Starlink: Closing the Digital Divide (Part 1 - Present)
Country Livin’ Without The Shitty Satellite Internet - How Starlink Will Make Current Rural Internet Providers Obsolete
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Lately I’ve been thinking about the new satellite internet provider, Starlink (a SpaceX company). Rural communities often don’t have access to the same internet that people in urban/metro areas do, which results in a stark digital divide. Current rural internet providers have been content for too long providing a costly and poor service. The tables are about to turn.
Ready Freddy? Let’s get this show on the road...
My Hypothesis: The death knell has sounded for old internet providers in rural areas thanks to Starlink, and maybe even fiber internet companies in rural areas.
Why Do I Believe this?
Satellite internet providers have been asleep at the wheel for some time. Why is this important? This has left over 30 million Americans with little to no access to options for high quality internet needed to have an adequate experience online today and in the near future.
Starlink solves the woes of many rural Americans. Why this is important? Key advances in technology have enabled a better product and service.
Infrastructure is expensive to expand good internet coverage in rural areas, for both fiber and old satellite internet companies. Why is this important? Government funding should go towards the emerging technologies, not the incumbents with legacy technology. This will help close the digital divide faster.
Intro
I’m not sure how some of these old sayings originated, but a common saying by Midwest Dads is, “If it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck.” While we could analyze this adage for an entire article, I interpret it as both (i) common sense and Occam’s Razor often explain the world, and (ii) that if you feel like you are being deceived, you likely are.
Well, unfortunately this phrase seems perfect for the current satellite internet providers who provide a poor product via poor speeds, high latency, and unreliable products. So how does Starlink solve these woeful internet speeds and reliability for rural internet users compared to the current competition? Simple, (i) cutting edge tech, (ii) reduced pricing to launch more satellites due to SpaceX (its parent company) dramatically reducing launch costs, and (iii) SpaceX became its own customer by launching satellites into space for Starlink. This all results in lower costs and better internet for users. As of Q2 2021, here’s how Starlink compared to Hughesnet, Viasat, and fiber companies (see graphic below). Starlink is almost as good as broadband in term of speed and latency, while other satellite internet providers struggle to offer a service that is fit for today’s internet and content needs.
If you’re reading this and are on HughesNet or Viasat, sign up for Starlink today! $99/month for speeds that continue to get better (100mbps+, and at times 250mbps), and the upfront hardware costs are around $500.
So how did we get to this tipping point in satellite internet, how can Starllink be that much better, and what does it mean for rural communities/governments? Let’s dig in.
Part One - Satellite internet providers have been asleep at the wheel (what a surprise)
#1 - The Product and Customer Service Has Been Poor for Some Time
The crooked and poor reputation that current satellite internet providers like Hughesnet, Viasat, and others have should have been a tell tale sign for this industry to be disrupted. But, given the (previously) super high costs to satellites, who dare enter the space and compete? According to reviews across internet providers, common complaints are EVEN worse than experiences that fiber customers have (Comcast, Spectrum, etc.), which is hard to imagine. In fact, out of the 38 internet providers in the US, current satellite providers rank DEAD LAST for service, offering, reliability, and cost. So those of us on Spectrum or Comcast, as both rank in the top 10, have NOTHING to complain about relative to these users who are often rural users.
In fact, I talked to a Viasat user who lives in rural Wisconsin. Three points of friction that rural internet users frequently run into. (i) Viasat is their ONLY option for internet. Cable internet providers don’t reach them, nor do those providers have plans expand to due to the cost. (ii) Other satellite internet providers like HughesNet say they can’t service them because of terrain. Reminder this is Wisconsin people, it’s not like there are mountains! This is likely due to any satellite service, up until Starlink, the user’s dish has to point in a certain direction because the space satellites orbit on a very specific plane. For example, Dish Network dishes have to point in either southwest (for HD TV) or northwest (for their old analog TV). (iii) Poor reception during bad weather (heavy rains or snow), they completely lose Viasat service. This is large in part due to the height that most older satellites fly at, which they were built to fly at that height.
#2 - If It Ain’t Broke, Don’t Fix It!
From a corporate strategy perspective, the primary reason companies do not work at areas in which they know they need to improve is that the rewards are in the future; the disruption, discomfort and discipline needed to get there are immediate. Said differently, why endure a challenge with no clear path to success, when you can focus on different parts of your business that seem more tangible in the near future? To be fair, it seems like Viasat has focused its attention on in-flight WiFi business (United, Delta, etc), while more or less neglecting their ground satellite internet product. HughesNet, well, they just seem incompetent, lol. This is despite them claiming to be the ‘Best Rural Internet - Best Sat-WiFi Provider 2021’. Technically this is a true statement, but when Viast ranks 36 and HughesNet ranks 37 out of 38 internet providers in the US, like a Midwest Dad says, “That’s like puttin’ lipstick on a pig.” Precariously, both HughesNet and Viasat are suing Starlink to slow down their expansion, and ‘all of a sudden’ announced plans to improve their service. I still believe these improvements will not be able to compete with Starlink's low latency, more on this later.
#3 - For Most Companies, Innovation Slowly Dies with Age
As Ben Thompson of Stratechery writes, “Culture is the product of successful decisions, and it allows a company to scale. When it is time to change, though, it is a straightjacket.” Viasat was founded in 1980 and went public in 1996, and HughesNet (EchoStar) has been around since 1980 in different businesses. The point here is that once a company goes public, there is a culture that is created that is often focused on hitting their quarterly targets. Trying to innovate takes capital and long term bets, both of which makes Wall Street squirm. Squeezing pennies out of customers to hit your quarterly guidance often in the long-term leads to being disrupted due to not actually solving for new customer problems they are willing to pay for.
There are few companies, like Amazon, who have been explicit that it does not focus on quarterly results, and is customer focused for the long term. Building a great product and company takes focus and dedication to customers, and if you are able to do that, as a company, you will be able to give yourself optionality to create great financial results for your shareholders.
Part Two - Why Starlink is Better and How They Do It
#1 - How Starlink Stacks Up on Speed
So some may be skeptical of Starlink because it’s a new service. But a new product/service that is overseen by Elon Musk, one the greatest first principle thinkers of our time, you should have confidence results will be delivered. The proof that Starlink is heads and shoulders above HughesNet and Viasat is summed up in the graph below. As a user of Starlink for a cabin in northern Wisconsin, I can attest to these results. Our download and upload speeds are now faster than my speeds in the Chicago area. (I’ll cover what impact this has on closing the digital divide, remote work, and how the space race will change thing in an upcoming article.)
#2 - With Starlink, Never Lose a Signal and Never Retry a Link
If you ever used a dish for TV or internet, you know that when bad weather arrives, you can guarantee constant disruption in service. What if I told you with Starlink, users are reporting this just doesn’t happen?
When it comes to slow latency, a typical user experience is clicking on a link on a web page, and it seems like nothing happened. HughesNet and Viasat, they average almost 1 second of latency, which is insanely high. Starlink is close to cable internet latency.
So how does Starlink achieve no weather disruption and low latency? With its (planned) network of up to 46,000 small satellites (eventually; 12,000 to start out with) in low orbit, and interconnectivity by laser-based optical communications in the vaccum of space, this infrastructure can beat any terrestrial communications in the sense of latency, and even speed. You read that right, “lasers”.
#3 - Coverage Like a “Fly on Cow Shit”
With a very large fleet of satellites, mentioned above, Starlink has to coordinate all of the satellites to ensure constant coverage and connection to the ground stations. Part of the upfront and ongoing investment by Starlink is to build more ground stations and deploy more satellites. Below is a map of their ground stations, as well as a mesmerising live view of their satellites orbiting the earth. Welcome to the future!
Part Three - Infrastructure is expensive to expand good internet coverage in rural areas, for both fiber and old satellite internet companies
#1 - Rural expansion of internet access is expensive.
It can cost up to $30,000 to deploy a single mile of fiber cable for just a few customers, which is not compelling for an internet provider, unless they are connecting to a huge new subdivision. Governments have tried to help subsidize these costs for internet providers, but the costs are just too steep. The Rural Digital Opportunity Fund established $20.4 billion to bring high speed fixed broadband service to rural homes and small businesses that lack it.
#2 - Telco’s like Verizon, AT&T, and T-Mobile have filled the gap over the last decade.
You’d have to assume that their blanketing of the America with cell signals let HughesNet and Viasat to be complacent. While this may or may not be true, one thing is for certain, they have NOT closed the digital divide. Terrible connections, high data needs of the modern internet, and more discourage people from even using the internet.
#3 - Helping bridge the digital divide in sparsely populated places costs so much because of outdated technology.
While building and maintaining Starlink’s network may be expensive, they are able to make a much smaller investment to bring coverage to a larger set of customers (ie better ROI than laying a single mile of fiber cable). That last point is where Starlink (and SpaceX) have the biggest competitive advantage, as incumbents like Hughesnet have to pay 10x the price to launch new satellites, SpaceX has reduced launch costs from $400-$500 million to as low as $28 million. More on what this technological breakthrough means for space and the future of humanity in another article.
Hat tip to DGT Infra for the picture
My Hypothesis: The death knell has sounded for old internet providers in rural areas thanks to Starlink, and maybe even fiber internet companies in rural areas.
Why Do I Believe this?
Satellite internet providers have been asleep at the wheel for some time. Why is this important? This has left over 30 million Americans with little to no access to options for high quality internet needed to have an adequate experience online today and in the near future.
Starlink solves the internet woes of many rural Americans. Why this is important? Key advances in technology have enabled a better product and service.
Infrastructure is expensive to expand good internet coverage in rural areas, for both fiber and old satellite internet companies. Why is this important? Government funding should go towards the emerging technologies, not the incumbents with legacy technology. This will help close the digital divide faster.