There are some distinct strategic scenarios. The most straightforward one is competing with the current terrestrial operators.
Being able to compete, not only on speed but on latency and network coverage, is massive. I have no doubt FCC Chairman Ajit Pai is looking for increase innovation in that space.
The FCC is currently examining additional applications for the operation of NGSO FSS constellations, most of which include large numbers of satellites,” the agency said. “With today’s action, the Commission facilitates greater broadband offerings and competition in the United States.”FCC Grants OneWeb US Access for Broadband Satellite Constellation
An essential advantage of a LEO satellite network, apart from global coverage, is long-distance latency. Communication between the satellites and ground stations is done via radio. However, SpaceX’s proposed satellite to satellite communication is done via optic links. This enables the creation of a high-speed low-latency space mesh network. This mesh can span 7846 km between nodes, allowing for a drastic reduction of the number of routers data has to go through. In other words, terrestrial long-distance connections (Europe to Singapore for example), might go through 10 routers and take 200 ms. Space long-distance connections will go through three routers (minisatellites) in under 50 ms.
The gain is more than considerable and it’s the chief competitive advantage Musk is after. Such an infrastructure would enable SpaceX to route part of the Internet’s long-distance traffic through their network.
“The goal will be to have the majority of long-distance Internet traffic go over this network and about 10% of local consumer and business traffic. So that’s, still probably 90% of people’s local access will still come from fiber but we’ll do about 10% business to consumer direct and more than half of the long-distance traffic.”
Elon Musk, SpaceX speech 2015
Beyond competing with Internet providers, it could enable strategic low-latency network for crucial businesses. Google, which is one of the leading investors behind SpaceX, is one that comes to mind. They already run their dedicated terrestrial fiber optics network. Having access to a space network would entrench their competitive position and enable them to have a massive advantage. Imagine the creation of a Space Content Delivery Network. Imagine the leverage YouTube might acquire with such infrastructure.
That’s if terrestrial operators don’t innovate and improve their networks. Musk isn’t discarding this option, and he acknowledges that the risk is real.
“One of the mistakes that Teledesic made was not assuming that terrestrial networks would get much better over time. So we need to make sure that the system we design is good, even taking into account significant improvements in the terrestrial systems, but I do think there’s an important difference between what we’re doing and say Teledesic.“Elon Musk, SpaceX speech 2015