OneWeb’s Loan-ly Quest

Last week, OneWeb approached the British government for a “rescue loan.” The bankrupt company reportedly highlighted a few desirable outcomes for the United Kingdom (UK) if a loan were to be approved:

1. It would move all “key” operations to the UK, which would...
2. ...allow the UK government to fulfill its promise for faster connectivity to rural areas
3. The company’s invaluable technologies (and probably associated intellectual property), would stay out of “foreign” hands

With OneWeb offering its reasons for the UK to provide a rescue loan, it also needs to prove it’s in good fiscal health (doubtful) and that its business case is solid (quite doubtful). Instead, it’s using a pseudo-public “stick and carrot” approach. On the one hand, UK politicians will look good if OneWeb can actually deliver the service it’s always said it was focused on to rural UK residents (this is the carrot). And if that wasn’t enough of an incentive, well, the fear of foreigners getting OneWeb’s tech may push the decision for the loan in its favor (the stick).

The promise of faster connectivity for remote UK areas is an enticing benefit to its politicians and may have been floated to those ignorant of geography, technology, and financing.

Fast Connectivity and Supply Chain

Does the UK occupy a large enough area of the Earth to warrant hundreds of LEO satellites servicing it?

It’s likely evident to everyone that the British Empire is not what it once was. According to Wikipedia, the area the UK encompasses is a tad over 94,500 square miles. The great state of Wyoming, just north of where I’m sitting, is a few thousand square miles larger. It's actually routine when driving through certain remote areas of Wyoming (and there are a lot of them) to not have cellphone coverage.

Does that kind of geographic footprint need a 640+ satellite constellation intended for GLOBAL broadband communications? In the UK's instance and for its remote needs, Google’s Loon almost makes more sense than OneWeb’s constellation for serving the UK’s rural residents. It will also be cheaper. And, Google probably won’t ask for a loan.

Probably not as evident to a UK politician is that OneWeb is using quite a bit of foreign technology (and foreign labor) for its satellites and ground stations. The company has emphasized just how diverse its supply chain is, with all of it coming together in a factory in the U.S. state of Florida. Would OneWeb invest in building a factory in the UK?

OneWeb's satellites deploy from a Swiss company’s (RUAG) deployer that’s designed to work with a Russian launch vehicle (now on hold), mainly to be launched from Kazakhstan. While the satellites can be launched with Virgin Orbit’s LauncherOne, OneWeb cut back on the number of launches to be conducted with that platform. It probably did so because kilogram for kilogram, it costs more to launch satellites with LauncherOne than with Soyuz, and LauncherOne can't launch more than a few OneWeb satellites at a time. Also, LauncherOne is still not operational. RUAG also manufactured satellite structures for OneWeb (more information about OneWeb supply chain supplier woes).

For its ground stations, which are critical for the constellation’s function, OneWeb contracted with American company Hughes. It’s highly doubtful any other company within the UK could quickly replace Hughes, and doubtful that Hughes wouldn’t push back.

Valuable Technology Going to Foreigners?

How valuable are the technologies OneWeb is using? If the technologies fell into foreign hands, are they so game-changing that the UK somehow loses out? Is it the fabled $15 antenna (made in the USA) for ground terminals? As noted before, OneWeb highlighted the international nature of its supply chain. It would be good, if the UK is seriously considering OneWeb’s request, for the government to ask for a list of the unique/valuable technologies and identify what the company believes is so critical to keep from foreign hands.

What is not clear is whose foreign hands OneWeb is concerned about? A few sites are guessing that China or Russia might be the potential "foreign fear" OneWeb is alluding to. However, it's not clear there is a technology in OneWeb's possession that would tilt the market in any one of the foreigner's hands. Looking at the company’s factory website, there’s not much there that appears groundbreaking (but would OneWeb list valuable tech there?). Closer to the truth may be that OneWeb’s radio spectrum might fall into foreign hands (maybe U.S. foreign hands), eventually. That Ka-band is very desirable to certain companies.

Less desirable may be the act of giving OneWeb more money based on its financing challenges in the past. OneWeb’s major investor, Softbank, decided to cut bait not that long ago. That should send a definite “no touchy” signal to the UK government. Softbank was likely privy to all the financing, all the resources that OneWeb used right up to its bankruptcy filing. Softbank would have been fairly intimately aware of OneWeb’s business case. It probably knew and maybe even understood the technologies involved. Yet, it decided enough was enough. Wouldn’t it be foolish for other potential investors/loan officers to ignore that?

Another consideration regarding financing, is, is it really so bad if no loan goes through? Charles Beames of York Space Systems noted this little gem in regards to government wisdom when it comes to business:

Government policymakers, many of whom have modest experience in commercial business, must recognize this fact as they determine their role in the future space industry. The ugliest thing is not bankruptcy; it's the government thinking it must prop up business ideas that are not viable.

Beames is being kind when he notes policymakers have “modest experience in commercial business.” Many have no experience and no business in the commercial business. But the point of this part of his article is that it’s okay for a company to file for bankruptcy. This is part of U.S. business processes, a place for the failed business to take a breather and figure out how to go on, or not. It's not clear if the UK government takes a similar stance.

Nearly two decades ago, the space communications company Iridium declared bankruptcy. The company was in such dire straits before its filing that it actually needed a "reset" through bankruptcy. Today, Iridium appears stronger than ever with its newest Iridium NEXT constellation operational (which satellites were manufactured in France). Perhaps OneWeb could do the same, but the circumstances for Iridium’s filing were much different than they are for OneWeb. OneWeb’s bankruptcy filing combined with its UK rescue loan request may indicate its business ideas are not viable.

OneWeb requesting a rescue loan from the UK government is not a good signal. The request makes it appear as if the company has exhausted all the commercial means of getting money (and is another reason why Softbank won’t invest in them anymore). It seems to be a “last resort” action, as a rescue loan is sure to have strings attached. That the company is using a stick and carrot approach to get that loan also sends, at least to me, negative signals about the company’s management.