SpaceX and Xplore are competing for Ontario’s rural internet customers

The new space race is turning into a David versus Goliath battle in Ontario.

What happened: The Government of Ontario issued a request for proposals for a company to provide high-speed internet to rural areas using satellites. Two companies were pre-qualified to submit: SpaceX and New Brunswick-based rural internet provider Xplore.

  • First announced last year, the project will reach 43,000 homes and businesses in parts of the province that can’t access high-speed internet. It’s part of a larger $4 billion government effort to connect every community in Ontario by the end of 2025.

Why it matters: A government contract could have big implications for both companies: SpaceX would get a foothold in Canada for its burgeoning telecommunications business, while Xplore would get access to a major market without fighting its larger competition.

  • It may not have as much experience working in space, but Xplore does have an advantage as Canada’s largest provider of rural internet.
  • Xplore also has a satellite ready to go: Hughes’ Jupiter 3, which became the largest commercial communications satellite launched into space last summer.

Zoom out: Companies in the space industry see providing satellite phone and internet service for underserved communities as a major revenue source.

  • That’s a business where Canada would be a major prize, since it’s difficult and costly to bring wire-based services to rural and Indigenous communities spread out across the country’s vast geography.

Catch-up: This week, SpaceX launched its first Starlink satellites for satellite cellular service, with Rogers as its telecom partner in Canada.

  • Amazon has also been laying the groundwork for a Canadian launch of Project Kuiper, its own satellite internet service.

Yes, but: Xplore is hurting financially. Bloomberg reported this week that the company is planning a drop-down deal, which reorganizes a company’s assets into new legal entities that it can then borrow against. Xplore will reportedly seek US$400 million from Stonepeak Partners, the private equity firm that bought the company in 2020.