"SpaceX's Starlink has a price problem," as I pointed out in February. And the problem is this:
SpaceX is counting on Starlink -- its innovative, low-altitude satellite constellation that delivers broadband internet from space -- to generate revenue of $30 billion for the space company, and operating profits of $18 billion a year, by 2025. At the prices SpaceX now charges, it will need to sign up more than 22 million customers paying $110 a month for internet service.
Here at the tail end of 2022, however, just three years from its deadline, SpaceX has only signed up about 500,000 customers for Starlink. And what's worse, Starlink appears to be running out of bandwidth to support new customer growth, making it difficult -- or even impossible -- to reach the necessary number of customers to achieve the revenue and profits it desires.
All of this makes Starlink a problem for SpaceX, but the company thinks it might have found a solution.
Image source: Getty Images.
More satellites, fewer problems
In addition to the 3,200-odd Starlink satellites that SpaceX currently has in orbit, and the 12,000 Starlink satellites that it initially received permission to launch, SpaceX has a long-term goal of orbiting 42,000 Starlink satellites in total.
Last month, the Federal Communications Commission gave SpaceX permission to proceed with at least part of its long-term goal, authorizing the launch of 7,500 new Generation 2 Starlink satellites in addition to the 12,000 Generation 1 satellites already authorized.
But this is more than just a story about SpaceX putting more satellites into orbit. This is a story about SpaceX putting more, bigger, and much more powerful satellites into orbit.
And potentially, it's a story about SpaceX figuring out a way to solve its bandwidth problems, and move its Starlink business closer to that $30 billion revenue and $18 billion profit.
Space math
Here's how the math works: First, assume that SpaceX complete its Gen 1 Starlink network, eventually getting 12,000 such satellites into orbit. According to published estimates, these 12,000 satellites should provide enough bandwidth to provide somewhere between 2.8 million and 8.4 million Starlink customers their promised download speeds, depending on how well SpaceX can juggle demand and throttle "power users".
Now add to those 12,000 Gen 1 satellites 7,500 new Gen 2 satellites. You might think that works out to only a 62.5% improvement in total bandwidth, not enough to support the 22 million customers SpaceX needs to get all the revenue and profit it wants.
But according to Elon Musk, the head of the company, Starlink's Gen 2 satellites will offer bandwidth "almost an order of magnitude" greater than what the Gen 1 can provide. And this means that adding 7,500 Gen 2 satellites to the Starlink constellation is the equivalent of putting 75,000 more Gen 1 satellites in orbit.
In other words, we're not talking about a 62.5% increase in bandwidth here, but about a 625% increase, enough to support 20 million Starlink customers easily -- and potentially enough bandwidth for a customer base of 60 million.
Simply put, if and when SpaceX deploys all its Gen 2 satellites, its Starlink problems will be over, and its dream of $30 billion in annual revenue could become a reality.
Caveats and provisos
That being said, although the Gen 2 Starlink might be more powerful than the Gen 1, it's also a lot bigger. Each Gen 2 satellite, CNET says, is expected to have five times the mass of a Gen 1. This implies that a SpaceX Falcon 9 rocket that could launch 60 Gen 1 Starlinks at a time could struggle to launch even 12 Gen 2 Starlinks, slowing deployment significantly.
Even launching weekly, it's hard to see how SpaceX reaches its goals of full deployment by 2025, as it had hoped to do. By my calculations, the best SpaceX can hope for at its current launch cadence is to complete deployment of its 12,000 Gen 1 satellites by the end of 2025 and perhaps start deployment of a few Gen 2 versions.
All that being said, SpaceX is clearly ahead of its rivals in this race, and pulling farther ahead with each passing day. Rival OneWeb, for example, has only 502 satellites in orbit today, and only 648 total are planned -- each of which, it's worth pointing out, offers substantially less bandwidth than even a Gen 1 Starlink. And rival Amazon (AMZN 0.87%) still has zero satellites in orbit.
If SpaceX has a bandwidth problem and is working to solve it, the best I can say for its rivals at this point is that they have their work cut out for them.
