SpaceX Is Bringing the World Satellite Internet – Here's Why

Lawren Henderson
Staff Writer at Cluster

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Elon Musk wants to go to Mars. It’s his stated life’s ambition. In the early 2000s, flush with his PayPal millions, Musk had the bright idea to send up something to Mars and reignite America’s fasciation with space. One small problem – finding a rocket ship was impossible. He got close to purchasing an ICBM from Russia, but they kept jacking up the price. So he did what any sensible entrepreneur with a degree in physics would do, he started his own rocket company. And in 2002 SpaceX was born. 

But getting to Mars and making humans an interplanetary species takes a lot of money, even when you have your own rocket company. And that’s where Starlink comes in.

Starlink Constellation

Starlink is a satellite constellation that SpaceX is building to beam satellite internet all across the globe. Musk wants to fill low-Earth orbit (LEO) with up to 42,000 small satellites that work in combination with ground transceivers to provide fast broadband internet, even to remote and underserved areas.

Satellite internet is nothing new. Companies like HughesNet and ViaSat operate very large satellites positioned in geostationary (fixed) orbit about 22,000 miles from Earth’s surface. But due to their far distance, these satellites have high latency or delays in data transfer. Currently, it takes about 100 milliseconds for data to travel from point to point using these legacy satellites, but really, 600 milliseconds isn't unheard of. It might not sound like a lot, but it is; the lag produces noticeable delay that would make a livestream or video chat unbearable.

In addition, these handful of satellites have very low capacity meaning they can't accommodate a ton of users and so internet service providers must enforce data caps. The slow speeds, delays, and data restrictions make for a frustrating user experience. And as a final indignity, the service is usually pretty expensive. 

A New Kind of Satellite Internet 

Starlink is deploying its non-geostationary (moving) satellites in LEO, a mere 112 miles to 1,200 miles from the Earth’s surface. The close proximity reduces latency by a factor of 20 for a seamless user experience with dramatically less lag time. The company is promising speeds of 1 gigabyte/sec, and since it will be operating thousands of satellites, it can offer greater capacity so that millions of users can connect at the same time. Plus, the caravan of satellites are always on the move, circling the Earth to provide coverage all around the world... eventually.

Target Customers

Most people living in cities or suburbs have their option of one, two, maybe three broadband internet providers, and the quality of service they provide leaves something to be desired. Musk is positioning Starlink as a rival to cable companies, offering high-speed broadband access at an affordable price. 

He also intends to target rural and underserved areas where there are even fewer options, if any at all. Some 49% of households, or 4 billion people, are unconnected to the internet. That's a huge market waiting to be served. Customers in developing countries will be able to get online using a Starlink terminal which costs about $200 and is the size of a medium pizza box. 

But in order to make real money, it’s believed that Starlink will go after enterprise customers, specifically, financial institutions, transportation companies, and militaries. 

Satellite signals (e.g., light waves) travel 47% slower in glass fiber than across the vacuum of space. Now, the average person may not care about a few extra milliseconds to scroll Instagram. But you know who does care? Financial institutions. Being able to execute transactions or trades just a few milliseconds faster could mean millions of dollars and give a firm a competitive advantage over a rival. It’s widely expected that banks and investment firms will be early adopters of low latency, high-speed satellite internet.

Then, there are trucking, shipping, and aviation companies that could benefit greatly from new, improved satellite internet. If you've ever tried to get online while flying on a plane then you already know it can be quite a pain. But Starlink's coverage would allow traveling vehicles to stay reliably connected, and at a more affordable price.

Finally, the U.S. military spares no expense when it comes to having the latest, greatest technology. So it's no surprise the U.S. Air Force is testing Starlink's encrypted internet satellite services for a number of military planes which would allow pilots to securely communicate while airborne.

So Much Money

It's estimated that in 2018 SpaceX generated $2 billion in revenue from the launch and aerospace services it provides to telecom companies and governments. It's a lot of money for sure, but not "build a colony on Mars" money. However, Elon Musk predicts Starlink, with its recurring monthly charges, will rake in $30 billion to $50 billion each year – and analysts seem to agree. That’s a lot of money SpaceX can use to fund its spacefaring operations.

Musk has no plans to take SpaceX public, which would force him to operate under the watchful eye of Wall Street. Plus, he doesn’t need to as he’s had no problem raising private equity funds. The company just secured a cool $500.06 million, increasing SpaceX’s valuation from $33.3 billion to around $36 billion. The recent oversubscribed round notched double the amount SpaceX was looking to raise.

But here's the good news for investors looking to get in on the next Musk venture: SpaceX President Gwynne Shotwell indicated that there’s a strong likelihood Starlink will spinoff and go public. It makes perfect sense as Musk has no desire to run a telcom company (he never even wanted to run Tesla!), and going public would bring in oceans of cash.

The Competition

SpaceX and Musk aren’t the only ones looking up to low-Earth orbit and seeing dollar signs. Amazon CEO and richest man in the world Jeff Bezos also has a documented childhood ambition of making humans an interplanetary species (must be a billionaire thing), and he has initiated Blue Origin and Project Kuiper to help in reaching that goal.

Blue Origin is Bezos’ privately-held rocket company, which many assume will take part in making Amazon’s satellite constellation, Project Kuiper, a reality. While Amazon has yet to launch an internet-beaming satellite into orbit, it is already building up its ground infrastructure, AWS Ground Station, with 12 satellite facilities to handle data transfer. 

Then, there’s OneWeb headquartered in the U.K. and backed by Softbank and billionaire business magnate Sir Richard Branson. OneWeb already has at least 30 satellites deployed and hopes to rapidly increase its number of satellites with 20 launches planned by the end of 2021, releasing between 30 to 36 satellites with each mission.

Starlink Goes Online in 2020

Last year, Musk tweeted the first tweet sent using Starlink internet, writing, “Whoa, it worked!!” He’s stated that the service will come online this year after SpaceX has inserted 800 satellites (it currently has 297). From there, it’s only a matter of time before Starlink starts printing money.

Unfortunately, none of us, not even Elon Musk, are getting any younger. At 48 years old, Musk worries SpaceX won’t make it to Mars before he dies.  

Fingers crossed the visionary is able to stick around long enough to see the fruits of his labor. 

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Published on
March 17, 2020