Alphabet, Google’s parent company, announced late last week that it would shut down Loon, a project that used helium balloons to beam internet access to remote areas from the stratosphere. Founded in 2011, Loon was one of the most hyped endeavors of X, Alphabet’s incubator for lofty “moonshot” technologies. But shaky finances—paired with a growing expectation within Alphabet that these moonshots actually figure out a way to make money—ultimately sank the venture. “While we’ve found a number of willing partners along the way,” wrote Loon’s chief executive Alastair Westgarth in a blog post announcing the closure. “We haven’t found a way to get the costs low enough to build a long-term, sustainable business.” Or, in deflating-balloon terms: pfffffffft.
Loon has boasted several high-profile successes over the past few years. In the wake of Hurricane Maria, which demolished Puerto Rico’s infrastructure in 2017, Loon worked with AT&T and T-Mobile to deliver basic internet service to 100,000 people in the territory. It was also able to conduct trials with its balloons in countries like Brazil, New Zealand, South Africa, and Sri Lanka. Just this past July, Loon launched its first commercial service for 4G LTE in Kenya, using about 35 balloons to cover a 50,000-square-kilometer area that included the capital city of Nairobi after striking a deal with the telecom provider Telkom Kenya. Given the inroads it was making, nonprofit organizations working to make internet access universal had big hopes for Loon. Robert Anderson, CEO of the nonprofit Telecom4Good, met with a Loon engineer in Senegal a few years ago and thought that the concept of delivering internet from the stratosphere would be helpful for reaching areas where it would be exorbitantly expensive to lay fiber-optic cables. “Let’s say you’re in the mountains or the eastern part of Kenya in a very rural area; how do you get internet to them?” Anderson told me. “You can take a balloon and give them internet in that area or even in refugee settlements that are between certain countries … in those places, to give individuals internet would be huge.” Loon’s balloons essentially functioned as floating cell towers that could provide mobile internet to LTE-enabled smartphones on the ground.
But all along, Loon’s path to profitability was uncertain. The Information reported in November that after becoming an independent Alphabet subsidiary in 2018, Loon had spent all the money it’d received from an external investor in 2019 and had been partly relying on Alphabet to keep it afloat since August. Loon had actively been seeking a second funding round before it pulled the plug. While for years Google was known for throwing fortunes at high-flying, dubiously monetizable projects like the Makani energy kites and the Foghorn sea water fuel, the company has reportedly become more abstemious under chief financial officer Ruth Porat. In Loon’s case, Alphabet’s allergy to the color red might be understandable: The project was burning an estimated $100 million per year.
Loon’s struggle to become financially sustainable was largely due to the higher-than-expected expenses required to operate the balloons, combined with the fact that customers in remote areas often can only afford internet service at a lower price. Each balloon cost tens of thousands of dollars and had to be replaced every five months. High costs are a constant challenge for nonprofit organizations and companies looking to expand internet access for remote populations; the considerable amount of investment often required to get infrastructure up and running in remote areas puts a strain on providers and customers. “We’re always very keen and open and eager to see new technologies coming into the space, especially if they can address the issue of affordability. That’s a big crisis for us,” said Onica Makwakwa, the Africa coordinator for the Alliance for Affordable Internet. Makwakwa noted that regulating internet access like a utility—and adjusting profitability expectations accordingly—would help initiatives like Loon to find better footing in the continent. “You need to increase the number of people who are using the internet for it to eventually get to that point of affordability,” she said. “I’m hoping that we move to a point where we begin to regulate access to the internet in quite the same way as we regulate electricity and water, so that we operate with the belief that everyone has to have access.”
Regulatory hurdles were also an issue for Loon. In Indonesia, rumors that the balloons contained cameras held up approval as authorities were spurred to inspect them for covert devices. Sri Lankan authorities ran into difficulties providing a radio frequency for Loon, as the United Nations was reportedly opposed to allowing the company to use the same frequency as the country’s public broadcasters. Jane Coffin, senior vice president at the Internet Society, noted, “Some people are risk-averse as far as trying out new things. There’s an old mindset about phones and how connectivity should work.” The coronavirus pandemic has made it even more difficult for companies to interface with regulators. “If you’re trying to do business, usually by going to some of the big international conferences you get all of the ministers and regulators in one place. It’s easier to get a sign off from folks and get their attention,” said Coffin.
In some areas where Loon tried to provide coverage, many people reportedly didn’t even have devices with which to connect to the internet. The 4G phones that Loon requires for internet connection are often too expensive for populations that don’t get service in the first place. Nongovernmental organizations have long struggled to make phones, computers, and other devices affordable for remote populations. Makwakwa notes that import duties are a major obstacle to affordability. Beyond simply lowering those duties, she calls for manufacturers to move some of their assembly operations to Africa. “One, it eliminates the whole issue of duty taxes. Two, it creates jobs in a continent where half the population is young people,” she said.
But there still may be hope for technology that can beam internet to remote areas from the sky. Some have speculated that Loon’s demise was in part due to the momentum behind Starlink, SpaceX’s own effort to launch thousands of satellites that would provide internet to areas that would otherwise be hard to reach. The company just launched 10 more Starlink satellites into space on Sunday.