The Starlink Mobile threat to wireless carriers became a little more real after SpaceX and Grain Management agreed on a transaction that will see the satellite company acquire 14 MHz of nationwide 800 MHz spectrum licenses.
Impact: The news that SpaceX and Grain Management agreed on a spectrum sale involving Grain’s entire portfolio of 800 MHz spectrum for a reported $8 billion made waves across the mobile industry and came just days after the FCC approved a SpaceX request to launch as many as 15,000 next-generation direct-to-device satellites to support its Starlink Mobile goals. Though characterized as a big move and described by SpaceX CEO Elon Musk as “the last critical piece of the spectrum puzzle needed for SpaceX to provide complete phone coverage in America,” analysts cautioned that while important, the spectrum won’t immediately make Starlink Mobile a competitor. The 14 MHz of paired low-band spectrum (817-824 MHz paired with 862-
869 MHz) adds to SpaceX’s terrestrial spectrum holdings and will enable Starlink Mobile to deliver on-the-ground coverage with signals that can penetrate walls and buildings. But most analysts seem to agree that SpaceX will need more terrestrial spectrum to make itself into a true mobile carrier. Beyond that, it will take years to construct an entirely new wireless network at an estimated cost of around $80 billion, according to data from TD Cowen.
There’s a certain irony involved in the SpaceX-Grain deal, because the transaction involves 800 MHz licenses that previously belonged to T-Mobile, which has refused to consider a potential MVNO deal with Starlink Mobile. After Dish Network’s financial difficulties over the past few years prompted the company to walk away from its commitment to acquire the spectrum as a condition of the 2020 T-Mobile/Sprint deal, T-Mobile attempted to auction the spectrum but didn’t get any takers. The carrier then traded the 800 MHz licenses to Grain earlier this year in return for additional 600 MHz spectrum and $2.9 billion in cash in a deal that closed barely two months ago. Grain had previously planned to make the spectrum available for use by utility companies but then asked the FCC for approval to also make it available for D2D service, which is where SpaceX got involved. While the licenses can now support both D2D or terrestrial use, the analysts at LightShed believe SpaceX will use the spectrum as a base layer in its terrestrial coverage. LightReading noted that more than one analyst theorized SpaceX would go after the spectrum in the two months since the spectrum swap closed. New Street Research analyst David Barden calculated that SpaceX paid $1.73/MHz/POP for the licenses, well above what Grain likely projected it could get for them with a purchase price of around $6 billion.
Now that SpaceX has gained access to additional terrestrial spectrum licenses (pending regulatory approval that’s sure to come from the FCC and Chairman Brendan Carr), it would seem that speculation about a Starlink Mobile MVNO would dissipate. But that hasn’t been the case. Wireless experts continue to theorize about which of the big three carriers will cave first and enter to an MVNO with SpaceX, particularly if their spectrum-pooling joint venture fails to get off the ground or doesn’t achieve the type of collaboration expected with other satellite players to extend coverage to U.S. dead zones. That’s because most analysts still believe SpaceX needs an MVNO agreement to establish Starlink Mobile as a true competitor to the big three carriers. But the spectrum deal does up the threat level to terrestrial carriers, hinting that SpaceX will chase more terrestrial spectrum and could play a significant role in upcoming 5G spectrum auctions, which could make it more difficult for carriers to get the spectrum they need at auction, particularly given’s SpaceX’s seemingly unlimited budget. The potential for SpaceX to acquire additional 5G spectrum combined with the licenses already acquired from EchoStar and now Grain Management, as well as the FCC approval of the 15,000-satellite constellation focused on better D2D connectivity and delivering “5G-like speeds and services,” could spell trouble for wireless carriers. The good news for the carriers and their existing MVNO partners is that it will take a while for SpaceX to get its Starlink Mobile plans in place and then implemented, giving them time to counter the rising threat.
