Starlink is Bringing Internet to New Adopters
2.9 billion people have never been online but satellite internet could be the solution
Hello readers! Apologies for the short hiatus while I was relocating. We're back this week with another Sandbox article.
Sandbox is a product-centric look at how global technology companies build for emerging ecosystems. This week we’re looking at SpaceX’s satellite internet service, Starlink, and how its service could bring billions of people online - if they learn out how to localize.
It's safe to assume anyone reading this article has an internet connection. You've probably had one for the better part of the last two decades, and you only think twice about access if you've lost cell reception. You may even count yourself among the legendary millennials who grew up using a landline phone to call friends or saw your parents navigate cross-country road trips using folded paper maps but now crumble at the thought of driving down the block without your GPS. The fact is, over one-third of the world's population had still never used the internet coming out of the Pandemic.
Enter Starlink, SpaceX's cash cow and pet project "to provide high-speed, low-latency connectivity across the globe." Targeting rural and remote areas of the globe unserviced by legacy internet service providers (ISP) and mobile broadband, Starlink is the latest generation of global satellite internet players.
Internet access is so widely acknowledged to have a positive effect on society and quality of life that we don't question its impact. It’s even more important to keep in mind that there's a tremendous difference between having poor internet access versus having no internet access. Think of a day when you lost your phone; remember how hard it was to access even the most basic of information and services?
How Does Satellite Internet Work?
Oddly enough, it's not rocket science. More specifically, the consumer usage of satellite internet isn't rocket science, but the mechanics of it are. There are endless explanations available on blogs and YouTube that range in technical depth, but for the average Joe I've included a simple illustration below:
Ground stations connect ISPs with satellites; in the case of Starlink, these are "Low Earth Orbit" (LEO) satellites which operate much closer to the Earth than others. The overly-simplistic explanation is that the closer the satellites are, the better. Users receive satellite signals via a dish connected to their home. From there, their home internet functions like any other fixed broadband connection.
I'd recommend this article for a more detailed explanation suitable for a generalist audience.
Is Starlink the First Product to Market?
SpaceX is the latest player but it’s not the first to offer satellite internet. Several providers have existed globally for over two decades, and while some leverage different technologies than others or target specific markets, all effectively provide the same service. Take this snapshot for consumer satellite internet in the US:
Other players are competing globally, and, most notably, Amazon's Project Kuiper is preparing its own satellite internet service to compete with SpaceX and recently received FCC approval for the launch of 3,236 satellites. Amazon has yet to share details on when the service will go live, but it must launch its entire satellite constellation by 2029 per its FCC license. Of course, it goes without saying that this is a capex-intensive business model, and market leaders will rely on competitive advantages drawn from having the largest, most efficient satellite constellation launched at low costs.
How Well Does Starlink’s Product Work?
The answer is: it depends. Fixed broadband is still the optimal solution for speed, ease of use, and reliability. However, remote or mobile locations don't always have broadband access, so satellite and mobile broadband offer alternative solutions. Below is a comparison of the speeds:
Satellite internet requires satellite density and unobstructed dish access. Weather and network congestion can also reduce speeds and cause outages. SpaceX frequently launches Starlink satellites, but the current count hovers around 4,000, far below their target of over 40,000. A quick scan of Reddit offers prospective customers mixed customer feedback pointing to waning speeds due to crowded bandwidth as the company surpassed the 1,000,000 user mark in December of last year.
So What Does this Mean for Emerging Economies?
Here's the challenge: with technology like this, we envision a utopia where the internet becomes a human right, and everyone has access. Unfortunately, barring some unique PR opportunities, the cost is prohibitively expensive to those who would benefit from it the most.
Let's use Starlink Brazil as an example. Starlink launched in-country in February 2022 with pricing over five times more expensive than fixed and mobile broadband sans hardware cost. However, in August 2022, recognising their mismatched pricing, Starlink cut their hardware costs by 20% and the monthly fee in half.
This example isn't to pick on Starlink but rather to highlight the challenge of having a near-inverse product market fit. Starlink competitors HughsNet and ViaNet are in a similar position and price their products comparatively, although they offer financing options to address the up-front costs. Brazil is also illustrative; most emerging and frontier markets will face the same issue. But, invariably, wealth sits in urban centres, which are already served by fixed broadband ISPs. Such is the paradox of satellite internet.
Aside from pricing, there are issues with trust, customer education, and anti-competitive regulation, which slow adoption and internet penetration. Brand recognition and years of service boost trust in a brand, and consumer education is a network effect. Our parents took years to figure out how to set up an iPhone, but it didn't take long before millennials quickly learned and became their parents' in-home Genius Bar. A similar knowledge proliferation will need to take place for the set-up of satellite dishes. Regarding regulation, Telecom ISPs in emerging markets are notoriously anti-competitive and boast strong government ties: look no further than Safaricom in Sub-Saharan Africa or Etisalat/Du in the United Arab Emirates. If you've ever used Comcast as your ISP, you'll know the US is no better.
What's not helping SpaceX is its clunky, US-centric approach to international growth and lacklustre localisation. Hiring is limited to US citizens, of which the State Department estimates only 37% have passports, so it presents a challenge when trying to add international experience to the roster. Still, the company continues operating with an unsustainable "one world, one market" approach and needs more direct engagement with its customers.
How Can Starlink Make Its Service More Accessible?
There are two levers here to reduce cost in the short term, barring the passing of any significant new cost-saving innovations to customers.
The first is subsidising. Subsidies could come from governments and public sector players interested in increasing the number of internet users. The public sector considers it a matter of economic productivity and efficient information and online services distribution. I have a feeling government officials don't mind that enabling digital economies also aids tax collection. So whether the focus is on consumers or small businesses, there is a real case for governments to consider subsidies for satellite internet players.
Private sector players could also participate in subsidisation to expand their addressable market and distribution. Depending on the market, partnerships could range from bundling streaming media services like Netflix, gaming hardware companies like Microsoft or Sony, or real estate developers seeking to provide internet to their homes.
The second lever to reduce costs for consumers is pooled access. Shared access requires more work on the product and sales operations side, but it would take the shape of an under-connected community sharing the cost of a dish and monthly connection or a small business offering customers access in a post-2010s take on the internet cafe.
To illustrate an example, I'll use my city of Irbid, Jordan. Although it's the second largest city in Jordan, high-speed broadband infrastructure in the city is poor relative to the capital of Amman. Many (including my extended family members) access the internet through mobile broadband routers using SIM cards with unreliable connections. However, the flat rooftops and relatively mild weather throughout the year make it ideal for satellite internet connections. My neighbourhood consists of two to three-story buildings with one to three families per house. An entrepreneurial resident could be incentivised to invest in a dish and sell access to his neighbours. Mosques, schools, and cafes could also offer reliable satellite connections.
Relative to the innovations made in this field to date, these adaptations and localisations are minor and they should be, as I pointed out in my last piece. The product itself won’t change by market, but how people access it and what they’re able to pay will differ. Given Starlink's nascency, it's more likely they don't have the software engineering and product capacity to implement these changes yet and are focusing on low-hanging commercial fruit.
There are other products in development that could be better suited for emerging markets. Starlink recently partnered with T-Mobile in the US to bring Direct-to-Device internet, meaning no Starlink dish is required. This reduces the barriers to entry for emerging markets where almost all consumers and even some businesses are mobile-first.
If you weren't born with it, the internet is still a marvel, but we still have a long way to go to improve accessibility in parts of the world with weaker telecom infrastructure. Enabled by venture investors, founders spend their time and resources building pet food marketplaces and selling JPEGs of cartoon apes for millions of dollars. Yet, we still need to enable access to the digital era's most basic of innovations for emerging and frontier markets: the internet. Satellite internet partly solves this, and service providers like Starlink, Project Kuiper, HughsNet, and ViaSat will lead the way forward. However, until Starlink and its peers build better-localised products and understand pricing in emerging markets, the majority of the consumer beneficiaries of this technology will likely be found in the US, Europe, and Australia.