Can Starlink stay ahead in satellite internet?

Summary

Summary of Episode: "Can Starlink Stay Ahead in Satellite Internet?"

The Indicator from Planet Money
Host: NPR
Release Date: June 30, 2025

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Introduction: Elon Musk’s Dominance in Satellite Internet

In the rapidly evolving world of satellite internet, Elon Musk's Starlink stands out as a formidable leader. Hosts Darian Woods and Waylon Wong delve into the factors that have propelled Starlink to its current dominance and explore whether it can maintain this lead amidst growing competition.

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Starlink's Market Dominance

Tim Farrer, a satellite communications analyst, highlights Starlink's overwhelming market presence:

“[...] it’s amazing how dominant 90%.”
[00:55]

Starlink commands approximately 90% of all global satellite data traffic, making it the top provider in the satellite internet industry.

Usage Scenarios: Starlink's versatility allows users to access high-speed internet in remote locations, such as log cabins or boats. This has not only broadened internet accessibility but also driven prices down to levels comparable with traditional broadband services.

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Economics Behind Starlink’s Success

Fixed vs. Variable Costs:

The high fixed costs associated with launching a satellite internet service include obtaining licenses from the FCC, building satellites, and manufacturing user terminals. Once these initial investments are made, variable costs—the expenses incurred from adding each additional customer—are relatively low.

Natural Monopoly Dynamics:

Due to high fixed costs and low variable costs, the satellite internet industry tends toward a natural monopoly, where a single provider can efficiently serve the entire market. This economic structure has significantly benefited Starlink, positioning it as the dominant player.

“Starlink is a natural monopoly in satellite communications very clearly.”
[07:01]
— Tim Farrer

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Competition in the Satellite Internet Sector

Despite Starlink's dominance, emerging competitors like OneWeb and Amazon's Project Kuiper are striving to enter the market. However, significant disparities in the number of operational satellites highlight the challenge Starlink faces:

• OneWeb: Over 600 satellites launched.
• Amazon Project Kuiper: Approximately 54 satellites in orbit.

In contrast, Starlink boasts over 7,000 satellites, creating a substantial lead that competitors find difficult to bridge.

“Starlink was the first to really invest at this enormous scale and make it accessible to everyday people.”
[08:02]
— Waylon Wong

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Operational Efficiency and Cost Management

Starlink's parent company, SpaceX, plays a crucial role in maintaining its competitive edge through cost-effective rocket launches. By leveraging SpaceX's resources, Starlink benefits from reduced launch costs compared to its competitors, who often rely on SpaceX for their own satellite deployments.

Manufacturing Advantages:

Starlink's large-scale production of terminals has driven down individual costs to approximately $500 per unit, significantly lower than competitors like Utilsat OneWeb, whose terminals cost between $5,000 and $8,000.

“Starlink’s made about 5 million terminals in the last 12 months. [...] all gets cheaper in the long run if you’re making a lot of them.”
[09:07]
— Tim Farrer

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Monopoly Concerns and Regulatory Implications

While Starlink's dominance benefits from economies of scale, it also raises concerns about monopolistic practices. In regulated industries like utilities, government oversight ensures that companies do not exploit their market power. However, satellite internet lacks similar stringent regulations, potentially allowing Starlink to prioritize profits over consumer interests.

Geopolitical Implications:

Elon Musk's control over Starlink has significant geopolitical ramifications. Notably, Musk has restricted Starlink's expansion into contested regions like Crimea, causing friction with Ukraine, which relies on Starlink for military communications.

“Elon Musk refused to let Ukraine extend Starlink to the contested territory of Crimea.”
[09:53]
— Darian Woods

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Financial Backing and Investment Capability

Starlink's unparalleled scale is partly due to SpaceX's financial robustness, allowing substantial investment without the typical financial constraints faced by other companies. This financial freedom enables Starlink to continually expand and innovate without the immediate pressure of profitability.

“SpaceX has not been subject to significant financial constraints, [...] they've been able to invest billions of dollars into developing the Starlink system.”
[10:23]
— Tim Farrer

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Future Outlook: Can Starlink Maintain Its Lead?

Given the current landscape, Starlink faces minimal immediate competition due to its extensive satellite network and cost advantages. However, long-term sustainability hinges on addressing monopoly concerns, regulatory challenges, and the ongoing need for technological advancements to fend off emerging competitors.

“Having a dominant company innovating and using those economies of scale is all well and good until that monopoly does begin to care about profits and raises prices on customers who have no other choice.”
[09:27]
— Darian Woods

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Conclusion

Starlink’s ascent to the forefront of satellite internet is a testament to strategic investment, operational efficiency, and the economic advantages of a natural monopoly. While its dominance currently appears unassailable, future challenges related to competition, regulation, and geopolitical factors will play crucial roles in determining its long-term position in the market.

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Notable Quotes:

• Darian Woods: “Starlink is top dog.” [00:55]
• Waylon Wong: “Starlink wasn’t the first Internet satellite company, but it’s been the first to really invest at this enormous scale and make it accessible to everyday people.” [08:10]
• Tim Farrer: “Starlink has over 7,000 satellites in orbit today. The next biggest system is OneWeb, which has just over 600 satellites launched to date.” [07:31]

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Produced by Angel Carreras with engineering by Neil Rauch. Fact-checked by Sarah Juarez. Edited by Julia Ritchie and Peyton Cannon.

Transcript

[NPR]

Npr.

[Darian Woods]

The first half of this year, it has been hard to go a day without hearing something new about Elon Musk.

[Waylon Wong]

Yeah, Musk unleashing Doge on the federal government was obviously the big news story.

[Darian Woods]

Followed by activists vandalizing Tesla dealerships.

[Waylon Wong]

And then we did have SpaceX successfully helping return astronauts from space. That was a win for Musk.

[Darian Woods]

And that's not even getting into the more gossipy elements.

[Waylon Wong]

I'll leave that for a different show.

[Darian Woods]

You're no fun.

[Waylon Wong]

The point is it's too early to talk about Ketamine Darian. And the other point is that Musk's personal brand has been as volatile as the price of Dogecoin. But one area where he is undoubtedly the leader is satellite Internet. That's with Starlink.

[Darian Woods]

Yes. Satellite communications analyst Tim Farrer says Starlink is top dog.

[Tim Farrer]

It's already 90% of all the satellite data traffic goes over Starlink in the world. I mean, it's amazing how dominant 90%.

[Darian Woods]

Of all satellite Internet traffic goes through Starlink.

[Waylon Wong]

Yes, when you want to stream movies in your log cabin, you know, like Abraham Lincoln did, or check emails on a boat, satellite Internet makes that possible. And, and what Starlink has done is driven prices down so that it's not that much more expensive than broadband. But in the process, has it created a monopoly? This is the indicator from Planet Money. I'm Waylon Wong.

[Darian Woods]

And I'm Darian Woods. Today on the show, the economics of Starlink. We learn how Elon Musk's satellite Internet service became so dominant and whether it's likely to stay that.

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[Waylon Wong]

Starlink is the satellite Internet service provided by SpaceX. You buy one of these terminals which looks kind of like a silver iPad. You set it up facing the sky and then almost anywhere in the world you can have high speed Internet. We asked satellite communications analyst Tim Ferrer whether he had Starlink.

[Tim Farrer]

Yes, we have a Starlink that we use when we go camping.

[Darian Woods]

Okay, so no campfire stories.

[Tim Farrer]

Well, I mean, we were away for the super bowl this February and we were not the only person in the campground who was watching the super bowl and having a party in the middle of nowhere in Southern California at an RV site. It's quite often now 20, 25% of the RVs are using it.

[Darian Woods]

You got to get some escapism from all that nature.

[Waylon Wong]

There's too many birds chirping here to put on the tv.

[Darian Woods]

So how did one company become the provider of satellite Internet? A big explanation is what's known as fixed costs. These are the costs before you add on more customers. So let's go through what's required to get the very first customer onto satellite Internet.

[Tim Farrer]

You need licenses from the Federal Communications Commission for the spectrum that you're going to use to transmit your signals from the satellites.

[Waylon Wong]

Then you have to build satellites and.

[Tim Farrer]

You have technicians crawling around sticking chips on there and wiring them and soldering them. Traditionally in the satellite industry has been a very manual process.

[Waylon Wong]

Oh, and by the way, one satellite will not do because most of the time it won't be passing above your customer.

[Tim Farrer]

You know, the satellites go all around the earth and they only spend a limited amount of time over somewhere like.

[Darian Woods]

The US Back of the envelope. We'll probably need a couple of dozen satellites to ensure continuous service. And with each of those satel, you want to make absolutely sure that they're going to work. So you do a lot of testing.

[Tim Farrer]

You shake it around really hard to check that nothing's going to come loose and mean your satellite stops working. Because when you launch it up on a rocket, there's obviously lots of vibration getting up there into space.

[Waylon Wong]

Then you find a rocket to get it up there. If it all goes to plan, those satellites will be good for several years, and even then you're not done. You need to have a factory to build what's called a terminal. This is what the user has, basically the satellite dish. And they're not cheap to build. Take the company called Utilsat OneWeb. In Europe, they've made several thousand terminals so far.

[Tim Farrer]

Those terminals cost about five to $8,000 when they come out of the factory.

[Darian Woods]

So between the licenses, the satellites and the terminal factories, the fixed costs of satellite Internet are really high. What is cheaper is what's known as the variable costs. Once you've added one customer, you've got one customer in place. Adding a second or a third one doesn't cost you that much extra. Mostly it's just the cost of manufacturing a new terminal.

[Waylon Wong]

What's interesting about industries with those characteristics is that these tend to be natural monopolies. That means the more customers a company gets, the cheaper it becomes for them to provide that service. One company naturally becomes a monopoly.

[Darian Woods]

Electrical grids in a local area are an example of a natural monopoly. Once the grid company spends a bit big fixed cost on building the power lines, adding new customers is relatively cheap. And it doesn't really make sense to have two sets of power lines going from house to house just for the sake of competition. So a monopoly arises. And so we wanted to know, is Starlink a natural monopoly for satellite Internet?

[Tim Farrer]

Yes, I think that's right. It's a natural monopoly in satellite communications very clearly.

[Waylon Wong]

But not everyone seems to agree that European satellite Internet service OneWeb is one of them. Clearly it's competing and thinks it has a chance to wrest away customers who might otherwise go to Starlink. Also, Jeff Bezos disagrees. Amazon has launched satellites into space too, to start an Internet service. This is called Project Kuiper. But they've got a lot of catching up to do.

[Tim Farrer]

So starLink has over 7,000 satellites in orbit today. The next biggest system is OneWeb, which has just over 600 satellites launched to date.

[Darian Woods]

Okay, 600 to 7,000. That is a huge gap. We're not talking about a neck and neck race. We're talking, you know, worlds abire, right?

[Tim Farrer]

And then everyone else is even further behind. Amazon would like to launch 3,000 satellites, but they've only launched about 54 satellites in orbit.

[Darian Woods]

54. Jeff Bezos, hurry up if you want to compete with Mr. Musk.

[Waylon Wong]

Starlink wasn't the first Internet satellite company, but it's been the first to really invest at this enormous scale and make it accessible to everyday people.

[Darian Woods]

The natural monopoly economics of the satellite Internet industry are the big reason why it's so far in the lead. But the granular details of how Starlink leaped ahead are pretty interesting. So let's recap the steps needed to get satellite Internet. You know, first, building your satellite.

[Tim Farrer]

Starlink has automated an awful lot of that. And even when it comes to launching them, because Starlink is throwing up so many satellites, if they have a few that don't work, they don't really mind.

[Darian Woods]

And because Starlink is owned by SpaceX, that means cheaper rocket launches than the prices its competitors have to pay. Sometimes the competitors are paying SpaceX itself to hitch a ride.

[Waylon Wong]

So with more satellites in orbit, that gives you more bandwidth. The more bandwidth you have, the more customers you can have, and, and the more customers you have, that helps you bring down costs through the magic of what's called economies of scale. Take terminal production.

[Tim Farrer]

StarLink's made about 5 million terminals in the last 12 months. If you are making it in huge volumes, you can invest in miniaturizing the components, integrating chips that are more powerful and fulfill more functions. And that all gets cheaper in the long run if you're making a lot of them.

[Darian Woods]

Tim says Starlink's got the cost of producing each one down to about $500, way below its competitors.

[Waylon Wong]

Having a dominant company innovating and using those economies of scale is all well and good until that monopoly does begin to care about profits and raises prices on customers who have no other choice. That's why a lot of utilities like power and natural gas are regulated by the government. There are limits to how much they can squeeze customers.

[Darian Woods]

Then there's the question of how much power one unelected person should hold. Elon Musk refused to let Ukraine extend Starlink to the contested territory of Crimea. Ukraine has been frustrated with this. Its military uses Starlink for partly this reason.

[Waylon Wong]

China and the European Union are encouraging their own satellite Internet. But any competitors have to grapple with the fact that Starlink is part of Elon Musk's empire. And that means the usual principles of finance don't, don't apply.

[Tim Farrer]

SpaceX has not been subject to significant financial constraints, unlike most normal companies. And so they've been able to invest billions of dollars into developing the Starlink system.

[Darian Woods]

I mean, Waylon, would you want to compete with a company that doesn't really seem to care about day to day profits and is backed by one of the world's richest people and his acolytes?

[Waylon Wong]

No, I'm just going to play with my ham radio.

[Darian Woods]

This episode was produced by Angel Carreras with engineering by Neil Rauch. It was fact checked by Sarah Juarez. Julia Ritchie edited, Peyton Cannon edits the show and the indicator is a production of npr.

[NPR]

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