Amazon.com (AMZN -1.73%) is making a big mistake -- and no, I'm not talking about its plan to lay off 10,000 workers, announced earlier this week.

As my fellow Fool Jeremy Bowman explained on Monday, CEO Andy Jassy's plan to right-size Amazon's workforce holds the potential to save the internet retailer as much as $1 billion a year in salaries -- which is great. Unfortunately, $1 billion is peanuts in light of the potential $10 billion in cash that Amazon wants to throw into an ill-considered effort to compete with SpaceX in satellite internet.

SpaceX is the company to beat

SpaceX didn't invent the idea of transmitting broadband internet from space. Other companies like Hughes, Viasat, and Iridium were doing satellite-based internet long before SpaceX came on the scene. But SpaceX has inarguably made the biggest splash in this business, launching more than 3,500 Starlink satellites into orbit over the past two years (of which approximately 92% remain in service today).  

Over time, as SpaceX launches more and more Starlink satellites into orbit (12,000, or even 42,000, are planned) and signs up more and more customers for Starlink (the total market size in the U.S. alone could be as high as 60 million customers), SpaceX sees Starlink growing into a $30 billion business.  

It's no surprise that numbers like these have attracted Amazon's interest. The problem is that the time to begin racing SpaceX to capture this market was two years ago when Starlink was just getting off the ground. Two years later, Amazon's attempt to horn in on the business that SpaceX has built just looks sad.

Amazon's slow start

According to documents filed with the Federal Communications Commission, Amazon aims to launch 3,236 KuiperSats into orbit. Amazon has enlisted an army of rocket launch companies to help it with this project -- everyone from Boeing and Lockheed Martin to Airbus, Blue Origin, and start-up space firm ABL.

And yet, Amazon hasn't yet begun launching KuiperSats with anyone -- and the clock is ticking. In order to meet the conditions of its FCC license, Amazon must put half its 3,236 satellites (so 1,618) into orbit by the end of 2026. Current plans are for the first two satellites to go up aboard the inaugural United Launch Alliance (ULA) Vulcan Centaur flight, scheduled for early next year.  

Amazon's high hopes

Even assuming that the launch goes off as planned, though, Amazon must launch 1,616 KuiperSats over the next four years, which is quite a tall order.

Consider: Each KuiperSat is believed to mass about 500 kilograms and will be launching to an orbit of 500 to 600 kilometers distant. A ULA Vulcan rocket with two solid rocket boosters should be able to lift about 15,000 kilograms of payload to that orbit, such that ULA (for example) could put about 30 Kuiper satellites, per flight, into orbit for Amazon. This implies that Amazon will need 54 launches in four years.  

To put that in context, though, over the last four years, all the launches that ULA managed to conduct for all its customers amounted to just 24 launches. So it's a very real question whether Amazon has enough time to meet its license requirements with the FCC.  

Depending on the kindness of strangers

Amazon may have a solution to this problem, but it's a bit off-the-wall. While ULA is averaging only six launches per year, SpaceX has conducted more than 50 launches so far in 2022 alone. Last month, Amazon Senior VP for Devices and Services Dave Limp suggested Amazon might consider hiring rockets from SpaceX to help it meet its goal.

"Yes, we are open to talking to SpaceX. You'd be crazy not to, given their track record [of rapid launches]," said Limp, calling SpaceX's Falcon Heavy rocket, and its upcoming Starship rocket, in particular, "very viable candidates."    

But here's the problem with that plan: When SpaceX uses Falcon rockets to put Starlink satellites into orbit, it's paying itself for launch services, so it can later charge relatively less for Starlink access once the satellites are in orbit. If Amazon uses SpaceX rockets to put KuiperSats in orbit, however, it will be subsidizing its competition with every dollar it pays -- and SpaceX can charge less for Starlink service while Amazon will have to charge more for KuiperSat service!

It's hard to imagine how this ends well for Amazon. While hiring SpaceX to launch KuiperSats might help Amazon meet its launch deadline, it will undermine the affordability of Kuiper service and hurt Amazon's own profitability. Call me a critic if you will, but that seems like a poor use of $10 billion by Amazon.

Maybe Amazon's best move at this point is to just cancel Project Kuiper and quit while it's behind.