How SpaceX and Starlink could disrupt the mobile market

Tim Courtney: I’d be very concerned. Jeff, it goes back to what we’ve been talking about for 10, 20 years. The carrier that wins at the end of the day has got the lower cost per cell site, basically. Everything being equal, you want to have the lowest opex. At the end of the day, you’ve got to figure out how to survive a price war.

Jeff Johnston: That was Tim Courtney, president of WAVSYS, a broadband network design company, about how concerned executives at Verizon, T-Mobile, and AT&T should be about SpaceX’s plans to launch their own mobile network

Hi, I’m Jeff Johnston and welcome to the All Day Digital podcast where we talk to industry executives and thought leaders to get their perspective on a wide range of factors shaping the digital infrastructure market. This podcast is brought to you by CoBank’s Knowledge Exchange group.

Recent commentary from SpaceX executives about their plans to build and operate their own mobile network has the broadband industry buzzing. The company has done an impressive job growing their satellite home internet service, so it would be foolish to dismiss their recent comments about the mobile industry. I invited Tim to come on the pod to hash this story out. Tim has extensive wireless network experience — he understands the technologies and the underlying business models driving them. He’s my go-to guy for this kind of conversation.

So, without any further ado, pitter patter, let’s hear what Tim has to say.

Tim Courtney, it’s great to see you again. You’re definitely a fan favorite on the podcast. Thank you for agreeing to come back on. How have you been, my friend?

Courtney: All’s good. It’s a crazy world with all this technology, AI, satellite, wireless, fiber. It’s been fun. It’s keeping me busy and keeping WAVSYS busy. Thanks for having me on. Great to talk to you and your clients as always.

Johnston: Dynamic times. A lot of new technologies and exciting things. You’re always my go-to guy to help cut through all the clutter and really talk about what’s truly going on and what could potentially happen. With that, Tim, I want to talk about Starlink, Amazon Leo. We can call them LEO operators. A lot of talk out there regarding mobile service from these folks. Maybe just to start off, Tim, from your perspective, how feasible is it for a Starlink or an Amazon Leo, to go from what I would call today’s direct-to-device service, which is what we’re seeing with messaging and so forth, to truly something that consumers would view as an alternative to Verizon or T-Mobile or AT&T with regards to their smartphone service?

Courtney: I think with every technology integration, it’s more and more feasible. People are talking about Rev2, Rev3, Rev4 satellite technology. No different than, Jeff, when you and I were working about GPS. GPS was a Garmin, TomTom device, and it took minutes to lock on to get your position. Now that’s almost instantaneous. The signals, the transmitters, the receivers get better over time.

I definitely think it could give the folks a run for the money, the cellular operators across the world, a run for their money in the future. In the short term, I would say it’s more of a complement. As you’ve seen with what Apple’s done and what T-Mobile’s done in the U.S. with Starlink, it’s definitely an outdoor technology that has to, eventually, to your question on the roadmap, can it work under trees? Can it work under a metal roof in a car? Can it work in the top floor of a house under an asphalt roof, let’s say? Again, I think those things are only going to improve over time in terms of the signal.

Johnston: I always thought line of sight was needed in order to connect to a satellite, but it sounds like you’re suggesting that perhaps that may not be the case down the road, that you could start to penetrate buildings and other things with radio signals from satellites to a cell phone.

Courtney: Don’t forget. The satellite operators, when they work with mobile, they’re going to use the same mobile frequencies, let’s just say, in general. Your mobile phone today, most cases, can’t physically see a cell site. When you’re in your office, when you’re in your house, you don’t have the luxury of seeing that beautiful monopole tower with three sectors on the top. Over time, as the cell sites got lower and lower, they got into the trees, so you’re not seeing those.

That same technology, if it’s going through the trees horizontally, can it go through the trees vertically to a satellite? Over time, the satellites have been getting closer and closer to the surface of the Earth. The challenges, the signal, the link budget has got a better chance to offer higher speeds, let’s say, a better connection.

Johnston: Let’s talk a little bit about capacity, ultimately where I’d like to get your thoughts on is, can these networks have enough capacity, enough satellites in the sky, to be able to handle the kind of mobile data traffic that’s going over terrestrial networks today? Could you see a path where these would ultimately replace terrestrial networks, I guess, is one question, and then maybe it would be more of a complement to terrestrial networks? I’d love to get your thoughts on that.

Courtney: If you look at the rural, there’s not a lot of population density. In my opinion, as an engineer, I’m not worried about the capacity short-term from the satellite providers offering mobile service. To take broadband out of the equation, take hotspots out of the equation, if we’re just talking mobile phones, I’m not concerned about capacity at this point at all.

Johnston: Interesting. Okay. Okay. Then how do you think about the costs associated with the satellite networks vis-a-vis the terrestrial networks? I was thinking about this. You don’t have to pay a tower company to lease space on a tower, so that’s one cost you eliminate. Then power, I guess, would be another. There’s ground stations, but it seems like there maybe not as many. When we think about mobile service from a satellite network versus mobile service from a terrestrial network, from a capex and an opex perspective, how do you think about those dynamics?

Courtney: The capex, obviously, for the satellites is going to be way off the charts. As you just described, the opex is going to be minimal to almost nothing once you get that satellite in the sky. That’s the curve, so to speak, the balance, the pendulum from heavy capex to light opex, whereas you have on a mobile network, a good amount of capex, but over the life of that cell site, 20, 30 years, the opex is really the driving factor. That’s why you see all three carriers in the U.S. really focus in on their opex burden, be it backhaul, be it electricity, be it tower leases.

Johnston: That makes sense. Yes. I guess I have to reconcile is even though you may have to launch a new satellite, I don’t know, every five years. How long do these things last for in the sky?

Courtney: Yes, the five-year window is plus or minus is where we’re at right now.

Johnston: Okay. It’s like looking at the recurring cost of launching satellites and then factor in the opex savings and compare that to what a terrestrial wireless network, opex and capex profile looks like to figure that out. We don’t have to do that math today, but it’s good to know what to think about it.

Courtney: If I was buying satellites and launching satellites, I wouldn’t look at this as a U.S. problem I’m solving. These satellites are spinning across the globe on different planes. They’re not just trying to generate revenue over the U.S.; they’re trying to generate in Asia, in South America, in Europe, in Africa. There’s a very big fungibility use of these satellites as they spin across the globe here.

Johnston: We’re talking about a much larger market. That’s a very important consideration. Tim, let me ask you: SpaceX has been pretty public about spectrum and mobile lately, What do you think their end game is? What is it about offering mobile service, if that’s their ultimate end game, which it sounds like it is, but what is it about that market that you think is so attractive to them?

Courtney: I think the attractiveness is, one, a cell phone is recession-proof. I think you’d cut your broadband before you cut your cell phone. It’s with you almost 24 by 7. Having that relationship with the consumer and the device, that’s pretty powerful, I would say. Then you and I’ve talked about over the last two or three years is the broadband cell phone bundle. A SpaceX, Starlink, they’re crushing it with broadband right now. They’re doing a great job across the goal, so why wouldn’t you want — I’m just speculating — why wouldn’t you want to pair that with a mobile phone play that they’ve talked about on their earnings calls? It makes sense to me to have the broadband component with a mobile component. I think, long-term, that’s some very good stickiness to reduce or eliminate churn.

Johnston: Yes, that’s certainly been a very powerful bundle out there. We’ve seen the wireless operators have a lot of success. Yes, you called that a while ago. I think you called it the “killer bundle” or something. You were very bullish on fixed wireless when a lot of people were saying, “Oh, they’re going to run out of capacity, and they’re not going to be able to scale the network.” You were like, “Not so fast.”

Courtney: When people say capacity limitations, you and I have been through this. We’ve talked to folks on Wall Street like, “Oh, Siri is going to break the network. FaceTime will never be on cellular.” We’ve heard this over and over and over again. You get some smart people; they’re going to solve these problems. I would say there’s some super-smart people right now in the LEO space that can solve any capacity problems that are presented. Now, that might be a hybrid of satellite and terrestrial. Don’t get me wrong.

You’re looking for your hot spots. Maybe you build a cluster of cell sites in and around that hot spot area. I’m just saying I’m never worried about capacity. There’s always a way to figure out. Get more spectrum, different technology. Licensed spectrum, unlicensed, but there’s ways to offer the customer a good user experience at the end of the day.

Johnston: You mentioned spectrum. If you think about SpaceX, with Starlink, if they truly want to scale that network to be able to support millions of smartphones on that network, in addition to their broadband network, how much more spectrum do you think they’re going to need, and how do you think they would get it?

Courtney: Well, you can’t have enough, as the three carriers in the U.S. have proven over the last 30 or 40 years. You don’t need, day one, all the spectrum that the three in the U.S. have. You can grow into that. They’ve already made the acquisition of the dish spectrum. There’s rumors that they’re looking for other spectrum as well. Between the auctions that they comment on, the upcoming auctions, private transactions, partnerships, I think they’ll be pretty smart; be it any LEO operator would want to get their hands on terrestrial spectrum. That would be my advice if I worked for a LEO company.

Johnston: Makes sense. Let’s just go back to their motives. You talked about the bundle, the smartphone broadband bundle. Makes a lot of sense. How much do you think AI is playing a role in this? We’re going to look down the road here a little bit. Do you think there’s a physical AI component to maybe long-term strategic thinking here,

Courtney: I don’t think so. I don’t think that the connection is important as what are you doing with your phone? If you’re the ISP, you don’t need to download an app on someone’s computer or phone. You’re literally seeing everything they’re doing on the phone with the IP addresses. You’re modeling where is the device? Where are they shopping? Where are they having recreation, entertainment? You’re building a profile just like the advertising people have built a profile.

I would say that data is huge to train a model, to train an advertising model, as we’ve seen already in the past.

Johnston: That makes sense. We haven’t talked about Amazon Leo, and I’d love to get your thoughts. If you were running Amazon Leo right now and you were looking at what SpaceX is saying publicly about Starlink and their efforts to launch a mobile service, are you thinking the same thing?

Courtney: Well, as a Amazon customer right now I’d love to see some sort of bundle or backup service with my Prime subscription. Be it a mobile phone, broadband, something. I would love to see that. Then on the other side of the coin, they have a lot to bundle. They’ve got their autonomous cars. They’ve got Amazon Prime. They’ve got their video. NFL. They’ve got a bunch of services that could be combined with a broadband play if they don’t dip their toe into the mobile play. I haven’t even read or seen any rumors of them getting into mobile, per se. They’ve talked about direct-to-the-device, but is that just supporting carriers today, or would they bring their own service? I don’t know. I think there’s a market for it. I think people are looking for value, and that the bundle, as we just talked about a few minutes ago, broadband and mobile phone is pretty powerful.

Johnston: For sure. Yes, there’s been a lot of reports over the years, I think some of them are somewhat accurate regarding Amazon talking to Dish about doing something with all the spectrum they had. I’m sure they’ve talked to the wireless carriers about MVNOs. It sounds like, and I don’t want to put words in your mouth, but it sounds like maybe they’ve looked at all of that, and decided, “We don’t need to do that. We can be our own network operator.” Do you think that’s how we got to where we are today?

Courtney: I think that’s quite possible, for sure. Don’t forget, Amazon is the largest wireless operator in the U.S. Their Amazon Sidewalk probably has more nodes than any cellular network combined in the U.S. They published their map, and it’s 95% of the U.S. population. Now, that’s low-speed IoT-type data. They’ve got some experience in wireless. They had a phone at one point. They’ve had ambitions in the past. I would hope it’s something they’re looking— Our day job is to help carriers design, build, and operate their network. The more people in the space, I think it just raises the whole boat. The ocean just raises everyone’s boat here.

Johnston: So Tim, if you were an executive at Verizon, AT&T or T-Mobile, how concerned would you be about what you’re seeing and hearing from SpaceX with regards to their efforts to get into the mobile business?

Courtney: I’d be very concerned. Jeff, it goes back to what we’ve been talking about for 10, 20 years. The carrier that wins at the end of the day has got the lower cost per cell site, basically. Everything being equal, you want to have the lowest opex. At the end of the day, you’ve got to figure out how to survive a price war.

That comes down to having the lowest everything on the opex. Do you rent or build? Backhaul your radios. Anything you could do to save costs, you have to do. Do you have too many stores? Can you do it online? Can you do self-serve? Can you use AI? All this stuff.

Johnston: So Tim, look, this has been great. We’ve covered a lot of really great information today. So, thanks again for your time joining us on the podcast today. But like I always like to do, I just want to give you the last opportunity to share anything that we didn’t talk about or points that you want to emphasize. So the stage is yours my friend.

Courtney: I’m just super excited that we’ve got the LEO operators coming in. It’s going to shake things up. It’s going to have everyone reevaluating their design, their build, their operate models, be it from a technology, a marketing, a sales perspective.

We’re hitting the reset button. The LEO folks definitely bring a valuable service to rural America to get reliable cell phone coverage. It’s only going to get better. Short term, can the cellular operators work with the LEO operators? That would be my first question. As a consumer, I want to see that. I want to have 100% coverage, great speed everywhere. I think there’s going to be a lot of change. I think it’s going to force everyone to rethink their strategies, which is not a bad thing. As we get ready for 6G, we’re in the lull between five and six right now. There’s a lot of smart people figuring out what the consumer needs, what the engineers need to run these big networks from an AI perspective, a cloud perspective. I’m pretty excited about what’s coming down the pike here.

Johnston: A special thanks goes out to Tim for being on the podcast today. I must say, I was a little surprised about how bullish Tim was on satellite networks eventually becoming a realistic alternative to today’s networks from Verizon, AT&T and T-Mobile. I think the operative word is “eventually,” as I suspect we’re probably several years away from this happening. But as Tim said, these satellite networks will get better and cheaper with each iteration, just like terrestrial wireless network did. And of course, we all how those networks contributed to the demise of the landline telephone business. 

Hey thanks for joining me today and a special thanks to my CoBank associates Christina Pope and Tyler Herron because without them there wouldn’t be an All Day Digital podcast. Watch out for our next episode.