Anpanman - The Great Satellite Pivot

[00:00:07] Speaker A: This is the AST SpaceMobile Podcast.
[00:00:11] Speaker B: It will just basically come to your phone and be seamless regardless of where you are. We don't want the user even to know that it's connected by satellite. Listen, the opportunity that we have is very, very, very large.
[00:00:27] Speaker A: Hey everyone, thanks for joining. Um, just want to see, can you guys hear me? Give me a thumbs up. I'm using my phone today because it, for whatever reason, I've been having difficulty on, um, on my desktop. Can you guys hear me? Hopefully everyone can hear me. You guys give me a thumbs up.
[00:00:46] Speaker B: Okay.
[00:00:50] Speaker A: All right, people can hear me. So I wanted to cover John Stankey's keynote address this morning, which was about as bullish as it could be for AST SpaceMobile. The reason why I'm saying that is, I guess before I start, let's talk about the context. So this joint venture between AT&T, Verizon, and T-Mobile, what they say in public and the goals and what they're trying to accomplish, they have to be very, very careful because this entity has to go through a Department of Justice and FCC review in terms of, you know, is this good for the consumer? Also, are there any antitrust issues around it? And so with that in mind, obviously the parties have to be careful in how they describe the structure of this joint venture and what the goals are, right? And so within that context, the companies have to say that they're obviously putting this together to foster competition. It's going to be good for the consumer, but it has to be couched in such a way that it's going to get through regulatory review. Putting that aside, I think it's important to listen very closely to what Jon Stanky said. So yesterday, T-Mobile CEO spoke about JV, said some very blanket generic things. Verizon, from what I understand, and I looked at the transcript, really didn't say that much on the topic, but obviously both were pushing for better, you know, pulling together resources for a better consumer experience and giving consumers choice, which is what you would expect to hear. Right. But today, John Stankey— and by the way, I posted the notes, which is cleaned up, you know, removing filler words and then kind of summarizing it in a more concise way. But the notes of his keynote today and This was a keynote where he discussed AT&T's business overall, but then the host asked him specifically about the joint venture and what they hope to accomplish with it. And I think Stanky spent about 7 minutes talking about it, of which maybe 1 to 1.5 minutes was allocated to AST SpaceMobile. And so, so yeah, it was very bullish from my perspective. So I'll just kind of go through it. You know, what John initially said is that they view satellite as a complement. to the threshold network and for their consumers, they want to be able to deliver a seamless and 100% connectivity type of experience. And so satellite is a natural extension of that. And the key obviously is for customers to never experience a drop in coverage and move also to allow them to move beyond just sending text, but doing broadband, right? And so Here, I guess, for, you know, device, direct-to-device connectivity, the goal is to ensure that, you know, every phone works and consumers view it as some, a seamless experience and they get, they can get accustomed to it and that a call or, or, you know, online experience on satellite should feel no different than a standard network call or, you know, stand just you using your browser or watching videos. Right. And so here he specifically talked about how They have this partnership with AST SpaceMobile and that partnership remains strong. And what AST is providing is very unique, a unique direct-to-device approach, which will provide seamless product that extends the network. And so I think this is really important because for those that have followed the industry closely, Starlink is offering a roaming network. It's separate. It's not fully integrated into the MNO network core. The menu of services that you can provide, that T-Mobile can provide over Starlink, is dictated by Starlink, right? Whereas what AST is doing is they are a wholesaler that's fully integrated into the MNO network, and you have seamless handover between the network and the satellite. And then the actual customer packages are determined by the MNO. Because they control the eNodeB on the ground, they actually control What types of services, you know, the pricing, all that stuff, what is offered to the consumer. And so here he talked about how the partnership with AST SpaceMobile is very strong. They're continuing to pursue that. And I think that's important context, right? Because in the T-Mobile call yesterday, while the CEO said that they, you know, they have a strong partnership with Starlink, they then talked about how They wanted more integration for the consumer. They wanted to be able to pool spectrum resources because they might— and this was kind of the funny part, but the T-Mobile CEO said that even though they might have spectrum in a certain park, they may not have spectrum in another park like a national park. And so whereas Verizon might have that spectrum, and so by pooling spectrum resources together, resources together, they might offer a better experience. The reason why that is very telling is that T-Mobile gave Starlink a committed band of 5x5, 1.9 GHz PCS G-block spectrum. And so that spectrum is nationwide. It covers every single corner of the US. And so pulling together spectrum resources, that comment doesn't make any sense. Where that comment matters is that he's talking very specifically about pulling low-band spectrum where they have pieces of it and where Verizon might have pieces of it. And this is in particular, they're talking about 800 MHz spectrum. So T-Mobile's already telling you like they're, they're doing this because they want to work with AC Space Mobile. I mean, it's— For people who are following this closely, and many of you are following closely, like you get it, but the general public doesn't get it. Like when T-Mobile says, we need to pull spectrum resources in order to provide a better service. They're not talking about Starlink. They're talking about putting together low-band spectrum and doing that together with the other carriers to provide a better service. Because you have to remember, Starlink is buying EchoStar, so they're going to have in total 60 megahertz of spectrum. There's no need to pull that spectrum. It's already available, and Starlink's going to deploy that. And so The fact that T-Mobile is entering this JV is a hard pivot away from Starlink. And so it's crystal clear. The other thing that Snakey said is that the joint venture is going to take some time to mature and reach full operating speed, but that all the details have already been worked out. And so this is something that's been in negotiations for quite some time. I do believe that Mike Sievert, who was the original architect, the original, you know, the prior CEO of T-Mobile. He's the one who pushed the idea of bringing Starlink on board and utilizing the service, which basically he birthed a competitor. And that's why I think, because T-Mobile under his stewardship was actually operating quite well and they were taking market share and they were hitting on all cylinders and all of a sudden he got canned out of nowhere. And so I think Deutsche Telekom initially they had to approve the transaction and they probably gave this guy some rope, some running room, but then in the end he got fired for creating Starlink, basically seeding Starlink as a competitor, which perhaps like we'll learn about that in a book or a Harvard Business Case Study sometime in the future. But yeah, so I think one of the things I was that was in my mind yesterday is that if Starlink truly embraces— sorry, if T-Mobile truly embraced Starlink and viewed it as its key enabling technology, then why even join the joint venture? It doesn't make any sense, right? This joint venture is structured to enable T-Mobile to walk from Starlink and to join AT&T, which, as I mentioned before, AT&T is actually quarterbacking this whole joint venture. So John Stankey has a very good relationship with Abel Avalon. They've been there as a supporter of the company since, you know, they started looking at the company, I think, in 2018, 2019, and then started working closely in 2020. And then, of course, you know, inked the commercial agreement in 2024, made the strategic investment in January 2024, and then inked the commercial agreement in May of 2024. And so, so I think it's important to understand like where this joint venture is coming from, because John Stanky, this is kind of his, his baby creating this joint venture. And the key thing as you go through his presentation, a lot of the elements of this joint venture really highlight their work with AST SpaceMobile and the work that lies ahead, right? So there are 4 strategic reasons why he laid out the need for this joint venture. And so in particular, you talked about how as each of the partners, T-Mobile, Verizon, and AT&T, as they progressed in pushing for direct-to-device connectivity, what he was saying is that in isolation, it made more sense to address key industry challenges together. And so he talks about these 4 areas. One is unified standards and lobbying. So He said here that it's inefficient for multiple carriers to lobby for different priorities regarding handset design, spectrum capabilities. Bifurcation harms the industry, so by combining their respective software IP, they can establish unified standards that allow heterogeneous networks to operate much more efficiently. So right here, this tells you that it's AST SpaceMobile, right? Because AST is integrating into the operator's core network. They're utilizing standards 3GPP, you know, they— the company's service already is backwards compatible with existing handsets. This is over low-band spectrum. In the future, of course, and this is in regards to setting any standards, so for mobile handsets to utilize MSS spectrum, which is L-band for AST or S-band for Starlink, you'll need to get handset manufacturers to adopt those frequencies, which is gonna happen in the next I think 3GPP release, maybe it's 18 or 19. Kat's even— no, I see him on here. But here it's important that, you know, AT&T has already been doing this integration work on behalf of AT&T and Verizon because they're, again, they're quarterbacking the whole AST solution. And so here when he's talking about putting together the carriers to lobby for one unified effort, That unified effort is AST SpaceMobile, right? Because T-Mobile is not going to carry the water anymore for Starlink. Because as we all know, Starlink is gearing up to be a direct competitor to the MNOs. And I guess T-Mobile, with the expiration of exclusivity this summer, they started to realize like, hey, we need to shift over and start working with AT&T and Verizon because we created this monster, which is Starlink. And so by combining respective software IP and establishing unified standards, that pretty much says like they're going to be pushing forward with AST, which is open. It's not proprietary. It's not, you know, Starlink is a proprietary network. It operates separately. By the way, Globalstar is the same thing. It's a completely separate network. At some point in the future, perhaps they'll architect it differently. for the new constellation, but that's probably 4 or 5 years from now. So yeah, that's one key thing, unified standards and lobbying. And so instead of AT&T and Verizon going to the FCC lobbying for AST, you're going to see T-Mobile join that effort, which is very powerful. Number 2, spectrum optimization. So this is the really telling part. Here, Sankey said, to make these applications work properly, a full portfolio of both scarce low-band and mid-band spectrum is necessary. By aggregating our traffic, we can collectively engineer a better, more widely available service and utilize the licensed spectrum with maximum efficiency. And so the key tell here is he talks about pulling together scarce low-band spectrum. And so this is something that T-Mobile alluded to yesterday, and then of course, you know, Stankey talked about it today, but there's only one provider that can deliver broadband connectivity to unmodified mobile phones, and that's AST SpaceMobile over low-band spectrum. Now, there is another player, Lynk Mobile, that makes these smaller satellites that provide intermittent texting over low-band spectrum, but they've obviously hit a wall and don't have much momentum. And from an architectural standpoint, they do have the same issue as Starlink. They actually put the eNodeB, the brains, behind the network into the satellite itself. And so Lynk is operating like a— it will operate like a roaming network, just like Starlink. And so it's not integrated into the network core, which, by the way, like, this whole joint venture is telling the industry and the world that they want to, um, they, they, they want the architecture that AST is pushing forward. And again, I can't emphasize enough that at the beginning, towards the beginning of this speech, he talked about the strong relationship with AST SpaceMobile, how they're continuing to do the work there. And so again, as AT&T being the quarterback of this joint venture, it's clear which provider they're going to use. Now, obviously, they've couched this as like, this is going to be pro-competitive. They want to standardize things and they could allow other constellations to come in. And that's what you need to get approval from regulators, right? You can't— we can't foreclose on other competitors. But, but for people who are astute and reading this, reading what's being said, what's not being said, it's clear that this joint venture is being enabled by AST, which Abel Avalon, in his tweet and also in the company's PR, which went out simultaneously, stated as clear as possible that AST is going to be the enabling technology for this. So number 3, he said that, you know, one of the key things for the JV is to create a robust wholesale market. And the primary goal of the JV is to foster a robust wholesale satellite market with multiple constellations to buy from. And so here he talks about ensuring healthy competition among satellite providers to keep wholesale pricing in check and prevent bottlenecks from a single provider dictating terms and ultimately keep costs lower for consumers. And so this is like, this is Stanky and the JV speaking directly to regulators. Like, we want to keep pricing in check. We want there to be consumer— we want there to be choice. And ultimately, it's going to keep costs lower for consumers. These are all keywords which allow you to get DOJ and FCC regulatory approval. But what's interesting here is that let's talk about pricing. So AST has the fairest deal out there, or sorry, AST, you know, with With AT&T and Verizon, there's a 50/50 rev share split. The reason why this is important is that the deal that T-Mobile worked out with Starlink, which we learned more recently, was an 80/20 where Starlink actually gets 80% of the economics and T-Mobile gets 20%. So the fact that they're talking about pricing and keeping it in check, and then T-Mobile joining this joint venture, just kind of shows like, hey, Starlink is not offering economically attractive terms, AST is, and that's why T-Mobile's joining. Now, what does that mean over the long run? Well, let's keep in mind that the commercial contract for AT&T and AST lasts through, I think, 2030. And then for Verizon, I believe that lasts through 2030 or 2029. So those economics are going to stay in place, right? And so my guess is with T-Mobile joining, they'll probably get most favored nation. So they'll get a 50/50 deal too, which by the way, like that's what the company AST is offering all the MNOs globally. It's not as if like, you know, someone's favored or not, but over time, you know, there has been some, you know, concern. Well, what if that pricing doesn't persist and they get pressured on pricing? Well, if you have 100% of the most profitable market, if you lose 5%, 10%, maybe in 2031, 2032, what does it matter? The fact that you can lock up 100% of the market and you give some concessions on pricing, fine, that's great. You'd expect that. But I think it's important to understand that this JV, once they go through regulatory review process, there's probably going to be— my guess is the Department of Justice is going to make it such that each of these carriers have to negotiate end pricing on their own. They can't actually use the JV as a cartel, right, to negotiate on their behalf. And so there's, my guess is like there's going to be some checks and balances there. But if you were to talk to Bell or Scott today, they'd probably tell you, well, if we, to get 100% of the market, if we have to give up 5 or 10% of the economics, take it. Like done deal. You're filled. That's good. So, so yeah, I think this point about a robust wholesale market is important in terms of, you know, getting regulatory review. But overall, in terms of the long-term economics for the company, I don't think it's an impediment at all. And then the last point, efficient infrastructure sharing. So here again, this is like really important stuff. Stinky talked about satellite traffic. First of all, they're gonna talk down the service, right? Because it's for a wireless carrier to say in the face of Starlink becoming a bigger competitor, they can't say like, oh yeah, satellite is gonna become a huge business for us. It's, and for companies that say that they provide 100% nationwide coverage or close to 100%, you would never say like, yeah, we've got a lot of dead zones or issues. But here he made the point that satellite traffic today represents a very small percentage of total network traffic, which is true for T-Mobile, by the way. T-Mobile made this point where it's like 0.005% of their network traffic today, which if you're doing intermittent texting and narrowband data services, yeah, it's going to be a small percentage of your network because first of all, the people who are using the service are Sending very few packets of data because this service is shitty. If you were able to do broadband and do video, then that traffic would actually be higher. And/or if people say— sorry, if people knew that it was a broadband service, they might actually use it or they might adopt it. And so, but here, you know, you had Sankey say this and then also the T-Mobile CEO say it yesterday. that at least today, it is a small percentage of overall network traffic. And keep in mind, like, we're talking about consumers who are in dead zones. And for Starlink, because of the nature of the service where they can't beam down specific fixed cells, it is limited to large geographies where there are dead zones. Whereas with AST SpaceMobile, you can actually pinpoint specific, like, small dead zone areas, whether it's on the beach or parts of the Hamptons and actually provide service, which is something that Starlink can't do today. But anyway, here, the efficient infrastructure sharing, this is like a key tell. So he talks about how for the 3 carriers, building separate redundant ground station infrastructure 3 times over makes no sense. The JV allows them to build ground structure, ground station infrastructure once using a shared set of standards that routes traffic efficiently into separate mobile cores. So this is like the most important part of this speech today aside from the pooling of low-band spectrum. So not building ground station infrastructure that can be used, right? And so by the way, like AT&T and Verizon are already doing that. AT&T is building it on behalf of themselves and Verizon to interface with AST's network. And so by bringing on T-Mobile, T-Mobile doesn't have to do that integration work either. Right? They're just going to piggyback off of what AT&T is doing. This is an important point because doing network integration is not easy and it takes time. And here they talk— he talks about using a shared set of standards that routes traffic efficiently to separate mobile cores. Here he's talking about like a one ground interface that's going to be able to take satellite traffic from AST, and then route it to Verizon, to T-Mobile, to AT&T, whichever user makes sense. You would do this only if you were using one constellation, because obviously there is some level of complexity where the constellation has to figure out like which network a particular user belongs to, right? And so if you were, for Starlink, by the way, Starlink owns its ground infrastructure. Like they, they, you are essentially a roaming customer on the Starlink network. And so it's not as if T-Mobile is buying ground infrastructure and deploying that. And, you know, it, it's actually Starlink because they have their own separate network. They have their own eNodeB or the brains of the network. And you're roaming. And then once they, once you're roaming on their network, then Starlink connects to your network separately on the ground and relays information back and forth. But what this efficient infrastructure sharing point basically is talking about, the very specific architecture and infrastructure that's required of utilizing AST SpaceMobile's service, right? And so AT&T and Verizon, they have been buying ground stations and putting in infrastructure. T-Mobile will be joining that effort too. That's not required of Starlink because again, Starlink owns their own stuff. And so this comment specifically tells you like they're not working with Starlink. And so, so yeah, today's speech, I put it on, I put the summarized transcript as the second tweet of this space. So definitely recommend everyone go through it. But in summary, the key takeaways here are that AST is the enabling technology. Now, in the future, could the joint venture work with Amazon, like once they have a reasonable solution that's up and running? Sure, they could. But keep in mind, like once you build out this infrastructure that tightly integrates AST's network with the cores of each of the operators, that's going to be very hard to rip and replace, right? From a competitive standpoint, if regulators are concerned, what the companies can do is say, hey, we're going to offer consumers For AT&T and Verizon, it's exclusive, so they can't do this yet. But for T-Mobile, they could say, well, we're offering consumers a choice. They can use AST SpaceMobile broadband satellite service, or they can also sign up separately for Starlink, and they can pick what they want to do because Starlink is a separate roaming network. For Starlink, the reason why Gwynne Shotwell and Dave Goldman are upset is that this standards-based approach, network integration, pooling of low-band spectrum, which they can't use, it all points to using AST SpaceMobile as the core constellation, right? And so what for Starlink, what it means is they're not going to have an MNO partner that's going to go to bat for them. They actually have to utilize their direct sales strategy, which is advertising directly to consumers and telling people, hey, if you just like these like these roaming services that you use when you go to Europe or Asia, that you can just buy an eSIM and utilize a network when you're away. Starlink's going to have to do that. They're going to have to go directly to consumers and say, hey, you can get Starlink service through this eSIM and it's going to, not seamlessly, but it's going to work where you don't have coverage of the terrestrial network. You know how in your mobile phone you can prioritize which network to go to first? And so it will be T-Mobile, or if you're on Verizon, it'll be Verizon, and then you can default back to Starlink. And that's how it's going to work for them. And it's not, it's going to be, there's going to be a lot of friction. It's a separate bill. Is the network going to be good in open areas? It'll be good. Like once in 2030, when they deploy the V2 satellites and they're able to utilize the spectrum that they're getting from EchoStar, like the service will be okay out in open areas and perhaps it'll work somewhat in buildings. But like probably most of you, I want something that's seamless, right? Like I want to pay one bill, I want to pay through Verizon or AT&T or T-Mobile, and I just want it to work, right? And I don't want to be able to— I don't want the 2 networks conflicting. I want to be handed off seamlessly between the satellite and the terrestrial network. And that is the solution that AST is putting forward with this JV. where it's gonna be broadband. It's not gonna be SOS texting. You're not gonna have to point the phone somewhere in the sky. You're utilizing the best spectrum out there, which is low-band spectrum. You're gonna be able to like use it within your house. You might be able to use it one level down in a subway, but of course, you know, you're probably gonna have terrestrial coverage there anyway, so it's not gonna matter. But if you're driving, Or if you are in the suburbs and you have a house, like, you know, back in the day when I would visit my parents, you know, there was no service at their house. And so it was either Wi-Fi or nothing. But with this new service with AST in partnership with AT&T, Verizon, and T-Mobile, you'll have access to service, right? Because that low-band spectrum is gonna penetrate through 2 walls, through a house, through your car. And so, yeah, this is gonna be game-changing. And it's important to remember, like, this is not just for the consumer day-to-day service. Obviously, FirstNet is being powered by AST SpaceMobile 2, so we're talking about first responders. And this is good for national security. Like, the fact that these 3 carriers are coming together and pulling resources to really bolster AST SpaceMobile service, like, this is gonna be good for natural disasters, right? Like in times where you've got a tornado or hurricane or fire and the traditional network goes down, all 3 carriers are gonna be able to provide you with service and help first responders, help victims get the help they need. And so this is really important stuff. And so putting aside like consumers, this, you know, there's also, you know, Internet of Things, autonomous cars, trucks, drones, you name it. This is going to be something, thinking beyond the consumer, whether it's fully connected devices, but also AI-driven applications on the edge, also military dual-use technology obviously comes into play as well. Anyway, but yeah, I just wanted to quickly summarize what John Stankey covered this morning. I think, again, it's very telling. Outside of what T-Mobile said yesterday, they had to reaffirm that they're happy with their Starlink partnership, which clearly if they were happy, they wouldn't have joined this joint venture, so they're not. But I think it was important that John Stankey talked very specifically about the strong relationship with AST SpaceMobile, how they're looking forward to commercial service that's going to start in the second half of this year. And because AT&T is quarterbacking this entire thing, yeah, I think AST's in the pole position. There's no other companies that are doing what AST's doing. The ones focused on low-band spectrum, everyone's satellites are architected or will be architected for utilizing MSS spectrum, which has its own benefits. But when used in combination, if you have multiple satellites, some that are able to deliver low-band, service and then others that are focused on mid-band service, that's going to be uniquely superior to anything else that competitors can field, right? And so AST has a multi-year lead on the competitors. Scott mentioned this yesterday. The Block 1 satellites, which were launched in 2024, achieved 100 megabits per second. The Block 2 satellites are expected to double that. And, you know, compare that to Starlink Direct to Cell, which is, I don't know, 5 megabits per second. And their second generation, which is predicated on Starship being successful. And I've talked about how, you know, there are a lot of technical issues for them to get over, especially related to returning the second stage and landing that without damage to the heat tiles. That satellite, which is probably going to be launching in 2028, 2027, maybe 2029. That satellite is expected to hopefully get to 150 megabits per second, which remains yet to be seen. So anyway, I'll pause there. Thanks everyone for joining. I'll probably, as I think through this more, might do a space later. But yeah, I think today's comments were very bullish. I definitely recommend people go back and read through the transcript, which I have summarized, and think about it through the context of the architectures of AST SpaceMobile versus Starlink. And if you do that, you'll see that clearly the JV is focused on delivering AST SpaceMobile as its preeminent solution. So with that, I'll end it. And thanks everyone for joining. We'll talk again soon. Take care. 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[00:32:17] Speaker B: We're doing something very, very big, and I think we need to know that we can Space to Space Mobile is the only company that has proven technology to deliver cellular broadband connectivity directly from space to the everyday smartphone. People will just basically turn on their phone and be seamless regardless of where you are. We don't want the user even to know that it's connected by satellite. Our role is to bring this into reality. Always important I'm gonna let you do the honors. Listen.
[00:33:02] Speaker A: Mmm, waffles.