The Battle of the Satellites: Amazon's Lawsuit against Blue Origin Sheds Light on the Complexities of Building a Satellite Network

A pension fund sues Amazon over its satellite launch deals, questioning the board's fiduciary duty and raising concerns about the choice of launch providers.

Building a network of thousands of communications satellites in low earth orbit was once deemed an insane idea. However, with the increasing demand for connectivity and advancements in technology, companies like SpaceX, OneWeb, and Amazon's Kuiper have taken on the challenge. While SpaceX's Starlink has already made significant progress, OneWeb faced bankruptcy but managed to reemerge, and Kuiper is preparing for launch. Amidst this competition, Amazon now faces a lawsuit from a pension fund over its choice of launch providers for Kuiper. Body:

The Lawsuit and Allegations against Amazon

A pension fund managing $425 million in investments has filed a lawsuit against Amazon, claiming that the board members overseeing the satellite launch deals failed in their fiduciary duty. The fund argues that the board did not consider hiring SpaceX, which could have been a more cost-effective option. Instead, contracts were approved with United Launch Alliance, Arianespace, and Blue Origin, with the latter being a related-party transaction due to its involvement in building rocket engines for ULA. The fund alleges that the approval process was rushed and lacked consultation with outside experts.

The Deadline and Pressure from the FCC

Amazon faces a tight deadline imposed by the Federal Communications Commission (FCC). The company needs to launch 1,618 Kuiper satellites by July 30, 2026. This deadline puts pressure on Amazon to test, manufacture, and launch its satellites within a limited timeframe. In comparison, SpaceX launched 1,145 Starlink satellites in just three years after its initial prototypes. Amazon's first prototypes are set to launch this fall, leaving a narrow window for the company to meet the FCC deadline.

The Legal Perspective and SpaceX's Capacity

While the lawsuit raises concerns about the choice of launch providers, US courts generally allow businesses to make their own decisions, even with related-party transactions. Amazon may argue that it rejected SpaceX due to competition concerns, as Starlink is Kuiper's biggest rival. However, it remains unclear if SpaceX has the capacity to launch all of Kuiper's satellites, even if Amazon were inclined to hire its competitor.

The Relationship Between Amazon and Blue Origin

The lawsuit highlights the complex relationship between Amazon and Blue Origin. While Amazon executives claim that the idea for the satellite network emerged organically, it is difficult to imagine that Jeff Bezos, the founder of both Amazon and Blue Origin, did not consider the potential role of his space company. The integration of Amazon's various businesses, including e-commerce and Amazon Web Services, with the satellite network further complicates the dynamics between the two entities.

The Importance of Vertical Integration in the Space Industry

SpaceX's success can be attributed, in part, to its vertical integration as a rocket company. By selling satellite launches and utilizing reusable rockets, SpaceX has been able to save millions of dollars compared to third-party launch providers. In contrast, Amazon's choice of more expensive launch vehicles for Kuiper may result in significantly higher costs. With each rocket potentially costing over $100 million, Amazon faces substantial expenses to get its satellite network off the ground.

The lawsuit filed against Amazon by a pension fund over its satellite launch deals brings attention to the complexities of building a satellite network. As the battle for dominance in the satellite industry continues, companies like SpaceX, OneWeb, and Amazon's Kuiper face challenges in meeting regulatory deadlines, choosing launch providers, and balancing the interests of related entities. The outcome of this lawsuit will shed light on the legal considerations surrounding such decisions and the implications for the future of satellite connectivity.