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Elon Musk's business empire has had a rocky year so far with one notable exception. Most satellite internet traffic goes to his satellite internet service, Starlink. How did Starlink become so dominant? And can it stay that way? Our colleagues Darian Woods and Wailin Wong at the Indicator report.
WAILIN WONG, BYLINE: Starlink is the satellite internet service provided by SpaceX. You buy one of these terminals, which looks kind of like a silver iPad. You set it up facing the sky. And then almost anywhere in the world, you can have high-speed internet.
DARIAN WOODS, BYLINE: Satellite communications analyst Tim Ferrer says Starlink is top dog.
TIM FERRER: So Starlink has over 7,000 satellites in orbit today. The next biggest system is OneWeb, which has just over 600 satellites launched to date.
WOODS: So how did one company become the provider of satellite internet? A big explanation is what's known as fixed costs. These are the costs before you add on more customers. So let's go through what's required to get the very first customer onto satellite internet.
FERRER: You need licenses from the Federal Communications Commission.
WONG: Then you have to build satellites.
WOODS: Back of the envelope, we'll probably need a couple of dozen satellites to ensure continuous service.
WONG: Then you find a rocket to get it up there. And even then, you're not done. You need to have a factory to build what's called a terminal. This is what the user has, basically the satellite dish and the modem.
WOODS: So between the licenses, the satellites and the terminal factories, the fixed costs of satellite internet are really high. What is cheaper is what's known as the variable costs. Once you've added one customer, you've got one customer in place, adding a second or a third one doesn't cost you that much extra.
WONG: What's interesting about industries with those characteristics is that these tend to be natural monopolies. That means the more customers a company gets, the cheaper it becomes for them to provide that service. One company naturally becomes a monopoly.
WOODS: And so we wanted to know, is Starlink a natural monopoly for satellite internet?
FERRER: Yes, I think that's right. It's a natural monopoly in satellite communications, very clearly.
WONG: Starlink wasn't the first internet satellite company, but it's been the first to really invest at this enormous scale and make it accessible to everyday people.
WOODS: And because Starlink is owned by SpaceX, that means cheaper rocket launches than the prices its competitors have to pay.
WONG: So with more satellites in orbit, that gives you more bandwidth. The more bandwidth you have, the more customers you can have. And the more customers you have, that helps you bring down costs through the magic of what's called economies of scale. Having a dominant company innovating and using those economies of scale is all well and good until that monopoly does begin to care about profits and raises prices on customers who have no other choice. That's why a lot of utilities like power and natural gas are regulated by the government. There are limits to how much they can squeeze customers.
WOODS: Then there's the question of how much power one unelected person should hold. Elon Musk refused to let Ukraine extend Starlink to the contested territory of Crimea. Ukraine has been frustrated with this. Its military uses Starlink.
WONG: For partly this reason, China and the European Union are encouraging their own satellite internet. But any competitors have to grapple with the fact that Starlink is part of Elon Musk's empire. And that means the usual principles of finance don't apply.
Wailin Wong.
WOODS: Darian Woods, NPR News Transcript provided by NPR, Copyright NPR.
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