CFO Pascal Desroches told an audience at a recent investor conference that “for us having choices, having a competitive marketplace will allow us to provide consumers with a great experience at a really affordable price.”

“Here is the way we’re thinking about this,” Desroches said. “There will be multiple providers, and in fact as far as we’re concerned, we want there to be multiple providers. We want the market to be fairly deep, and AST is one of the companies.”

Desroches’ “affordable price” comment will be key to those satellite telecom efforts. Analysts are starting to warn that operators will be challenged in crafting a financialy viable business model around satellite connectivity.

Juniper Research in a report stated that while satellite links will increasingly power low-bandwidth IoT services like asset tracking and monitoring, those use cases “will generate an average of less than $2 per month; diminishing operators’ ability to secure a return on investment.” Those operators will be more challenged in convincing “mobile subscribers to adopt an additional subscription for direct-to-cell services on top of existing cellular plans.”

Sam Baker, VP of telecom market research at Juniper Networks, noted that telecom operators will need to “promote the substantial coverage their direct-to-cell networks serve and apply premium pricing for data-intensive connections for broadband and consumer use cases. This will attract users of profitable direct-to-cell services, such as mobile broadband and smartphone subscriptions.”