How Elon Musk’s Starlink Is Bringing In Billions For SpaceX

And liftoff of the Falcon 9. Elon Musk's SpaceX is known for its frequent launches, which now dominate the space industry. But what many of these rockets are launching is just as important for the company as the launches themselves. Broadband mega Constellation, Starlink, Starlink.

And we saw this garland of little lights, one after another, absolutely perfectly sequenced.

And it was StarLink. Starlink is SpaceX's answer to providing global high speed Internet coverage using a network of thousands of satellites buzzing around the planet in a region known as low Earth orbit, about 342 miles above the Earth's surface.

While Starlink may be a business unit within the broader SpaceX company, it's seen as crucial to its overall goals of making humanity multiplanetary and exploring bodies like the Moon and Mars. Because Starlink is seen as an economic.

Engine for the company, SpaceX reportedly generated $1.4 billion in revenue from Starlink in 2022. In early November 2023, SpaceX CEO Elon Musk announced that Starlink had achieved break even cash flow.

StarLink's importance to SpaceX overall as a company is imperative. The Euroconsult estimates that optimistically, by the end of 2023, this business of Starlink could represent upwards of 40% of SpaceX's overall business. This total would be somewhere in excess of $3 billion generated from Starlink.

SpaceX launched its first batch of Starlink satellites back in 2019, and since then, adoption of the service has ballooned. Starlink now has over 2 million active customers and is available on all seven continents and in over 60 countries. Starlink has been praised for its ability to connect remote parts of the world that would otherwise not have access to reliable Internet. The service has also become indispensable in areas hit by natural disasters and more recently during times of war, particularly the Russia, Ukraine war. Elon Musk has also said, quote, SpaceX will support communication links with internationally recognized aid organizations in Gaza, although Musk said in late October that no Starlink terminal has attempted to connect from Gaza yet. But Starlink's growing influence is garnering condemnation from some who say that Musk is meddling in geopolitics.

A Ukrainian official says that you have enabled Vladimir Putin as an aggressor. What do you say to that?

Meanwhile, the scientific community has its own concerns.

The astronomical community got concerned because the projection of the full constellation of several tens of thousands of satellites in low Earth orbit was immediately seen as an interference to both the optical observ observation and to radio observation.

But none of this has slowed down SpaceX's ambitions to expand Starlink's service even further. CNBC explores what has led to Starlink's rapid adoption and growing influence. With around 5,000 active satellites now in orbit, Starlink satellites account for the majority of all the world's active satellites.

This growth is uncharacteristic in the sense of its magnitude. Whereas prior satellite service providers have ramped up to anywhere at most between 500,000 to a little bit over a million subscribers, and this has taken a 10 year period, Starlink's race to 2 million subscribers has taken only the better part of two years.

Experts estimate that the global market for consumer satellite services, including TV, radio and broadband Internet, was worth over $92 billion in 2022. And Starlink could be in a good position to capture a big piece of this market going forward. By design, LEO satellite constellations like Starlink are more flexible than geostationary satellite networks like those operated by legacy satellite Internet service providers ViaSat and HughesNet.

These satellite service providers have been constrained on capacity. They launch large geostationary satellites the size of a minibus, weighing multiple tons, and they last 15 years. So what ends up happening is they have more boom bust satellites cycles, and Starlink, who tends to introduce capacity so far at an unrelenting pace. So they're able to onboard more and more subscribers by continually launching new satellites for the incumbent players, they're kind of stuck with what they have.

Although initially conceived for the consumer segment, Starlink's offerings have expanded to serve enterprise markets, including the maritime and aviation industries.

Starlink is absolutely witnessing explosive growth in the maritime segment, having captured commitments for over 4,000 vessels by our count as of the third quarter of 2023, and now have confirmed commitments on over 400 commercial aircraft and business aviation aircraft.

SpaceX has also announced plans to offer cellular satellite connectivity to unmodified smartphones in partnership with several global telecom partners, including T mobile in the US it's a feature Apple introduced in the iPhone 14 in partnership with US satellite operator Globalstar.

Your phone or mine, if they're compatible with the T Mobile network, they will be compatible with Starlink's direct to cell service. So when you exit coverage areas on rural highways, national parks, just areas of poor cellular coverage, you'll be able to automatically roam onto a space based network extension of T Mobile's network essentially.

Another factor that's helped Starling's rapid growth is the independence with which SpaceX is able to operate.

Starlink is vertically integrated. It makes its own satellites, it launches them and it's crafted its own service, so it's almost completely disintermediated in terms of suppliers and its distribution channels.

It's a portable system, so when you think about how you connect to Starlink satellites, it's a small antenna or terminal, fairly inexpensive, and all you need to do is plug it into a power source.

But making its equipment user friendly has not come cheap for SpaceX. Early on, the company faced steep costs to manufacture its consumer antenna. Production was initially estimated to be as high as $3,000 per unit. At the time, SpaceX charged consumers $499 for its equipment, meaning the company was eating a lot of the cost. Since SpaceX has cut the manufacturing cost of its antenna to under $600 and charges residential customers $599 to buy them. Starlink's ease of use and deployment has made it an indispensable tool in the Russia, Ukraine war.

The big benefit of Starlink and how it's being used in Ukraine today, it is communications. It's providing a pathway for the military, for civilians to stay connected to the outside world. It allows a pathway for the military to communicate with each other and to provide command and control direction to their forces.

SpaceX began offering its Starlink service to Ukraine at the request of Ukraine's digital Minister, Mykhailo Fedorov, back in February 2022. Here's Musk reflecting on Starlink's importance at the 2023 Viva Technology Conference in Paris.

Russia had actually taken out all of the satellite communications and all of the ground communications, except, except for Starlink. It was the only one that was still operating, and even today, it is still the only one that is effective at the front lines. And Starlink today is the backbone of the Ukrainian military communications.

One of the other benefits that we're seeing in Ukraine from the use of Starlink is its overall resilience. With thousands of satellites on orbit at any given time, it makes it a lot harder to jam all of those satellites or to target them all. The other benefit is just how agile and quickly they can move. So as Russia has sought to jam Starlink, they've been able to make software updates on the fly to mitigate the effect of that jamming, to keep people connected.

But SpaceX has expressed reservations about how its technology is being used by Ukraine offensively, specifically to coordinate drone strikes. During a conference in Washington, D.C. in February 2023, SpaceX President and COO Gwynne Shotwell said that while the company had been, quote, really pleased to be able to provide Ukraine connectivity and help them in their fight for freedom. She emphasized that Starlink quote was never intended to be weaponized. Questions about Starlink's and Elon Musk's outsized influence on the war came to a head when it was revealed that in September 2022 the SpaceX CEO had refused a request by Ukrainian military officials to turn on Starlink service in Crimea, which would have allowed for a sneak drone attack on a Russian naval fleet. According to the author of a recent biography about the tech billionaire, Musk refused to cooperate because he was worried that a Ukrainian attack on Russian vessels would have provoked the Kremlin into launching a nuclear war. The magnitude of his influence is not lost on Musk. At one point, the SpaceX CEO wrote, between Tesla, Starlink and Twitter, I may have more real time global economic data in one head than anyone ever.

I think what's important to remember about the use of Starlink in Ukraine is there was not a contract signed with the government or with our U.S. department of Defense. So there weren't necessarily terms and conditions that Starlink had to meet for the government customer.

In June 2023, the Department of Defense did sign a contract with SpaceX for its use of Starlink in Ukraine. SpaceX has also won a Department of Defense contract worth up to $70 million to make a military specific version of Starlink called Starshield. Seeing the influence Musk's Starlink may have on geopolitical matters, has prompted some countries to invest in their own satellite networks. The European Union has said that it will contribute 2.4 billion euros to help build out a constellation that's expected to reach full capacity by 2027. China is building out its own low Earth orbit satellite Internet network after the country made it clear that it didn't want Starlink services being offered to its citizens. Taiwan, wary of Musk's ties to China through his other venture, Tesla too has expressed interest in a proprietary satellite network to help shield the country from a potential assault from China. SpaceX has said that it eventually wants to launch as many as 42,000 Starlink satellites into orbit. Competitors including Amazon, Eutelsat, OneWeb and Telesat want to launch thousands more satellites. And that's not even counting the several nations planning their own megaconstellations.

The concern of the astronomical community is mainly due to the fact that these satellites are very numerous. We are moving from the 2200 satellite of two, three years ago in orbit to something that will be 40,000 or even 100,000 satellites. So for most of the time during the night, these satellites are illuminated by the sun, and so they are visible in the sky and interfere with the observation, in particular with photographs that the astronomers take for their research.

This image, taken from a telescope in Chile in November 2019, illustrates the concerns from astronomers. The telescope, meant to see images of distant stars and galaxies, instead captured the light trails of 19 Starlink satellites. Observations from the Hubble Space Telescope, long lauded as a vital research tool for astronomers, have also been affected. Benvenuti says SpaceX has been responsive to concerns from the scientific community. He points to several design changes SpaceX made to its satellites to reduce their brightness, but says more needs to be done.

The final solution is to know exactly, for every satellite, the precise position in the sky at any time from any observer. And so we are working with the companies to have this information and create a service that can be used by any observer, and they will know when the satellite is crossing their field of view, and they can plan their observation in a way that this disturbance is avoided.

Satellites also pose a threat to radio astronomy.

The interference to the radio observation is a very serious one and very difficult one, because these satellites are there to transmit information to the ground in microwaves. So the only solution is to switch off the transmission when the satellite is in view of one of the large radio observatory. So what we are trying to do now is to negotiate with the company to have the switch off the transmission when they are over these facilities.

The massive number of anticipated satellites has also led to fears of a proliferation of debris, which some experts worry may eventually render large parts of Earth's orbit unusable. And then there's the potential risk to people on Earth as satellites are deorbited. In the past, SpaceX has said the lifetime of a Starlink satellite is about five years, which means satellites must be frequently replaced to maintain service. A recent report by the Federal Aviation Administration, which is responsible for issuing launch licenses for satellites in the US and nonprofit research group the Aerospace Corporation, predicted that by 2035, Starlink satellites would account for 85% of the risk to aviation in people on the ground from falling space junk. The report went on to say that by 2035, if Starlink satellites did not fully burn up in the atmosphere before falling back to Earth as designed designed, the FAA expects one person on the planet to be killed or injured every two years as a result of Starlink satellite debris. In a letter dated October 9, 2023, SpaceX disputed the report, saying that the report relied on a deeply flawed analysis that falsely characterizes Reentry disposal risks associated with Starlink. The letter went on to say that a lack of knowledge, a flawed methodology and an over reliance on outdated data contributed to corporations quote distorted analysis that makes preposterous unjustified and inaccurate claims regarding Starlink disposal risk to people on the ground and to aviation and requested that the FAA correct its report to Congress.

SpaceX's response to the FAA analysis really centered on the data that was underlying the report and pointed to the fact that not only was the data from satellites that were not Starlink, but also that the company's own track record shows that Starlink satellites completely burn up when they enter the Earth's atmosphere.

The FAA declined CNBC's request for an interview and SpaceX did not respond to our request for an interview. Benvenuti says that while he doesn't believe that there is a risk of stray Starlink debris injuring anyone, he does have some environmental concerns.

The chemical composition of these satellites that return to Earth, they are burned in into the higher atmosphere. What would be the effect of that is not known and is not completely fully studied. So the impact on the space environment should be fully studied before we continue to populate the lower Earth orbit. With such a large number of satellites.

There'S no question that Starlink has grown a tremendous amount in just a few short years. But whether SpaceX can keep up this pace remains to be seen.

The pace of growth that Starlink has exhibited will be difficult for them to keep up going forward and for a couple of reasons. On the first end there's a certain degree of demand saturation that's happening where after the service was introduced and now it's been two years in many markets, the lowest hanging fruit in terms of the subscribers who are most desperate for a better service have likely already moved over to Starlink. We've also seen evidence that Starlink is having to spur demand in the market by reducing the cost of its user terminals. It's run promotions where its baseline costs in the US of about $600 for the equipment have been reduced to as low as $150 in Canada in rural areas. And the same has been done in Australia and Japan, for example, in localized targeted campaigns.

Starlink's success, many believe, is closely tied to SpaceX's other major undertaking. So Starship SpaceX hopes to use the massive next generation reusable rocket to launch cargo people and a lot more satellites. But development of the rocket has hit a number of delays in order for.

SpaceX to keep Starlink on that hockey stick. Like growth that it's seen so far. The company needs Starship to begin flying Starship is a much larger and more powerful rocket than the current method that SpaceX uses to get its Starlink satellites into order orbit, which are its Falcon 9 rockets. To meet both the expansion of the network by launching more and more satellites into orbit, as well as replace aging satellites over time, SpaceX needs Starship flying regularly to be able to meet that overall growth trajectory.

Competition in the consumer satellite Internet market has also been heating up. One service that's expected to be a big challenger is Amazon's Project Kuiper, which launched the first of its satellite prototypes in October. Amazon plans to begin beta testing its network with customers by the end of 2024.

Amazon is adopting a similar approach in terms of its vertical integration, manufacturing the satellites to a certain extent, launching them themselves through an affiliated company, Blue Origin. And they'll be making their own user terminals and leveraging their E commerce platform to deliver these pieces of equipment and services remotely to the same swath of users as Starlink.

In the future, you will see much more of these types of LEO broadband Internet systems. It provides a tremendous amount of flexibility and mobility, and that is tremendously powerful, not just for national security, but to connect disadvantaged populations, rural populations that don't have that kind of connectivity. Today day.