- SpaceX’s IPO filing says Starlink Mobile wants to move beyond dead zones in rural areas
- U.S. mobile operators are collaborating on a D2D-dedicated JV to foster competition
- Starlink Mobile remains reliant on mobile network operators for spectrum, distribution, roaming and device ecosystem – for now
SpaceX’s highly anticipated S-1 filing is the latest reminder that Starlink Mobile’s ambitions go beyond filling dead zones in mostly rural areas.
“While we expect Starlink Mobile service today to be most impactful for customers in remote areas uncovered by terrestrial mobile networks … we will compete to be the preferred connectivity experience to our customers no matter where they are located, whether in rural, suburban, or urban areas,” SpaceX said in the filing.
Those ambitions are already shaping carriers’ strategies.
SpaceX’s IPO, which could make Elon Musk the world’s first trillionaire, is seen by some as the catalyst that led AT&T, T-Mobile and Verizon to announce a joint venture last week that will see them pooling their resources in the satellite direct-to-device (D2D) space. The JV is a way for the carriers to create a D2D ecosystem that includes the likes of AST SpaceMobile and Amazon Leo rather than cede the D2D market to the now-dominant Starlink.
Starlink Mobile’s $632M revenue
One of the nuggets in the S-1 that analyst TMF Associates principal Tim Farrar pointed out on social media is the revelation that Starlink Mobile made $632 million in revenue last year. “No wonder there’s a big fight about future pricing with T-Mobile if they are only paying $100M total over multiple years,” he said.
Farrar suspects the exclusivity T-Mobile enjoys with Starlink for its T-Satellite D2D service will expire this summer and is likely the subject of negotiations. The Information in April reported (subscription required) that T-Mobile is paying $100 million over multiple years based on certain milestones.
If that is the case, it stands to reason that SpaceX would try to push T-Mobile into paying more, and “clearly T-Mobile is publicly saying no, effectively, and we’ll see how that goes because I don’t think either side wants to necessarily turn the service off,” Farrar told Fierce.
For now, it appears they’re dependent on one another. Starlink is using T-Mobile’s spectrum for the T-Satellite service and there’s no other low Earth orbit (LEO) constellation far enough along for T-Mobile to turn to for a commercial D2D service.
D2D hype is real
The D2D space has received a huge amount of hype over the past few years despite not yet generating a lot of revenue. T-Mobile charges $10/month for T-Satellite and includes it in some higher tier plans at no additional cost.
T-Mobile CEO Srini Gopalan has publicly said T-Satellite usage isn’t as high as expected and it’s mostly used in national parks. Earlier this week, he disclosed that based on May data, T-Satellite traffic comprised about 0.0002% of its total network usage, proving that satellite D2D is a “fundamentally complementary” category to regular terrestrial mobile service.
Other details in the prospectus offer a few more clues about the scale of Starlink Mobile’s business, putting total addressable market (TAM) for Starlink Mobile at $740 billion worldwide. Starlink Mobile currently reaches about 7.4 million unique devices each month across about 30 countries.
But its average revenue per user (ARPU) is just a tiny fraction of the ARPU the biggest U.S. mobile carriers bring in, estimated at $8 per user globally.
Not the first or the last of it
Of course, the language in the S-1 isn’t the first time we’ve seen Musk or Starlink Mobile talk about how they want to compete directly with terrestrial mobile operators. Last year, Musk was outright asked if he would just buy Verizon, to which he smiled and said: “It’s not out of the question.” (Verizon had no comment.)
SpaceX further solidified its intentions in the mobile space last September when it agreed to buy EchoStar’s AWS-4 and H-block spectrum, which received FCC approval last week.
The S-1 filing states that next-generation Starlink Mobile satellites, in combination with the spectrum from EchoStar, are designed to provide high bandwidth and low latency connectivity directly to end users, enabling a “connectivity solution on par with terrestrial mobile networks.”
Starlink still relies on carriers
For the foreseeable future, Starlink Mobile still needs mobile operators for spectrum, distribution, billing, roaming, regulatory approvals and device ecosystem leverage, noted Roy Chua, founder of AvidThink.
Indeed, the prospectus notes that Starlink Mobile does not have direct contractual arrangements with handset manufacturers. Instead, it expects mobile network operator partners, which are major purchasers of mobile devices, to drive adoption.
However, “if SpaceX can move from SMS and low-bandwidth services to higher-capacity 5G-like direct-to-device connectivity, the relationship with carriers becomes more complicated,” Chua said. “Starlink starts as a coverage-extension partner for dead zones and resiliency, but over time it could become a negotiating counterweight, a wholesale layer, or in some cases a competitive access network.”
“For now, physics, spectrum depth, handset RF support, indoor coverage and economics will favor terrestrial networks in most urban and suburban use cases. But the fact that SpaceX's S-1 filing is spelling out a large Starlink Mobile market TAM is signaling a much broader long-term mobile ambition,” Chua concluded.