The Demise of Loon

February 2021

Disruptive technologies have been reshaping the face of infrastructure as never before.  From wind turbines, to solar cells, smart meters, distributed generation, and now battery storage, new technologies have almost completely displaced traditional fossil-fuel sources in electricity supply.  Electric vehicles, automation, and mass-data-enabled business models like Uber and Lyft are similarly turning transportation infrastructure upside down – with Tesla now worth far more than General Motors. Hardly anyone remembers rotary phones, let alone land lines.  Yet not all promising technology breakthroughs survive to become the “next normal,” even with the deepest pockets behind them.

Meet Loon.

It was only a year ago that Loon balloons were being touted as the next big thing in telecommunications, especially in remote or disaster-hit areas.  Owned by no less than Google itself (through Google’s parent company, Alphabet), Loon’s high-flying balloons were, well, high fliers.  Enabled by artificial intelligence, Loon’s helium-filled polyethylene balloons were able to hover in one place for extended periods, serving as air-borne cellular towers in areas where such towers either didn’t exist or had been knocked out.  AI helped predict wind speed and direction at various heights, then use that information to raise and lower the balloon accordingly.  Loon’s balloons work by beaming Internet connectivity from ground stations to a balloon 20 kilometers overhead. The signal is then sent across multiple balloons, creating a network of floating cell sites that deliver connectivity directly to a user’s phone or computer router.

A Loon Balloon in action

Each Internet-enabled balloon covers a large area—roughly 30 times greater than a ground-based system—Loon can provide service to traditionally hard-to-reach or underserved regions.  Loon’s earliest markets were, not surprisingly, exactly these kinds of places: outlying areas of Brazil, Indonesia, New Zealand, Peru, Puerto Rico, and Sri Lanka, and disaster zones.  The first big commercial contract came in Kenya, where a 2018 agreement with Telkom Kenya to support internet access for the 70% of Kenyans who did not have it was followed by emergency grants of balloons to help the Kenyan government deliver health care messaging during the early months of the COVID pandemic.  For Google, all this was great public relations, as well as part of a strategic approach to diversify into other cutting-edge technologies.  The company touted Loon’s ability to bring the internet to the “bottom of the pyramid,” or “the bottom billion.”  A $125 million investment from partner Softbank in 2019 made the future seem promising.

Then in late January, 2021, came the news from Google headquarters: it was pulling the plug on Loon.  In a blog post, Google said “the road to commercial viability has proven much longer and riskier than hoped. So we’ve made the difficult decision to close down Loon.”  For all its promise and disruptive technology, Loon ran out of money. 

What happened?  A mix of good and bad news.  On the positive side, Loon’s technology worked.  The underserved and disaster-hit were able to get cellular and internet service.  At the same time, on the positive side for the under-served “bottom of the pyramid,” but bad news for Loon, other existing technologies were at work narrowing the innovation’s market window.  When Loon was started a decade ago, the share of the world’s population without internet availability was 25% — nearly 2 billion people.  Today it is about 7%, a bit more than half a billion, only a quarter of the market opportunity it was before.  The bad news for Loon is that is that its model is more expensive than more traditional existing technologies, and that the remaining population without service is the most expensive to reach, and the least likely to be able to afford the prices that would keep Loon airborne – not to mention the problem of administering payment of bills.  Potential commercial success had gone from “around the bend” to out of sight.

Google and Alphabet will go on.  New technologies will continue to appear.  But as always, spreading the benefits to the least well-off is the hardest part.  For now, the remaining poor unserved will continue to fall behind the rest of the world.  Yet Loon’s failure is a failure to be applauded.  Perhaps a foundation will partner with international funding agencies to continue stationing floating cellular towers to reach the poor – on a fully subsidized basis – if connectivity is deemed an important enough developmental goal.  A lot of rooftop solar has been built this way in low-income countries, and product development costs – possibly as much as half a billion dollars – have already been absorbed by one of the few companies which could afford it.  Time will tell.

And in the meantime, this tale illustrates that technological disruption in infrastructure continues to broaden – and that the early winners become the likeliest to have the money to kickstart more innovation.  Loon’s balloons may or may not live another life; that there will be more tales such as Loon’s is certain.

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