Satellite versus towers: D2D satellite connectivity will reshape mobile network economics

Direct-to-device (D2D) satellite connectivity could make it more cost effective to serve some low-traffic areas from space rather than through terrestrial towers.

Terrestrial tower infrastructure will remain essential in high-demand locations, but D2D satellite connectivity is creating a credible alternative for rural and remote sites that carry relatively little traffic but remain expensive to operate. As satellite performance improves and system costs fall, operators may be able to maintain geographic coverage while reducing or avoiding selected terrestrial infrastructure costs. 

This report examines the conditions under which satellite connectivity becomes more cost effective than maintaining or building a terrestrial tower, which sites may be most exposed and how hybrid terrestrial–space networks could develop in the near future.

Strategy, network and M&A leaders at telecoms operators, tower companies and investors should consider the following three key findings.

• Identify where the economics cross over. At an illustrative D2D system cost of USD1 per GB, satellite connectivity could become more cost effective than maintaining an existing tower at around 10–20TB of annual traffic per site. At USD5 per GB, the threshold could fall to around 2–4TB.
• Assess the low-traffic end of the portfolio. After allowing for future traffic growth, our modelling indicates that around 2–15% of existing telecoms macro sites could warrant evaluation for D2D, although the share will vary by market, network and operator.
• Prepare for hybrid terrestrial–space networks. D2D is unlikely to replace dense urban infrastructure, but it could reshape rural coverage, new-build plans, upgrade priorities and the long-term value of selected tower assets. 

For an illustrative portfolio of 10 000 macro sites, selective substitution could produce annual savings of approximately USD2.5–15 million. Actual outcomes will depend on site costs, traffic, regulation, spectrum availability, service quality requirements and commercial models.

The report outlines how stakeholders can act now

Operators should model portfolio-level scenarios, identify candidate sites, develop trials and partnerships with D2D providers and engage regulators on licensing and spectrum policy. Tower companies and investors should assess where D2D could create risk or opportunity before it begins to influence network plans, asset values and long-term returns.

Acknowledgements 

This report benefited from the expertise and perspectives of Charles Murray, Lluc Palerm-Serra and Rupert Wood, whose input helped to shape the analysis, challenge assumptions and inform its overall direction. We are grateful for their contributions.

To explore the implications of D2D connectivity for network strategy, tower portfolios or investment decisions, connect with Antoine Grenier, Charles Murray, Lluc Palerm-Serra or Rupert Wood and continue the conversation.