Chip giant Qualcomm Technologies terminated a partnership with satellite communications provider Iridium Communications that highlights the tenuous and competitive nature of the satellite telecommunications space.

Iridium and Qualcomm had been working through an agreement signed earlier this year that called for the two firms to connect the chip giant’s Snapdragon smartphone chip to Iridium’s satellite constellation. That connection would be a low-speed service supporting basic text-messaging services.

Iridium earlier this month reported that the two firms “successfully developed and demonstrated the technology” but that “smartphone manufacturers have not included the technology in their devices.” This led to Qualcomm terminating the deal effective December 3.

Iridium CEO Matt Desch noted in a statement that he remains positive on the broader satellite communications market. This includes his expectation that Iridium will generate around $1 billion in annual service revenue by 2030.

Still bullish on satellites and mobile

"While I'm disappointed that this partnership didn't bear immediate fruit, we believe the direction of the industry is clear toward increased satellite connectivity in consumer devices," Desch noted in a statement. "Led by Apple today, MNOs [mobile network operators] and device manufacturers still plan, over time, to provide their customers with expanded coverage and new satellite-based features, and our global coverage and regulatory certainty make us well suited to be a key player in this emerging market. User experience will be critical to their success, and we've proven that we can provide a reliable, global capability to mobile users."

The satellite service provider said it’s now “free to directly re-engage” with other chipmakers, smartphone manufacturers and operating system developers.

“Companies electing to adopt an Iridium solution today will have long-term service certainty and can be involved in Iridium's narrowband non-terrestrial-network service development planning,” Iridium added.

ABI Research noted late last year that more than “70 satellite service providers [are] currently providing services worldwide.” More recently it predicted the market could generate $124.6 billion in service revenues 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 [low-Earth orbit],” 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.”

Monetization still needs work, though

Despite that optimism, published reports indicated that the deal was nixed due to costs, technology challenges and the lack of a clear business model.

"Qualcomm conveyed to us that even though the Iridium service was functional and available for smartphone manufacturers to incorporate in their phones, the smartphone manufacturers did not have a 'line of sight on the monetization models,'" William Blair analyst Louie DiPalma told Seeking Alpha.

The device challenge is understandable. Apple, which owns a considerable share of the smartphone market, last year integrated direct-to-satellite connectivity into its iPhone 14 models. This also included an investment in satellite provider Globalstar to power an emergency 911 service for new iPhone devices.

Low-speed vs. high-speed services

The Iridium constellation includes more than 65 satellites split into six different “planes” in north-to-south orbit, as well as nine in-orbit “spare” satellites to take position in the event of any failed primary satellite. This effectively means complete global coverage.

However, that constellation is currently limited to providing low-speed data services. This has served Iridium well in terms of supporting basic IoT use cases like tracking, but limits its ability to serve potentially higher revenue–generating broadband use cases.

The low-speed data space has several high-profile competitors like Globalstar and Elon Musk’s SpaceX, which signed a deal last year with T-Mobile to initiate a text messaging–based commercial service beginning next year.

There are also a growing number of satellite players in the broadband-speed space. SpaceX is currently the heavyweight in that market, but there are also providers like AST SpaceMobile, which has been working with operators AT&T and Vodafone on 4G LTE and 5G-based satellite services, and SES, which this weekend launched its fifth and sixth satellites into orbit and is working with NTT DoCoMo on private 5G and edge services.

More players entering the field

Hyperscalers are also rapidly extending their reach into the space.

Amazon last month launched the first test satellites for its long-gestating Project Kuiper program. That program is Amazon’s $10 billion plan to extend broadband connectivity using more than 3,200 LEO satellites, which Amazon plans to start shooting off into space beginning next year with the target of having at least half of those satellites operational by mid-2026.

Vodafone recently jumped on board Amazon’s voyage, stating plans to use the constellation to expand the reach of its broadband services in Europe and Africa through its Vodacom operations. The move followed those by other operators, including Verizon in late 2021.

These deals with telecom operators are expected to play a big role in the viability of satellite providers.

“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.

“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," he continued. "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.”