Satellite Start Up LeoSat Secures Customer For High Speed Trading. Venture aims to transit data from New York to Tokyo within less than 130 milliseconds. By Robert Wall.
By ROBERT WALL
Sept. 6, 2016 3:03 a.m. ET
LONDON—Space startup LeoSat Enterprise LLP said it has secured its first customer for a proposed new satellite constellation promising high-speed traders and others a quicker way to complete transactions.
LeoSat is one of the latest ventures hoping to use satellites to provide high-speed connectivity to overcome perceived shortfalls in terrestrial infrastructure. The Washington, D.C.-based startup, which was founded in 2013, is in talks with investors to help get the constellation, which could encompass up to 108 satellites, off the ground.
New satellite ventures aren’t without risk. Facebook Inc.’s effort to provide internet connectivity from space suffered a major setback this month when the Falcon 9 rocket made by Space Exploration Technologies Corp exploded during a test days before launch. More than a decade ago, Iridium Communications Inc. spent $5 billion to create a network of 66 satellites before going bust. The company was bought out of bankruptcy and is poised to soon launch the first of a new generation of satellites.
LeoSat is betting about $3.5 billion that minute differences in the speed it takes light to transit through space compared to the time it takes the signal to travel through fiber-optic cables will help create a satellite services market that hasn’t existed before.
“For high-frequency and normal trading, nanoseconds count. We improve speed by milliseconds,” LeoSat Chief Executive Mark Rigolle said in an interview. LeoSat is promising its link will send data from New York to Tokyo within less than 130 milliseconds, almost half the 250 milliseconds it said it would take using current terrestrial fiber links.
LeoSat wouldn’t identify its first customer beyond saying it was a “globally operating financial trading company” with a global footprint.
For high-frequency traders, speed is critical. The rapid-fire investors make their fortunes by reacting more quickly to market-sensitive information and placing their bets before rivals can act.
“Speed is something that is crucial to them. Ten milliseconds these days would be considered a very long time,” said Richard Payne, professor of finance at the Cass Business School in London. The traders would seek faster access to emerging-market information, he said, then the ability to react more quickly than others.
LeoSat said it would transmit customer data to satellites using a radio link that provides high bandwidth. Once in space, the signal would be passed via a laser between satellites before being transmitted back to the ground. LeoSat’s spacecraft would be positioned in low-earth orbit, a lower altitude than typical for communications satellites. That saves time but requires more satellites to achieve global coverage.
Unlike many satellite-connectivity providers trying to tap consumer markets, LeoSat said it is focused on corporate customers willing to pay a premium for higher capacity, little time delay and higher security. Mr. Rigolle said data going through LeoSat will be encrypted to a high level and benefits from not having to pass through multiple service providers, as is often the case for terrestrial communications.
In addition to the financial services industry, LeoSat executives are betting the Pentagon may be interested in its encrypted bandwidth. Additionally, oil and gas companies may embrace the service, Mr. Rigolle said. LeoSat’s two founders, Cliff Anders and Phil Marlar, were executives at oil-field-services giant Schlumberger Ltd. More automated oil rigs heavily reliant on data will require higher bandwidth, LeoSat said. That is a market rivals such as Inmarsat PLC and ViaSat Inc. also are targeting.
LeoSat is in talks with seven potential strategic investors from the satellite-services sector to raise an initial $100 million to begin detailed design of its satellites, to be built by Thales Alenia Space. It also plans to place two demonstration satellites into space to help build customer confidence in its still-new laser-link technology.
LeoSat hopes to begin launching the first 84 satellites, including six in-orbit spares, in 2019, to begin offering service from 2020. The company hasn’t signed launch services deals, though Mr. Rigolle said it was considering using SpaceX Falcon 9 and at least one other rocket provider.
Mr. Rigolle made his remarks before the explosion that destroyed the SpaceX rocket.
Write to Robert Wall at firstname.lastname@example.org