SpaceX’s Starlink division has failed to live up to the grand expectations it set for itself and investors, according to a recent Wall Street Journal report. The report reveals that Starlink, which was touted to reach 20 million subscribers and generate nearly $12 billion in revenue by 2022, ended the year with just 1.5 million subscribers and $1.4 billion in revenue.
The revelation comes from a 2015 presentation used by SpaceX to attract investors, which projected ambitious growth for the satellite internet service. However, reality has fallen far short of these projections, highlighting the challenges of building a global satellite network.
“Starlink hasn’t signed up customers as quickly as SpaceX had hoped,” the WSJ wrote. “Toward the end of last year, Starlink had more than one million active subscribers, SpaceX has said. The company thought its satellite-Internet business would have 20 million subscribers as 2022 closed out, according to SpaceX’s 2015 presentation.”
Starlink’s slow customer adoption appears to be a significant factor contributing to its underperformance. While the company claimed to have “well over” 1.5 million customers worldwide, it’s evident that it faced difficulties in achieving its initial goals. The report points out that in regions with access to cheaper, readily available high-speed broadband, its appeal is limited.
In South Africa for example, the country’s telecoms regulator, the Independent Communications Authority of South Africa(ICASA), has ordered IT Lec, the only company rerouting Starlink’s network, to cease the importation of Starlink kits. It further demanded that the Northern Cape-based internet service provider (ISP) discontinue any active Starlink internet services to users in the country.
This has led to SpaceX classifying South Africa as a low-priority area for a potential launch. The company said it had a way of prioritizing countries ahead of a Starlink rollout. Markets without any registration or licensing criteria are considered high-priority.
While countries with licensing requirements with few possible challenges are deemed to be medium-priority, finally, countries that SpaceX believes will present challenges in terms of licensing are termed low-priority.
Read more: Starlink classifies South Africa as ‘low-priority’ as regulatory hurdles stall launch
SpaceX’s positive expectations for Starlink remains
Despite setbacks, SpaceX aims to make Starlink profitable by 2023, a pivotal moment as it seeks to revolutionise global connectivity.
In February, the company’s President and COO Gwynne Shotwell said that the satellite service is expected to turn a profit this year. While Starlink’s specific profit or loss is unknown, the WSJ previously reported that SpaceX overall “eke[d] out a small profit in the first three months of [2023] after two annual losses.” SpaceX’s Q1 2023 numbers reportedly included a $55 million profit on $1.5 billion in revenue.
Starlink currently boasts the largest network of low-Earth orbit (LEO) broadband satellites, with over 4,700 satellites in orbit. This technical feat has allowed the company to provide high-speed internet to remote areas where traditional cable or fibre is unavailable. However, the report highlights the challenges of maintaining quality and speed as the customer base grows.
“The majority of the world’s population that the business could serve and that can afford high-speed broadband lives in cities. In those regions, Internet service is readily available, usually offers cheaper monthly costs than Starlink and doesn’t require specialized equipment.”
WSJ wrote in the report
Elon Musk, known for his ambitious goals, initially set the bar high for Starlink. However, he has also acknowledged the pitfalls and potential bankruptcies associated with satellite internet ventures. His more recent, modest public statements about its capabilities, particularly in densely populated urban areas, contrast sharply with the initial projections.
“That’ll be a big step to have, like, more than zero [LEO satellite companies] in the not-bankrupt category,” he said in 2020. SpaceX has said it is likely to eventually spin off Starlink and take it public.
Read also: Elon Musk’s ‘most powerful rocket ever made’ is finally ready for space exploration
Starlink “might have” broken even with user terminals
In June 2021, Musk said “We are losing money on that terminal right now. That terminal costs us more than $1,000.” At that time, Starlink was charging users $499 for the user terminal, and Musk said he would like to eventually “reduce the terminal cost from $500 to, I don’t know, $300 or $250, or something like that.” Despite that statement, Starlink raised the terminal price from $499 to $599 in early 2022.
But now, an interesting development is SpaceX’s assertion that it is no longer selling user terminals at a loss. This shift could signal a positive direction for the company’s overall financial health as it seeks to streamline costs and make the service more accessible to a broader audience.
“We were subsidizing terminals but we’ve been iterating on our terminal production so much that we’re no longer subsidizing terminals, which is a good place to be,” Hofeller said, according to the CNBC article.
As for pricing, Starlink’s residential service costs $120 a month in most areas in the US, with a reduced rate of $90 a month in “high-availability” locations. This pricing puts it in direct competition not only with traditional internet providers but also with emerging technologies aiming to bridge the digital divide.
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