Even Elon Musk Makes It Clear Starlink Could Have Limited Impact, May Not Be Financially Viable

from the subsidize-me-please dept

When even Elon Musk is reining in expectations and speaking carefully about one of his products, you know you probably shouldn’t get too excited.

We’ve noted how Musk’s Starlink satellite broadband venture will certainly help a few people out of the reach of broadband options, but isn’t going to meaningfully disrupt telecom. Limited capacity means Starlink will be able to provide broadband service to somewhere between 400,00 and 800,000 subscribers, in a country where up to 42 million Americans lack access to broadband, 83 million live under a broadband monopoly, and tens of millions more live under a duopoly. In short, Starlink will “fix” US broadband much like a squirt gun will kill an elephant.

Musk clearly knows that Starlink’s reach doesn’t meet the usual hype surrounding the billionaire’s products, so he continues to be more candid and honest when talking about Starlink versus many of his other abundantly hyped projects. Like during his onscreen talk at Mobile World Congress (MWC) in Barcelona, where he once again tempered enthusiasm about Starlink’s real-world impact:

“You can think of Starlink as filling in the gaps between 5G and fiber, and really getting into parts of the world that are hardest to reach,? he told interviewer Justin Springham, publisher of Mobile World Live, in a keynote Tuesday at the wireless industry trade show. As in, the last “3%, maybe 5%.”

Musk also made it clear that the low orbit satellite broadband business is littered by failures, something he’d like to avoid:

“Every other low earth orbit constellation ever done has gone bankrupt,? Musk said early in the half-hour talk, citing such past collapses as Iridium. ?Step number one for Starlink is don?t go bankrupt.”

At the same speech Musk noted he’s currently selling his “Dishy” terminals to users for around $500 despite costing $1000 to make. Other outlets, like Reuters, were even more pointed about the chance of Starlink success given it lacks the capacity to really obtain any real scale:

“Starlink would need a few million subscribers paying about $99 a month each to recoup a $5 billion investment in a year’s time, said analyst Tim Farrar, president of TMF Associates.

A $30 billion investment over a decade would not require a dramatic rise in subscribers, but to achieve Musk’s 2020 projection of roughly $30 billion revenue a year would require tens of millions of subscribers, he said.

But even the most rosily optimistic projections I’ve seen, which assume a full fleet of 42,000 satellites capable of offering 60 Gbit/s each many years from now, tops out at around 6 million max subscribers. So in other words there’s a very real potential that Starlink not only doesn’t really make much of a dent in the US broadband problem, but can’t get anywhere close to financial viability anytime soon.

So the question then becomes, why bother? And the answer is because much like his heavily-ridiculed Las Vegas space tunnel, he’s using potentially doomed side projects to nab government subsidies to finance his space ambitions. The FCC recently came under fire for giving the planet’s second-wealthiest human being $883 million to deliver satellite broadband to a handful of traffic medians and already served airports. Instead of funding future-proof fiber, the FCC has been criticized for throwing money at a man who doesn’t need it, to finance a project that may not even be around a few years from now.

To be clear, Starlink, if it survives, can genuinely help Americans out of the reach of traditional options. But keep in mind with a $600 first month cost ($500 for hardware, $100 a month) it’s not exactly helping those who can’t afford broadband. And with only 300,000 to 800,000 initial slots, those who really need the service will have to battle with Musk fanboys who already have decent options, but just want to be early adopters due to the Musk brand. In short there’s an awful lot that can go very wrong here, and even the most optimistic projections for the venture aren’t particularly productive or disruptive.

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Companies: spacex

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Comments on “Even Elon Musk Makes It Clear Starlink Could Have Limited Impact, May Not Be Financially Viable”

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20 Comments
Anonymous Coward says:

Doesn’t solve the Broadband problem, but may put a big dent in the Rural Broadband problem. Think farmland, off-the-grid, research stations, fire watch towers.
And, this is an orbital network. South America, Africa,Australia for example, yes?
What is the potential world-wide capacity? Not just US capacity.

Christenson says:

Re: Needs model

Look: a few million subscribers to pay back the investment in a year isn’t a good model; that’s asking for a fantastic short term ROI time.

Let’s assume he can get 500K subscribers, how long will that take for payoff?? And what’s his potential worldwide? Students are curious…

Meanwhile, uh, yeah, Falcon9 seems to have a lifetime of at least 10 launches, putting everyone else to shame…

Anonymous Coward says:

Re: Re: Needs model

I’m surprised he’s not heavily targeting the high-speed trading market. Until hollow-core submarine fiber is laid, he’s got the theoretically lowest-latency paths across the oceans, by perhaps 4-7 ms (remember: fiber sends data around 0.66c, whereas Starlink sends above 0.99c with a 1100 km detour). Financial firms paid a lot of money to lay a straighter fiber path from Chicago to New York, then paid again to have it replaced with microwave towers.

This comment has been flagged by the community. Click here to show it.

Anonymous Coward says:

Please help me out here...

So a potential revenue stream of $3.6 billion per year (for 6 million subscribers) is not enough to repay the investment, but $863 million over ten years is going to make the difference and is Musk’s sole reason for Starlink.

Sorry, I’m having trouble understanding your math there Karl.

Anyway, the real money is in getting laser connections going. They have the potential to cut transmission delays significantly, even over terrestrial fiber, if the can route fast enough at each satellite node. Faster dedicated links are worth billions. If SpaceX can tap into this market, a tiny fraction of their network could bring in upwards of $5 billion per year (perhaps upwards of $15 billion per year). I believe a group of traders paid $5 billion to put in a dedicated fiber link from NY to Chicago. I think this is what they are ultimately after. I can see tiered subscriptions, with ultrafast at the top, modile (planes, ships) mid-range and (usually) fixed domestic at the bottom of the cost structure. That would make the domestic internet market the least important, but still a decent chunk of change and Elon is not one to leave money lying on the table (which is, I believe, why he claimed the subsidies that, it should be noted, he did not lobby for.

So please, check your math and stop knocking Elon Musk just because you hate him.

Anonymous Coward says:

Re: Please help me out here...

Faster dedicated links are worth billions. … I believe a group of traders paid $5 billion to put in a dedicated fiber link from NY to Chicago. I think this is what they are ultimately after.

If they’re smart. The link you’re talking about was not about being "dedicated", it was literally just a straighter path to shave a few milliseconds of latency—which is the only "speed" important to the traders. They later replaced that with a series of microwave links, because light in air travels about 50% faster than light in glass fiber (fiber speed is around .65c).

Starlink could shave as much as 17 ms of latency between New York and Hong Kong, assuming only one trip up to orbit and one down (that is: no intermediate ground stations). That would be huge. Hollow fiber is coming, but it may still be years before they’re able to use it for long submarine links.

idearat (profile) says:

Internet to homes isn't the only thing

In the vein of "if you build it they will come", having access to reasonably priced broadband can change rural businesses dramatically.
There is a lot of automation available now and coming in the near future for agriculture. Much of it really needs reliable communications.
Most broadband maps focus on where people live, not rural businesses like ag, forestry, mining that cover large empty areas.
And no, you don’t need a Dishy McFlatface on every item that needs internet. An outdoor WiFi network could work well with a single uplink.

Anonymous Coward says:

Re: Re:

It’s not that Karl is less than worshipful that annoys me – it’s that his criticisms are downright fraudulent and don’ t pass even a cursory inspection. There are plenty of real – if not so "glamorous" – flaws in Musk and his companies, why not criticize them, rather than all these make believe lies that Karl comes up with.

OGquaker says:

Re: Reads Techdirt, lies his way out

Tweet
Scott Manley
14h
Putting the C3 numbers into plain english:
Image
Jeff Foust 16h
Useful chart from NASA’s Launch Services Program presented at today’s planetary sciences decadal survey steering committee meeting, comparing performance of launch vehicles at several C3 (characteristic energy) values.

Chris G – NSF 13h
Have you looked at a variant of Starship that is essentially the probe, too? Instead of paying to build two things, could a deep-space Starship incorporate those science instruments? Reduce cost even a little more for science missions?

Elon Musk Replying to
@ChrisG_NSF and @DJSnM
Yeah, that would be cool. Also, using ship itself as structure for new giant telescope that’s >10X Hubble resolution. Was talking to Saul Perlmutter (who’s awesome) & he suggested wanting to do that.
11:51 AM · Jul 7, 2021·Twitter for iPhone

That Anonymous Coward (profile) says:

For the Elon faithful, who seem to be out in force…
Y’all are defending a guy who offered to bring his tunnel tech to Florida.
You know that state on sandstone and sinkholes… where you can’t tunnel because the earth will just swallow it all up.
Perhaps he isn’t the all powerful savior y’all imagine.

And before one wishes to attack my spelling & grammar, without a program saying which team you are rooting for y’all could be mistaken for Trump supporters who can’t accept the idea anything he ever did was bad or failed.

You can be impressed with Tesla & SpaceX and still note that perhaps sometimes after loading up the bong he shouldn’t launch some of the ideas he gets from the smoke.

Anonymous Coward says:

Re: Re:

While I largely agree with you, you are also showing something that is really starting to piss me off. If you had watched the infamous Joe Rogan podcast with Musk, you would know that Rogan pushed Musk very hard to take a drag of MJ, almost to the point of bullying, after Musk said he didn’t. Musk took one draw that his reaction suggested he didn’t enjoy and that was it.

I don’t understand why people insist on pushing lies and misinterpretations of Musk when he has plenty of obvious flaws that are ignored to push fraudulent claims of misbehaviour.

timlash (profile) says:

Karl, there are other countries

Karl, your points about Starlink are 100% true for the U.S. ISP marketplace. I beg you to acknowledge the global impact this company can have. Ultimately 6 million customers in the U.S., likely a similar number in Europe, India and China. Now we’re up to 24 million global customers. It will be very interesting to see if Starlink will use that base to try innovative deployment strategies in Africa. Yes, Starlink will be a footnote in the U.S. broadband landscape, but it can still deliver a global impact if it can survive the growing pains that plague every company that attempts to build an operate a satellite constellation. Rebutting your narrowly focused reporting on this topic is starting to feel like a part-time job. Maybe you can join MY Watercooler club.

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