Origin

Starlink is the satellite broadband arm of SpaceX’s, the aerospace manufacture and space transportation company founded by Elon Musk. This enterprise, based on building a massive constellation of low-flying satellites spread out in different orbits, aims to provide more affordable internet services with lower latency and higher capacity than current fibre services. This venture is part of Elon’s ultimate goals: fund interplanetary transportation to Mars and the moon.

Launch

After its first launch in May 2019, Starlink has released several batches of 60 satellites each increasing its consistency over time. Construction efficiency has also been improving, being now able to manufacture at an unprecedented rate of 120 satellites a month, levels never seen before in the satellite sector. This has enabled them to release two batches a month since October 2020, with the overall number of satellites in orbit totalling 904.

With 12,000 satellites approved by the FCC (Federal Communication Commission) and another 30,000 requested, these interconnected networks will be able to beam with ground stations to provide high-speed internet anywhere in the world.

Revenue

With more than half of the world’s population lacking in Internet access, success of this and similar enterprises could bring huge implications, especially for those living in remote locations. As such, Starlink’s initial target will be rural areas where traditional providers are struggled to reach. They have recently been granted a licence to operate in Canada (where 40% of the population lives in rural areas without access to high-speed internet), adding to its previous one million terminals authorized in the US, and planning to expand to near-global world population coverage in 2021.

As they are currently conducting private trials, a public beta is expected to be released in the coming months, moment from which we could start measuring Starlink’s success by its revenues rather than pace of development. Such programme, called ‘Better Than Nothing Beta’, will charge US users a one-off $499 for the equipment and a monthly subscription of $99. Internet broadband is expected to reach 150Mpbs and latency of 20ms (providing capability for gaming and HD streaming) during the first months, claiming those figures will improve as they launch more satellites, install more ground stations, and improve their software. Since nearly 700,000 individuals across the US have already indicated interest in the upcoming service, Starlink has requested to increase the number of authorised terminals to five million.

With regards to expectations, Starlink’s internal documents forecast 40 million subscribers and revenues of $30 billion to $50 billion a year from 2025. In line with company’s outlook, UBS has estimated a $10 billion to $20 billion per year revenue opportunity, while investment bank Morgan Stanley has projected a more optimistic scenario of roughly $34 billion as soon as next year.

Additionally, this megaconstellation project has also drawn attention in the military sector, where the Pentagon awarded a $28.7 million contract over the next three years to study, develop and test possible military applications

Cost and funding

Back in 2018 the cost to design, build, and deploy the constellation was estimated to be about $10 billion.

Several companies which have attempted a similar undertaking in the 90s ended up in bankruptcy. However, the previous satellites weighed several tons whilst the new smaller satellites are around 260 kg (570lb), which is crucial to lower the cost per unit.

As building rockets requires massive amounts of investment, SpaceX has continued to raise capital over the years. After fundraising $3.4 billion since inception, in August 2020 the firm secured an extra $1.9 billion, doubling their initial offering due to strong demand, and likely guaranteeing the health of the expensive programme for 12 to 18 months.

Competitors

Now, as the cost to launch satellites has fallen and demand for accessing the internet has increased globally, there has been an emergence of competition amongst several private firms:

• Oneweb: the most ambitious project alongside Starlink, the firm was backed from inception by Airbus, Japan’s Softbank and Virgin Group owner Richard Branson. After launching 74 of the 648 planned satellites, financial difficulties forced Oneweb to furlough much its staff and file for bankruptcy in March 2020. However, after securing over $41 billion in new funding (including the UK government, who will hold 42% in the enterprise), in the last few weeks it has emerged from Chapter 11 bankruptcy and resumed the deployment of its constellation.
• Kuiper: subsidiary of Amazon, in July 2020 announced their intention to enter the race by investing over $10 billion in Project Kuiper, after been approved to deploy over 3,200 satellites internet constellation over the next decade. However, it is yet to confirm whether they intend to sell broadband services directly to consumers.
• Azure Orbital: funded by Microsoft, the company is designed to compete with Amazon Web Services by allowing external companies to use Microsoft’s ground stations to connect with their satellites.

Challenges

There are a few significant challenges Starlink faces in its bid to revolutionise internet connectivity across the globe:

• High astronomy pollution: astronomers claim that the number of visible satellites will outnumber visible stars and their brightness will severely impact scientific observations. As by default Starlink’s satellites change their orbits autonomously, observations cannot be easily scheduled to avoid them. Additionally, there are growing concerns that megaconstellations could litter low Earth orbit with hundreds of dead satellites, this is, those which had lost contact with ground control teams.
• Possibility of satellites colliding: to avoid potential impacts, collision avoidance manoeuvres are performed three times a day, with estimations suggesting this number will increase to eight an hour if all planned mega constellations are launched. If two satellites crash, they could produce thousands of debris pieces which could potentially hit other satellites or even the Earth. In 2019, a near miss took place when a SpaceX satellite did not move and almost collided with a European Space Agency (ESA) one.

As countermeasures to tackle those challenges, Starlink have lowered the altitude of its satellites to about 550 km, changed satellites coating to reduce their albedo (measure of how reflective a surface is) and will provide on-demand orientation adjustments for astronomical experiments.

Potential valuation

Starlink has proved so far to be ahead on the satellite internet race due to its independent building and launching of spacecrafts, with cost efficiency still to be achieved by its competitors. Furthermore, Starlink has safeguarded sufficient funds to ensure the business can operate for the foreseeable future.

By securing a substantial market share, Starlink could become self-sustaining soon. With revenues projected to reach $30 billion to $50 billion by 2025, the initial substantial cost of building the satellite constellation, estimated in $10 billion, could be offset in the coming years.

Recently, investment bank Morgan Stanley has estimated Starlink’s valuation to be around $81 billion dollars, nearly doubling the figures announced during summer, based on a revised outlook of 364 million subscribers by 2040 and an investment of $240 billion required to build out infrastructure.

The key question is, can Starlink fend-off competition, raise additional capital and attract the hundreds of millions of customers needed to achieve its goal?