Elon Musk eyes next target after cars, rockets and robots

Elon Musk has disrupted one industry after another, from space rockets and electric vehicles to humanoid robots.

His latest target: the stodgy club of mobile networks.

The announcement this week that Musk’s SpaceX is purchasing $17 billion in wireless spectrum has sent jitters through an industry now eyeing the prospect of Elon-style disruptions to a market long dominated by Verizon, AT&T and T-Mobile. The new bandwidth is destined for use by SpaceX’s satellite service, Starlink.

“Everyone is wondering if becoming a mobile network carrier is the ultimate destination,” said Kim Burke, director of government affairs at the consultancy Quilty Space.

Starlink’s entry into the sector is likely to put new pressure on major U.S. mobile carriers to deliver better service to rural customers, analysts say, whether through a tie-up with Starlink or a competing technology. While companies including Apple and T-Mobile have rolled out satellite text messaging in remote areas, largely for emergency situations, Starlink is promising streaming videos at the ends of the Earth in a couple of years’ time.

“The net effect is you should be able to watch videos anywhere on your phone,” Musk said Tuesday on “All-In,” an influential podcast hosted by four prominent Silicon Valley venture capitalists.

Brendan Carr, the chairman of the Federal Communications Commission, this week called the SpaceX spectrum purchase a “potential game changer,” and Tom Stroup, president of the Satellite Industry Association, said it was “one of the most significant announcements” made to date for satellite cell service. The seller was EchoStar, a Colorado-based satellite and wireless company that last month agreed in a separate deal to sell spectrum to AT&T for $23 billion.

Starlink says its upcoming cellphone service will provide “full 5G cellular connectivity with a comparable experience to current terrestrial LTE service” in “most environments.” Many industry experts are more cautious, saying Starlink is unlikely to be able to go head-to-head with Verizon or AT&T in crowded urban areas anytime soon, because of limited spectrum, and will probably remain an add-on to traditional mobile plans.

Musk is not ruling out becoming a direct rival in the future. Asked on Tuesday’s “All-In” podcast whether he might purchase a company like Verizon one day, he said it was “not out of the question.”

In a couple of years, Musk said, once hardware changes allow smartphones and Starlink satellites to communicate through the newly purchased spectrum, his company will be able to offer a “comprehensive solution” for high-bandwidth connectivity, both on a Starlink home-satellite dish and on a phone on the go.

Verizon, AT&T, T-Mobile and SpaceX did not respond to requests for comment.

Starlink had begun testing a text-messaging service last year through a partnership with T-Mobile, using spectrum owned by the mobile carrier. The service launched this year as “T-Satellite” for $10 a month.

Starlink now has the bandwidth to upgrade from texting alone. The company’s website says cellular data service will begin this year and voice calls will begin “soon.”

In conjunction with the spectrum sale, EchoStar said this week that its Boost Mobile customers would be joining T-Mobile’s in accessing Starlink’s direct-to-cell service.

“This transaction with SpaceX continues our legacy of putting the customer first,” EchoStar President Hamid Akhavan said in a statement, adding that the tie-up would result in a “more innovative, economical and faster” rollout of satellite service for Boost Mobile.

While satellite service is generally much worse than terrestrial mobile service in cities, wireless analyst Peter Rysavy said, it is the best option for users in rural areas outside the coverage of traditional networks. Starlink built a robust customer base for its satellite dishes in rural areas, he said, and will probably find customers there for its phone offering.

“Over very large expanses of geography around the world, satellite is your best option, because in many cases, it’s your only option,” Rysavy said.

Craig Moffett, a telecom analyst at MoffetNathanson, said there was “no scenario” in which Musk would compete directly with AT&T, Verizon and T-Mobile in urban areas. While SpaceX’s $17 billion deal gives it access to valuable spectrum and increases its coverage of sparsely populated corners of the globe, that pales in comparison with the hundreds of billions of dollars the big three telecommunications firms have invested in infrastructure, Moffett said.

“[Musk] will have a satellite-delivered distribution system that will work outdoors in relatively sparse areas but is not remotely competitive in terms of coverage, speed and throughput to what you would get from one of the big three,” he said.

Burke, the Quilty analyst, said SpaceX would also face a “painful slog” in regulatory hurdles in the United States and abroad if it seeks to become a mobile carrier in its own right.

“For me, the more pressing question isn’t whether SpaceX can bypass mobile network operators - they can, eventually - but whether they even want to,” she said.

SpaceX launched its Starlink satellites in 2019, with Musk viewing the service as a potential cash cow that could fund his long-term ambitions to explore Mars and beyond. While Starlink started out as a home internet service beamed to satellite dishes, said a former SpaceX executive, the company from the outset envisioned expanding to other satellite functions.

“They’ve always viewed this as a platform that can support lots of different services,” the former executive said, speaking on the condition of anonymity to discuss a former employer.

Starlink has more than 8,000 satellites in orbit, according to astronomer Jonathan McDowell, making it far and away the largest satellite system orbiting Earth. It has steadily added users, reaching an estimated 8.5 million subscribers compared with 4.7 million last year, according to the investment bank Morgan Stanley.

Starlink has grown into a critical source of cash for SpaceX, which has long depended heavily on contracts from NASA and the Pentagon. Morgan Stanley estimates that SpaceX is on track to generate about $15.9 billion in revenue this year, about 70 percent of which is expected to come from Starlink. (Exact revenue figures are unavailable as SpaceX is a private company.)

In July, Bloomberg reported that the company was valued as high as $400 billion. In a mark of the company’s sway with investors, half of EchoStar’s $17 billion price tag was paid in SpaceX equity.

SpaceX’s purchase from EchoStar puts a cap on a years-long tussle between Musk and EchoStar’s billionaire founder, Charlie Ergen, over the scarce resource of spectrum. Musk had accused Ergen as early as 2022 of trying to “steal” the bandwidth that Musk wanted for Starlink.

After SpaceX’s urging, the FCC opened a probe in May over whether EchoStar’s spectrum should be handed over to other companies in light of its failure to become a robust fourth player in 5G alongside Verizon, AT&T and T-Mobile. “EchoStar does not use the spectrum to serve American consumers,” SpaceX vice president of satellite policy, David Goldman, wrote to the FCC, arguing that other companies stood ready to “swiftly deploy ubiquitous mobile connectivity to millions of American consumers.”

EchoStar subsidiary Dish protested to the FCC in June that the commission should not destroy its 5G network “by taking away its lifeblood - the licensed spectrum EchoStar spent billions acquiring, building, and utilizing.” Taking away the spectrum granted to EchoStar would chill investment nationwide, it said.

EchoStar said this week that the FCC’s investigation into the matter has been resolved by its spectrum sale to SpaceX.