Driving the news: SpaceX is putting together the pieces needed to become a major wireless operator in the United States, potentially building its own ground network and purchasing available spectrum.
- These moves are aimed at either building the ability to bypass existing carriers or bringing them to the table for a deal that would allow Musk to strike a deal for wholesale access to their networks.
- Musk may have reason to act quickly as long as the current administration and its regulators remain in place, a reason cited by some analysts in the context of proposed mergers between Tesla and SpaceX.
What they say: Blair Levin, a former FCC chief of staff who now runs policy at Optimal Advisory, says Musk’s financial resources set him apart from previous challengers.
- “For the first time, there is an entity that can scare off investors from the traditional big three,” Levin told Axios.
- Unlike Dish, which has faced serious financial constraints, SpaceX can rely on the capital markets that have rewarded Musk’s ambitious plans.
The last: SpaceX has held discussions with EchoStar about acquiring Boost Mobile or gaining access to its network agreements, according to a Washington Post report Monday.
- That could provide a fast track to customers and infrastructure, although approval of such a deal is far from a foregone conclusion if Musk’s companies find themselves drawn into the regulatory quagmire after the midterm elections.
- The Post reported that Verizon, AT&T and T-Mobile have all rebuffed Musk’s efforts to gain access to their networks.
State of play: Musk also has a way around them.
- SpaceX has signed multibillion-dollar spectrum deals, including a variety of low bands useful for reaching indoor customers and supporting a traditional cellular network.
- The company could build its own network using smaller towers and rooftop antennas, although this would require considerable investment and time.
The big picture: The U.S. wireless industry has spent much of the past two decades consolidating.
- T-Mobile once played the role of scrappy challenger, shaking up the industry with aggressive pricing and elimination of unpopular practices.
- But its acquisition of Sprint in 2020 reduced the number of major national carriers from four to three.
- Regulators tried to preserve a fourth competitor by requiring the sale of Boost Mobile to Dish Network, which planned to build a national network.
- This effort never resulted in the competitive alternative envisioned, leaving Verizon, AT&T and T-Mobile firmly entrenched.
The plot: Musk would move from a company in which SpaceX enjoys enormous technical and economic advantages to one in which established players have spent decades building infrastructure, acquiring customers and learning how to serve them.
- In terrestrial wireless, the big three carriers have spent decades investing in towers, spectrum, indoor coverage and the countless small improvements that make their networks reliable.
- Building such a network isn’t just about spending billions on infrastructure, MoffettNathanson’s Craig Moffett said in a recent podcast interview. It also means making up for decades of work to close coverage gaps in stadiums, airports and other difficult locations.
The trap: Even if Musk manages to build the necessary infrastructure, it’s far from clear that becoming a nationwide mobile carrier would be a particularly attractive business.
- Moffett questions why SpaceX would want to enter a sector where even established carriers struggle to achieve attractive returns on investment.
Between the lines: Success will depend on fundamentally reducing the cost of providing the service or creating something that consumers are willing to pay a premium for.
- SpaceX has floated the idea of using Starlink rooftop equipment as small cellular base stations, potentially reducing some of the costs of building a traditional network.
The political context: Musk’s plans come as Washington faces potentially significant change following Tuesday’s midterm elections.
- Although SpaceX likely faces significant political and regulatory risks due to Musk’s ties to Republicans, analysts are unsure whether this will translate into opposition to a wireless deal that adds competition to the market.
The bottom line: Musk has repeatedly succeeded in industries where established players doubted his ambitions. But this time, he’s the underdog, trying to overcome the advantages of companies that have spent decades building the networks he wants to challenge.
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