Musk is ready to discuss Starlink progress as cost and demand prevent

Don Joyce, a Nokia director working from home in a remote lake house in Canada, recently gave up his painfully slow phone line internet in favor of the satellite broadband service Starlink offered by Elon Musk’s SpaceX.

Starlink, which cost him C $ 600 (US $ 486) for hardware and a high C $ 150 monthly subscription, provides “dazzlingly fast” speeds when uploading videos or streaming movies, he said.

But the beta test customer said he is experiencing dropouts during calls to Microsoft Teams and Zoom.

“If you are in the city and you have alternatives, I would not recommend it. But if you are in the country, like in the middle of nowhere, and you get pathetic internet service, then it is definitely a competitor. ”

For billionaire entrepreneur Elon Musk – founder of electric car maker Tesla Inc – the success of one of his biggest bets could come down to how many people like Joyce out there.

Musk on Tuesday is expected to discuss Starlink’s progress in a speech at the Mobile World Congress telecommunications event, an audience with much at stake in Starlink’s fate.

Musk is ready to discuss Starlink progress as cost and demand prevent

SpaceX Starlink 5 satellites are pictured in the sky seen from Svendborg on Sydfyn, Denmark 21 April 2020. The picture was taken with long exposure. Ritzau Scanpix / Mads Claus Rasmussen via REUTERS

If successful, the service could greatly expand the reach of broadband Internet around the world, connect Tesla vehicles and even provide a new platform for shoppers and others with exotic Internet needs, said people familiar with the Starlink plan.

But to do so, it must avoid the fate of similar satellite projects that preceded it.

“Not bankruptcy, that would be a big step,” Musk said last year. “That’s our goal.”

SpaceX’s Starlink division launched its “Better Than Nothing Beta” program in the United States last October, with data rates up to a competitive 150 megabits per second. Early reviews are mixed, with some users complaining about the problems that have always plagued satellite internet: sensitivity to the weather.

The recent heat waves have created new problems.

“I’ll have to spray it with a garden hose to restart my internet … It just feels so wrong,” said a Reddit user who said he lives in Arizona, sent earlier this month along with an error message , which says “Offline: Thermal Shutdown” and “Starlink will reconnect after cooling”.

SpaceX President Gwynne Shotwell said in April that the company has “a lot of work to do to make the network reliable”. The company on Tuesday had no immediate comment.

The service needs to be improved with more satellites and other improvements: Starlink has so far launched over 1,700 of its 260 kg satellites and envisions more than 40,000.

The economy is nonetheless scary. Musk has said Starlink could earn less than 5% of Internet users and still generate $ 30 billion a year in revenue. Critics called it wishful thinking.

“Is there demand for tens of thousands of subscribers at that price point?” asked analyst Tim Farrar, president of TMF Associates. “In most parts of the world, if you told anyone your broadband service would cost you $ 100 a month, they would be like, incredible.”

He said there may be wealthy people in isolated areas, “but there are just not that many of these people”.

He said Starlink would also fight for sufficient capacity to support this level of demand, especially as people use more data for video streaming. That would mean “significant additional costs for upgrading the satellites and adding more satellites.”

Price pain could be alleviated with nearly $ 900 million in Federal Communications Commission grants earmarked for Starlink to bring the Internet to rural areas.

Jonathan Hofeller, vice president of SpaceX, said COVID-19 highlighted the need for “high-quality Internet access” across the globe.

Perhaps more importantly, Starlink said, it can reduce the cost of building its own terminals and satellites. It has hired engineers from chipmakers Broadcom Inc, Qualcomm Inc and others to design its own communications chips, said a person familiar with the matter – a similar approach as Tesla.

Starlink has more than halved terminal costs from $ 3,000 and expects it to be within a few hundred dollars within the next year or two, Shotwell said in April.

“Lowering Starlink terminal costs, which may sound quite pedestrian, is actually our most difficult technical challenge,” Musk tweeted last year.

Starlink also benefits from SpaceX’s low-cost launch features.

“When you own pieces of the stack, you can do really technically sophisticated things at an affordable price,” said Misha Leybovich, a former sales director at Starlink.

Still, the competition promises to be fierce. Inc’s subsidiary Kuiper has a direct competing project, while OneWeb – a collapsed satellite operator rescued by the UK government and India’s Bharti Group – has also promised to join the game. Terrestrial telecom providers, meanwhile, are running to implement high-speed fifth-generation (5G) broadband services.

The rapid proliferation of wireless and terrestrial broadband, along with high prices, were significant factors in killing previous low-ground satellite projects. Motorola-backed Iridium Communications Inc went bankrupt after billions of dollars in investment, while a similar fate befell Teldesic, backed by Microsoft Corps founder Bill Gates.

SpaceX, Amazon and a number of others have “created a whole race that no one is quite sure if there is a large enough market for it,” Iridium CEO Matthew J. Desch told Reuters.

(Reporting by Hyunjoo Jin and Supantha Mukherjee; Editing Jonathan Weber and Christopher Cushing)

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