China vs Starlink: The Race for Orbital Internet Dominance

The Resurgence of Satellite Broadband

A significant number of companies have recently emerged, aiming to deliver broadband internet access via a network of satellites positioned in low-Earth orbit (LEO). This approach promises near-global coverage.

However, this isn't a novel concept. Previous attempts to establish LEO-based internet services, involving substantial investments from prominent figures like Bill Gates and Motorola, ultimately resulted in widespread failures and limited connectivity two decades ago.

A New Wave of Investment

Despite the past setbacks, a renewed surge of investment is currently underway. From 2015 onward, and accelerating since 2020, billionaires such as Elon Musk and Jeff Bezos, alongside organizations like SoftBank and the UK government, are committing billions to the development of space-based broadband.

This period has also coincided with a rapid advancement in China’s space program. Concurrent with the expansion of SpaceX’s Starlink constellation starting in 2020, China has been actively developing its own capabilities in this domain.

China's Response: SatNet and GuoWang

China’s response includes significant policy support, financial resources, and technological advancements. Notably, the creation of China SatNet, intended as a direct competitor to Starlink, and the associated GuoWang (National Net) constellation have been prioritized.

While currently under development, SatNet and GuoWang are poised to challenge Starlink and other providers in specific markets. Furthermore, these initiatives may serve strategic governmental objectives.

The Future of Space-Based Internet

Backed by powerful stakeholders, the deployment of a Chinese satellite internet network – often referred to as “Red Starlink” – is anticipated over the next few years, extending its reach across China and internationally.

The competition in this sector is expected to intensify as both Starlink and Chinese constellations mature and expand their coverage areas. Broadband from space is becoming a reality.

Starlink's Impact and China's Response

Understanding China's initiatives regarding Low Earth Orbit (LEO) satellite constellations requires considering the broader context of global technological competition. China's advancements in this field are, in part, a response to innovations originating in Western nations. Specifically, the accelerated development and growth of Western LEO constellations, particularly Starlink, have spurred China's own ambitions.

Until approximately the middle of 2019, the number of LEO broadband satellites in orbit was limited. Most operational satellites at that time were either early deployments from OneWeb or the initial test satellites launched by Starlink. While proposals existed for constellations encompassing thousands of satellites, no entity possessed the capacity for such large-scale manufacturing and launch operations.

However, the situation has changed considerably in the last year and a half. Starlink has successfully deployed over 1,700 satellites as of late May, establishing itself as the world’s largest satellite operator based on the sheer number of orbiting spacecraft. This swift deployment has enabled the company to initiate trials of its communication systems with organizations like the U.S. Air Force and the Space Development Agency (SDA).

Furthermore, Amazon committed a $10 billion investment in July 2020 to its Kuiper constellation, which is planned to consist of more than 3,000 satellites.

Since late 2019 and early 2020, the LEO constellation business model has experienced a notable surge in activity, with several financially robust companies reinforcing their LEO strategies. Although the long-term viability of this model remains unproven – historically, all first-generation LEO constellations have faced financial difficulties or outright failure – significant advancements have been made. Throughout this period, China has been carefully navigating the complexities of developing its own competing constellation.

Key Developments Driving Competition

• Starlink's Rapid Expansion: The launch of over 1,700 satellites has positioned Starlink as a dominant force.
• Amazon's Kuiper Investment: A $10 billion commitment signals strong belief in the LEO market.
• Increased Testing: Starlink is actively testing its technology with military organizations.

The competitive landscape is evolving quickly, and China is actively working to establish its presence in the LEO satellite market. The initial reactive phase has transitioned into a focused effort to build a robust and independent capability.

LEO Broadband Development in China

Establishing a Low Earth Orbit (LEO) broadband network presents substantial challenges within China. Both the aerospace and telecommunications sectors are subject to stringent governmental control and are largely controlled by substantial state-owned enterprises (SOEs) possessing considerable monopolistic influence.

Notwithstanding these complexities, the Chinese government has taken definitive action. New regulations have been implemented to expedite the development of a robust industrial foundation.

These regulations encompass areas such as satellite internet provision, satellite production, and launch capabilities, with the majority enacted since 2020.

Early Constellation Plans

Previously, China’s ambitions for LEO broadband constellations were comparatively restrained. The initial significant project announced was the Hongyan (鸿雁) constellation, planned to comprise approximately 320 satellites.

China Aerospace Science and Technology Corporation (CASC), a leading entity in the Chinese space sector, was designated as the manufacturer and launch provider for the Hongyan constellation.

Shortly after, a comparable initiative, Hongyun (虹云), was unveiled. This broadband constellation was to be developed by China Aerospace Science and Industry Corporation (CASIC), a long-standing competitor to CASC.

Both constellations were initially publicized around 2017 and secured substantial financial backing from their respective parent organizations.

Slow Initial Progress

However, as 2018 and 2019 progressed, limited progress was observed. Only a small number of satellites were launched by the two companies collectively.

Updates regarding the constellations’ development were also infrequent during this period.

China's Rapid Advancement in Space-Based Internet

Following SpaceX's consistent launches of Starlink satellite constellations – approximately 60 satellites bi-weekly starting around late 2019 – increased activity within China’s low Earth orbit (LEO) broadband sector became evident.

A significant initial indicator was the April 2020 declaration by the National Development and Reform Commission (NDRC) designating “satellite internet” as part of its “New Infrastructures” (新基建) initiative. This list prioritizes key digital technologies for development in China, including 5G and the Internet of Things (IoT), alongside satellite internet services.

The “New Infrastructures” designation carries substantial weight; for instance, Tencent, a leading Chinese technology company, committed to investing ¥500 billion (approximately $70 billion) into these prioritized areas in early 2020.

Just two weeks after the NDRC’s announcement, China Unicom, a major telecommunications operator, unveiled plans to develop satellite internet solutions for maritime applications, in-flight connectivity, and other sectors, directly referencing the NDRC’s initiative.

Subsequently, in May 2020, Commsat, a Chinese commercial satellite manufacturer, secured ¥270 million (around $40 million) in funding. These funds were specifically allocated to constructing a manufacturing facility in Tangshan, Hebei Province, capable of producing 100 small satellites annually, with the NDRC ruling highlighted in the funding announcement.

Later, in November, Galaxy Space, another commercial satellite manufacturer, completed a new funding round (the amount remained undisclosed) achieving an ¥8 billion ($1.25 billion) valuation, establishing it as the first “unicorn” within the Chinese commercial space industry. The investment was earmarked for building a “satellite superfactory” in Nantong, Jiangsu Province, aiming for a production capacity of 300-500 satellites per year. Galaxy Space also acknowledged the NDRC ruling during its funding process.

Concurrently, the China Aerospace Science and Industry Corporation (CASIC) designed and constructed a satellite factory in Wuhan, completed within 429 days, with approximately 60 days occurring during the stringent COVID-19 lockdown. This facility, with an eventual capacity of 240 satellites annually, was finalized in January 2021 and produced its initial satellite in May.

China Aerospace Science and Technology Corporation (CASC) has also been enhancing its mass-manufacturing capabilities through new facilities in Tianjin and Chongqing, though with less public visibility than CASIC or the commercial entities. CASC’s Tianjin facility is projected to have a production capacity exceeding 100 satellites per year, while details regarding the Chongqing facilities are still pending.

In summary, within the last 18 months, at least five significant satellite factories have been either commissioned or completed throughout China.

The Emergence of GuoWang and SatNet

Astute observers may have analyzed the previously mentioned figures and questioned the rationale. Considering Hongyan and Hongyun’s ambitions for hundreds of satellites, coupled with China’s potential to produce over 1,000 annually, a disparity between supply and demand appears evident. What, then, will the nation do with this excess capacity?

The answer unfolded in two stages. Initially, discussions within Chinese circles in 2020 alluded to “GuoWang,” signifying a “National Net(work)” – a more extensive and all-encompassing LEO broadband constellation. These GuoWang rumors aligned closely with filings submitted by China to the International Telecommunication Union in 2019 and 2020, utilizing the prefix “GW” for constellations ranging from hundreds to over 1,000 satellites. The total satellite count specified in these filings neared 13,000, revealing a considerably larger undertaking than either Hongyan or Hongyun alone.

Subsequently, in April 2021, the establishment of China Satellite Network Group Limited (中国卫星网络集团有限公司) occurred, a state-owned enterprise designated to operate China’s GuoWang constellation.

This represents a significant shift in the Chinese government’s approach to constellations. Prior to SatNet’s formation, China’s constellation initiatives were fragmented and relatively small in scale. Hongyan, being a CASC project, would likely have prioritized procuring satellites and launch services from CASC or its affiliates. Hongyun would have similarly favored CASIC. Following SatNet’s announcement, the President of China Satcom – a CASC subsidiary and state-owned satellite operator – indicated that Hongyan and Hongyun would undergo “major changes,” suggesting their integration into SatNet.

By establishing SatNet as a centrally managed SOE – directly overseen by the state-owned Assets Supervision and Administration Commission (SASAC) – authorities have empowered SatNet to source from and compete with any provider. SatNet now operates at the same hierarchical level as CASC, CASIC, China Telecom, China Unicom, and China Mobile.

The significance of this development cannot be overstated. The Chinese government has essentially assembled a team of leaders from diverse backgrounds to spearhead a broadband network from space. This approach is likely more effective than attempting to foster competition between state-owned enterprises like CASC and CASIC. Now, CASC and CASIC will compete to supply an independent, equally ranked operating company with satellites and rockets, and SatNet can theoretically procure from commercial entities as well, benefiting companies like Commsat. SatNet embodies an experiment in disruptive innovation within a Chinese SOE framework, and its structure was unexpected.

In the weeks following SatNet’s establishment, several leadership positions were filled. These include a chairman from China Electronics and Technology Corp (CETC) with expertise in electronic equipment, a general director from CASC specializing in satellite manufacturing, and board members from CASIC, CNSA, and other key organizations. The CFO was recruited from CNSA, an organization recognized for its financial integrity. SatNet’s leaders have already engaged with the Chongqing city government to discuss developing satellite manufacturing, applications, and related capabilities, demonstrating considerable political influence to shape the network’s development.

Recently, the State Administration for Science, Technology and Industry for the National Defense (SASTIND) released regulations in mid-May concerning the “orderly development of the small-sat manufacturing industry.” While still broad, the document outlines guidelines for companies manufacturing satellites under 1,000 kg – encompassing all LEO broadband satellites.

The Current Status of China's Satellite Broadband Initiative

Despite trailing behind established players like Starlink and OneWeb in the deployment of a satellite broadband constellation, China has made substantial progress in establishing the necessary groundwork. A considerable amount of ground infrastructure is now in place, encompassing satellite production facilities, robust launch capabilities, and a growing number of companies focused on developing associated technologies and applications.

Looking ahead, SatNet is anticipated to begin awarding satellite manufacturing contracts to various companies. This approach will allow for an evaluation of different capabilities and a testing of diverse technological approaches. Simultaneously, increased coverage of SatNet within state media is expected, particularly in relation to the Belt and Road Spatial Information Corridor.

The Belt and Road Spatial Information Corridor

This ambitious project envisions a space-based infrastructure network. A key component of this corridor is the planned deployment of a worldwide network of communication satellites.

From a broader viewpoint, integration of GuoWang with other components of China’s technological ecosystem is likely. For example, if Huawei constructs a 4G or 5G network in a remote region, satellite connectivity could extend service to the most inaccessible locations.

Consider Baidu’s efforts to implement its Apollo autonomous vehicle system on roads in distant areas. Connection via GuoWang represents a plausible solution for maintaining reliable communication. Furthermore, numerous Chinese state-owned enterprises involved in global projects – such as mining and road construction – could also benefit from GuoWang connectivity.

The Future of LEO Broadband

The low Earth orbit (LEO) broadband sector remains in its nascent stages. Multiple Western companies, backed by significant investment, are poised to launch constellations offering extensive global coverage in the coming years.

While China is not expected to immediately lead this race, recent advancements suggest a considerable acceleration in its efforts. It is increasingly probable that the People’s Republic will soon be providing connectivity to previously isolated areas.

Key Takeaway: China is rapidly developing its satellite broadband capabilities, positioning itself to become a significant player in the global LEO broadband market.