Musk’s Starlink plots small cell rollout to rival US mobile operators

• Elon Musk’s SpaceX has presented its first earnings report since becoming a public company
• During the earnings call senior executives, including Musk, discussed plans and aspirations for SpaceX’s connectivity division
• The company plans to build a small cell network across the US to offer a cellular service that will compete with AT&T, Verizon and T-Mobile US
• Musk also believes that Starlink’s broadband service will ultimately dominate the global data access connectivity sector

Elon Musk and his SpaceX management team used the company’s first earnings conference call since its IPO to unveil its plan to build an extensive Starlink cellular small cell network across the US in order to compete directly with the market’s three major telcos, AT&T, T-Mobile US and Verizon, by providing “connectivity that is, we think, probably better and higher bandwidth than what is currently available from cellular providers,” noted Musk. 

The charismatic executive, who is CEO and chief engineer at SpaceX, and his team shared a lot of insights relevant to the communications services sector, with specific references to: The evolution of Starlink Mobile, which enables direct-to-device (D2D) services; Starlink satellite broadband (providing data connectivity via the company’s terrestrial receivers/dishes); and the financial performance. 

(There were also many other developments of general interest with regards to SpaceX’s AI and space developments, in particular the larger-than-expected AI infrastructure investments, and the company’s aspirations for lunar landings and robot-enabled infrastructure deployments on the moon, all of which was shared just as part of a SpaceX rocket crashed into the moon’s surface.) 

But I’m going to focus on the connectivity developments, because Musk’s plans look set to shake up the US mobile services sector and the global broadband services sector in a significant way. 

Starlink Mobile’s US strategy

There has been much speculation about whether Starlink would seek to compete directly with mobile network operators by building out its own terrestrial cellular infrastructure and offering its own mobile service, and now we know for sure that it does intend to do just that, starting in the already highly competitive US market. 

Starlink Mobile currently provides a wholesale D2D service to mobile operators around the world, including T-Mobile US (for its T-Satellite service), using a dedicated constellation of about 650 low-earth orbit (LEO) satellites that carry radio access network (RAN) technology.

Naturally, the SpaceX team believes the current network provides a decent service (messaging as well as voice and video calls over Signal and WhatsApp), but it has plans to offer a much more capable and powerful service via its next generation of D2D satellites and combining the functionality of those satellites with the 65 MHz of spectrum it acquired from Echostar in deals announced last year and which were approved in May by the Federal Communications Commission (FCC). 

During the earnings call, SpaceX chief operating officer (COO) Gwynne Shotwell noted that the current Starlink Mobile constellation uses about 5 MHz of spectrum to deliver its D2D service. She also stated that the next generation of Starlink Mobile satellites will enable 10x more capacity and that, once combined with the much greater spectrum availability from the Echostar deal, Starlink Mobile will be able to provide a D2D service that offers a 100x improvement on what is currently possible. 

This all refers to the Starlink Mobile V2 constellation that was presented at MWC26 in Barcelona earlier this year and for which Starlink already counts Deutsche Telekom as one of its wholesale customers. 

She noted that “we will start to fly the [next generation] satellites next year, and we will start providing service [by the] end of next year… I'm quite excited about Starlink Mobile going forward. The spectrum we purchased from EchoStar does have terrestrial components [and] we definitely intend to build out the terrestrial component… the hardware and systems necessary to make a true mobile service. I'm not going to talk about the capex for that,” she stated, before outlining how the company plans to build out its own RAN and core infrastructure.  

“You don't have to necessarily spend many billions of dollars in low-band spectrum all upfront before you deploy your system. That's why I don't want to talk about the capex for building out the terrestrial, because we have a lot of really great and new ideas for how we're going to do that, and I think it will be quite capex efficient,” stated Shotwell. 

“Let me give a little hint.. you could put a cellular base station on the gear that holds a Starlink broadband dish. You can have little femtocells around the country, and you deploy that as you need it,” noted the COO, who certainly has AT&T, Verizon, and T-Mobile US in her sights. 

“I anticipate us to be able to acquire quite a few of their customers because I think our service will be better. We will eliminate dead zones… It'll be better during any sort of natural disaster because surprisingly, even though space movies make space look super dangerous, it's a pretty quiescent environment,” noted the COO.  

Musk added: “This is quite an important point. Instead of having to deploy these very expensive and difficult-to-locate large cellular base stations, we feel reasonably confident that we can deploy a large number of small stations. They're really just Starlink dishes that also provide connectivity in the mobile spectrum bands and have them all over the place. The Starlink antennas are located on the roofs of houses and businesses, so they've got a sort of clear view for providing connectivity directly to cell phones on the ground… providing connectivity that is, we think, probably better and higher bandwidth than what is currently available from cellular providers.”

This will be fascinating to watch and a development of great excitement to the small cell sector. No wonder, then, that the relationship between T-Mobile US and Starlink is becoming more and more tense as the months progress and that the three major US telcos are forming a D2D joint venture. 

But, of course, adding small cell tech to Starlink broadband dishes will only provide patchy cellular coverage where users need it most -- in and around their homes and workplaces. Might Starlink Mobile also strike an MVNO deal? Or might it make Starlink broadband so attractive in price terms that the company ends up covering just as much of the US land mass as any of the big three mobile operators and pitching a hard-to-ignore converged broadband-plus-mobile service package? Order some popcorn folks!

The evolution of Starlink broadband

The SpaceX team is also excited about the potential of the next generation of its broadband satellites – for this particular constellation, this new constellation would be V3.

Musk noted on the earnings call that these new satellites will deliver a “step change” in service capabilities – 10x the capacity of the satellites currently operational – and that new improved broadband services would be on offer by the second quarter of 2027 once about 1,000 V3 satellites have been put into operation. 

Musk stated: “I think people are really underestimating Starlink… It's kind of hard for people to wrap their minds around this, but it's not out of the question that, at some point, Starlink will deliver a majority of the world's internet, at least in countries where we're allowed to operate, which is the vast majority of countries [currently 167]. This is important to bear in mind, and it's not in the infinity future – it's less than 10 years. With the advent of AI, and humanoid robotics and vehicle robotics and just a massive number of robots, the appetite for bandwidth will be much greater than it has been in the past,” as the output of the IT infrastructure that will be connected to the internet in the future could be generating “billions of bits per second continuously” compared with the output of an average human (less than 90,000 bits per day), according to Musk.

“This is why I would expect the appetite for bandwidth to grow dramatically with the growth of AI and robotics. I think Starlink is the only thing that can actually service that bandwidth,” added Musk. 

Shotwell added:  “In the years ahead, we expect Starlink will represent a significant portion of global internet traffic. We also see significant growth opportunities for Starlink on the enterprise and government side of the business. We believe revenue from these markets have the potential to reach a scale at least comparable but likely exceed our consumer business as we continue to gain share. In the second quarter, we signed a major agreement with American Airlines [and] activated our service with new partners including Southwest, Virgin Atlantic, Iberia, and Aer Lingus. We have become the provider of choice among major airlines with outstanding customer feedback but still have significant room for growth.”

She continued: “On the government side, we won more than $6bn in US contracts in the second quarter, supporting major Space Force programs that offer our nation mission-critical communications and sensing capabilities, and we see even more room for growth in this sector in this coming year.”

SpaceX’s head of investor relations, Andrea Williams, also pitched in to answer analyst questions about the potential for Starlink broadband services in the enterprise service sector. 

“We are quite bullish on our enterprise activities… Enterprise revenue is quite sticky. We have never lost an enterprise customer. [Enterprise users are] quite happy with the Starlink capability that we have right now… we are only 10% penetrated in the aviation industry, which definitely represents a lot of headroom for revenue going forward. Maritime, I think, opens up the TAM [total addressable market]] dramatically” as ships and other maritime vessels “don’t really have much connectivity right now because they can't afford VSATs. We can basically outfit those ships with Starlink Maritime. I'm quite bullish on enterprise, very bullish on government, and quite happy with the stickiness that we've seen in those markets,” stated Williams. 

Musk noted that early Starlink broadband services struggled to achieve the reliability that enterprise customers need and that “in order to secure a large amount of enterprise revenue, you have to demonstrate a very high reliability, very high uptime. In the early days, Starlink did not have high uptime,” and that is likely still the perception of many enterprises currently. Musk is convinced that enterprise can now “treat Starlink as a primary provider, not sort of as a backup provider. This requires… educating them about the current state of the Starlink system and where it's going. I would expect enterprise revenue to substantially exceed consumer revenue.” 

Second quarter SpaceX connectivity financials

For its broadband service, Starlink has 12 million customers, double the number a year ago, paying an average monthly fee of $66 (down from $85 a year ago). 

Second quarter total connectivity revenues came in at $4.29bn, up by 66% year on year. Consumer customers generated revenues of $2.49bn, up 44% year on year, while enterprise and government customers generated $1.8bn, more than double the $867m generated a year earlier. 

Connectivity adjusted EBITDA in the second quarter hit $2.6bn, up by 64% year on year.  

For the full run down of SpaceX’s second quarter financials, see this results document. 

- Ray Le Maistre, Editorial Director, TelecomTV