The Starlink supporters
who discount the emerging competition are quite foolish. The LEO wars
are just beginning. The typical Starlink investor fan has a limited
understanding of the importance of a strong terrestrial telecom backbone
and a huge customer base. Amazon has both. It is the largest cloud
provider on the planet and has subsea cable ownership stakes which give
it a more resilient and scalable network. Amazon has 310 million
residential customers to which it can market satellite services as well
as 8 million businesses including a majority of the Fortune 100. Amazon
has cash and cash equivalents equal to $58 billion and is net cash flow
positive. In contrast, Starlink still depends largely on equity and debt
sales to finance its business. Starlink is also probably bleeding cash
in many markets. In emerging markets like Hungary it is offering zero
install charges on 12 month contracts. In other words, it is losing at
least a couple hundred dollars upfront on every sale. Not to mention,
the margin rich 40 Euro per month fee. In a price war Amazon's cash
advantage could prove decisive.
Amazon
has existing relationships with most large corporations and many
national governments. This gives it more credibility than a startup run
by a guy who appears on stage with a chainsaw. 😀 There are rampant
complaints about Starlink's nonexistent customer service. It is
impossible to reach a customer service representative and the website
offers limited options. In contrast, Amazon has great customer service.
Amazon's rise was built on great customer service including rapid
delivery and many product options.
The
chart below shows Amazon will be ready to soon to serve the regions in
which LEO service can make a big difference. These areas include West
Africa, the Indian Ocean, etc. It is worth mentioning that Amazon is
offering much higher bandwidth on Internet links than Starlink, namely
up to a full gigabit. For most corporations Starlink's 200-250 megabits
is a no go. It is simply not enough throughput for business and
government applications.
Moreover,
there are signs that Starlink growth is petering out. The US is its
biggest market, but the first 8 months of 2024 saw only a 100K increase
in customers. Even in markets where Starlink has enjoyed robust growth
like Kenya, gains have almost flattened. The satellite provider is
experiencing network capacity shortages, but lacks the fibre ownership
to scale gracefully. In contrast, all Amazon must do is buy some cards
and light wavelengths on its subsea cable systems. Starlink must buy
more lit capacity in contrast. That is a slower, more expensive and
complicated undertaking.
Comments
Post a Comment