AT&T and T-Mobile are in a heated race to space

AT&T and T-Mobile – two of the three big wireless network operators in the US – appear to be in an increasingly noisy proxy battle in the pursuit of coverage from space. The winner would potentially have a demonstrable competitive advantage: No more dead zones.

So far, it's not clear which company might emerge victorious. Each company's fortune is at the mercy of its respective satellite partner. For T-Mobile, that's Elon Musk's SpaceX. For AT&T, it's a startup called AST SpaceMobile.

The value of the phone-to-satellite market remains unclear. Apple just sidestepped plans to begin charging for its own emergency satellite messaging service by announcing that its Globalstar-powered offering will remain free for new iPhone customers to use for another year. Separately, Android smartphone makers like Honor, Motorola, Nothing, Oppo, Vivo and Xiaomi recently signaled disinterest in investing in a similar, proprietary version of the technology, thereby shattering Qualcomm's early phone-to-satellite partnership with Iridium.

Regardless, AT&T appears keen to prevent T-Mobile from getting any possible space-based advantage. Meanwhile, T-Mobile is undoubtedly hoping that its partner, SpaceX, will pull off yet another regulatory victory in the next few weeks.

At stake is a leadership position in a developing market. And bragging rights, of course.

Multiple paths to the cell

Apple emerged as a trailblazer for phone-to-satellite connections last year by investing roughly $500 million into Globalstar. That investment allows new iPhone users to send emergency text messages through Globalstar's satellites and spectrum. 

"This innovative technology – which enables users to text with emergency services while outside of cellular and Wi-Fi coverage – has already made a significant impact, contributing to many lives being saved," Apple wrote in a press release this week. "Apple today announced it is extending free access to Emergency SOS via satellite for an additional year for existing iPhone 14 users."

The announcement allows Apple to sidestep the thorny problem of charging for a service that was previously free – and also from setting a bar for the value of emergency, satellite-based messaging.

However, the direct-to-cell technologies pursued by AT&T and T-Mobile are different. They might support texting, calling and – possibly in the future – slow-speed data connections. And they would be available to any subscriber, not just those with new phones.

That's because SpaceX (T-Mobile's partner) and AST SpaceMobile (AT&T's partner) plan to conduct phone-to-satellite communications inside the spectrum already owned by their respective mobile partner.

There's just one catch: The two companies need to launch new satellites in order to get the service off the ground. And they need approval from regulators to offer the service commercially.

Launch costs and federal blessings

Getting cellular-capable satellites into orbit poses substantial challenges.

For example, SpaceX urges the FCC to approve its direct-to-cell application before the agency develops rules for supplemental coverage from space (SCS) technologies. "By swiftly processing pending supplemental coverage applications while it considers long-term rules, the commission will not only benefit millions of Americans, but through US leadership in authorizing supplemental coverage, also will help enable this transformative technology to bring connectivity to potentially billions of people in areas that lack terrestrial networks or have been impacted by natural disasters," SpaceX wrote to the FCC.

Along those lines, SpaceX's latest filing on the topic addresses a number of FCC questions about how its service might work. "SpaceX's direct-to-cell satellites will use directional, phased array antennas and efficient beam-planning software to prevent harmful interference to other in-band, out-of-band, and crossborder users," the company wrote. "SpaceX will also continue to coordinate proactively and in good faith with the National Science Foundation on radio astronomy matters to ensure that its direct-to-cell operations protect important science missions."

SpaceX recently received regulatory approval to launch its second massive Starship rocket. That launch vehicle is big enough for the second-generation satellites capable of broadcasting signals in T-Mobile's spectrum.

AST SpaceMobile, meanwhile, is hunting for the cash necessary to finance the construction and launch of its cellular-capable satellites. Negotiations with multiple strategic investors are ongoing, AST SpaceMobile CEO Abel Avellan said this week on the company's quarterly conference call.

As noted by SpaceNews, AST SpaceMobile has burned through hundreds of millions of dollars since going public in 2021. It had just $135.7 million left in cash as of September 30. (SpaceX, meanwhile, is considering an IPO for its Starlink business as early as next year, according to Bloomberg – though billionaire owner Elon Musk called that report false.)

Interestingly, SpaceNews also reported that AST SpaceMobile tweaked the orbital inclination of its planned satellite constellation to improve coverage for a potential, unnamed customer. B. Riley analyst Mike Crawford suggested that last-minute deployment change indicates AST SpaceMobile is close to signing a definitive commercial agreement with AT&T.

That wouldn't necessarily be a surprise, considering AST SpaceMobile was name-checked in AT&T's third-quarter earnings release.

Counting down the days

It's unclear exactly when SpaceX and AST SpaceMobile might be able to start offering commercial direct-to-cell services in the US.

For AST SpaceMobile, officials said the company remains on track to launch its first five commercial satellites – atop SpaceX rockets – in the first quarter of next year.

That would allow the company to begin offering services worldwide – AST SpaceMobile boasts of agreements with 40 operators globally, including Vodafone, Rakuten, Bell Canada, Telefónica and others.

However, it's unclear when the company might begin offering commercial services in the US through AT&T, considering such a service would require regulatory approvals from the FCC. The agency continues to work on its SCS rules. AT&T has argued that AST SpaceMobile and SpaceX should wait for those rules to be released before offering services.

AT&T has not said how it might profit from phone-to-satellite connections, but company officials have suggested the service might be initially appropriate for AT&T's FirstNet public safety service.

SpaceX is in a similar situation. It's asking the FCC for "Special Temporary Authority" starting in December to launch and test the company's direct-to-cell services via SpaceX's second-generation satellites. That approval would, presumably, allow SpaceX and T-Mobile to stick to their initial timeline of testing the technology in 2023.

SpaceX, for its part, has promised commercial texting services in 2024, though the company did not say where it might offer those services. Besides T-Mobile in the US, other SpaceX mobile network partners include Optus in Australia, Rogers in Canada and KDDI in Japan.

Verizon, the other big nationwide wireless operator in the US, has yet to articulate a clear plan for direct-to-cell services.