Will SpaceX Kill the Cable Internet Industry?

For as long as the average American can remember, the big three cable companies, Comcast Verizon, and AT&T have been a virtual triopoly in the American Communications Market. For decades, their business model was selling cable television service subscriptions to American consumers.

Their sheer size was demonstrated as they weathered the cord-cutting, cable-dropping epidemic that the United States saw after the advent of relatively affordable and fast home internet connection that was more cost-effective than subscribing to cable.

Their infrastructure meant that they could just transition their business model to selling internet access. they weren’t fazed by dwindling cable subscriptions, because internet subscriptions were rising faster and faster every year.  Their control of the National Market disincentivized expansion and left millions of American subscribers with lackluster internet support and virtually no other options.

That all changed when SpaceX announced their Starlink program. After launching over one thousand satellites into low earth orbit following a launch schedule starting in early 2018 and still going strong, Starlink plans to offer up to 1Gb/s satellite internet plans to anyone in the world who wants it in the near future. They’ve been making huge strides, rolling out beta access in the United States in October for $99 per month, expanding into Canada in November, and winning an $885 million subsidy, and been issued a permit by the FCC to accrue 640,000 new customers.

A survey of 500 Internet subscribers aged 18 and up estimates that 64% of Americans would consider leaving their current Internet service providers, (which most likely is Comcast, Verizon, or AT&T), and switching to Starlink. The same survey shows that 51% of Americans plan to switch to Starlink as soon as the service becomes available beyond its beta plan.

The abject neglect from the biggest ISPs in America has given the average rural internet subscriber countless headaches. Faced with deficits of tens or even hundreds of megabytes per second compared to the average Urban subscriber, rural internet users are done dealing with the hassle of decreasing customer support,  no plans for a rural expansion, and an aging infrastructure that resists upgrading and seems to constantly degrade. Starlink presents an alternative to the system that grows enticing every month, as around 120 new satellites are added to the orbital Network.

However, don’t think Starlink has yet worked out the kinks in their infrastructure, or even in their business model. Starlink has what could be a prohibitively expensive entry price. It currently costs $499 to purchase the satellite internet plans that the subscriber mounts on their roof.  In the same survey as reference previously, survey respondents said they’d pay the $99 per month price tag for Starlink internet if they were given an option to make payments on the $499 equipment fee as well.

This presents a definite discrepancy in the number of subscribers who are willing to pay Starlink’s asking price to begin accessing their Network. Additionally, in its beta state, some Starlink customers are getting as little as 50 Mbps in speed, and sometimes experience brief periods of no connectivity at all. However, in the market that Starlink is targeting, that probably ends up being a net gain in internet quality and speed. But to urban customers, Starlink is not currently cost-effective, with speeds up to 200 megabytes per second being as low as $50 per month with traditional ISPs.

These consumers will probably tend to stick with their current ISPs, rather than risking $500 on an investment that does not appreciate in internet speed. Overall, Starlink already seems to be a company that can take on the incumbent behemoths of American internet providers. Only time will tell if they will be able to topple them.

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