Another space race is on.

On one side: Elon Musk, founder of SpaceX (and Tesla Motors), backed by Google. On the other: Musk's friend Greg Wyler, founder of OneWeb, backed by Virgin Galactic parent company The Virgin Group and its eccentric billionaire founder Richard Branson.

The prize: the chance to sell high-speed satellite internet connections to the billions of people throughout the world who don't yet have access—and in the process become a global telecommunications company to rival giants like Comcast and Verizon. And, in Musk's mind, the opportunity to sell internet access to Martian colonists, when the time comes.

Late last month, as first reported by DCInno, SpaceX filed an application with the Federal Communications Commission to begin testing such a system. Unfortunately, the idea of cheap, ubiquitous high-speed satellite Internet may be just as science fictional as Musks's dreams of planetary migration.

Sky-High Ambitions

Satellite internet has been around for years, but extreme latency—the gap in time between the satellite receiving a request and responding—is a problem, making it impractical for real-time or near real-time applications such as online games or teleconferencing tools like Skype. Both Musk and Wyler plan to eliminate that latency by placing their satellites in what's called low Earth orbit, which ranges from roughly 100 to 1,250 miles above Earth. By bringing their satellites closer to home than other satellites, SpaceX and OneWeb could cut latency from 500 milliseconds to 20 milliseconds, which is about what you'd expect from a fiber optic home internet connection in the US.

The catch is the signal from those satellites won't be able to cover as much of the planet as satellites in geosynchronous orbit some 22,000 miles up. That means the companies will have to launch far more satellites to make up for the difference. Wyler told Business Week earlier this year that OneWeb plans to build a network of around 700 satellites to blanket the earth. Musk, on the other hand, told the magazine SpaceX is planning a network of 4,000 or so.

That may sound ambitious, and it is. But humans have been sending satellites to space for decades. The real trouble with these plans is that they could be astronomically expensive.

The prize: the chance to sell high-speed satellite internet connections to the billions of people throughout the world who don’t yet have access.

Musk and Wyler are far from the first to propose low Earth orbit constellations as a way to provide high-speed internet. Several companies launched with that mission in the 1990s, the most famous of which was Teledesic, funded by Bill Gates, early cellular service entrepreneur Craig McCaw, and Saudi prince Alwaleed bin Talal. The much hyped company planned an 840-satellite constellation but was plagued with setbacks until it suspended operations in 2002 and relinquished its wireless spectrum rights to the FCC in 2003. The failure of Teledesic and its contemporaries has left many observers cynical about the prospects of the latest crop of would-be satellite providers.

"These large constellations are very inefficient," says Roger Rusch, a satellite communications industry analyst. He acknowledges that the small satellites SpaceX and OneWeb hope to use are less expensive today than they were in the 1990s, but says they're still too costly. "They're cheaper, but you need 4,000 of them, so they need to be 1,000 times cheaper," he says.

Facebook CEO Mark Zuckerberg mentioned the possibility of providing satellite internet service via the Internet.org initiative—a non-profit he co-founded to expand internet access throughout the world – is a blog post last year. But he's already shelved the idea due to its cost, according to The Information.

A Matter of Control

Controlling costs is especially important since SpaceX and OneWeb will be going after people in developing countries, not wealthy entrepreneurs and executives who want to check their email while vacationing in exotic locales. That means everything from the subscription cost to the satellite dishes must be cheap. Plus, Rusch says, both fiber optic internet connections and wireless mobile data plans are spreading rapidly throughout the world. It could end up being far cheaper to connect these billions of unserved people with an old-fashioned wire.

Even if SpaceX and OneWeb can make the pricing work, they'll have to contend with the earthbound politics of telecommunications. And that's one area where OneWeb has an edge: Wyler owns Teledesic's old slice of the wireless spectrum. And Virgin's Branson says there's not enough to go around.

"Greg has the rights, and there isn’t space for another network—like there physically is not enough space," he told Business Week. "If Elon wants to get into this area, the logical thing for him would be to tie up with us, and if I were a betting man, I would say the chances of us working together rather than separately would be much higher."

Musk has floated the idea of using laser-based transmission—another unproven technology—to avoid licensing, though last month's FCC application makes no mention of such a scheme.

Internet, Grounded

But if anyone knows the costs of trenching fiber optic pipe and building satellite networks, it's Wyler. After selling his first company, a computer parts outfit called Silent Systems, for $100 million in 1999, he founded Terracom, an Internet service provider in Rwanda that had to build much of its own network infrastructure, including fiber optic pipes and cell towers. After selling that company for $20 million, he started satellite Internet company O3b in 2007.

O3b provides Internet service via mid-Earth orbit satellites. By compromising between low Earth orbit and geosynchonous orbit, the company is able to provide a reasonable 150 millisecond latency without the need for hundreds of satellites. But instead of providing service directly to end users, as SpaceX and WebOne want to do, it sells connectivity to Internet service providers in places like the Cook Islands, which in turn provide their customers with service via cellular networks or fixed line connections.

Wyler, who left O3b last year before working briefly at Google, has some specific ideas to to deal with costs. He told BusinessWeek that instead of having every user buy their own dish, he expects them to be installed in public places like schools and hospitals, which will then provide WiFi connections.

And as for SpaceX, the company's entire purpose is to find ways to make space travel less expensive. It's possible that Musk and company could find ways to manufacture and deploy satellites more cheaply than anyone has ever expected.

The real problem, though, is that it might not be possible to predict how much the system will cost until it's too late. "It's really difficult to test the concept without building out the network," says William Ostrove, an aerospace and defense analyst at the firm Forecase International. "That's going to be extremely expensive."

Sure, it's possible that one or both sides in this race will succeed in creating an affordable satellite Internet service and bringing the entire world online. But it's just as likely that they will burn through billions in a competition that's as much about astronomical egos as innovation.