“When The Loons Rule The World”

Foreword

This isn’t about what you’re thinking. It’s about what you’re not thinking.

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Start with a definition, a prediction and a little-known fact:

Loon:

1. a large North American bird that eats fish and has a cry like a laugh
2. a silly or foolish person

Prediction:

By 2020, a new sixth species of loon might very well rule the world of communications, enabling billions of people to get online for the first time, thanks to Google X’s Project Loon.

Google is in the early stages of launching hundreds, soon to be thousands, of helium balloons (or “loons”) into the wind currents of the stratosphere, some 65,000 feet above the earth’s surface. These loons are outfitted with communications equipment that will enable online access for all the people below, whether in New Zealand, the Australian Outback or Times Square. This new species will span the globe and become a part of our everyday lives. Fascinating.

Google is in the early stages of helium balloons (or "loons") that will enable online access for all the people below.
Google is in the early stages of helium balloons (or “loons”) that will enable online access for all the people below.

We recently stumbled across a Popular Science interview with Mike Cassidy, leader of Google X’s Project Loon. What kind of technology makes this possible? In his words, “I believe we’re the first to have an altitude-control system that works on a steady basis. The balloons have solar panels for power, GPS so we know exactly where they are, Iridium antennas for communication, and onboard computers to receive commands…”

Whoa, Nellie! Something doesn’t add up. Until you realize you’ve just discovered…

This little-known fact:

He’s referring to Iridium Communications, Inc. Iridium failed as a Motorola satellite project back in the late 1990s. Today, it stands alone as a publicly-traded company under the symbol IRDM. Great management team and governance. Revenues and cash flows are growing. The company is leveraging its position into a growing base of subscribers and partners across numerous commercial and governmental markets. It’s the world’s only commercially-available satellite network with 100% global coverage. And within a few years, Iridium will have replaced its existing satellites with new ones, providing even faster transmission rates and tons of hosted payload space. Payload space for things such as global aviation communications, machine-to-machine interaction and so on.

Yet a quick Google search of the keywords “Google Loon” and “Iridium” returns some 395,000 results, the top 20+ of which portray Iridium as a tired old horse turned out to pasture, compared to Google X’s Project Loon as a rising force of nature. Nobody, other than Cassidy, seems to be talking about the fact that Project Loon’s success is dependent upon Iridium.

So are you thinking like a loon, or are you really thinking? Investors take note:

The space frontier is changing at a faster rate than we have seen in 15 years, driven in part by the insatiable demand for broadband. Consider the following: Cisco claims that mobile broadband connections in the developing world are growing faster than any other area (84% CAGR between 2007 and 2014), but still 3 billion people in the developing world have no access to the internet. Companies have been trying for years to connect these people cost effectively, but traditional methods that are based on equipment on the ground have been too expensive or difficult, so companies have been looking to the sky instead. Google in particular is looking for new customers (just about everyone who has access already is a customer), and has been looking to both the sky and space as a way to reach the whole world. Project Loon is indeed a rising force of nature.

But, alas, balloons rise, drift, and at times need to come back down for maintenance, or shift tack to avoid collisions with random pieces of atmospheric “junk.” Hence, they have to be controlled (as any loon should). Based on the Cassidy interview, that would appear to be where Iridium comes in – command and control. By providing real-time communications for the computers aboard the Loons to be controlled through the Iridium antennas. That would mean Iridium is a key technology partner in Project Loon, which stands in stark contrast to the general market’s perception. But it’s right there in print, and now you know where to find it. Nothing short of a ringing endorsement of Iridium’s value proposition.

Why Iridium? Certainly not the only possible satellite (or ground) solution around. The answer could be glaringly simple: only Iridium has uncompromising coverage of 100% of the world where the winds can blow these balloons, and each of them really needs to be under control at all times for this idea to work.

So let’s not be so quick to dismiss Iridium. After all, Google hasn’t; nor has Facebook, which recently called off plans for building its own satellite constellation once they figured out the real cost. The games are just beginning, and Iridium is a sphinx, not a loon.

We hope you have enjoyed this second in a series of case studies.

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