How much of a threat does the SpaceX Starlink low-earth orbit (LEO) satellite broadband service present to other broadband providers? In the U.S., not much, according to a research note from telecom financial analysts at MoffettNathanson Research—at least not for a while and maybe not ever.
The analysts estimate SpaceX’s total addressable U.S. market at full deployment at between 300,000 to 800,000 households, or less than 1% of the market.
It’s a particularly noteworthy number, considering that SpaceX is poised to receive nearly $900 million from the Rural Digital Opportunity Fund (RDOF) to cover some of the costs of bringing broadband to unserved rural areas. And considering that the total number of locations for which SpaceX was the winning RDOF bidder is 642,000.
That suggests that if MoffettNathanson’s analysis of the SpaceX threat is correct, SpaceX might barely be able to meet its RDOF buildout requirements and would be unable to offer service to anyone else.
There is a possibility that SpaceX’s winning RDOF bid could be rejected by the FCC, as the commission is still reviewing long-form applications from winning bidders. Some stakeholders have argued that SpaceX’s bid should be rejected, arguing that the company may not have sufficient capacity or that its satellites have a life span of only five years and therefore should not be subsidized. (The MoffettNathanson researchers also noted the five-year lifespan of the SpaceX satellites.)
MoffettNathanson’s estimate of SpaceX’s addressable market is based on several assumptions, which according to the researchers, are conservative. These include:
- Although Starlink currently has about 1400 satellites deployed, the analysis is based on the nearly 12,000 satellites that the company expects to launch, approximately one third of which will cover the U.S.
- Based on satellite inclines of 53 degrees, researchers estimate that only about 3% of Starlink’s satellites will be visible to U.S. customers at any given time.
- According to SpaceX FCC filings, each satellite will have a capacity of 17-23 Gbps, but future developments could expand that. Therefore, the researchers assumed a doubling or tripling of per-satellite capacity.
- The average broadband user consumes data at a constant rate of 2.2-2.7 Mbps during peak consumption hours, leading to researchers’ assumption that 4 Mbps of bandwidth per user would be needed to provide good quality of service today. The researchers forecast that requirement to increase to 10-18 Mbps per user in the next five years.
Where the potential longer-term SpaceX threat comes in: The researchers note that SpaceX has requested approval to launch more satellites—as many as 30,000 more. If the company receives approval to do that and does so, however, and even if capacity per satellite increases, the researchers estimate that Starlink would not be able to address more than a “few million U.S. households over some extended time horizon.”
Considering that the primary target for SpaceX service is rural areas, however, a “few million” U.S. households could represent a considerable portion of unserved rural areas. All of which means that if SpaceX does indeed deploy 30,000 additional satellites, the company potentially could pose a threat to rural broadband providers.
The question then becomes how long it might take SpaceX to reach that point—and how many inroads broadband providers may have made in unserved areas by that time. The researchers note that the federal government is considering allocating close to $100 billion toward broadband – an amount that would “utterly dwarf” RDOF funding and would reduce the size of the unserved market.
Intersatellite Links, Antenna Subsidies and More
Other notable information included in the MoffettNathanson analysis about the SpaceX threat:
- The latest FCC-approved SpaceX configuration lowers the satellites in initial deployment from 1150 kilometers to 550 km and modifies the arrangement of 72 orbital plans of 22 satellites each. The lower altitude should support lower latency and the rearrangement will accelerate coverage to the southern U.S., the researchers note.
- Using lasers to communicate between satellites could help SpaceX maximize capacity by enabling areas covered by one satellite to use capacity from another satellite. As of now, the company has only 10 satellites with lasers, but expects all satellites launched next year to have them. (It’s worth noting that Telesat also plans to use intersatellite links for the LEO satellite broadband offering it is planning that will target the enterprise and wholesale market.)
- SpaceX is charging customers $499 for a rooftop antenna, which according to news reports, cost the company $2,400, which suggests that the company is subsidizing each installation by nearly $2,000.