How Elon Musk’s Starlink Is Bringing In Billions For SpaceX

And the takeoff of the Falcon 9. Elon Musk's SpaceX is known for its frequent launches, which now dominate the space industry. But what many of these rockets launch is as important to the company as the launches themselves. Starlink broadband megaconstellation. Stellar link. And we saw this garland of little lights, one after another, absolutely perfectly sequenced. And it was Starlink. Starlink is SpaceX's answer to providing global high-speed Internet coverage, using a network of thousands of satellites orbiting the planet in a region known as low Earth orbit. About 342 miles above the Earth's surface. While Starlink may be a business unit within the broader SpaceX company, it is considered crucial to its overall goals of making humanity multiplanetary and exploring bodies like the Moon and Mars.

Because Starlink is seen as an economic engine for the company. SpaceX reportedly generated $1.4 billion in revenue from Starlink in 2022. In early November 2023, SpaceX CEO Elon Musk announced that Starlink had achieved balanced cash flow. The importance of Starlink to SpaceX as a whole as a company is imperative. Euroconsult optimistically estimates that by the end of 2023, this Starlink business could represent more than 40% of SpaceX's total business. This total would exceed the $3 billion generated by Starlink. SpaceX launched its first batch of Starlink satellites in 2019, and adoption of the service has skyrocketed since then. Starlink now has more than 2 million active customers and is available on all seven continents and in more than 60 countries.

Starlink has been praised for its ability to connect remote parts of the world that otherwise would not have access to reliable Internet. The service has also become indispensable in areas affected by natural disasters and, more recently, during times of war, particularly the war between Russia and Ukraine. Elon Musk has also said: "SpaceX will support communication links with internationally recognized aid organizations in Gaza." Although Musk said in late October that no Starlink terminals had attempted to connect from Gaza yet. But Starlink's growing influence is drawing condemnation from some who say Musk is meddling in geopolitics. A Ukrainian official says you have enabled Vladimir Putin as an aggressor.

What do you say to that? Meanwhile, the scientific community has its own concerns. The astronomical community became concerned because the projection of the entire constellation of several tens of thousands of satellites into low Earth orbit was immediately considered an interference to both optical observation and radio observation. But none of this has slowed SpaceX's ambitions to further expand the Starlink service. CNBC explores what has led to the rapid adoption and growing influence of Starlink. With around 5,000 active satellites currently in orbit, Starlink satellites represent the majority of all active satellites in the world. This growth is unusual in the sense of its magnitude.

While previous satellite service providers have grown to, at most, between 500,000 and just over a million subscribers, and this has taken, you know, a ten-year period, Starlink's race to 2 million subscribers has taken only the better part of two. years. Experts estimate that the global market for consumer satellite services, including TV, radio and broadband Internet, was worth more than $92 billion by 2022, and Starlink could be well positioned to capture a large share of this market. in the future. By design, LEO satellite constellations like Starlink are more flexible than geostationary satellite networks like those operated by traditional satellite Internet service providers Viasat and HughesNet.

These satellite service providers have seen their capacity limited. They launch large geostationary satellites the size of a minibus that weigh several tons and last 15 years. So what ends up happening is that they have more boom and bust cycles than Starlink, which until now tends to introduce capacity at a relentless pace, so they can add more and more subscribers by continually launching new satellites. Current players are stuck with what they have. Although initially conceived for the consumer segment, Starlink's offerings have expanded to serve enterprise markets, including the aviation and maritime industries. Starlink is witnessing absolutely explosive growth in the maritime segment, having secured commitments for over 4,000 vessels by our count through Q3 2023, and has now confirmed commitments for over 400 commercial aircraft and business aviation aircraft.

SpaceX has also announced plans to offer satellite cellular connectivity to unmodified smartphones in partnership with several global telecom partners, including T-Mobile in the US. It's a feature that Apple introduced in the iPhone 14, in partnership with the carrier American satellite company Globalstar. Your phone or mine, if compatible with the T-Mobile network, will be compatible with Starlink direct-to-cell service. So when you go out of coverage areas on rural roads, national parks, just areas of poor cellular coverage, you'll automatically be able to access a space network extension of the T-Mobile network, essentially. Another factor that has helped Starlink's rapid growth is the independence with which SpaceX can operate.

Starlink is vertically integrated, it manufactures its own satellites, launches them and has created its own service. Therefore, it is almost completely disintermediated in terms of suppliers and distribution channels. It is a portable system. So when you think about how to connect to Starlink satellites, it's a small, fairly inexpensive antenna or terminal, and all you need to do is connect it to a power source. But making its equipment easy to use hasn't come cheap for SpaceX. Initially, the company faced high costs to manufacture its consumer antenna. Initially it was estimated that production would amount to $3,000 per unit.

At the time, SpaceX was charging consumers $499 for its equipment, which meant the company was shouldering much of the cost, as SpaceX reduced the manufacturing cost of its antenna to less than $600 and charges residential customers 599 dollars to buy them. Starlink's ease of use and deployment has made it an indispensable tool in the war between Russia and Ukraine. The big benefit of Starlink and how it is used in Ukraine today is communications. It is providing a path for military and civilians to stay connected to the outside world. It allows a path for militaries to communicate with each other and provide command and control direction to their forces.

SpaceX began offering its Starlink service to Ukraine at the request of Ukraine's digital minister Mykhailo Fedorov back in February 2022. Here's Musk reflecting on the importance of Starlink at the 2023 Viva Technology conference in Paris. In fact, Russia had eliminated all satellite communications and all terrestrial communications except Starlink. It was the only one that was still working and, even today, it is still the only one that is effective on the front. And Starlink today is the backbone of Ukrainian military communications. One of the other benefits we are seeing in Ukraine from using Starlink is its overall resilience. With thousands of satellites in orbit at any given time, it becomes much more difficult to jam or target all of those satellites.

The other benefit is the agility and speed with which they can move. So when Russia tried to jam Starlink, it was able to make software updates on the fly to mitigate the effect of that interference and keep people connected. But SpaceX has expressed reservations about how Ukraine is using its technology offensively, specifically to coordinate drone strikes. During a conference in Washington, D.C. In February 2023, SpaceX President and COO Gwynne Shotwell said that while the company had been "really pleased to be able to provide connectivity to Ukraine and help it in its fight for freedom," she emphasized that Starlink "never had intended to be used as a weapon.

Questions about Starlink and Elon Musk's enormous influence in the war came to a head when it was revealed that in September 2022, SpaceX's CEO had rejected a request from Ukrainian military officials to activate Starlink service in Crimea, thereby which would have allowed a sneak attack. Drone attack on a Russian naval fleet. According to the author of a recent biography about the tech billionaire, Musk refused to cooperate because he was concerned that a Ukrainian attack on Russian ships would have caused the Kremlin to launch a nuclear war. The magnitude of his influence is not lost on Musk. At one point, SpaceX's CEO wrote: "Between Tesla, Starlink, and Twitter, you may have more real-time global economic data in one head than anyone else." I think what's important to remember about using Starlink in Ukraine is that there was no signed contract with the government or our US Department of Defense, so there weren't necessarily terms and conditions that Starlink had to follow. for government customer.

In June 2023, the Department of Defense signed a contract with SpaceX for the use of Starlink in Ukraine. SpaceX also won a Department of Defense contract worth up to $70 million to manufacture a military-specific version of Starlink called Starshield. Seeing the influence Musk's Starlink can have on geopolitical issues has led some countries to invest in their own satellite networks. The European Union has said it will contribute €2.4 billion to help build a constellation that is expected to reach full capacity in 2027. China is building its own satellite internet network in low-Earth orbit, after the country left Of course I wouldn't.

I do not want Starlink services to be offered to its citizens. Taiwan, wary of Musk's ties to China through his other company, Tesla, has also expressed interest in a proprietary satellite network to help protect the country from a possible attack from China. SpaceX has said it eventually wants to put up to 42,000 Starlink satellites into orbit. Competitors such as Amazon, Eutelsat OneWeb and Telesat want to launch thousands more satellites. And that's not counting the various nations planning their own megaconstellations. The concern of the astronomical community is mainly due to the fact that these satellites are very numerous.

We are going from the 2,200 satellites that were in orbit two or three years ago to something that will be 40,000 or even 100,000 satellites. So, for most of the time during the night, these satellites are illuminated by the sun. That is why they are visible in the sky and interfere with observation, particularly with the photographs that astronomers take for their research. This image, taken from a telescope in Chile in November 2019, illustrates astronomers' concerns. The telescope, intended to view images of distant stars and galaxies, instead captured light trails from 19 Starlink satellites. Observations made from the Hubble Space Telescope, long praised as a vital research tool for astronomers, have also been affected.

Benvenuti says SpaceX has responded to the scientific community's concerns. He points to several design changes SpaceX made to its satellites to reduce their brightness, but says more needs to be done. The final solution is to know exactly, for each satellite, the precise position in the sky at any time by any observer. That is why we are working with companies to have this information and create a service that can be used by any observer, who will know when the satellite crosses their field of view and will be able to plan their observation so that this disturbance is avoided. is avoided.

Satellites also pose a threat to radio astronomy. Interference to radio observation is very serious and very difficult, because these satellites are there to transmit information to the ground in microwaves. Therefore, the only solution is to disconnect the transmission when the satellite is in view of one of the large radio observatories. So what we are trying to do now is negotiate with the company so that they cut the transmission when they are over these facilities. The huge number of planned satellites has also raised fears of a proliferation of debris, which some experts fear could eventually render large parts of Earth's orbit useless.

And then there is the potential risk to people on Earth when the satellites are deorbited. In the past, SpaceX has said the lifespan of a Starlink satellite is about five years, meaning the satellites must be replaced frequently to maintain service. A recent report from the Federal Aviation Administration, responsible for issuing satellite launch licenses in the U.S., and the nonprofit research groupprofit The Aerospace Corporation predicted that by 2035, Starlink satellites would represent 85% of the risk to aviation and people. on the ground from falling space debris. The report goes on to say that by 2035, if the Starlink satellites do not completely burn up in the atmosphere before falling back to Earth as designed, the FAA expects one person on the planet to be killed or injured every two years as a result of Starlink. satellite debris.

In a letter dated October 9, 2023, SpaceX disputed the report, saying it was based on "a deeply flawed analysis that falsely characterizes the reentry elimination risks associated with Starlink." The letter went on to say that a lack of knowledge, flawed methodology and over-reliance on outdated data contributed to "a distorted analysis that makes absurd, unjustified and inaccurate claims about the risk of Starlink's removal to people on the ground and to the aviation," and requested that the FAA "correct its report to Congress." SpaceX's response to the FAA's analysis really focused on the data underlying the report, pointing to the fact that not only was the data from non-Starlink satellites, but also that the company's own history shows that satellites Starlink burn completely. when they enter the Earth's atmosphere.

The FAA rejected CNBC's interview request and SpaceX did not respond to our interview request. Benvenuti says that while he doesn't believe there's a risk of Starlink's lost debris harming anyone, he does have some environmental concerns. The chemical composition of these satellites that returned to Earth causes them to burn up in the upper atmosphere. What the effect of this would be is unknown and has not been fully studied. Therefore, the impact on the space environment should be thoroughly studied before we continue to populate low Earth orbit with such a large number of satellites. There is no doubt that Starlink has grown enormously in just a few years.

But it remains to be seen whether SpaceX will be able to maintain this pace. They will find it difficult to keep up with the pace of growth that Starlink has shown in the future, and for a couple of reasons. On the first end, there is a certain degree of demand saturation that is occurring after the service was introduced and now that two years have passed in many markets, the lower hanging fruit in terms of subscribers who are more desperate for better service, there is probably I already moved to Starlink. We have also seen evidence that Starlink is having to stimulate demand in the market by reducing the cost of its user terminals.

It has run promotions where its base costs in the US of around $600 for the equipment have been reduced to as low as $150 in Canada, in rural areas. And the same has been done in Australia and Japan, for example, in localized and targeted campaigns. Many believe that Starlink's success is closely related to SpaceX's other major venture, Starship. SpaceX hopes to use the massive next-generation reusable rocket to launch cargo people and many more satellites. But the rocket's development has suffered several delays. For SpaceX to keep Starlink at the hockey stick-like growth seen so far, the company needs to get Starship flying.

Starship is a much larger and more powerful rocket than the current method that SpaceX uses to launch its Starlink satellites, which are its Falcon 9 rockets, into orbit. To cope with both the expansion of the network by launching more and more satellites to orbit, such as to replace obsolete satellites over time, SpaceX needs Starship to fly regularly in order to meet that overall growth trajectory. Competition in the consumer satellite Internet market has also intensified. One service that is expected to be a big challenge is Amazon's Project Kuiper, which launched the first of its satellite prototypes in October.

Amazon plans to begin beta testing its network with customers in late 2024. Amazon is taking a similar approach in terms of its vertical integration, manufacturing the satellites to some extent, launching them themselves through an affiliated company, Blue Origin, and They will manufacture their own user terminals and leverage their e-commerce platform to deliver these equipment and services remotely to the same group of users as Starlink. In the future, you will see many more of these types of Leo broadband Internet systems. It provides a tremendous amount of flexibility and mobility, and that's tremendously powerful not only for national security, but also for connecting disadvantaged populations, rural populations that don't have that kind of connectivity today.