(Photo by David Ramos/Getty Images)
As Starlink gains traction as a potential disruptor to traditional ISPs, Verizon’s CEO is downplaying the threat, predicting that satellite rivals SpaceX and Amazon will remain niche internet providers in the US.
“I think satellite is a really good complementary service for a product, but they cannot compete in urban and suburban [areas] against a terrestrial network,” Dan Schulman said on Wednesday at MoffettNathanson's media conference.
Schulman didn’t refer to Starlink or Amazon Leo by name. But he did predict a cap on the market demand for low-Earth satellite internet service providers, as Policyband first reported.
“In urban and suburban areas, terrestrial networks are 100 to 1,000 times more efficient than low-Earth orbit. But is there a market for that? Of course, there is,” Schulman said. “I think over the next seven to 10 years, I think that’s maybe 5 million households or so. It’s a real market, but it’s not our market.”
In July, SpaceX revealed that it’s serving over 2 million active customers in the US. Meanwhile, the global user base topped 10 million in February. In contrast, Verizon has been serving 16.8 million US customers through gigabit fiber and fixed wireless. Schulman also argued that “90% plus” of the revenues are based in suburban and urban areas.
Schulman's comments aren’t exactly controversial. In 2021, SpaceX CEO Elon Musk noted that Starlink wasn’t suited for highly populated urban environments since orbiting satellites have limited capacity to serve users in each cell. “Satellites are best for low to medium population density areas,” he tweeted at the time.
Starlink also faced congestion woes in areas with too many people connecting to the network. To prevent network overload in select cities and counties, SpaceX has since been requiring new customers to pay a one-time “demand surcharge” that can range from $500 to $1,500.
But in other parts of the US, SpaceX has aggressively offered cheaper plans and short-term discounts to lure in new subscribers. The deals have been enough to pull consumers away from a Virginia-based ISP, although only for those on the slower cable service, not the faster fiber.
At the same time, SpaceX has improved Starlink's speeds and capacity, aiming to eventually offer gigabit speeds with next-generation satellites. The Federal Communications Commission even views Starlink as a way to pressure traditional ISPs; the agency recently passed new rules to allow low-Earth orbiting satellites to increase their capacity by as much as sevenfold.
So, the capabilities and appeal of Starlink could change over time. Speedtest.net parent Ookla has also noticed Starlink use in urban areas, suggesting some consumers might be dissatisfied with their current ISPs. It’s also important to note that Starlink offers a Roam plan that let’s customer use the service in more than one location and on the road, including from RVs.
Still, Verizon’s CEO pointed to the population density of urban and suburban environments and “orbital physics” as to why low-Earth satellite constellations won’t pose a competitive threat. “When you have a low-Earth orbit satellite, its beams cover a much wider area than a cell tower," he said. "When we get congestion into our network, we add another cell site, and it increases capacity two to four times."
News about Schulman's comments prompted Michael Nicolls, a SpaceX VP, to respond with the words "Bookmark this one..." suggesting the company is betting it can surpass the 5 million household mark.