NEW YORK (TheStreet) - A plan that would have Google (GOOGL - Get Report ) become a major investor in Elon Musk's SpaceX to help fund and launch hundreds of satellites that would bring the Internet to every corner of the globe will not pose an immediate threat to land-based telecommunications companies.
The idea has Google investing $1 billion in SpaceX to provide satellite Internet service to areas not currently served. This would allow SpaceX to launch hundreds of small satellites into orbit at about 750 miles above the Earth.
The question is whether a space-based system designed to serve lower-income and rural customers is worth the return on investment and poses a threat to traditional Internet providers.
"Yes, the telcos should be concerned about this, but they have a few years to figure it out. Musk has said that rollout would take at least five years, " said Scott Strawn, IDC's research director.
But there is a long-term menace to the telcos.
"The people involved in this likely believe that Internet access is likely to substantially spur additional activity and Google and (FB ) want their piece of the action. That said, I imagine the intent is to build a global network which may replace the need for telcos in more advanced economies, as well, which will help them generate revenue to justify the expense. But it is better PR to talk about those countries that don't currently have access, " Strawn said.
Making such a system work financially is an issue, and that could reduce the threat to the established Internet delivery players.
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