High-speed internet service is a must-have for most Americans. But according to the FCC, as many as 19 million Americans still do not have access to fixed-broadband services. This small subset of the population might never get access, because it is unprofitable for providers to run cable wires in rural areas with low population density. This problem is even more prevalent in countries with less-developed telecom infrastructure.

For those people who live in areas not serviced by fixed broadband, there are few choices. DSL is generally available but at a very slow internet speed. The only option for fast connection speeds is satellite internet.

The two dominant services today

In the North American market for satellite internet, there are only two providers to choose from, HughesNet (owned by EchoStar (NASDAQ:SATS)) and ViaSat (NASDAQ:VSAT). There are differences in pricing and speed packages offered, but the two services are similar.

EchoStar's service has more than twice the subscribers ViaSat's does, giving it a 69% market share. This larger market share could give EchoStar an ability to charge a lower price due to its greater scale. ViaSat has nearly 600,000 subscribers, but it lost customers after it changed its go-to-market strategy. In recent years, ViaSat has transitioned to selling more premium services with faster speeds and higher prices.

Metric 2016 2017 2018
EchoStar satellite internet subscribers 1,036,000 1,208,000 1,361,000
ViaSat satellite internet subscribers 659,000 576,000 586,000
Total industry subscribers 1,695,000 1,784,000 1,947,000
Total subscriber growth %   5.3% 9.1%

Data Source: Company financial reports. Note: ViaSat's fiscal year-end is March 31.

Given that EchoStar and ViaSat are the only two operators in North America, it's fair to say that the sum total of their subscribers represents the market. Nearly 2 million customers subscribe to one of the services, but as mentioned earlier, there are 19 million people without access to broadband. That 19 million translates into 7.6 million households if you assume 2.5 people per household. With only 2 million total subscribers today, market penetration for satellite internet is only at 26%.

The market for satellite internet has a lot of potential for growth, but it is constrained by available satellite capacity.

EchoStar has noted that its North American capacity is currently pretty full, but the company is working on launching its next-generation Jupiter 3 satellite in 2021, which will significantly increase capacity and accommodate internet speeds up to 100 mbps. ViaSat is also planning to launch its next-generation satellite, ViaSat-3, in the 2021 time frame.

Image of Earth seen from space, covered by communication network.

Image Source: Getty Images.

Next-generation satellite internet services

As compelling as the satellite internet offerings provided by EchoStar and ViaSat are, a new crop of space industry start-ups is working on new satellite internet technologies that could change the game.

SpaceX, the rocket company backed by Tesla CEO Elon Musk, is working on a satellite internet service called Starlink. Unlike existing satellite internet services, which use just a handful of satellites to provide service, Starlink would deploy thousands of smaller satellites at a lower altitude to create a web of satellites that could provide internet service around the globe.

SpaceX has received approval from the U.S. FCC to launch 12,000 satellites in the coming decade to create its network. It could start offering its service to customers in the United States as early as 2020.

OneWeb is another high-profile satellite start-up that seeks to create a network of low-earth-orbit satellites, creating a "satellite constellation" around the earth. OneWeb has raised more than $1 billion in venture capital funding and has started to manufacture its satellites. It plans to launch its internet service sometime around 2021.

These next-generation satellite companies could disrupt the global internet market by providing internet access to remote places where it's not economical to run fixed lines. The timing and commercial viability of these projects are still quite uncertain, but they will be interesting to watch.

Where to invest

Public-market investors today can only invest in ViaSat or EchoStar to play the satellite internet growth thesis. ViaSat's consumer broadband service is a relatively small piece of the overall company. EchoStar primarily makes money through its satellite internet service.

An investment in EchoStar could make sense. Its business is growing, and the upcoming launch of its Jupiter-3 satellite will significantly improve its broadband capacity and connection speeds. There is plenty of room for the market to keep growing and for EchoStar to reap the rewards of that growth.

Investors should just be aware of the risk of technological disruption from next-generation satellite companies like SpaceX and OneWeb. If either company successfully launches its satellite network and can offer broadband at an affordable price, the incumbents could lose significant market share.

However, SpaceX and OneWeb have a long way to go before they can be commercialized. There is no guarantee that their technology will work or that it will be affordable compared with the incumbent offerings. The developments in these newer technologies should be monitored, but they should not be seen as shoo-ins to dominate the market anytime soon.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.