Starlink, SpaceX’s satellite-powered internet service, is set for a big production cost cut.
Currently in the beta stage, the service promises users high-speed internet access by pointing a dish at a clear view of the sky. But during the 36th annual Space Symposium event in Colorado Springs, SpaceX president Gwynne Shotwell explained that the company currently loses money on each of those user terminals — but it’s set to make big progress in this area.
“I think they'll be about a quarter of the cost to us right now in maybe a year,” Shotwell said.
It will be welcome news for SpaceX, which plans to use the revenue from Starlink to fund some of its most ambitious missions. CEO Elon Musk explained in 2015 that the project was “all for the purpose of generating revenue to pay for a city on Mars.”
However, it’s important to note that Shotwell’s comments suggest the cost of producing SpaceX’s Starlink user terminal will drop, rather than the price paid by the consumer. SpaceX currently charges $499 for the Starlink Kit that includes the terminal, plus an extra $99 per month for access to the service.
There is no guarantee that those savings will pass down to the consumer, especially as SpaceX aims to develop Starlink into a new source of revenue.
Shotwell’s comment suggests that the company sees the price the consumer pays as “expensive.” This suggests that the company could pass those savings down eventually.
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SpaceX Starlink: what did Gwynne Shotwell reveal about user terminal costs?
During the event, Shotwell said:
“We were able to tackle almost all the elements of the cost before we rolled out service, with the exception of the user terminal.”
“I can say, not proudly, that with every customer we acquire we lose money on the user terminal because the cost of that user terminal is higher than the average consumer can afford. However what's critical for us now is the speed of spin on those designs, and in fact, the ones that we will have later this year will cost roughly half of what our current user terminals cost, and then we think would be able to cut that in half yet again.”
SpaceX produces the dishes at the cost of about $1,300, according to PCMag, meaning the company currently takes a loss on production costs.
Shotwell explained that SpaceX mitigates the cost of the terminal, as paid by the consumer, through two methods:
- Making it easy to install. This means buyers don’t have to hire an installer to place the dish in many common places.
- Bundling the wi-fi router, so there’s no additional cost. Other internet service providers may charge their customers a monthly fee to rent the hardware.
“The only place...and I don't want to say we fail because we've made tremendous progress on the user terminal, but those are still expensive,” Shotwell says.
Shotwell went on to say that the user terminal should reach “a quarter of the cost to us right now in maybe a year.”
SpaceX Starlink: what is SpaceX’s goal?
Shotwell said the aim is to connect “the three to five percent where fiber just does not make any sense.”
Musk claimed in May 2019 that the internet connectivity industry brings in about $1 trillion in revenue per year globally. SpaceX’s internal projections from 2017 suggested the company could reach annual revenue of more than $35 billion by 2025, $30 billion of which could come from Starlink.
Currently, the company has coverage “plus or minus 50 degrees...53, 55 [degrees]” latitude. It hopes to reach the poles later this year. The company was hoping to reach that stage “a little bit sooner” but instead focused on developing the laser connections essential for deploying those satellites.
SpaceX’s long-term goal with Starlink is to use the money to build a city on Mars. Musk projected in 2019 that the city would cost between $100 billion and $10 trillion.
SpaceX Starlink: how to sign up
SpaceX is inviting users to provide their email and home address to the Starlink website during the beta stages. SpaceX will then invite users to pay a deposit equivalent to one month’s service.
From there, it depends on the area. While some regions are currently taking orders, others may have to wait a bit later in the process.
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