And the Juggernaut Plows On…

Heavy equipment OEMs, including Caterpillar, Komatsu, and Hitachi, were some of the earliest adopters of satellite IoT services. Remote locations. Expensive Assets. Global coverage. Mobile tracking. Satellite IoT checks all of the boxes. CAT began reselling Orbcomm “M2M” services in the early 2000s, and by the early 2010s, most of the world’s heavy equipment OEMs were offering satellite-enabled telematics services as a standard feature. 

But not John Deere. Until now. In September 2022, Deere stunned the satellite industry when it issued an RFP for satellite services that could make Deere “the single largest buyer of satcom in the world excluding government entities,” according to a Deere official. Bigger than customers in the cruise, IFC, and enterprise markets? That’s saying something.

Why so large? Deere currently has 1.5 million assets it would like to track, only 500,000 of which are currently connected (100% cellular). Capturing 50% of those 1 million assets at $30 per month would pencil out to $180 million/year for Starlink. Don’t like our numbers? Pick your own. Whether they grow to a low, mid, or high nine-figure opportunity, Deere undoubtedly has the potential to become one of the industry’s single largest customers. 

Not surprisingly, Deere’s 2023 industry day attracted more than 60 participants, including (presumably) every major GEO satellite operator and OneWeb. So, how did SpaceX outmuscle the competition?

• • Timing. Bidders were required to demonstrate their network capability during 2023, with an ability to begin full commercial deployments in 2024. That deadline was undoubtedly a problem for every operator not named SpaceX that is currently waiting for new capacity to come online, including SES (mPower), Intelsat (four SD satellites), and OneWeb (still not fully operational).

  • Latency. Yeah, not really. According to Deere officials, the ~1-second latency associated with GEO was not a deal-breaker, given the requirement for a five-second refresh rate. In fact, Deere officials indicated that they would prefer a hybrid (LEO/GEO) solution for redundancy.

  • Terminals. SpaceX must still develop a ruggedized version of its flat panel antenna (FPA) suitable for Deere’s operating environment, which Competitive FPAs from Intellian, Kymeta, Hughes, etc., start at the high four figures and into the low five figures.

  • Bandwidth. Unlike traditional narrowband OEM telematics service offered by CAT, Komatsu, and others, Deere demands multi-Mbps uplink/downlink speeds capable of streaming live video from a vehicle. Traditional satellite IoT services from Iridium/Inmarsat typically top out at ~1 Mbps, and most are optimized for message-based IoT rather than streaming, while most GEO satellites were not designed to support a large number of direct users.

  • Global coverage. Deere will initially deploy the service in North America and Brazil, expanding globally by the end of the decade. While many GEO and LEO operators can fulfill the global coverage requirements, several will struggle to meet regional demand requirements with current capacity (e.g., 50,000 terminals in Brazil at ~5 Mbps). Meanwhile, regional Brazilian operators, Embratel Star One, Hispasat, and Telebras lack sufficient capacity to serve North America.

According to the Wall Street Journal, SpaceX’s strongest competing contender was Intelsat, which operates the world’s largest fleet of Ku-band satellites (the same frequency used by SpaceX) and already resells competitive services from OneWeb. This, theoretically, would position Intelsat to become the world’s preeminent hybrid Ku-band systems integrator, offering an Intelsat-supplied GEO overlay coupled with LEO services from Starlink/OneWeb. 

Only two problems. Why would SpaceX agree to sell capacity to Intelsat at anything other than the zero-margin markup currently offered to every other reseller? Would Intelsat take it? The second problem – Intelsat is a wholesaler, not a systems integrator. Yeah, they bought the Gogo commercial aviation business, but it’s not (yet) in their DNA elsewhere.

Where does the plow go from here? It might be tempting to assume other heavy equipment OEMs will piggyback on Deere’s solution, but there is a wide gap between the $5-20/month that most OEMs pay today and the likely ~$100/month pricing that would be offered for customers not named John Deere. While we expect most heavy equipment vendors will choose to stick with their current solution, we can think of other examples where this type of service might have applicability. Tesla, anyone?

SOURCE: https://www.deere.com/en/news/all-news/john-deere-partnership-with-spacex/