NEW YORK (The Deal) -- Facebook's (FB - Get Report) reported $60 million purchase of Titan Aerospace is a minuscule investment for the social networking giant that could have profound repercussions for the commercial satellite and space industry.
Menlo Park, Calif.-based Facebook's planned purchase of Titan, which has been reported by various news sources but not yet confirmed by the company, would be part of the company's broader plan to bring Internet access to parts of the globe that lack connectivity. Moriarty, N.M.-based Titan makes solar-powered drones the company said should be able to go five years between landings.
TechCrunch reported Tuesday that Facebook would like to deploy as many as 11,000 drones hovering 12 miles over the Earth in support of Facebook CEO Mark Zuckerberg's previously announced internet.org initiative.
Providing data access where wires are scarce is now the domain of satellite operators, including publicly traded ViaSat (VSAT - Get Report), Globalstar and Iridium Communications (IRDM - Get Report), and expected expansion of those services is part of the growth story for satellite manufacturers including Boeing (BA), Lockheed Martin (LMT), Space Systems/Loral Inc. and Europe's Astrium.So far, there has been little evidence that the satellite firms have anything to worry about, and unmanned aerial systems, or UAS, Internet plans like Titan and Google's (GOOG - Get Report) "Project Loon" proposal to float balloons to connect have plenty of skeptics. But Frost & Sullivan aerospace and defense analyst Michael Blades noted that if Facebook believes in the technology, and is willing to put its cash stockpile behind Titan, it might be time for satellite firms to be concerned. "This could have a profound effect on both the UAS and satellite industries," Blades said. "If the atmospheric UAS concept can be realized, the market for these platforms will grow rapidly while the commercial communications satellite market will be significantly impacted." Facebook and other tech companies are dabbling with drones and other ideas because launching communications satellites is expensive: Blades said it can cost upward of $1 billion per satellite, including manufacturing and launch costs. If drones can do an adequate job at a fraction of the cost, the market for commercial communications satellites would shrink considerably. Given the combination of budget pressures and new competition on the government side of the business, there's ample reason for satellite firms not to "like" Facebook's latest move.