Sky's the Limit: Web Giants Battle for Air Superiority

The battle for domination is being fought in space, but the market is firmly anchored on earth.

Since the first days of the internet, the largest technology companies have embraced as a operating proposition the notion that one of their primary competitive advantages the elimination of 'friction,' the economic drag caused by inefficiencies like poor infrastructure, government regulation and, if we are being totally honest, people like employees and customers. It would all work so much more smoothly if they could just eliminate all those whiners and complainers with their incessant demands.

One of the obstacles to further growth of internet services on this planet is the uncertain quality of access to the internet. Telephone and electricity providers are often owned all or partly by their host governments. Provision of world-class service is often secondary to national and/or personal objectives.With all those graspy people in the way, it's tough to improve service - and to rake in more revenue.

So, the big providers are suddenly embracing a strategy that the US military refers to as full-spectrum dominance. These enterprises want to own the means of production and transmission, to say nothing of financing, content provision and so forth. One way of doing that is by creating their own infrastructure, but one that is untethered to earthly demands and rules. So they are buying aerospace companies to see if they can gird the world with a network of technology providers not dependent on telephone wires, cellphone towers or the people who regulate them.

Whether the technology will prove out is one question. Whether earthbound authorities will be willing to surrender their prerogatives is definitely another. JL

Alistair Barr and Reed Albergotti report in the Wall Street Journal:

The potential for Internet service delivered from high-altitude drones or balloons is presumed to be large. "They could build proprietary networks offering Internet and wireless bandwidth that are worth billions of dollars,"

Google Inc.  FB in Your Value Your Change Short position had also considered acquiring—as the technology giants battle to extend their influence and find new users in the far corners of the earth.

Google didn't disclose the purchase price for New Mexico-based Titan Aerospace, which is developing jet-sized drones that are intended to fly nonstop for years. Google said the technology could be used to collect images and offer online access to remote areas.

Facebook had been in talks to buy Titan earlier this year, but Google offered to top any Facebook offer, according to a person familiar with the matter. Facebook later agreed to pay $20 million for Ascenta, a U.K.-based aerospace company that also has been working on solar-powered unmanned aerial vehicles.

The drone makers are on the leading edge of a promising but largely unproven technology to beam Internet access to parts of the world not served by telephone wires or cellphone towers. However, industry observers say there are still technical challenges to overcome. Even Amazon.com Inc., AMZN in Your Value Your Change Short position which is developing less sophisticated aerial vehicles for short-hop deliveries, says its drones remain four or five years in the future before regular use.

Titan and its roughly 20 employees would stay in New Mexico and the company would continue to be run by Chief Executive Vern Raburn, a technology-industry veteran who previously headed Symantec Corp. SYMC in Your Value Your Change Short position and Microsoft Corp.'s  MSFT in Your Value Your Change Short position consumer-products division.

Founded in 2012, the Moriarty, N.M., aerospace company confirmed its sale to Google on its website on Monday, and referred further media inquiries to Google's press office. Google said Titan would work closely with its Project Loon, which is building large, high-altitude balloons that send Internet signals to areas of the world that are currently not online. Titan also may work with Makani, another early-stage Google project that is developing an airborne wind turbine that it hopes will generate electricity efficiently.

One reason Facebook and Google are veering toward solar-powered aircraft is that balloons are at the mercy of weather, said Kurt Barnhart, director of the Applied Aviation Research Center at Kansas State University. Balloons "are larger and harder to control," he said, while solar power is a better choice for unmanned aircraft than batteries, which can only keep aircraft afloat for an hour or two. Fossil fuels are more expensive and would require regular refueling.

Areas of focus for Google's teams include advanced material design for lightweight flying vehicles and algorithms for wind prediction and flight planning, Google said.

Titan has said its drones could collect real-time, high-resolution images of the earth, carry other atmospheric sensors and support voice and data services. That type of technology could help Google businesses, such as its Maps division.

"It is still early days, but atmospheric satellites could help bring Internet access to millions of people, and help solve other problems, including disaster relief and environmental damage like deforestation," a Google spokesman said in a statement.

Titan is developing two dragonfly-shaped drones powered by batteries charged by wing-mounted solar panels to remain aloft at night. The smaller model, the Solara 50, has a 164-foot wingspan, larger than a Boeing Co.  BA in Your Value Your Change Short position 767 jetliner.

Titan claims that its drones can help deliver data at speeds of up to one gigabit a second using special communications equipment. That would be significantly faster than broadband speeds available in most developed countries.

The company has said it expects "initial commercial operations" in 2015. However, experts say there are many technical challenges to overcome before such services become a reality.

"The problem with solar planes is that they are limited to smaller payloads, at night you are not collecting energy from the sun and it takes a lot of power to broadcast Internet signals," said Patrick Egan, a drone expert and an editor of sUAS News, a website covering the unmanned aircraft industry.

Facebook began reviewing solar-powered drones about six months ago, according a person briefed on the company's "connectivity lab," a group focused on finding new ways to provide Internet services to places that are not online.

This person said Facebook's acquisition talks with Titan lasted weeks. After the talks were disclosed, Titan was approached by Google, which said it could beat whatever price Facebook was offering. The talks broke down and Facebook set its sights on other companies, the person added.

Google declined to comment on details of its Titan talks.

As part of its work on a possible deal, Facebook had tested Titan's technology, and researchers at the startup were able to get a solar-powered aircraft 400 feet off the ground for a few minutes. Members of Ascenta worked on another solar-powered drone, called Zephyr, that stayed in the air for two weeks above the Arizona desert in 2010.

Despite such problems, the potential for Internet service delivered from high-altitude drones or balloons is presumed to be large, suggesting a reason for Google and Facebook to pursue the technology.

"If they can get past the technical challenge, they could build proprietary networks offering Internet and wireless bandwidth that are worth billions and billions of dollars," Mr. Egan said.

Facebook and Google potentially could reach millions of new customers for their services as more of the world gets online, and the companies could also sell their bandwidth to other providers, he explained.

The biggest opportunity may be in the developing world, where Google and Facebook are battling to be the first point of contact. The search giant has its Android mobile operating system, which last year captured 79% world-wide market share of smartphones shipped, according to market researcher Strategy Analytics.

Facebook hopes to boost its user base in poorer countries with two projects.