It’s getting tougher to reach for yields within the telecom sector, especially when you have a company like Space Exploration Technologies (NASDAQ:SPCX) out there with its disruptive satellite connectivity business, Starlink, which might just be the cash cow the firm needs to fuel its other, more ambitious voyages. In its current state, it feels like Starlink is mostly seen as connecting rural homes rather than urban environments.
However, that could change with time as the technology becomes better at beaming data from space to devices and through walls. Of course, those big cell towers aren’t going anywhere anytime soon, as they just get the job done better. But the big question on the minds of investors is how long before Starlink can become more of a direct-to-consumer kind of mobile service provider.
With SpaceX also reported to show off a device, something that Elon Musk himself was quick to deny, questions linger about what direction Starlink is headed next, and whether it has what it takes to disrupt a very profitable corner of the market.
Though I don’t know what to make of the AI device prototype rumors and reports that have been floating around this week, I do think that I would be just a bit concerned if I were a shareholder in a hard-hit telecom company right now.
Could satellites reduce or eliminate the need for cell towers? I wouldn’t rule it out.
While it feels far-fetched to think satellites will disrupt cell towers, I certainly wouldn’t ignore the longer-term potential behind any sort of Starlink Mobile kind of service. It’s not just satellites and the technology behind them that stand to improve drastically over time, but the chips within smartphones and other devices also stand to get better on the receiver side.
Indeed, Apple‘s (NASDAQ:AAPL | AAPL Price Prediction) upcoming iPhone 18 Pro model is rumored to feature the in-house C2 chip, which could change the way we think about satellite connectivity. As the new chip enables devices to browse the web using satellite connectivity, perhaps it’s only natural to question where the technology could go next. We’ve come a long way since the days when satellite connectivity was just a nice-to-have for smartphone users who got stuck in the wild and were in need of help.
While Elon Musk has been known to be quite ambitious, I do think that the telecom business is about to become a whole lot more competitive, especially as Starlink looks to challenge the dominance of telecom incumbents that might not have what it takes to compete if we do reach a phase where cell towers just aren’t needed anymore. We hear about how nobody wants an AI data center in their backyard, but what about those unsightly cell towers?
Arguably, SpaceX is closer to eliminating the need for such terrestrial cell towers before data centers. While there are challenges that exist that could prevent direct-to-device connectivity that’s on the level of a cell tower, I certainly wouldn’t want to bet against SpaceX and Elon Musk as they’re serious about taking Starlink to the next level. As it turns out, there’s more than just dreams when it comes to the space economy.
Starlink’s disruptive threat is real
In my view, the threat of Starlink bypassing traditional carriers is real. As to whether SpaceX will decide to go down the phone route as well or open up the low-Earth orbit (LEO) constellation to phone makers prepared to pay remains the big question. I think the latter makes far more sense, especially since there are more urgent projects for SpaceX to spend money on.
Most notably, AI and space-related endeavors. Will Elon Musk change his mind with an AI phone at some point down the road? I have no idea. For now, one has to believe the man when he says that the report of such a device is “utterly false.” In my view, I don’t get why the firm would want to get into that business when there are more pressing matters to tackle.
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