SPI White Paper on GEOs and LEOs.Final.31.Oct.2017

©2017,SpacePartnershipInternational,LLC;AllRightsReserved

WhitePaper:

ComparisonofGEOsandLEOs,

andthePlannedAuroraIVandOneWebSystems,forAlaska

October2017

Abstract

Thesocioeconomicbenefitsofbroadbandarewellestablished.1 Tocompete in themoderneconomy, broadband services are essential. Populations with high broadband penetrationgenerally excel and those with limited access decline.2 As such a robust, cost-effective,broadbandinfrastructurethatcanserveallofAlaskaisvital.3Currently,Alaskahassignificantgapsinitsbroadbandcoverage,particularlyinruralandremoteareaswhereadversetopographicalandweatherconditionsmaketerrestrialnetworkbuildoutnoteconomicallyviable.Asaresult,asignificantportionofthepopulationinAlaskahasnoaccesstobroadband,orhasbroadbandthatisdeemedbytheUSFederalCommunicationsCommissiontobeinadequate.DespiteheavyfederalsubsidiestoAlaska’scarrierstoextendtheirterrestrialnetworks,manyAlaskanswillremainunservedorunderservedafterthesubsidiesexpire10yearsfromnow.4Thispaperconsiderstheuseofanewgeneration,highthroughputsatelliteasacomplementtothe existing terrestrial network, to create a complete, seamless Alaska broadbandsolution.5Fortunately,thereareawealthofcasestudiesacrosstheglobefromwhichAlaskacanbenefit,manyofwhichinvolvesimilarchallengesasthosefacedbyAlaska,suchasahighlynon-uniform and widely dispersed population spread across challenging geographies, often withextremeweatherconditions.Inallthesecases,satelliteshaveplayedamajorroleinreachingtheportionofthepopulationthatcannotbeeconomicallyservedbyothermeans.6We review the global literature regarding holistic broadbandofferings, and then analyze thesatellitecomponent. Wediscussthekeydifferencesbetweensatelliteofferings includingthenextgenerationofhigh-throughputgeostationary(GEO)andLow-Earth-Orbiting(LEO)satellitesystems. WecompareboththekeytechnicalandbusinessaspectsoftheAuroraIVGEOHTSsystemcurrentlyunderdevelopmentbytheAlaska-basedPacificDataport,Inc.(“PDI”),withtheplannedOneWebglobalLEOsystembeingdevelopedbytheVirginia-basedcompanyWorldVuSatellitesLtd.OurfindingsarethatbothAuroraIVandOneWebcoexistingandcompetinginthemarketplaceisnotonlybeneficial,butessentialtosecureacompetitive,reliableandaffordablebroadbandfutureforAlaska.

©2017,SpacePartnershipInternational,LLC;AllRightsReserved 2

ComparisonofKeyAspectsofHTSGEOandLEOSystems

Continuousadvancementsandinnovationsinsatellitetechnology,includinghigherthroughputsatellites,antennadesignandperformanceandhigh-volumemanufacturingcapabilities,haveresultedinarenewedinterestinleveragingtheuniquecharacteristicsofthiscapability,whetherthroughnextgenerationGEOhighthroughputsatellitesorglobalconstellationsofsatellitesinLEO.Thefollowingtableanddiscussionprovidesahigh-levelcomparisonofkeyaspectsofboth.7

GEOs LEOs

CoverageandCapacity:

OnlyoneGEOisnecessarytoprovideconsistent,uniterrupted,highcapacityservicetoatargetmarket

HundredsofLEOswithoverlappingbeamsinahighlyorganizedconstellation.Theneedforlow-costsatellitesdrivessingle-stringlessreliabledesignsthanGEO.IndividualSatelliteoutagescauseperiodicgapsincoverageuntilreplaced

NetworkStability:

StaticgeometryofGEOs,i.e.,fixed,highpoweredbeamdeliveringconsistenthighthroughputcapacity,isbetterforstabilityofservices

LEOsaremobilesystems;assuch,userexperienceissimilartowirelessmobileeveninfixedinstallations.Certainapplicationsmaysufferduetofrequenthandoffsbetweensatellitesandahighdegreeoftrafficvariability

Latency:Impactoflatencyisapplicationdependant.Latencyhasverylittleeffect95%ofbroadbandapplications,andmostmediaandmobilityapplications.

ClosertotheEarththanGEOs,solowerlatency.SomeadvantageoverGEOsfortime-criticalapplications,suchasgamingandhighspeedtrading

Efficiency: AsingleGEOcanfocusitscapacitypermanentlyonagivenmarketwherethecapacitywillbeused

SinceLEOsatellitesareconstantlymovingaroundtheEarth;assuch,morethan80%oftheirtimeisspentoverwateranduninhabitedregionswithlittleorzerorevenueproducingtrafficmakingitverydifficulttoachieveprofitability

Complexity:GEOsremainfixedoverthesamegeographicareaandrequirearelativelysimplegroundsegment,includinglow-cost,readilyavailablefixed-siteantennas

LEOconstellationsareoperationallycomplex,andrequirecostlygroundantennasthattrackandhand-offsignalsbetweensatellitesastheymoveoverhead.ThecurrentgenerationofLEObroadbandsystemsarethemostcomplexspaceundertakingseverattempted

Cost:AsingleGEOhasbuilt-inredundancy,longerlifetime(typicallylasting18+years),lowergroundsegmentcostandcandelivercapacityexactlywhereitsneeded

Economiesofscaleforvolumemanufacturing,offsetbyneedfor100sofsatellitesandgateways,higherdeploymentanduserterminalcostsandlessefficientuseofcapacity

RFSpectrum:GEOstypicallysecureanorbitlocationandassociatedRFspectrum,withpriorityofuseoncecoordinated,thatissufficienttomeettheiranticipatedservicerequirements

CoordinationofRFspectrumforLEOsisdifficult,astheymustavoidcausinginterferencetoGEOsinmostcases,andmustsharetheirspectrumwithotherLEOs

TimetoMarket:

AsingleGEOcanbegingeneratingrevenuesoveritstargetmarketassoonasitcompletesinorbittesting.Ifmorecapacityisrequired,additionalGEOscanbedeployed

AsignificantportionoftheLEOconstellation,includingsatellitesandgatewayearthstations,mustbedeployedbeforeitcanbegingeneratingrevenuesoveranyregion

MarketFocus:GEOscanfocustheircapacityonspecificgeographicareaswheredemandisclearlyidentifiedandsaleseffortscanbetargetedtomaximizeeconomicreturns

GlobalLEOconstellations,withtheircapacityspreadworldwide,andsignificantlylimitedinanygivenarea,requirebroadmarketaccess,andrapidbuildupofpayingsubscribersfromcountriesallovertheworld


CoverageandCapacity:OnlyoneGEOsatelliteisrequiredtoprovide24x7x365uninterruptedhighcapacityservicetoatargetmarket.Ontheotherhand,hundredsofLEOsatelliteswithoverlappingbeampatternsinahighlyorganizedconstellationarerequiredtoprovideseamlesscoverageoveragivenregionoftheEarth,withcapacityspreadevenlyacrossallregionsoftheEarthratherthanconcentratedintargetmarketswhereitisneeded.NetworkStability:ThestaticgeometryofaGEO,i.e.,asatelliteingeostationaryorbitwithahigh-throughputspotbeampermanentlyfocusedonthesamegeographiclocation,isexcellentforstabilityofservice.Incontrast,aLEOconstellationisessentiallyawirelessmobilesysteminwhichtheuserscanbeconsideredasfixedandthecellsaremoving.Allcellularusershaveexperiencedspottycellularcoveragewhichmanifestsitselfasblockedcalls(callsthatcannotbeplaced),ordroppedcalls(callsthatareinterruptedandrequirearedial).Manyoftheseirregularitiesofserviceoccurduetocellhandoffswheretheusertransitionsfromonecelltothenext.InthevernacularofLEOsatellitesystems,cellhandoffsareanalogoustobeam-to-beamhandoffsandsatellite-to-satellitehandoffs. Withhundredsofsatellitescirclingtheglobeevery90to100minutesorso, thesehandoffscanoccurasfrequentlyasseveraltimesperminute insomesystems. Eachhandoffrepresentsapotentialconnectionanomaly.Assuch,LEOsystemscansufferfrominconsistencyofservicebothintheformoftransmissionspeedandserviceavailability.Latency:Latencyisthetimeittakesforamessage,orapacket,totravelfromitspointoforigintothepointofdestination. This isasimpledefinition,but itcanbemisleading.Broadbandsystemscontain multiple elements contributing to the overall transmission time. It is important tounderstandthecontributorstolatencyandthefactorsthatdictatetheirperformance.Theseare:Transmissiondelay: thetimeintervalrequiredtopushallthepacket’sbitsintothelink,which

isafunctionofthepacket’slengthanddatarateofthelink;Propagationdelay: the amount of time required for a packet to travel from the sender to

receiver;Processingdelay: thetimerequiredtoprocessthepacketheader,checkforbit-levelerrors,

anddeterminethepacket’sdestination;andQueuingdelay: howlongthepacketiswaitinginthequeueuntilitcanbeprocessed.Thetotallatencyofthesystemisthesumoftheaforementioneddelays.Transmissiondelayisdictatedbytheavailabledatarateofthetransmittinglinkandhasnothingtodowiththephysical


distancebetweenthesenderandreceiver.Propagationdelayisgenerallyaconstantfactorofthespeedoflightdependingonthemediumthroughwhichthesignaltravels.Thetimerequiredforthespeedoflighttotransitfromthesurfaceoftheearthtoasatelliteandbackisafactorinsatellitesystems.BecauseGEOsatellitesorbitatamuchhigheraltitudethanLEOsatellitesGEOlatenciesarehigher.Fromauserexperiencestandpoint,theeffectsoflatencyareverymuchapplication-dependent.95%ofinternettrafficisvideotransmission-relatedandforthistypeofdatalatencyisvirtuallytransparenttotheenduser.Real-timeservicescanexhibitadegradationofuserexperienceovernetworkswithhighlatency.High-speedfinancialtradingisparticularlysensitivetolatencyfollowedbyapplications,suchasgaming.Otherreal-timeapplicationsthatarelessimpactedincludeVoiceOverInternetProtocol(VOIP)andvideoconferencing.Whileuserscanperceivetheadditionalpropagationdelays,GEOsatelliteshavebeensuccessfullyservingthisneedformorethan50yearsandtheycontinuetobe instrumental forservicessuchascellularbackhaul today. Indeed,manyof today’smobiletelephonecallspassthroughsatellitenetworkstransparentlytotheenduser.Insummary,muchismadeoflatencybecauseitisafacetwhereGEOandLEOsatellitesystemsdiffer.Latencycannegativelyaffectuserexperienceintime-criticalapplications,suchasonlinegaming, high frequency electronic trading, but these applications make up less than 5% ofinternetusage.8Efficiency:AsingleGEOsatellitecanfocusitscapacitypermanentlyonatargetmarketwhereitscapacityissuretobeused,andthenefficientlyfocusitseffortsonthegroundinthesamemarketutilizingtheappropriatesalesanddistributionchannelsaswellastherequisiteinventoriesofaffordableuserterminals.Incontrast,sinceLEOsatellitesareconstantlymovingaroundtheEarth,mostofthey spendmost of their orbit over oceans and other uninhabited areas. This geographicalinefficiencytranslatestoeconomicinefficiency,i.e.,aLEOcompanywillneedtoadoptastrategyofglobalmarketaccess,i.e.,gainingaccesstothemarketsofasmanycountriesaroundtheworldaspossibleonacasebycasebasis.Eachmarkethasitsownregulatory,politicalandeconomicchallenges,andthentheLEOcompanymustfindlocaldistributorstosellequipmentandservices,inordertoachievetherevenuerequirementstodrivetheeconomicsoftheLEOsystem.Complexity:A single GEO satellite, once in its designated orbit location,will remain fixed over the samegeographicareaforthedurationofits18+yearlifetime.Itwillrequirearelativelysimplegroundsegment,includinglow-cost,readilyavailablefixed-siteantennas,inordertoprovidehighqualitybroadbandservicesthroughoutitscoveragearea.


LEO constellations, on the other hand, are operationally complex, and require costly groundantennasthattrackandhand-offsignalsbetweensatellitesastheymoveoverhead.Theoriginal“Big LEOs”, such as Iridium and Globalstar, had 66 and 48 satellites in their constellations,respectively.ThecurrentgenerationofplannedLEObroadbandsystems,suchasOneWeb,willhavehundredsifnotthousandsofoperationalsatellitesintheirconstellations.Thishasneverbeenattemptedbeforeandcomeswithitsownuniquesetofrisks.Cost:GEOsatellitecostsmorethanasingleLEOsatellite,butithasbuilt-inredundancy,longerlifetime(18+ years), lower ground segment cost and can deliver capacity exactlywhere it is needed.Further,ifmorecapacityisneeded,anadditionalGEOsatellitecanbedeployedintoanearbyorbitalslotwithavailablefrequencies(with2degreesofspacingormorebetweenthesatellites)andfocusitsspotbeamsonthesamecoveragearea.Incontrast,althoughLEOconstellationscantakeadvantageofhigh-volumemanufacturingforeconomiesofscale,theeconomicbenefitisoffsetbytheneedforhundredsofsatellites,morelaunchesandhighercosttodeploythem,withmorefrequentneedforreplacement(averagelifetimeisfivetosevenyears).Further,thegroundsegmentforLEOsisfarmoreexpensive,withtheneedfortensorhundredsofgateways,dependingonthesystem,andfarmoreexpensiveUTs.Inaddition,inordertoincreasethecapacityofthesystem,significantlymoresatellitesand/oranentirelynewconstellationmustbedeployed.RadioFrequency(“RF”)Spectrum:GEOs typically secureanorbit locationandassociatedRFspectrum,withpriorityofuseoncecoordinated, that is sufficient tomeet their anticipated service requirements. The same RFspectrum can be re-used over the same coverage area by as many other GEO satellites asnecessaryaslongastheirorbitlocationsarespacedatleasttwodegreesapartfromeachother.Incontrast,coordinationofRFspectrumforusebyLEOconstellationsisdifficult,astheymustavoidcausinginterferencetoGEOsinmostcases,andmustsharetheirspectrumwithotherLEOs.Suchsharing isextremelydifficult fromtechnicalandoperationalstandpointsandcanhaveamajorimpactontheamountofcapacityavailabletotheaffectedLEOs.TimetoMarket:AsingleGEOcanbegingeneratingrevenuesoveritstargetmarketassoonasitcompletesinorbittesting.Ifmorecapacityisrequired,additionalGEOscanbedeployed.InthecaseofLEOs,asignificantportionoftheconstellation, includingsatellitesandgatewayearth stations, must be deployed before it can begin generating revenues over any region.ImplementationofaLEOconstellationlikeOneWeb,withmorethan680operationalsatellitesin18orbitalplanes,canliterallytakeseveralyearsfromthetimeoftheinitiallaunchtocommercial


revenues.Thecriticalpathincludesdeployingtheentireconstellationofsatelliteswithmultiplelaunches (eachwith itsownriskof failure),drifting thesatellites into theirdesignatedorbitalplanes,testingthemforfunctionality,andthengoingthroughthesamedeploymentrigorswiththe55to75regionalgateways.Onlythenwillthesystembereadytocommenceservice.MarketFocus:GEOscanfocustheircapacityonspecificgeographicareaswheredemandisclearly identifiedandsaleseffortscanbetargetedtomaximizeeconomicreturns.LEOconstellations,ontheotherhand,havetheirtotalcapacityspreadglobally,makingcapacitysignificantlylimitedinanygivenarea.Inaddition,theyrequiremarketaccesstomanycountrieslocatedallovertheworld, inordertomatchdemandtoavailablecapacity,andonlythencantheybeginrapidlysecuringasufficientnumberofpayingsubscribers inordertoservicetheirdebtandmeetequityreturnsexpectations.

ComparisonofKeyAspectsofPlannedAuroraIVandOneWebSatelliteSystemsThefollowingdiscussionprovidesadetailedcomparisonoftechnicalandeconomicaspectsoftheAuroraIVGEOHTSsystem,designedexclusivelyfortheprovisionofbroadbandservicetoAlaska,andtheOneWebLEOsystem,whichbyphysicalnecessityisglobalindesignandfocus.


BusinessRisks:

AuroraIV OneWeb

AccesstoRadioFrequency(RF)Spectrum:

NoRFspectrumconstraints.HasalloftheKa-bandspectrumneededtomeetcapacity/servicerequirements

OneWeb'saccesstoKu-andKa-bandspectrumcouldbelimitedbyITUregstoavoidinterferingwithGSOsatellitesandtosharespectrumwithotherLEOs

UserTerminalAvailabilityandCosts:

UTsfortheAuroraIVsystemarereadilyavailableatpricespointsoflessthan$350USDeach

TechnologyforconsumerUTsnotyetavailable;OneWebnotplanningtofundR&Dorproduction.IfOEMsdon'tup,supplyandcostofUTscouldbeaffected

MarketAccess:TherearenoissuesorimpedimentstosecuringthenecessarylicensesforcommencementofbroadbandsatelliteequipmentandservicessalesinAlaska

Licensesrequiredfromeachcountrytobeserved.Verydifficulttosecureinsomecountries.Indonesia,China,RussiamovingtoblockOneWebfrommarketaccess

Distribution:Aurora'sprincipalfounder,Microcom,hase34+yearsofdistributionexperiencewithdirecttoconsumerandwholesalesalestocarriersandbusinesses

OneWebreliesonSoftbankfordistributionagreementswith3rdpartiesworldwide.IfSoftbankfails,or3rdpartiesfailtosecuresubscribers,OneWebfails

Competition:

NoGEOHTSsystemsplanningtocoverAlaska.SeveralLEOsystemshaveannouncedintent,butonlyOneWebandO3Bnextgen(mPower)announcedimplementationplans;mPowerdoesnotcoverAlaska.

OneWebfacesglobalcompetitionfromGEOHTSoperatorsandLEOcompetitionfromO3B/mPowersystem,whichwillattackOneWeb'smarkets+50degreesnorthandsouthoftheEquator

LaunchRisk:SinglelaunchonSpaceXFalcon9orArianeV,eachwithverysuccessfultrackrecords

20+launchesof30satelliteseachtodeployinitialconstellationover2to3years.Likelihoodofatleastonefailureis(statistically)>70%.NotrackrecordforVirginGalacticorBlueOrigin,socan'tevaluateviability

ScheduleRisk:

Thesatellitetechnologyisprovenandtheconstructionandlaunchscheduleispredictable.Noregulatoryissuesandcapitalacquisitionrequirementsaremanageable.Consumer-gradeUTequipmentiswidelyavailable.

Newtechnologyrequired;mega-projectwithlarge,interdependent,concurrent,developmentprograms;globalregulatorymorass;UTs,marketaccessanddistributionpartnersin190+countriesarerealissues.

GatewayOperations:

AuroraIVwillnotrequiremorethan2or4gatewaysforthefull-upsystem,alltobeownedandoperatedbyPDI.Thetechnologyforeachoftheseiswelldeveloped,andtheperformanceandcostsarewellknown

Functionalityofconstellationdependson55-75gateways,tobeowned/operatedby3rdparties.Ifanygatewaynotinplaceorproperlyoperated,wouldnegativelyimpactOneWebperformance

SystemCost:Thereisverylittleriskthatthesystemcostwillincreasebeyondcurrentestimates.ThekeycomponentsoftheAuroraIVsystemarewellknown

$2to$4billioninCAPEXforOneWeb'sgatewaysandothergroundcomponentsnotincludedinspacesegmentcost

FundingStrategy:

AuroraIVwillbefinancedbyprivateequity,capacitycommitmentsanddebt.Totalequityinvestment,whichwillbeoffsetevenfurtherbyupfrontpaymentsforbulkwholesalecapacity,islessthan$40millionUSD

OneWeb’sfundingstrategyincludesmixoffinancing.OneWebplanstouseSoftbankcapacitycontracttosupport$3.5billioninECAprojectfinancing.IfSoftbankdefaultsoncapacitycontract,ECAfinancingatrisk

InternationalBusinessRisk: None;AuroraIVisdedicatedtocoverageofAlaska

MostofOneWeb'sserviceareaisoutsidetheUS.Thereissignificantregulatory,politicalandeconomicinstabilityinmanyofthecountrieswhereOneWebneedstoprovideservicestoachieveeconomicviability.

CollisionwithSpaceDebris:

TherehasneverbeenalossofaGEOsatelliteduetoacollision.Probabilityislessthan0.0041

CollisionriskismuchgreaterinLEOthanGEO,especiallywithintersectingpolarorbitsand100sofsatsdriftingbetweenplanes.Collisiondebriscanthreatenwholeconstellation.RussianandIridiumsatscollidedin2009creatingdebrisfieldthatcontinuestothreatenLEOs

NetworkSecurity:

Informationsecurity("IS")perUSbestpractices.Networksecurityisrobustbydesignwithonlyonesatelliteandaclosednetworkarchitectureof3to4gateways

ISwithOneWebsystemwillbesubjecttolargenumberofforeignentities,manyindevelopingworld.Networksecurityuncertainwithgatewaysmanagedbyforeigngovernments/operators.Cyber-threatsignificant


Mission:TheAuroraIVsatellitesystemisfocusedexclusivelyonAlaska,withthegoalofbridgingAlaska’sdigitaldividewithUSqualityofservicestandards.9In contrast, OneWeb’s stated mission is to enable affordable Internet access for everyone,connecteveryschoolonEarthby2022,andbridgetheglobaldigitaldivideby2027.10Whileachievingeitherofthesemissionobjectiveswouldbeanextraordinaryaccomplishment,itseems that the likelihoodof success isgreaterwithamission focusedexclusivelyonAlaska’sbroadband requirements, as opposed to one that attempts to satisfy the broadbandrequirementsofeverycountryintheworld.Onereasonforthisissimplythemagnitudeoftheeffort.AnotheristhattheapproachtakenbyPDIwithitsAuroraIVsystemisbasedontechnologythatisproven,readilyavailableandaffordable,allcreatedwithinawell-knownandmanageablebusinessandregulatoryenvironment.TheOneWebsystem,ontheotherhand,despiteitsundeniablygrandobjectives,isbasedonahighly complex system,with technology still in development, user terminals that arenot yetavailable,andtheneedtosuccessfullynavigatethebusinessandregulatoryenvironmentsof194differentcountriesaroundtheworld.SpaceSegmentandCoverage:TheAuroraIVsatellitesystemwillconsistofasinglesatellitelocatedingeostationaryorbitandasupportinggroundnetwork,withhighpoweredspotbeamsfocusedexclusivelyonAlaskaandsurroundingoceanareas.TheAuroraIVsatellitewillbelocatedinthegeostationaryarcatorabout150degreesWestLongitude,andhavetheabilitytomaintainitspositionatthislocation,whichisanoptimallocationforcoverageofAlaska,fortheentiretyofits18+yeardesignlife.Incontrast,theOneWebsystemwillconsistofaninitialconstellationofmorethan680satellites,operatingin18high-inclinationplanes(87.9degreescircularatanaltitudeof745milesabovetheEarth)of36satelliteseach.11Theoverlappingbeamsofthesesatelliteswillprovidecoverageoftheentireplanet.OneWeb’sabilitytomaintainthisglobalcoveragewillbedependentuponcontinuouslyensuringthefullfunctionalityofthesesatellites,byacomplexstrategyofstation-keeping,incrementalreplenishmentatthetimesuchsatellitesreachtheendoftheirusefullife,andinsomecases,bystatisticallyexpectedpre-maturefailure.ImplementationSchedule:Vendor selection for the Aurora IV satellite is scheduled for January 2018, with satelliteconstruction to be completed within 26 months thereafter, with satellite deployment andcommencementofservicein2020.


OneWebplanstobeginconstructingsatellitesin2018,withlaunchesbeginningin2019,andagoalofhavingtheinitialglobalconstellationofhundredsofsatellitesinplaceandoperationalby2022.12Capacity:Aurora IV is designed to provide at least 20 Gigabits per second (“Gbps”) of capacity forbroadband services to Alaska, with the concentration of such capacity mapped to Alaska'spopulation and data density requirements, to ensure maximum usable capacity where it isneeded.13 Ifneeded,additionalcapacitycanbeaddedbylaunchingasecondsatelliteintoanadjacentorbitlocation.According to OneWeb, the theoretical global capacity for the entire constellation isapproximately5Tbps.14However,mostofthiscapacitywillbeunusable,becausetwothirdsoftheconstellationwillalwaysbeoperatingoveroceanregions,15andadditionalcapacitywillbeconstrainedduetoITUrequirementsforLEOsystemstoavoidcausingRFinterferencetoGEOsystems16andspectrumsharingrequirementswithotherLEOsystems.17WithrespecttoAlaska,theamountofOneWebcapacityactuallyavailableforuseisestimatedtobe+12to18Gbps,basedontheassumptionthatatleastthreeOneWebsatelliteswillhavefullorpartialcoverageofAlaskaatanytime,butwithfootprintsthatconstantlyvaryintheamountofoverlap.LaunchServices:TheAurora IVGEOsatellite isdesignedfor launchonaSpaceXFalcon9orequivalent launchvehiclewithregardtoperformanceandprice. TheAuroraIVsatellite’smassandvolumewillenableittosharethelaunchwithacompanionsatellite,reducingthetotallaunchcostforAuroraIVtohalfofthepriceforadedicatedlaunchonaFalcon9.18OneWebhascontractedwithArianespacefor21Soyuzb2launchesforinitialsystemdeployment(atleast30satellitesperlaunch)overaperiodof18to24months.VirginGalactichasacontractfor 39 launches (maximum2 satellites each) to fill in gaps in the initial constellation and forsatellitereplacement/replenishment,andBlueOriginisnowundercontractaswellforlaunchesbeginningin2020.19GroundSegment:TheAuroraIVsatellitesystemrequiresonly2to4HTSgatewaysincrementallydeployedforfull-up operations, tomaximize its capabilities in Alaska. The gateways are fully developed andreadilyavailable,andsimilargatewaysarealreadyinusewithHTSsystemsoperatingoverthecontinentalUS.20AccordingtoOneWeb,itsnetworkarchitecturerequiresatleast55to75regionalgateways(with~ 10 antennas each) strategically placed to connect the countries in its service area to theOneWebsystem.Thesegatewaysarethecoreofatotallynewsystemarchitecture,thatincludes


operations,billingandglobalInternetconnectivity.NetworkgatewaysmustbefullyfunctionalandinterconnectedtotheglobalinternetbackboneinorderforcountrieswithintheirrespectivegatewayserviceareatoaccesstheOneWebsystem.21UserTerminals:TheAuroraIVsystemisdesignedtooperatewithlow-cost,consumer-grade"fixedantenna"anduser terminal equipment, such as the ViaSat Surfbeam 2 or the Hughes HT2000W. Thisequipmentisalreadyavailableforpurchaseatcurrentpricepointsof$350USDorless,andpricesareexpectedtocontinueadownwardtrendasconsumeruptakeofthisequipmentcontinuestoincreaseonGEOHTSsystemsworldwide.AccordingtoPDI’sprimarydistributor,Microcom22,whichhasmore than34yearsof experienceas the leadingproviderof satellite systemsandservicesthroughoutAlaska,theseuserterminalscanbeeasilyinstalledatanylocation,urbanorrural,inlessthantwohours.23TheOneWebuser terminals (1st generation),on theotherhand, currently consistof ahighlyexpensiveantennasuite:2to3mechanicalsatellitetrackingantennasperuserterminal,withmultiple transceivers for frequent handoffs between satellites. OneWeb has indicated thatelectricallysteeredantennaswillbeavailableforlatergenerations,butcurrentlytheseunitsaremore than anorder-of-magnitude tooexpensive andhavenot reachedperformance targets.Currently, a user terminal with similar capabilities for government or enterprise use costs$25,000USDto$50,000USDperunit.24QualityofService:ThebroadbandservicetobeprovidedbyAuroraIVisdesignedtomeetorexceedbaselineUSFCCrequirementsofspeedanddatausageforbroadbandInternetservices,i.e.,forward/returnspeedsof25/3Mbps,andmonthlydatausageofatleast150Gbps.ThislevelofserviceisbeingdeliveredtodaybyPDI’sdistributionpartnerMicrocom.QualityofservicewillbecomparabletoHTSbroadbandservicesprovidedinthecontinentalUnitedStates.OneWeb’s LEO satellite systemwill provide "one-size fits all" uniform coverage. There is noaccommodation for user distribution. Quality of service is expected to be comparable todevelopingnationsandremoteoceanregions.PotentiallatencyadvantageoverGEO.OneWeb’smovingsatellitesposeconsiderabletechnicalchallengesthatlikelywon'tbecharacterizeduntilthe satellite are on-orbit. Loss of anyOneWeb satellitemeanspotential for periodic serviceoutagesuntilreplaced(GEOsatellitesarebuiltwithspace-gradeelectroniccomponentsandhavebuilt-in redundancy). Low cost, high volume production satellites are single-string and usecommercialofftheshelfelectronicscomponentstocontrolcomplexityandcost.ThiscombineswithhostileenvironmentofVanAllenradiationbeltsveryclosetoOWorbitaltitude. Failureratesareunknown.


SatelliteDesignLife:TheAuroraIVsatelliteisexpectedtoprovidecontinuousservicetoAlaskafor18+years,sowitha2020deployment,itshouldnothavetobereplaceduntil2038attheearliest.25Incontrast,OneWeb’ssatellitesaredesignedtolastapproximately7years.Onthisbasis,withadeployment between 2019 and 2022, the constellation will need to be completely replacedduringthe2026to2029timeframe,andthenagaininthe2033to2036timeframe.Additionally,OneWeb's mass production strategy for its satellites trades redundancies, hardening andindividual unit testing for lower costs, resulting in a higher pre-mature failure-rate across allplanes,andarequirementforreplacementofindividualorsmallgroupsoffailedsatellitesonacontinuousbasis.CAPEX:The entire Aurora IV GEO HTS satellite system (including satellite, launch services, spaceinsuranceandgroundsegmentinfrastructure,whichismodularandupgradeable)willcostlessthan$200milliontoimplement.26The space segment alone for the first generation OneWeb constellation (satellites, launchservicesandinsurance)isestimatedtocostatleast$4BillionUSDtoimplement.Thegroundsegment, which consists of regional gateways, back office software and other elements, isexpectedtocostanincremental$2to4billion.However,giventhepotentialneedtoreplacetheentireconstellationtwiceduringthe2026to2036timeframe,thecostofsuchreplacementwillbeconsiderable,particularlywhenaddedtotheinitialcostofthesystem,eventakingeconomiesofscaleintoaccount.27BusinessModel:TheAuroraIVbroadbandcapacitywillbeusedforprovisionofretail(directtoconsumer)servicesthroughoutAlaska,forwholesalesalestoAlaska’sfixedandmobilecarrierstomeettheirmiddlemile /backhaul requirements, forbackupcapacity forAlaska’s terrestrialnetworks incaseofoutages,andforwholesalesalestoAlaskanresellersfocusedontheaeroandmaritimemarketsintheairspaceandoceanareasacrossandaroundAlaska.TheOneWebbusinessmodelrequiresthatsatellitecapacitybesoldintoasmanyoftheworld’s194countriesaspossible,inordertoachievethesubscriberbaseandrevenuesnecessarytodrivethe economics of the system. SoftBank has agreed to purchase from OneWeb 100% of thecapacitygeneratedbyOneWeb’sGeneration I satelliteconstellation foraperiodof tenyearsfromtheservicecommencementdate.ThepurchaseagreementrequiresSoftbanktoactastheprimarydistributorofOneWebcapacity,andtoberesponsibleforresellingsuchcapacitytothirdpartydistributorsallovertheworld.28


DistributionStrategy:DistributionisoneofPDI’sstrongestcapabilities.Microcom,theprinciplefounderofPDIandtheAuroraIVsystem,has34+yearsofexperienceasthelargestsatellitedistributorfortheAlaskamarket,withakeenunderstandingofthedemand,costsandpricepointsforsatellitebroadbandservices in Alaska, and strong distribution channels (direct to consumer and wholesale)throughouttheState.29Microcomwillbetheprimarydistributionpartnerfordirecttoconsumerservices.Additionally,PDIwillprovidewholesalecapacitytoarangeofcustomers.AsaresultoftheCapacityPurchaseAgreementwithSoftbank,OneWebwillrelyonSoftbanktoidentify and secure distributor relationships with appropriate third-parties in each countryaroundtheworldwhereitsuserterminalequipmentandassociatedservicesaretobeprovided,tosecuretherequisitenumberofpayingcustomersandensurea levelofservicequalityandcustomercaretoretainthem.MarketandSubscriberRequirements:

TheAuroraIVbusinesscaseclosesbasedonAlaskademandalone,witharelativelylownumberofsubscribers(e.g.,approximately35,000customers)orequivalentsalesofwholesalecapacity.OneWebwillneedtoacquiremillionsofpayingsubscriberswithinacoupleofyearsinordertomeet its revenue requirements. Since the satellitesare capacity limited, the subscribersandsystemusagewillhavetocomefrommarketsallovertheworld.TheabilitytoachievethiswillbelargelydependentupontheabilityofSoftbankanditssub-distributorstorapidlysecureaccesstokeymarketsandaggressivelybuildsubscribers.


BusinessRisks:

AuroraIV OneWeb

AccesstoRadioFrequencySpectrum:

NoRFspectrumconstraints.HasalloftheKa-bandspectrumneededtomeetcapacity/servicerequirements

OneWeb'saccesstoKu-andKa-bandspectrumcouldbelimitedbyITUregstoavoidinterferingwithGSOsatellitesandtosharespectrumwithotherLEOs

UserTerminalAvailabilityandCosts:

UTsfortheAuroraIVsystemarereadilyavailableatpricespointsoflessthan$350USDeach

TechnologyforconsumerUTsnotyetavailable;OneWebnotplanningtofundR&Dorproduction.IfOEMsdon'tup,supplyandcostofUTscouldbeaffected

MarketAccess:TherearenoissuesorimpedimentstosecuringthenecessarylicensesforcommencementofbroadbandsatelliteequipmentandservicessalesinAlaska

Licensesrequiredfromeachcountrytobeserved.Verydifficulttosecureinsomecountries.Indonesia,China,RussiamovingtoblockOneWebfrommarketaccess

Distribution:Aurora'sprincipalfounder,Microcom,hase34+yearsofdistributionexperiencewithdirecttoconsumerandwholesalesalestocarriersandbusinesses

OneWebreliesonSoftbankfordistributionagreementswith3rdpartiesworldwide.IfSoftbankfails,or3rdpartiesfailtosecuresubscribers,OneWebfails

Competition:

NoGEOHTSsystemsplanningtocoverAlaska.SeveralLEOsystemshaveannouncedintent,butonlyOneWebandO3Bnextgen(mPower)announcedimplementationplans;mPowerdoesnotcoverAlaska.

OneWebfacesglobalcompetitionfromGEOHTSoperatorsandLEOcompetitionfromO3B/mPowersystem,whichwillattackOneWeb'smarkets+50degreesnorthandsouthoftheEquator

LaunchRisk:SinglelaunchonSpaceXFalcon9orArianeV,eachwithverysuccessfultrackrecords

20+launchesof30satelliteseachtodeployinitialconstellationover2to3years.Likelihoodofatleastonefailureis(statistically)>70%.NotrackrecordforVirginGalacticorBlueOrigin,socan'tevaluateviability

ScheduleRisk:

Thesatellitetechnologyisprovenandtheconstructionandlaunchscheduleispredictable.Noregulatoryissuesandcapitalacquisitionrequirementsaremanageable.Consumer-gradeUTequipmentiswidelyavailable.

Newtechnologyrequired;mega-projectwithlarge,interdependent,concurrent,developmentprograms;globalregulatorymorass;UTs,marketaccessanddistributionpartnersin190+countriesarerealissues.

GatewayOperations:

AuroraIVwillnotrequiremorethan3or4gatewaysforthefull-upsystem,alltobeownedandoperatedbyPDI.Thetechnologyforeachoftheseiswelldeveloped,andtheperformanceandcostsarewellknown

Functionalityofconstellationdependson55-75gateways,tobeowned/operatedby3rdparties.Ifanygatewaynotinplaceorproperlyoperated,wouldnegativelyimpactOneWebperformance

SystemCost:Thereisverylittleriskthatthesystemcostwillincreasebeyondcurrentestimates.ThekeycomponentsoftheAuroraIVsystemarewellknown

$2to$4billioninCAPEXforOneWeb'sgatewaysandothergroundcomponentsnotincludedinspacesegmentcost

FundingStrategy:

AuroraIVwillbefinancedbyprivateequity,capacitycommitmentsanddebt.Totalequityinvestment,whichwillbeoffsetevenfurtherbyupfrontpaymentsforbulkwholesalecapacity,islessthan$40millionUSD

OneWeb’sfundingstrategyincludesmixoffinancing.OneWebplanstouseSoftbankcapacitycontracttosupport$3.5billioninECAprojectfinancing.IfSoftbankdefaultsoncapacitycontract,ECAfinancingatrisk

InternationalBusinessRisk: None;AuroraIVisdedicatedtocoverageofAlaska

MostofOneWeb'sserviceareaisoutsidetheUS.Thereissignificantregulatory,politicalandeconomicinstabilityinmanyofthecountrieswhereOneWebneedstoprovideservicestoachieveeconomicviability.

CollisionwithSpaceDebris:

TherehasneverbeenalossofaGEOsatelliteduetoacollision.Probabilityislessthan0.0041

CollisionriskismuchgreaterinLEOthanGEO,especiallywithintersectingpolarorbitsand100sofsatsdriftingbetweenplanes.Collisiondebriscanthreatenwholeconstellation.RussianandIridiumsatscollidedin2009creatingdebrisfieldthatcontinuestothreatenLEOs

NetworkSecurity:

Informationsecurity("IS")perUSbestpractices.Networksecurityisrobustbydesignwithonlyonesatelliteandaclosednetworkarchitectureof3to4gateways

ISwithOneWebsystemwillbesubjecttolargenumberofforeignentities,manyindevelopingworld.Networksecurityuncertainwithgatewaysmanagedbyforeigngovernments/operators.Cyber-threatsignificant


AccesstoRadioFrequencySpectrum:

AuroraIVhasalloftheradiofrequency(“RF”)spectrumneededtomeetitsprojectedbroadbandcapacityandservicerequirements.ItsITUfilingsfortheAuroraIVsystemincludethefollowingKa-bandfrequencies:17.7–19.3GHz,and19.7–20.2GHz(Forwardlinksforusersandgateway),and27.5–29.1GHz,and29.5–30.0GHz(Returnlinksforusersandgateways),foratotalof4.2GHzineachdirection.30OneWebplanstouseapproximately3GHzofKu-bandRFspectrumforuserlinks(10.7-12.75GHzSpacetoEarth;14.0-14.5GHzEarthtoSpace)and4GHzofKa-bandRFspectrum(primarilyforfeederlinks-17.8-20.2SpacetoEarth;27.5-30GHzEarthtoSpace).Inordertousethesefrequencies,itmustavoidcausinginterferencewiththeoperationofexistingandplannedGSOsatellites,inaccordancewithequivalentpowerfluxdensitylimitsarticulatedinArticle22oftheITU Radio Regulations, and must adhere to spectrum sharing requirements with other LEOsystems.31UserTerminalAvailabilityandCost:Thereisnotechnical,costoravailabilityriskassociatedwiththeuserterminalsfortheAuroraIVsystem.Thesystemwilluseconsumer-gradeuserterminals,suchastheViaSatSurfbeam2andHughesHT2000W,bothofwhicharereadilyavailableinlargequantitiesandlowprice-pointstodistributorsforsaletoendusers.Instarkcontrast,thetechnologyrequiredforOneWeb’splannedconsumer-gradeuserterminalswithelectronicallysteeredantennasisnotyetavailable. Consequently,OneWebhasrecentlyannouncedthatitwillusemechanicallysteeredantennasforitsfirst-generationuserterminals.According to the Intelsat Confidential Offering Memorandum (published on the Internet),OneWebhasnoplanstomanufactureorcontractfortheuserterminals.32Rather,itintendstorely on Original Equipment Manufacturers (“OEMs”) for user terminal development andproductiononitsbehalf.IftheseOEMsdonotadequatelyprovideforthetechnicaldevelopmentandmassprocurementofuserterminals,thesupplyofuserterminalscouldbelimited,andthecost of user terminals could be substantially higher than currently anticipated. This couldsignificantlyaffectOneWeb'srevenuemodel,whichcouldhaveamaterialandadverseimpactonitsstrategiesandbusinessprospects.MarketAccess:FortheAuroraIVsystem,therearenomaterialissuesorimpedimentstosecuringthenecessarylicenses for provision of GEO HTS broadband services and sales of associated user terminalequipmentinAlaska.33FCCandITUregulatoryauthorizationprocessesarewellunderstood.PDIwillneedtocompletetheITUcoordinationofitsorbitalslot/Ka-bandfrequencies,andsecureFCCauthorizationtoprovidebroadbandservicesinAlaska.


In thecaseofOneWeb, itwill requiremultiple typesof regulatoryauthorizations fromeverycountryintheworldinwhichitplanstoofferservices;i.e.,landingrights(notallcountriesrequirelanding rights), licenses to provide satellite broadband services including transmission to thesatellite,tointerconnecttotheInternetbackbone,toselluserterminals,etc.Manycountrieshavestructuralissuesthatcanslowandlimitpenetrationinthisregard.34Forexample,InmarsatstartedseekingnationalregulatoryauthorizationsanddistributionpartnersforitsGlobalXpresssatellitesystemmorethan7yearsago,anditstilldoesnothaveapprovalsandpartnersincertainkeycountries.35 Iridium,Globalstar,Orbcommandmost recentlyO3BareexamplesofNon-GeostationarySatelliteOrbit(“NGSO”)systemsthathavetakenthebetterpartofadecadetosecure key regulatory authorizations for market access around the world, and still haven’treceivedauthorizationsorfoundappropriatedistributionpartnersinsomecountries.Somecountries,suchasIndonesia(217millionpeople,4thlargest landmass,andtheworld's16th largest economy) and China (1.4 billion people, 3rd largest landmass, and 3rd largesteconomy)have,forvarioustechnical,economicand/orpoliticalreasons,alreadymovedtoblockOneWebfromobtainingmarketaccess.Similarly,theAustralianMilitaryhasvoicedobjectionstoOneWeb,andothercountries,suchasRussia,haveblockedcertainKu-bandfrequenciesfromOneWebusebecausetheyplantobuildtheirownNGSOconstellation.36TheoperationofeachofOneWeb's55to75regionalgatewayearthstationswillalsorequirelicensesorotherauthorizationsfromnationaland(insomecases)localgovernments.Thegrantofsuchlicensesorauthorizationswilllikelybesubjecttodifferentdecision-makingprocessesineachcountryorregionandmayleadtoadditionalregulatoryoversightincertaincountriesorregions. Gateways pose additional issueswith respect to the bypassing of national systemswithintheserviceareaofthegateway(revenueandsecurity).Further,OneWebwillrelyonthirdparties inmost cases to own and operate the regional gateways. If OneWeb can’t establishrelationshipswiththesethirdparties,orifthesethirdpartiesfailtoproperlyoperateand/ormaintainthegateways,OneWeb’scontroloveritssatellites,marketaccessandinterconnectionwiththeInternetcouldbediminishedanditsbusinessharmed.Distribution:TheAuroraIVdistributionplanisalreadyinplaceandverylowrisk.TherisksassociatedOneWeb’sdistributionstrategyareextremelyhigh.IfSoftbankisunabletosecuretheappropriatethird-partydistributors,oriftheyareunsuccessful,OneWeb’srevenuesand profitability could be adversely affected. Moreover, thewillingness of these entities toengage in OneWeb’s business also depends on a number of factors, includingwhether theyperceiveOneWeb’sservicestobecompatiblewiththeirbusinessobjectives,whetherthepricestheycanchargeend-userswillprovideanadequatereturn,andregulatoryconstraints, ifany.Since these resellers will "own the customers" in most markets, OneWeb will be totallydependentuponthemwithrespecttocustomercare,pricing,billing,andothercriticalaspectsofserviceprovisionandrevenuegeneration.


Competition:TherearecurrentlynonewGEOHTSsystemswithannouncedplanstocoverAlaska.SeveralLEOsystemshaveannouncedintent,butonlyOneWebandtheO3Bnextgenerationsystem,mPower,have announced implementation plans. Noteworthy in this regard is that the O3BmPowersystem,withanadvancedHTSpayloadproducedbyBoeing,isanequatorialsysteminMediumEarthOrbit (“MEO”),andonlycoversgeographicareasbetween50degreesNorthandSouthlatitude.ItdoesnotcoverAlaska.OneWebfacessignificantglobalcompetitionforHTSsatellitebroadbandservicesfromexistingGEOsatelliteprovidersincludingViaSat(withitsViaSat1and2satellitesalreadyoperationalandthreeViaSat3satellitesscheduledforglobaldeploymentbeginningin2020)37,HughesJupitersatellites, Inmarsat (with its Inmarsat V satellites fully deployed and Inmarsat VI satellites indevelopment),Eutelsat,SES,Intelsatandothers,aswellastheO3B/mPowerMEOequatorialsystem,scheduledfordeployment(accordingtothemPowersatellitemanufacturer,Boeing)inthe2020timeframe38.Thesesystemsmayhavea significant impactonOneWeb'sability toobtain sufficientmarketshare to reacheconomicviabilityandsustainability. Collectively, theywillhave theability toprovidebetween10and15Tbpsofcapacity,mostofwhichwillbeconcentratedintheareasaroundtheworldwhereOneWebneedstoachievemostofitssubscribersandrevenues.ThemPowerMEOsysteminparticular,withitslow-latencycapabilities,posesasignificantthreattoOneWeb,sinceitisanextensionoftheexistingO3Bconstellationwhichisalreadyoperationalandalreadyhasitsfinancing,regulatoryauthorizationsanddistributionpartnersinkeycountriesinplace.LaunchRisk:AuroraIVwilllaunchitssatelliteoneitheraSpaceXFalcon9oranArianespaceVlaunchvehicle.BothvehicleshavesuccessfultrackrecordsoflaunchingcommercialGEOsatellitesintospace.TheArianeVlaunchvehiclehashadmorethan80consecutivesuccessfulmissionssince2003.39TheFalcon9launchvehiclehashad41successfulmissionssinceitsinception7yearsago,withonefailure,fora97.6%successrate.40Intheunlikelyeventofalaunchfailure,AuroraIVwouldbefullyinsured.Theinsuranceratetofullyprotectagainstanyfailureresultingfromthelaunchorsatelliteanomalyduringthefirstyearonorbitcurrentlyrangesfrom3%to4%ofthetotalsuminsured(i.e.,replacementcostforthesatellite,launchserviceandinsurance).41OneWebisrelyingon20+ launchesoftheArianespaceSoyuzb2 launchvehicletodeploytheentireconstellationofOneWebsatellitesoveraperiodoftwotothreeyears.Thelikelihoodofoneormorelaunchfailures inthismanylaunches, likely interspersedwithlaunchesforothercustomersusingthesamevehicletype,isgreaterthan70%.42VirginGalacticandBlueOriginarestillintheexperimentalstagesofdevelopment,andtodatehavenotsuccessfullylaunchedanysatellites,sothereisnooperatinghistoryuponwhichtoevaluatetheirabilitytosupportOneWeb


launches.Anylaunchdelays,failuresorunderperformancebytheselaunchservicescouldhaveamajorimpactontheimplementationschedule,andhencetheOneWebbusinessplan.43ScheduleRisk:ScheduleriskfortheAuroraIVGEOHTSsatellitesystemisminimal.TheAuroraIVsatelliteusesexisting technology and the satellite system construction and launch schedule is fairlypredictable;regulatoryrequirementsarerelativelysimple(LimitedtoanITUfilingfororbitalslotand FCC authorization for US market access); and the system has relatively small capitalacquisitionrequirements.Consumer-gradeUTequipmentforthissystemiswidelyavailableatcompetitivepricepoints.ThescheduleriskforOneWebisextreme.Thisisamega-projectcomposedofnumerous,large,interdependent,concurrent,developmentprograms(satellite,ground,launch,regulatory,userterminals, etc.). Substantial new technological developments are required. There are 194different countries that will require various types of authorizations for market access.Distributorsandresellersmustbeidentifiedandsecuredtoleadthepursuitofmarketaccessandthensubscriberacquisitionforeachofthesecountries.Appropriatethirdpartiesmustalsobeidentifiedandsecuredtofinance,ownandoperatatethe55to75regionalgateways.Thesystemwillrequirevastcapitalrequirements.44TherearemanyfundamentalfactorsthatcouldcausesignificantdelaysintheOneWebimplementationschedule.GatewayOperations:TheAuroraIVsystemwillnotrequiremorethan2to4gatewaysfortheentiresystem.Whilethegatewayvendorhasnotyetbeenselected,theprospectivevendorsareViaSatandHughes.Thegatewaytechnologyforeachoftheseiswelldeveloped,andtheperformanceandcostsarewellknown.OneWeb’s gateways are quite complex, with at least 10 satellite tracking antennas andassociatedequipmentforsignalhandoffsateachgateway.ThefutureoperationsofOneWeb’ssatellite constellationwill rely on the functionality of these gateways,most ofwhichwill beownedandoperatedbythirdparties.Ifthesegatewaysarenotproperlyoperatedormaintained,theirperformancecouldbeaffected,therebyreducingtheiravailabilityandnegativelyimpactingtheperformanceofOneWeb’ssysteminthatregion.SystemCost:WithrespecttotheAuroraIVsystem,thereisverylittleriskthatthesystemcostwillincreasebeyondcurrentestimates. Thekey componentsof theAurora IV systemarewell known. Ifanything, the ultimate price may be significantly less than original estimates, as a result ofcompetitionamongthesatellitemanufacturersintheformalRequestforProposal(“RFP”),whichis scheduled to be issued in late October or early November, with vendor selection in earlyJanuary2018.


OneWeb'sestimatedCAPEXrequirementscanbeexpectedtoincreasematerially,basedonthefactthatitisadevelopmentalsystem,andhistoricalexperienceinthisregardwithotherNGSOsystems,includingIridiumandGlobalstar.45FundingStrategy:The Aurora systemwill be financed by a combination of private equity from established USsatelliteowner/operators;Alaskaninvestors,others),prepaidcapacitycommitments,anddebtfrom sources such as Export Credit Agencies, Alaska-based lenders andother sources. Totalequity investment,whichcanbeoffseteven furtherbyupfrontpayments forbulkwholesalecapacity,islessthan$40millionUSD.OneWeb’s funding strategy is amixof private equity, takeorpay capacity contracts, vendorfinancingandExportCreditAgencyfinancing.Asof24March2017,OneWebhadsuccessfullyraised$1.165billionUSDalongwithapproximately$645millionUSDincommitmentscontingentupon OneWeb obtaining loans from ECAs, ECA guaranteed lenders, development finance orothermultilateralinstitutions.OneWebhasalsosecureda$4billionUSD“takeorpay”capacityagreement with Softbank, with options for an additional Take or Pay contract if OneWebproceedswithitssecond-generationsystem.OneWebiscurrentlyseeking,buthasnotclosedon,approximately$3.5billionUSDinloansfromECAs.46SubstantiallyallofOneWeb’srevenuesinthenearfutureareexpectedtoarisefromtheSoftBankCapacity Purchase Agreement. This Agreement, which is subject to OneWeb achieving andmaintainingcertainservicestagestandards,meetingcustomaryindustryservicelevelsandforcemajeureevents,requiresSoftbanktomakeminimumpaymentstotaling$4billionUSDinrespectofGenerationICapacityand,ifSoftBankexercisesitsrighttopurchaseGenerationIICapacity,$6.5billionUSDinrespectofsuchGenerationIICapacity.Additionally,theAgreementrequiresSoftbanktopayOneWebasubstantialpercentageoftherevenuesgeneratedfromthesaleofOneWebcapacitybySoftbankanditsresellers.47WereSoftbanktobeunableforanyreasontocontinuewith its capacitypurchaseor distributorobligations, it couldhave amajornegativeimpactonOneWeb’sbusinessandprospects.InternationalBusinessRisk:SincetheAuroraIVsystemisdedicatedtoAlaska,thereisnointernationalbusinessrisk.MostofOneWeb'scoverageareaisoutsidetheUnitedStates.Itsinternationaloperationsinvolvevaryingdegreesofriskanduncertainties.Suchrisksincludetariffs,taxes,governmentsanctionsandregulatoryactions,tradebarriersthatmaybe imposedon itsservices,orbypoliticalandeconomic instability,aswellasactsof terrorismorwar, in thecountrieswhereOneWebwillprovideservices.AsignificantportionofOneWeb’srevenuesandtherevenuesofitsdistributorsand sub-distributorswill need to come from sales in developing countries, where such risksdescribed above, and economic, political or diplomatic conditions in particular, may be


significantly greater than would be the case in the United States and other industrializedcountries. Any such disruptions or the threat of disruptions could result in financial harm toOneWebandnegativelyaffectitsoperationsandeconomicviability.48CollisionwithSpaceDebris:TherisktoAuroraIVofacollisionwithspacedebrisingeostationaryorbitisminimal.Therehasneverbeena reported lossofageostationarysatellitedue tocollisionwithanothersatellite.According toa studyconductedbyLincolnLabs, theprobabilityof suchanevent is less than0.0041.49However,therehasbeenatleastoneincidentinwhichaGEOsatelliteisthoughttohavebeenstruckbyspacedebris.50CollisionswithspacedebrisorotherspacecraftcouldmateriallyaffectsystemperformanceandOneWeb’sbusiness.OneWeb’ssatellitesoperateatLEOaltitudes,inaregimepopulatedbyotheroperationalsatellites,defunctsatellitesandothercatalogeddebris,anddebristhatistoosmalltobetracked.OneWeb’ssatelliteswillgenerallybeabletomaneuveraroundobjectsandreactto warnings received from government authorities (JSPOC) to avoid space debris or othersatellites, provided thatOneWeb receives accuratedata and sufficient advancednotice. TwomajoreventsinrecentyearshavesignificantlyincreasedtheLEOdebrispopulation:adeliberateChineseanti-satellite test in2007andanaccidentalcollision in2009betweenanoperationalIridiumsatelliteandanon-operationalRussiansatellite.51Theriskofcollision is significantlygreater inLEOthanGEO,especiallywith intersectingpolarorbits, and hundreds of satellites performing autonomous orbit raising and drifting betweenplanes. 680operational satellites requiremore than1,000 launchedover first five years. Acollisioncanthreatenthewholeconstellationduetoresultingdebrisscatteringabouttheorbit.52The Russian Kosmos-2251 satellite collided with an operational satellite from the Iridiumconstellation(only66satellites)onFebruary10,2009generatingasubstantialdebrisfieldwhichcontinuestothreatenotherobjectsinLEO.NetworkSecurity:TherisktoAuroraIVsystemnetworksecurityisverymanageablewithonlyonesatelliteandaclosedsystemof2to4gateways.OneWebreliesonnetworkandinformationsystemsandothertechnologiesandadisruption,cyber-attack, failureordestructionofsuchnetworks,systemsor technologiesmaydisrupt itsbusiness,which couldhave amaterial adverse effect on its financial condition. The capacity,reliability and security of OneWeb’s information technology hardware and softwareinfrastructureareimportanttotheoperationofitsbusiness,whichwouldsufferintheeventofsystem disruptions or failures, such as computer hackings, cyber-attacks or other or othermalicious activities. Such activities have significantly increased in recent years. OneWeb’snetworks,systemsandtechnologiesmayalsobevulnerabletosuchmaliciousactivities,andthus


couldbeexposedtosignificantcosts,interruptions,delaysormalfunctionsinitsoperations,anyofwhichcouldhaveamaterialadverseeffectonitsbusinessandprospects.53

ConclusionAresilientsatellitecomponentasacomplementtotheAlaskanterrestrialbroadbandnetworknecessitatesaHTSGEOelement.AlaskawillbenefitfromalocalsolutionsuchastheplannedAuroraIVHTSGEOsystem,thatistailoredspecificallytotheneedsofAlaskawherecapacityisconcentratedexactlywhere it is demanded. If a LEO system is also available, it canprovideservicesandapplicationsthatwillcomplementthoseprovidedbyAuroraIV.Conversely,itwouldbeamistaketorelyexclusivelyonaLEOsystemtomeetAlaska’ssatellitebroadbandneeds.LargeLEOconstellationsthesizeofOneWebhaveneverbeenattempted.InadditiontomanybillionsofUSDofcapitalinvestment,theestablishmentfromagreenfieldofaglobalvaluechain,andgloballyfavorableregulatoryregimes,theyrequirenotjustinnovation,butinventiontoimplement.Evenifalloftheseobstaclesareovercome,theystillrepresentamissionaryenterpriseofferingbroadband service to largelyundeveloped countries. Manyofthesecountrieslackeventhemostbasicinfrastructure,suchaspower,toenabletheuseofaLEObroadbandservice.Andwhiledemandforbroadbandservicesispresentineverycountry,theabilitytopayforitinmanyisanotherquestion.JustaswiththeLEOnarrowbandsystemsofthe1990’s,successoftheseenterprisesisfarfromassured.SolerelianceofAlaskaonsuchasystemcouldleaveAlaskaanother10yearsbehindthedigitaldivide.Theeconomicdownsidecouldbeprofound.Alaskaneedstheabilitytocontrolitsownfateandtoberesponsibleforitsownwell-being.Itwouldbeamistaketorelyexclusivelyonexternalsourcesoverwhichithasnocontrol.Alaska’spopulationof740,000represents1/100thofone-percentoftheglobalpopulation,andlikewise,Alaska represents a very small percentage of the revenues that a global LEO system mustgenerate in order to achieve economic viability. In such a context, can Alaskans exert thenecessary influence on a globally deployed broadband network to assure their needs areadequately served? Should theglobal LEOnetworkbediminishedor cease toexist,withoutAlaskahavinganylocalalternativeonwhichitcouldcontinuetofunctionandsustainitself, itwouldbeahugesetbackanddetriment.ContactInformation:Forfurtherinformation,pleasevisitourwebsiteatwww.spacepi.com.

1CiscoVNI:ForecastandMethodology,2014-2019;CiscoVNI:GlobalMobileDataTrafficForecastUpdate,2015-2020;RKFEngineeringandTMFAssociates.2NoteonSocio-EconomicBenefitsofHighSpeedBroadband,IvetteOomensandFilippoMunisteri,EUBroadbandVision,EuropeanCommission,2015;APolicymaker’sGuidetoRural


BroadbandInfrastructure,DougBrake,InternationalTechnologyandInnovationFoundation,April2017;TheImportanceofBroadbandforSocio-EconomicDevelopment:APerspectiveFromRuralAustralia,JulieFreemanetal.,AustralasianJournalofInformationSystems,2016;TheSocioeconomicImpactofBroadband,BroadbandCaribbeanForum,PortofSpain,Trinidad&Tobago,2016.3ABlueprintforAlaska’sBroadbandFuture,ReportfromtheAlaskaStatewideBroadbandTaskForce,October2014,http://www.alaska.edu/oit/bbtaskforce/docs/Statewide-Broadband-Task-Force-Report-FINAL.pdf;ConnectAmericaFund,WCDocketNo.10-90,UniversalServiceReform–MobilityFund,WTDocketNo.10-208,ConnectAmericaFund—AlaskaPlan,WCDocketNo.16-271.4Id.,ConnectAmericaFund,WCDocketNo.10-90,UniversalServiceReform–MobilityFund,WTDocketNo.10-208,ConnectAmericaFund—AlaskaPlan,WCDocketNo.16-271,DissentingStatementofCommissionerAjitPaiandStatementofCommissionerMichaelO’Rielly;AlaskaPlan:TailoredforaUniqueState,ChristineO’Connor,AlaskaTelephoneAssociation,14September2016,http://rca.alaska.gov/RCAWeb/Documents/Telecomm/2016-09-14%20Alaska%20Plan.pdf.5CommentsoftheSatelliteIndustryAssociationforNTIA’sBroadbandOpportunityCouncil,DocketNo.1540414365-5365-01,TomStroup,President,NTIA,12June2015,https://www.ntia.doc.gov/files/ntia/satellite_industry_association_boc.pdf.6See,NBNImplementationStudy,https://web.archive.org/web/20110220174537/http://data.dbcde.gov.au/nbn/NBN-Implementation-Study-complete-report.pdf;SatelliteBroadband,AGlobalComparison,AReportNBN,Australia,28April2016,https://www.nbnco.com.au/content/dam/nbnco2/documents/Satellite%20Broadband%20-%20A%20Global%20Comparison%20-%20FINAL.pdf.7Theframeworkforthistableandcontentsarederivedfromthefollowingarticle:LEOandGEOConstellations:7ElementstoConsiderBeforeJoiningtheDebate,ThierryGuillemin,ExecutiveVicePresident&ChiefTechnologyOfficer,Intelsat;IntelsatINSIDER,SecondQuarter2015;http://www.intelsat.com/newsletter/Intelsat-Insider/2nd_Quarter_2015/Article_1.html;ForalternativescenariosontheviabilityofLEOSystems,see,LEO-HTSConstellationsResurrected:WillTheyorWon’tThey?,JosedelRosario&PrashantButani,NorthernSkyResearch,13May2015.82016InternetPhenomena,LatinAmericaandNorthAmerica,SandvineIntelligentBroadbandNetworks;https://www.sandvine.com/downloads/general/global-internet-phenomena/2016/global-internet-phenomena-report-latin-america-and-north-america.pdf.9PDIMissionStatementforitsAuroraIVGEOHTSsatellitesystem.


10OneWebMissionStatement,OneWebwebsite:www.oneweb.net.11OneWebGlobalAccessPresentation,page4,TonyAzzarelli,VPRegulatoryandPolicy,OneWeb,atGlobalConferenceonSpaceandtheInformationSociety,8August2016,www.iafastro.org/wp-content/uploads/2016/05/Tony-Azzarelli-2016.05.30-OneWeb-GLIS.pdf.12Id.OneWebGlobalAccessPresentation,page12.13PDI’srequirementspecificationsandtherespondingproposalsfromtheprospectivevendorsisforatleast20Gbps.14SatelliteTechnologyTrends-AperspectivefromIntelsat,page8,GonzalodeDios,ITUInternationalSatelliteSymposium2017,29May2017,https://www.itu.int/en/ITU-R/space/workshops/2017-Bariloche/Presentations/11%20-%20Gonzalo%20de%20Dios%20-%20Intelsat.pdf.15AccordingtoNOAA,(theUSGovernment’sNationalOceanicandAtmosphericAdministration),“Theoceancoversmorethan70percentofthesurfaceofourplanet.”https://oceanservice.noaa.gov/facts/oceanwater.html.16RulesestablishedbytheInternationalTelecommunicationUnion(“ITU”)andUSFederalCommunicationsCommission(“FCC”)requireLEOsatelliteconstellationstoavoidcausingRFinterferencetoGEOcommunicationssatellitesoperatinginfrequencybandswhereGEOsatelliteshavepriority,see,www.spacenews.com/low-earth-orbit-constellations-could-pose-interference-risk-to-geo-satellites;andUpdatetoParts2and25ConcerningNon-Geostationary,Fixed-SatelliteServiceSystemsandRelatedMatters,F.C.C.ReportandOrderIBDocketNo.16-408(2017)http://transition.fcc.gov/Daily_Releases/Daily_Business/2017/db0927/FCC-17-122A1.pdf.17LEORoarorWhimper,LowEarthOrbitBroadbandConstellations,TechnicalandEconomicTruths,page13,ICG,25September2015,https://www.edocr.com/v/mb43yade/bobritain/LEO-Broadband-Constellations-Technical-and-Economi.18The2018listpriceforadedicatedFalcon9launchtoGeostationaryTransferOrbit(“GTO”)is$62millionUSD,accordingtotheSpaceXwebsite:http://www.spacex.com/about/capabilities.19OneWebPresentationtoFutureSatAfrica,page13,PatrickKariningufu,VPMiddleEastandAfrica,5October2015.20PDIplanstouseeitherViaSatorHughesforitsgatewaysandoverallsatellitebroadbandsolution.ThegatewayswillthereforebesimilartothoseusedontheViaSatand/orJupiterHTSsatellites.


21OneWebVGpresentationtoFutureSatAfrica,page6,PatrickKariningufu,VPMiddleEastandAfrica,October5,2016;OneWebGlobalAccessVGPresentation,TonyAzzarelli,VPRegulatoryandPolicy,TUSymposium,16June2016.22MicrocomisaDBAforSateoInc.23ConfirmationbyTomBrady,CTO,Microcom,ofpricingandinstallationtimefor0.74-meteruserterminal,includingantennamountandtransmitter/receiver,forAuroraIVGEOHTSsystem,12October2017.24TeleconferencewithNSR[staff]regardingtechnicalandeconomicaspectsofNGSOsystems,includingthestateoftechnologydevelopment,manufacturingandpricingforOneWebUTs;LEORoarorWhimper,LowEarthOrbitBroadbandConstellations,TechnicalandEconomicTruths,pages20-21,ICG,25September2015,https://www.edocr.com/v/mb43yade/bobritain/LEO-Broadband-Constellations-Technical-and-Economi.25ThebidproposalsbyallofthesatellitemanufacturerscontendingfortheAuroraIVsatellitecontract,includingOrbital/ATK,ThalesAleniaSpaceandMDA/SSLhavesatellitedesignlifetimesofatleast18years.Thisdesignlifetimeiscommonforcurrentgenerationsatellites,andsuchlifetimeiscommonlyexceededbypastGEOsatellitesandthosecurrentlyinoperation.26The$140millionUSDNotToExceedcostfortheAuroraIVsystemisbasedonformalresponsestoadetailedRequestforInformationissuedbyPDIinJune2017tomultiplesatellitevendors,combinedwithpublishedpricingforSpaceXFalcon9launchservices,andindicationsfromseveralmajorspaceinsurancebrokersthatthecurrentinsuranceratetocoverthelaunchoftheAuroraIVsystemplusoneyearonorbitisapproximatelythreepercentofthetotalsuminsured,orabout$4.2millionUSD.27ExcerptsfromConfidentialOfferingMemorandadated24March2017,page9.www.sec.gov/Archives/edgar/data/1525773/000119312517096107/d364392dex991.htm.28Id.,atpages25-27.29MicrocomBackgroundSummary,MicrocomWebsite,http://microcom.tv/.30See,PDIITUFilings,FCCOnlineTableofFrequencyAllocations,47C.F.R.§2.106RevisedonAugust25,2017,https://transition.fcc.gov/oet/spectrum/table/fcctable.pdf.31Id.,OneWebPresentationtoFutureSatAfrica,page9.32ExcerptsfromConfidentialOfferingMemorandadated24March2017,page9.www.sec.gov/Archives/edgar/data/1525773/000119312517096107/d364392dex991.htm.33PDIhasalreadyfiledwiththeITUforitsGeostationaryOrbitalSlotandassociatedradiofrequencies,andbasedonitsanalysisof3rdpartyfilingsforadjacentorbitalslots/frequencies,


isconfidentthattherearenoregulatoryimpedimentstoitsuseoftheentiresetoffrequenciesfromitsselectedorbitlocation.ItmustalsosecureauthorizationfromtheFCCtoprovidesatellitebroadbandservicestotheAlaskamarket.PDIisnotawareofanyissuesthatwouldcausetheFCCnottograntPDI’srequestinthisregard.See,FCC,47C.F.R.Parts0and25[FCC15–167andFCC16–58],ComprehensiveReviewofLicensingandOperatingRulesforSatelliteServices,FinalRule,C.F.R.Vol.81,No.160,Aug.18,2016,RulesandRegulations.34RegulationofGlobalBroadbandSatelliteCommunications,pages25-40,ITU,April2012,http://www.itu.int/ITU-D/treg/broadband/ITU-BB-Reports_RegulationBroadbandSatellite.pdf;InternationalTradeandMarketAccess,SatelliteIndustryAssociation,http://www.sia.org/international-trade-and-market-access/.35See,InmarsatGlobalXpressPartners,https://www.inmarsat.com/partners/.36ABSCEOTomChoi'sVision:UnbridledExuberanceandtheSatelliteIndustry'sUncertainFuture,Gottlieb'sSatelliteMobilityWorld,page14,VolumeII,No9Oct2017.37Dankberg:ViaSat3SatelliteWillHaveMoreCapacitythantheRestoftheWorldCombined,CalebHenry,February10,2016,http://www.satellitetoday.com/telecom/2016/02/10/dankberg-viasat-3-satellites-will-have-more-capacity-than-the-rest-of-the-world-combined/.38SESBuildinga10-TerabitO3b‘mPower’Constellation,CalebHenry,SpaceNews,September11,2017,http://spacenews.com/ses-building-a-10-terabit-o3b-mpower-constellation/.39See,Ariane5rockettallies80thstraightsuccesswithon-targetsatellitelaunch,SpaceflightNow,28June2017,https://spaceflightnow.com/2017/06/28/ariane-5-rocket-tallies-80th-straight-success-with-on-target-satellite-launch/;SeeAlso,EuropeanSpaceAgencyLaunchLog,http://www.esa.int/Our_Activities/Space_Transportation/Launch_vehicles/Ariane_5.40See,SpaceXMissions,http://www.spacex.com/missions.41DiscussionsatSatelliteBusinessWeek,ParisFrance,11-15September2017,withrepresentativesfromAonSpace,WillisTowersWatsonandMarsh,theworld’sleadingspaceinsurancebrokers.42Statisticalanalysisbasedon20launcheventsofthesamevehicletype,eachwith0.95probabilityofsuccess,toimplementtheinitialglobalconstellation.43ExcerptsfromConfidentialOfferingMemorandadated24March2017,page41.www.sec.gov/Archives/edgar/data/1525773/000119312517096107/d364392dex991.htm.44Id.,page22.


45LoralDeals,DilemmasDetailedinRetiredChief’sAutobiography,PeterdeSelding,SpaceNews,3March2014,http://spacenews.com/39701loral-deals-dilemmas-detailed-in-retired-chiefs-autobiography/.46Id.,DescriptionofOneWebCapacityPurchaseAgreementwithSoftbank,pages25to27.47Id.,pages25to27.48ExcerptsfromConfidentialOfferingMemorandadated24March201,page50.www.sec.gov/Archives/edgar/data/1525773/000119312517096107/d364392dex991.htm.49Probabilityofcollisioninthegeostationaryorbit,RaymondLeClair&RamaswanySridharan,ProceedingsoftheThirdEuropeanConferenceonSpaceDebris,19-21March2001.50“ExoAnalyticVideoShowsTelkom-1SatelliteEruptingDebris;”byCalebHenry,SpaceNews,August30,2017,http://spacenews.com/exoanalytic-video-shows-telkom-1-satellite-erupting-debris/51Booker,SullivanPressFCConSpaceDebris,October2,2017,https://www.booker.senate.gov/?p=press_release&id=668;U.S.SenatorsaskFCCtoLeadDebris-MitigationPolicyAheadofMega-Constellations’Arrival,PeterB.deSelding,3October2017,SpaceIntelReport,https://www.spaceintelreport.com/u-s-senators-ask-fcc-lead-debris-mitigation-policy-ahead-mega-constellations-arrival/.52Alargecollisioninalong-livedorbitcouldbeatriggerforacascading‘KesslerSyndrome’asthephenomenonhasbecomeknown.See,Update:High-RiskSatelliteConjunctionpasseswithoutIncident,Spaceflight101,SpaceNewsandBeyond,7January2017,http://spaceflight101.com/close-orbital-encounter-january-7-2017/.53ExcerptsfromConfidentialOfferingMemorandadated24March201,page54.www.sec.gov/Archives/edgar/data/1525773/000119312517096107/d364392dex991.htm.

SPI White Paper on GEOs and LEOs.Final.31.Oct.2017

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Transcript of SPI White Paper on GEOs and LEOs.Final.31.Oct.2017