Musk runs toward, not away from, such scientific challenges. Starlink intends to deploy small stations attachable to homes and businesses along with new satellites. Handsets also would require modification to support the frequencies, a roughly two-year process, according to Musk, whose timelines are often optimistic. It all sounds like a long-shot, but Ergen’s Dish Network and rival DirecTV delivered television service this way for years before the economics of the business deflated.
A more robust partnership would be easier. Verizon did something similar with Charter Communications CHTR.O and Comcast CMCSA.O, giving the cable operators partial access to its network so they could sell cellular service to their customers. For now, none of the three telecom titans has signaled a willingness to let Starlink rent its airwaves, but everyone has a price. During an interview last year, Musk also alluded to the idea he could buy one of companies.
With a valuation now crystallized at $2 trillion, SpaceX is worth three times more than all three combined. Its balance sheet also carries net cash, a situation unlikely to last much longer as it spends heavily on terrestrial data centers while simultaneously trying to build them in outer space. Verizon, AT&T and T-Mobile already collectively hold nearly $400 billion in net debt.
Although Musk clearly prefers to go big, even the current trajectory poses trouble for established kingpins. Many of Starlink's new wireless customers are likely to come at the expense of Verizon and its peers. SpaceX also needn't worry about funding dividends and has room to undercut competitors on price while sustaining a roughly 40% operating margin. Its mobile business is on pace to grow 7 times faster than rivals, with $2.5 billion of projected revenue in 2031, MoffettNathanson analysts estimate.
Comcast and Charter used promotions and discounts to encroach on the mobile market. Their share of monthly subscribers climbed from zero to approximately 7% over 9 years, according to Bernstein analysts, while Verizon's dropped into the low 30% range from 40%.
Ignoring the risks would be foolhardy, especially considering recent developments. Not long ago, more than 100 million U.S. households watched TV provided by cable and satellite operators. Their reach has dropped by more than half over the past 16 years and media conglomerates are hiving off collections of niche channels. Time Warner's boss in 2010, Jeff Bewkes, dismissed Netflix as the "Albanian army," one that stood little chance of conquering Hollywood. Wireless executives can hardly afford to make the same mistake with Musk.
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