Will Starlink Be Successful?

Starlink is a SpaceX-owned satellite internet service provider. According to recent FCC filings, Elon Musk owns 43.61% of outstanding SpaceX shares with 78% voting rights. Therefore, Elon Musk owns and controls Starlink. 

Starlink is not a competitor for cable internet. Cable internet can provide better and faster service in cities and suburbs than Starlink. 

Starlink’s main competitors are Viasat and HughesNet in the satellite internet business. Even though Amazon also announced its own Kuiper satellite internet project, Amazon is nowhere in achieving SpaceX’s success.

Many companies tried to provide high-speed satellite internet before but went bankrupt. However, Starlink is different.

Starlink will be successful because it provides high-speed internet without data caps at an affordable price, has its satellite manufacturing facilities, and uses its own SpaceX rocket to launch satellites. Moreover, the US Army and Airforce use it for national security.  

High Speed

HughesNet and Viasat also deliver satellite internet. Unlike SpaceX’s Starlink, which uses low earth orbit satellites, HughesNet and Viasat use geostationary satellites to provide their internet.

Geostationary satellites are placed 22,236 miles (35,785km) above the earth. As these satellites are too far from the ground, only a handful of them are necessary to provide coverage to the entire planet. However, as these satellites are too far from earth, the internet speed is painfully slow. 

On the contrary, Starlink satellites are typically placed 350-550km above the earth. Therefore, even though it requires too many satellites for worldwide coverage, its internet is significantly faster.

A recent report from SpeedTest shows that Starlink is 5 times faster than HughesNet and Viasat and has a very competitive speed compared to cable internet.

[Table] Internet Speed Report

Service ProviderDownload Speed (Mbps)Upload Speed (Mbps)Latency (ms)
SpaceX Starlink104.9712.0440
Cable Fixed131.3019.4914

From the above table, we can see that HughesNet and Viasat have already lost to SpaceX. The download speed, upload speed, and latency are horrible on HughesNet and Viasat. On the contrary, Starlink rivals cable internet.

Competitive Pricing

For homes and offices, one needs unlimited internet data. Watching streaming services such as YouTube, Netflix, Hulu, and DisneyPlus is impossible without limitless data.

Both HughesNet and Viasat provide only capped internet. In contrast, Starlink provides unlimited internet without any data cap.

Starlinks’ monthly plan costs $110. There are no bandwidth limits and no long-term contracts — however, there’s a $600 one-time hardware cost.

[Table] HughesNet Service Plan

Monthly Data CapMonthly PriceSpeed
15 GB$6525 Mbps
30 GB$7525 Mbps
45 GB$11025 Mbps
75 GB$16025 Mbps

HughesNet provides a $20/month discount for the first six months. However, a user must sign a 2-year contract, and the initial setup cost for hardware is $450. There’s also a $400 early cancellation penalty (cancellation before the two-year contract ends) (source).  

Even though HughesNet advertises that there’s no hard data limit, after a user exhausts all their monthly data quota, HughesNet caps the speed to 1-3Mbps, which is entirely unusable.

[Table] Viasat Service Plan

Monthly Data CapMonthly PriceSpeed
40 GB$7012 Mbps
60 GB$10025 Mbps
100 GB$15030 Mbps

Viasat has a $300 hardware installation fee and requires a 2-year contract (source). There’s also an early termination penalty. The fee is $15 x the number of remaining months in the 2-year contract. 

It’s evident that between Starlink, HughesNet, and Viasat; Starlink provides the most cost-effective high-speed unlimited internet. 

Lower Launch Cost

Except for SpaceX, no other internet service provider has both rockets and satellite manufacturing facilities. Therefore, no satellite internet company can compete with Starlink on launch cost.

For example, HughesNet and ViaSat hire third-party vendors to build and launch their geostationary satellites. Amazon will make its satellites but hired Blue Origin to launch its satellite. And OneWeb will launch its satellite on SpaceX rockets. 

Therefore, no company can compete with Starlink on the manufacturing and launch costs. 

The initial investment required to set up a satellite internet business is enormous. Even though Amazon has the money to pull it off, Kuiper will struggle to become profitable because Starlink has a head start and is already operational.

Revenue Growth

HughesNet is a subsidiary of EchoStar Corporation (SATS). EchoStar has multiple businesses besides their internet service. Thus, they don’t provide data on how much revenue they collect from HughesNet alone.

However, according to Echostar’s 2021 yearly financial statement, they collected $2 billion in revenue with $62 million in profits, which is extremely low. Echostar has a market of $2 billion.

Viasat also has various products besides their satellite internet. According to the 2021 yearly financial statement, Viasat’s annual revenue was $2.3 billion. However, only $869 million came from their internet business, with 590,000 worldwide subscribers and 1480 commercial aircraft internet. ViaSat (VSAT) has a market cap of $3.4 billion.

Starlink and its parent company SpaceX are privately held. Starlink isn’t on the stock market yet. Only selected private companies, funds, and individuals are allowed to invest in the SpaceX stocks. However, Elon Musk previously said that Starlink would become a public company if it consistently generates profits in the future. Currently, SpaceX has a market cap of $100 billion.

According to an FCC report, 19 million Americans still don’t have a broadband internet connection in their homes. In rural America, 14.4 million people lack high-speed internet service. Globally billions of people still don’t have internet access.

Besides high population density areas, laying out fiber or cable internet isn’t profitable. Thus, ISPs will show little interest in expanding their coverage in rural and low population density areas even in the future.

In August 2021, Elon Musk announced on Twitter that Starlink had reached 100,000 customers globally. Even if Starlink gets 10 million users globally, Starlinks yearly revenue would be 10 million x $110 x 12 = $13.2 billion, which is 13 times more than ViaSat’s (internet) annual revenue, and 6 times more than Echostart’s revenue.

Starlink can outgrow HughesNet, Viasat, and OneWeb because Starlink is not constrained by Geostationary satellites and its limitations.

Governmental Use

In February 2022, the US military announced they were testing the Starlink internet. Moreover, the US Air Force has been using the Starlink internet since 2021 (source). Thus, the US government has an active interest in this satellite internet. Various reports have shown that Starlink performs satisfactorily in emergencies.

Bottom Line

Compared with existing satellite internet providers, it’s clear that Starlink provides very lucrative services at a competitive price for private and government agencies. Thus, Starlink will be another successful business originating from Elon Musk.