Prediction: SpaceX Starlink will compete with AST SpaceMobile

If you know anything about SpaceX and its Starlink program, you probably know that this is Elon Musk’s master plan to bring satellite Internet service to everyone on Earth — and to increase SpaceX’s profits in the process so that -finance his plan to colonize Mars. .

If you only know one little more about Starlink, you know it has already evolved beyond this original plan. The US military and others are already starting to throw money at SpaceX as the company offers to build military versions of Starlink (called Starshield) for national security missions.

But here’s something you might not know at all about Starlink: It may soon let you make phone calls from your cell phone to your friend’s… through space.

Image source: Getty Images.

SpaceX: the world’s 911 provider

SpaceX is calling this newest service “Starlink Direct to Cell” and recently added a page to its website announcing “seamless access to text, voice and data for LTE phones around the globe.” The company plans to use Starlink satellites tuned to allow cell service to allow regular, non-satellite phones to make calls to other cell phones via satellite, even in areas without cell tower coverage.

The company plans to start offering mobile-to-mobile text services later this year — perhaps as early as Q3 2024 — with voice and data services in 2025.

In a letter to the Federal Communications Commission (FCC) last week requesting an expedited license, SpaceX said it is working with T-Mobile USA (TMUS -0.36%) to provide “direct-to-cell satellite service that closes mobile ‘dead zones’ everywhere.” To date, SpaceX has put 130 Starlink satellites into orbit with this capability “with more launches on the way.”

SpaceX notes that some telecom rivals oppose its licensing application, citing concerns about signal interference with other communications. (And SpaceX is asking the FCC to waive requirements for proof of non-interference.) In what appears to be an effort to bolster its case, SpaceX has also offered to facilitate “free” “emergency” phone calls.

On second thought, SpaceX Starlink will provide free access to emergency cell phone services for people in distress.

This applies worldwide, subject to approval by country governments.

I can’t have a situation where someone dies because they forgot or couldn’t…

— Elon Musk (@elonmusk) August 27, 2024

SpaceX versus the competition

But direct-to-cell, or DTC, is not an original idea for SpaceX.

On the contrary, in recent years, space communication companies like it Globalstar (GSAT -4.58%) and AST SpaceMobile (ASTS -0.72%) have taken the lead in DTC communication, where standard cell phones can be used like old-style satellite phones, calling anyone anywhere on Earth by transmitting signals directly from satellites.

AST, in particular, gained notoriety this year by signing partnerships with (and commitments for financial support from) both AT&T (T 0.71%) and Verizon Communications (See 1.28%). Earlier this month, AST also announced FCC approval to begin commercial service via its first five BlueWalker satellites, which are scheduled to launch from Cape Canaveral later this month.

Globalstar announced a similar license win last week, when the FCC extended its own license by 15 years and allowed Globalstar to add 17 new communications satellites to its constellation.

But while these companies have taken the lead in this market, SpaceX has proven to be adept at outpacing the first movers in lucrative markets.

SpaceX, the competition-quasher

As perhaps the biggest player in space, launching more rockets carrying more satellites for more types of businesses than anyone else on Earth, SpaceX is uniquely positioned to identify which space businesses are the most profitable—and their change the business model to take over those industries. .

This happened first in the heavy-lift rocket market, where SpaceX started as an upstart but quickly eclipsed traditional agencies like United Launch Alliance and Arianespace and became the largest launcher of large rockets on the planet.

It still happened at small launches, where SpaceX noticed companies like Spaceflight Inc. making good money buying Falcon 9 rockets, bundling more small satellites on board and mass launching satellites. Surprise! SpaceX announced its own Transporter service that did exactly the same thing, but at reduced prices. Within months, Spaceflight sold its own bundling business to Japan’s Mitsui and exited the business.

We’re seeing similar dynamics across space, in fact, as SpaceX explores new areas of space business, from space “tugs” to space tourism to Earth observation satellites. And now it looks like SpaceX has its sights set on DTC’s nascent mobile phone service business.

The result for investors

Whether SpaceX will succeed remains to be seen, of course, but given SpaceX’s track record to date, I wouldn’t bet against it. Moreover, the size of SpaceX’s satellite constellation — only 130 DTC satellites, but over 6,000 satellites in total, and constantly being refreshed with new, improved satellites that TO supports DTC — already surpasses anything its competitors can boast.

On top of everything else, SpaceX has an almost unlimited war chest to draw on while investing in this new venture. Even without the DTC market, Starlink is expected to generate between $6.6 billion and $6.8 billion in revenue this year from the sale of broadband Internet services alone and generates a free cash flow margin of nearly 10 percent from that income. Meanwhile, both Globalstar and AST are still burning cash.

Given the company’s many upsides, competition from an underdog like SpaceX is a risk investors in Globalstar and AST SpaceMobile can’t afford to ignore.