Google Wins Cloud Deal From Elon Musk's SpaceX for Starlink Internet Connectivity

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  • Google announced that its cloud unit has won a deal to supply computing and networking resources to Elon Musk's SpaceX to help deliver internet service through the latter's Starlink satellites.
  • The Starlink satellite internet will rely on Google's private fiber-optic network to quickly make connections to cloud services as part of a deal that could last seven years.

Google announced on Thursday its cloud unit has won a deal to supply computing and networking resources to SpaceX, Elon Musk's privately held space-development company, to help deliver internet service through its Starlink satellites.

SpaceX will install ground stations at Google data centers that connect to SpaceX's Starlink satellites, with an eye toward providing fast internet service to enterprises in the second half of this year.

The deal represents a victory for Google as it works to take share from Amazon and Microsoft in the fast-growing cloud computing market.

Investors are counting on Google's nascent cloud business to boost growth in the event that its advertising business slows down. While Google's cloud business delivered only 7% of parent company Alphabet's total revenue in the first quarter, it grew almost 46% year over year, compared with growth of 32% for Google's advertising services.

It's also an unusual type of deal for Google -- or any other cloud provider -- as it relies heavily on Google's internal network that connects data centers, rather than simply outsourcing functions like computing power or data storage to these data centers.

"This is one of a kind. I don't believe something like this has been done before," said Bikash Koley, Google's head of global networking. "The real potential of this technology became very obvious. The power of combining cloud with universal secure connectivity, it's a very powerful combination."

"They chose us because of the quality of our network and the distribution and reach of our network," said Thomas Kurian, CEO of Google's cloud group.

Amazon popularized the public cloud business with the launch in 2006 of general-purpose computing and storage tools from its Amazon Web Services division. Google introduced its own computing service in 2012. But over the last two decades, Google has also spent money assembling a private fiber-optic network to connect its data centers, Koley said. While much of Google's cloud growth has come from taking care of computing and storage needs for clients such as Goldman Sachs and Snap, the SpaceX deal will draw heavily on Google's networking capabilities.

Cloud providers have increasingly focused on the telecommunications industry, particularly with the ascent of 5G connectivity. Last month, for example, Amazon said Dish would use AWS infrastructure to deliver 5G service to consumers.

In SpaceX's case, there is no need for cell towers. Instead, customers' devices will communicate to satellites, and then the satellites will link up to Google data centers. Inside those data centers, customers can run applications quickly using Google's cloud services, or they can send the information on to other companies' services that are geographically nearby, enabling low latency so there's minimal lag. Data then comes right back through the Google data centers to satellites, and then down to end users.

The deal could last seven years, according to a person who declined to be named discussing confidential terms.

Starlink's service might be valuable for consumers living in places with limited internet access, as well as businesses and government organizations running projects in remote areas, Kurian said. He anticipates that having Starlink draw on Google's cloud network will lead organizations to deploy applications inside Google's cloud to take advantage of high speeds.

Google is not the only cloud provider to be working with Starlink.

In October, Microsoft said it was working with SpaceX to bring Starlink internet connectivity to modular Azure cloud data centers that customers can deploy anywhere. SpaceX would still rely on Google data centers in that scenario, a person familiar with the matter said. (Data would travel from the customer's Azure modular data center through the Starlink satellite to Google's data center and then out to other cloud services — and return in the opposite direction. "Our current partnership with SpaceX Starlink provides high-speed, low-latency satellite broadband to extend our Azure capabilities with worldwide satellite connectivity and unblock cloud computing in more scenarios," a Microsoft spokesperson told CNBC in an email. "Efforts are currently underway to expand those scenarios and we will have more to share in the coming months.")

Initially SpaceX will deploy the ground stations at Google data centers in the U.S., but the company wants to expand internationally, the person said.

SpaceX is one of the world's most valuable privately held start-ups, having raised money at a $74 billion valuation in February, CNBC reported. Google invested $900 million in SpaceX in 2015. SpaceX has launched over 1,500 Starlink satellites into orbit, and last week the company said more than 500,000 people have ordered or made a deposit for the internet service.

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