Tantra Analyst

Is Apple’s iPhone satellite communications a game changer or a dud?

It is no secret that whenever Apple introduces a new feature in Phones, it becomes the industry norm, be it removing the audio jack, non-removable batteries, or anything else. Other OEMs are either forced to adopt such features for parity or blindly follow suit, thinking those will become mainstream.

However, the support for satellite communications (satcom) announced as part of the iPhone14 series has seen different responses. Some pundits think this will revolutionize the satellite industry, and others discount it as a novelty that only a few adventurers will use. Nonetheless, it has created a lot of interest in satcom. For example, T-Mobile and Elon Musk-owned Starlink preempted and announced their own plan a couple of days before Apple’s announcement.

In this article, I look deeper into Apple’s motivation, monetization opportunities, service evolution, competitive landscape, and how this might affect Apple’s rumored modem development plan. Most importantly, whether this will be a game-changer.

Apple’s motivation for bringing satcom to phones

If you are a serious hiker like me, you will love this feature. Most national parks, where the exciting climbs and trails are, be it Grand Canyon or Mt. Whitney, don’t have cellular coverage. I know of many lone hikes losing their lives because they couldn’t call for help after slipping or falling. The only option for such hikers now is an expensive satellite texting device that costs $400 or more.

In the U.S. alone, millions of square miles of mainly rural regions don’t have cellular service, probably much more outside. These include country roads, where people often get stuck because of accidents, vehicle breakdowns or bad weather. For them, having this feature might be the difference between life and death. For others, this will be an insurance policy.

When performance gains in the smartphone are slowing, Apple has recently championed privacy and security as its central themes, which help its business as well as customer perception. If Apple can say it provides emergency connectivity no matter where you are on the planet, that has enormous marketing value.

How did Apple do it, and how can it monetize the investment?

The previous efforts to bring satcom to phones such as Iridium have failed because of two primary reasons: 1) Dedicated satcom modems in phones that affect its size and battery life; 2) Dedicated satellite networks for phone services, which are very expensive. Apple was smart enough to avoid both of these pitfalls.

As I had predicted, Apple is using Qualcomm’s Snapdragon X65 modem for this purpose. It also has custom RF circuitry for the purpose. Most likely, Apple has some proprietary, very narrow band, rudimentary air interface, like GSM or NB-IoT, to connect to satellites. So, the whole thing can be implemented without compromising the device’s size or battery life. Any wideband solution will require a lot of development, and the standard-based solution requires licensing, etc., delaying implementation.

As widely discussed, Apple is utilizing the Globalstar satellite system. Apple will pay 95% of the CAPEX needed for this service, amounting to a couple of hundred million dollars. That is a lot of money but negligible compared to a dedicated satellite network. So, there you have it. Answer to all those naysayers, pointing out previous failures.

The simple answer to the monetization question is “stickiness.” There are multiple dimensions to this. Apple’s current strategy is to utilize its unparalleled installed base to sell content and services. For that to work, it needs as many lock-in options as possible. Satcom connectivity and emergency service give existing customers more reason to stick around. The peace of mind this service can provide is priceless.

The satcom connectivity on iPhones is free for the first two years. I feel Apple will keep the basic emergency services free forever and only charge for non-emergency connectivity, e.g., subscription plans for outdoor pros. It could also bundle this with its other slew of content and services, such as Apple One. There are many such upsell options. Additionally, since this will be unique to Apple for a considerable period, they could add this to iMessage and extend the “Blue bubble” differentiation and legacy. There’s some good discussion on this on a Twitter thread here.

Can other OEMs support it easily?

Since this connectivity is working on a Qualcomm modem, technically, it should be possible for other OEMs to replicate it, working with Globalstar or other satcom providers. However, Globalstar has committed 85% of its capacity to Apple, and I assume there might also be some exclusivity. The bigger challenge will be the backend system and logistics. Substantial initial and ongoing investment is needed to offer true emergency service. Only a company like Apple, with its large customer base and high margins, can scale it without significant direct revenue. Samsung might have the scale to make it possible, but nobody else. 

The other option is to use 5G standard-based Non-Terrestrial Network (NTN) connectivity. This is what I think T-Mobile and Starlink are envisioning. However, scaling this model globally will be challenging, as Starlink has to harmonize the frequency and sign deals with many operators worldwide, which will be a slow, arduous process. If you look at how long it took for global roaming to work, you get an idea. Neither satellite companies nor operators nor phone OEMs have a clear monetization opportunity. Maybe Google can step in and create scale but it would still face hurdles because of the fragmented Android ecosystem.

To summarize, it will be hard for the competition to match Apple’s offering quickly. Even if it did, it would not be for at least the next 2-3 years.     

Evolution of smartphone satcom connectivity

Although Apple’s announcement has reinvigorated the interest in the satellite industry, a handful of players, such as AST SpaceMobile, Lynk, and others, have been steadily working on this idea. Only that they are still at very early stages, whereas Apple is all set to provide commercial, albeit very limited service. I don’t think satcom will ever be able to replace terrestrial service, performance or cost-wise. However, there is enough interest and market need to provide such connectivity to smartphones and beyond to augment terrestrial cellular networks. Services such as rural/agricultural IoT, maritime communications, etc., are some potential use cases, which are, in fact, the reasons behind 3GPP’s 5G NTN effort.

Considering that Apple’s solution is very low-speed, low-traffic and low-capacity, it might be hard to evolve it far beyond. If this service takes off, and Apple has to offer expanded services such as MMS, video, etc., it may have to switch to NTN later, supporting higher speeds and more capacity.

Additionally, satcom functionality being in the modem increases Apple’s dependency on Qualcomm and adds another hurdle to its rumored effort to make its own cellular modem.

In closing

To summarize, Apple’s decision to support satcom seems to be a well-calculated move. It brings an exciting new feature without compromising the iPhone size or battery or building a new satellite network. The most prominent monetizing option is to increase the stickiness and opportunity to market Apple’s concern for its customers’ safety and security, with possible subscription revenue from outdoor pros.

Under current conditions, it might be hard for the competition to support such a service quickly. So, Apple will enjoy this differentiation for a few years. This feature might slightly complicate Apple’s own modem plans.

I want to acknowledge my good friend and fellow analyst Samir Khazaka here, with whom I vehemently debated and brainstormed the ideas and concepts in the article.

Prakash Sangam is the founder and principal at Tantra Analyst, a leading boutique research and advisory firm. He is a recognized expert in 5G, Wi-Fi, AI, Cloud and IoT. To read articles like this and get an up-to-date analysis of the latest mobile and tech industry news, sign-up for our monthly newsletter at TantraAnalyst.com/Newsletter, or listen to our Tantra’s Mantra podcast.