Today, I\u2019m talking with Walter Piecyk, a partner and analyst at LightShed Partners who covers tech, media, and telecom, about SpaceX\u2019s recently announced<\/a> plan to become a major wireless carrier.<\/p>\n<\/div>\n Last week, SpaceX agreed<\/a> to buy a big chunk of low-band spectrum to expand the Starlink network, spectrum that\u2019s been traded around the telecom business for decades now. SpaceX\u2019s ambitious plan is to use that spectrum to help build \u201cthe world\u2019s most advanced mobile network.\u201d<\/p>\n<\/div>\n Verge<\/em> subscribers, don\u2019t forget you get exclusive access to ad-free Decoder<\/em> wherever you get your podcasts. Head here<\/a>. Not a subscriber? You can sign up here<\/a>.<\/p>\n<\/div>\n<\/div>\n<\/div>\n Combined with news that the FCC approved<\/a> the deployment of 15,000 next-gen Starlink satellites and the company\u2019s previous agreement to purchase close to $20 billion worth of EchoStar spectrum<\/a> last year, it\u2019s now clear SpaceX is serious about competing with AT&T, Verizon, and T-Mobile.<\/p>\n<\/div>\n I\u2019ve covered the telecom business for a long time, and I\u2019ve always known that these companies can say they want to do something until they run into the harsh reality of how expensive it is to actually do it. The telecom graveyard of pivots, bad ideas, and failed acquisitions is vast.<\/p>\n<\/div>\n Walt has been closely monitoring SpaceX\u2019s acquisition, and he\u2019s correctly predicted that the company was headed in this direction for months now. So I wanted to dig into whether SpaceX can pull this off, why Walt thinks the existing telecom giants have really fumbled their response to SpaceX\u2019s growing threat, and what happens when Elon Musk\u2019s rocket company jumps headfirst into a business everyone loves to hate.<\/p>\n<\/div>\n Okay: LightShed Partners\u2019 Walter Piecyk on SpaceX\u2019s plan to expand into mobile. Here we go.<\/p>\n<\/div>\n This interview has been lightly edited for length and clarity.<\/em><\/p>\n<\/div>\n Walter Piecyk, you\u2019re a partner and a tech, media, and telecom analyst at LightShed Partners. Welcome to<\/strong> Decoder<\/em><\/strong>.<\/strong><\/p>\n<\/div>\n Thanks for having me. I\u2019m looking forward to it.<\/p>\n<\/div>\n I\u2019m excited to talk to you. I feel like we\u2019ve been tweeting or posting around each other for many, many years, but I\u2019m a telecom nerd at heart. I\u2019ve been covering the space for ages. SpaceX is going to make a big splash. It\u2019s going to be the fourth major mobile carrier in the United States and maybe the world. It bought some spectrum to do it.<\/strong><\/p>\n<\/div>\n It\u2019s EchoStar spectrum by way of private equity. It is at once very simple and also very complicated. Give us the state of the state. SpaceX<\/strong> bought 800 Mhz spectrum for $8 billion<\/strong><\/a>. They spent<\/strong> nearly $20 billion already<\/strong><\/a> on separate EchoStar spectrum. What is SpaceX trying to do here?<\/strong><\/p>\n<\/div>\n It\u2019s definitely complicated, but maybe less complicated than trying to figure out how to put a data center out in space and making that work. Or something on the moon. But they don\u2019t typically want to own spectrum and spend for spectrum. If you think about how Starlink was built, satellite companies don\u2019t typically pay for spectrum. And then as the business evolved and as they saw the opportunity in telecom, they purchased some spectrum initially from EchoStar.<\/p>\n<\/div>\n The feedback they got from investors at that time was very positive and they said, \u201cWait a minute, you should do more here.\u201d This is a trillion-dollar enterprise value business in the US alone. Obviously they have global aspirations both for Starlink as well as what they\u2019re doing with this mobile telephone service. So they bought more. They went back to EchoStar. That\u2019s a key thing to pay attention to, in that they bought some spectrum and then they went back and bought some more.<\/p>\n<\/div>\n Because with a lot of things that Elon Musk does, he learns as he goes. He bought the spectrum, got feedback, talked to people in telecom, and bought some more spectrum. Then we didn\u2019t hear from them for a while. Now, you have this thing that happened last week where they bought some more spectrum, and I can go through the history of it if you care, but it\u2019s long, wonky telecom stuff. This was originally the Nextel spectrum, if you remember that company.<\/p>\n<\/div>\n I do. Actually, I do want you to go through the history because I think the telecom business is best understood as a bunch of lobbyists trying to make everything more complicated than it should be. Yes, spectrum auctions are complicated and what spectrum is good for what is deeply tied to the physics of the radio spectrum and all that.<\/strong><\/p>\n<\/div>\n But here it\u2019s the 800 MHz spectrum from the Nextel service, the old push-to-talk, walkie-talkie service that Sprint<\/strong> had to divest as part of the deal<\/strong><\/a> to get sold to T-Mobile. They\u2019ve been trying to sell it for ages. They<\/strong> sold it<\/strong><\/a> to this company, Grain Management. They\u2019ve been sitting on it, and when Starlink showed up, Elon bought it. Nobody else wanted it. What did he see in the spectrum that no one else did?<\/strong><\/p>\n<\/div>\n When you realize that you need to build a terrestrial network to support what you\u2019re doing with satellites, because satellites work fine if you\u2019ve got your dish on the top of your house and you\u2019re getting your broadband, but when you\u2019re trying to connect with a phone that doesn\u2019t have the same type of power or you\u2019re going inside a home, you\u2019re going to need better coverage.<\/p>\n<\/div>\n Sirius Satellite also has supplementary towers. There are not that many of them, but sometimes when you get out of Sirius coverage, you will connect to a tower. When they bought that EchoStar spectrum and then got FCC approval, and if you looked into those details of that FCC approval and what was required, you would see that they can\u2019t do this by satellites alone. There had to be terrestrial.<\/p>\n<\/div>\n Then SpaceX, as Elon is wont to do, tries to send some diversions like, \u201cWe\u2019re going to do Femtocell, we\u2019re not going to do macrocell, this, that, and the other thing.\u201d But they realized that they were going to build a terrestrial network. Now they finally realized, \u201cIf I\u2019m going to offer mobile service, I need some form of a terrestrial network.\u201d<\/p>\n<\/div>\n At the same time, the telcos are not going to help them out. They\u2019re not going to give them a wholesale agreement. Then when they go back and say the companies that had the lowest churn, what is the fundamental value you need in a terrestrial network? It\u2019s low-band spectrum. Why? It travels further, you can get better coverage, and you have that connectivity.<\/p>\n<\/div>\n So getting this low-band spectrum piece was just an important part, not to make the satellites work better, but to actually give them the spectrum assets that they need to build a terrestrial network. That\u2019s why the stocks reacted, because people finally came to terms with the fact that Elon is actually going to build a terrestrial network.<\/p>\n<\/div>\n I\u2019m less interested in the stock and more interested in just the cost structure of how this works. If I rewind my brain to being a baby blogger at<\/strong> Engadget<\/em><\/strong> 100 years ago, the FCC told all the TV networks they had to stop broadcasting on 700 MHz and we were going to run an auction.<\/strong><\/p>\n<\/div>\n Verizon and AT&T bought big chunks of 700 MHz spectrum and that\u2019s what 4G is built on. That\u2019s the low-bandwidth spectrum that you\u2019re talking about. It goes everywhere. This was a big victory that we reallocated 700 MHz, and 800 MHz was sitting right there the whole time. This is the Nextel spectrum. If it is so valuable, why wasn\u2019t there a market for it until Elon showed up just now?<\/strong><\/p>\n<\/div>\n It was part of this transaction. T-Mobile ended up having to sell it because the government said, \u201cIf we\u2019re going to allow you to take out the fourth competitor, which was Sprint, then in order to enable another fourth competitor out there, we need to have you guys give up some of your low-band spectrum.\u201d<\/p>\n<\/div>\n Part of the deal that T-Mobile and Sprint had with the government was that they would sell it to EchoStar. Why? Because Charlie Ergen, CEO of Dish at the time \u2014 it\u2019s EchoStar now \u2014 was going to be the fourth competitor. This was the rationale that they gave in terms of the approval of the transaction. Dish needed low-band spectrum. The problem is Ergen went about his business, he was trying to build a network, and then he just couldn\u2019t afford to buy that<\/a>.<\/p>\n<\/div>\n They had the rights to buy. Then at that point when Ergen failed on the bid to come up with the dollars<\/a> to buy that spectrum, it enabled T-Mobile and actually forced them to put it up for auction. Now, your question: Why didn\u2019t someone else show up then? Again, from SpaceX\u2019s standpoint, as I mentioned at the start of this podcast, their strategy has been evolving over time.<\/p>\n<\/div>\n In terms of the other telcos, they can\u2019t really use it. There are some limitations that they have. But in hindsight, maybe Verizon or AT&T should have bought this 800 MHz spectrum for whatever it was, let\u2019s call it $8 billion. They\u2019re probably losing more in enterprise value over the concerns of what\u2019s happening with SpaceX than what it cost them just to buy it in what\u2019s known as foreclose. They basically just take it, even if they don\u2019t use it or do whatever they need to meet those build out requirements and stop SpaceX from having unnecessary assets. I don\u2019t think even these companies were taking Elon seriously and thinking that he would actually build the network.<\/p>\n<\/div>\n Do you think that\u2019s colored by<\/strong> the failure of Dish<\/strong><\/a>? We covered the promises of Dish Network to build a fourth wireless carrier in this country so closely. Their attempt was predicated on some amount of technology innovation.<\/strong><\/p>\n<\/div>\n They were going to build this thing called an O-RAN network, which had a more competitive supplier base instead of just Nokia or Siemens or whoever, and they were going to run it on AWS and that was going to reduce costs. Man, eventually they supported one Motorola handset in Vegas and even that was backstopped by AT&T. They literally could not do it. These promises never came true. Dish is a different company and Charlie Ergen\u2019s a different CEO and their ability to just throw money at a problem until it\u2019s solved is very different from Elon.<\/strong><\/p>\n<\/div>\n But if they couldn\u2019t innovate to make a cheaper, faster network, what\u2019s the evidence that Starlink can stand up an entire terrestrial network at a cost basis that allows them to compete selling service to consumers, while they\u2019re also standing up an entire network in space? Because that feels like adding up a lot of cost.<\/strong><\/p>\n<\/div>\n I\u2019m going to go back even deeper than that. Remember when Sprint was struggling, Masayoshi Son from SoftBank was claiming the same thing. They were going to cut their CapEx to nothing and they were going to use these small cells. They innovated how wireless was going to get delivered. That failed. Obviously, they had to get bailed out through the purchase when T-Mobile bought Sprint effectively for just the spectrum.<\/p>\n<\/div>\n That network got completely decommissioned. To your point, Dish got a network built, but they couldn\u2019t resonate in the market. The difference between Dish and SpaceX is Elon\u2019s ability to get customers. That\u2019s where Dish truly failed. They built the network. The network worked fine. They had the wholesale agreements that they needed.<\/p>\n<\/div>\n I\u2019ll push back on you a little bit there. I have a very funny email from a Dish PR person from several years ago where they said, \u201cWe\u2019d like to issue a correction to your story. Our network does exist.\u201d That was the level that they were competing at, where they had to insist to us that the network was real, even though we could not find it in our tests in the various cities they claim.<\/strong><\/p>\n<\/div>\n Maybe there was a network, they built some amount of network, but they had not built anything that competed at the national scale with the big three.<\/strong><\/p>\n<\/div>\n Absolutely. It\u2019s not like your phone. The phone that I was using, I had an iPhone that it was mostly going to roam onto the AT&T and T-Mobile wholesale agreements that existed. The theory is you get the customers, you have a go-to-market strategy, and then you backfill the network. This is probably going to be something similar.<\/p>\n<\/div>\n You can even go back to when John Legere first took over T-Mobile. They had a crappy network, and then Legere promised, \u201cWe\u2019re going to build it,\u201d taking on customers saying that the network was great before the network was great. Then it caught up because they actually finally got the Germans, Deutsche Telekom, to give them the money to invest in the network.<\/p>\n<\/div>\n The same thing can happen here where SpaceX will sell something that\u2019ll probably rely on other assets that are out there, even if the telcos themselves are circling the wagons. They have the satellites for certain benefits in terms of coverage and then they can build the capacity over time. The point is it\u2019s going to take time. You can\u2019t just turn on a network overnight and start selling service on that.<\/p>\n<\/div>\n This has always been my framework of how to think about telecom companies. You can try to run the network cheaper or you can run some kind of different technology to make that cheaper. Or you can just spend and have the best network, which was the Verizon strategy for years and years and years.<\/strong><\/p>\n<\/div>\n Then you\u2019ve got to acquire and manage your customers. That was the T-Mobile strategy. That was John Legere. He was just nicer to people than AT&T was, and he picked up a lot of customers and that drove some investment.<\/strong><\/p>\n<\/div>\n Then you\u2019ve got to get some devices. You have to have the iPhone. We can set that aside because it feels like that era of competition is over. We\u2019re not doing exclusive devices anymore. But those are the two. I\u2019m just looking at the network here. It does not seem to me, from the outside, that Starlink is proposing to build a cheaper network.<\/strong><\/p>\n<\/div>\n It feels like they\u2019re proposing to build a vastly more expensive network because they need the satellites. They\u2019re going to launch 15,000 more satellites to support this network. Then they\u2019re going to build a terrestrial network by investing in spectrum on the ground and building some set of base stations.<\/strong><\/p>\n<\/div>\n Then they\u2019re going to have to convince one of the big three to let them roam over as some sort of mobile virtual network operator (MVNO). The big three<\/strong> do not want to do that<\/strong><\/a>. So they\u2019re going to overcharge them for that. I\u2019m just stuck at that being a lot of cost, even if you\u2019re Elon Musk and you can make some set of people buy whatever you\u2019re selling.<\/strong><\/p>\n<\/div>\n The third thing you said is obviously the most challenging. That\u2019s the tent and the pole that prevents you from launching services sooner rather than later. But without necessarily getting a wholesale agreement, there might be other ways. Roaming agreements exist out there. There are roaming partners that exist that these telcos still rely on. It\u2019s very expensive. It\u2019s not something you can build a high-margin business on, but it perhaps provides an entry to the market sooner rather than later.<\/p>\n<\/div>\n As Apple has pitched in terms of satellite connectivity, some people are in the middle of the Utah desert texting because they\u2019re injured. There\u2019s value there. But it\u2019s the soccer field. We have, maybe not in the cities, but in the suburbs, plenty of areas that the telcos have effectively given up on trying to provide coverage because of NIMBY-ism, meaning people just don\u2019t want these cell sites. This satellite coverage can give you not just this basic text messaging that Apple has been doing through the Globalstar constellation, but a true cellphone-type experience.<\/p>\n<\/div>\n So that\u2019s a positive. The second differentiation is the fact that these telcos have 60 percent earnings before interest, taxes, depreciation, and amortization (EBITDA) margins. So there\u2019s a lot of fat there that can be eaten off of, that when you\u2019re selling other services in terms of Elon, like home broadband, maybe this becomes an entree in terms of pushing Grok and people\u2019s usage. You don\u2019t necessarily need 60 percent margins, in this case, for him to justify building this network.<\/p>\n<\/div>\n They also talk about other data connectivity that these satellites are going to enable. Again, in the current constellation, you need a lot of power and you need a dish. But if you don\u2019t have that, if you have the cell phone-type power, then the internet of things (IOT) and other types of opportunities that exist there become another revenue opportunity that they look at.<\/p>\n<\/div>\n It\u2019s just funny. The IOT story \u2014 that\u2019s what all these companies promised us about 4G. That\u2019s what they all promised us about 5G. There\u2019s something about this business that just rhymes every time. They\u2019re going to do self-driving cars and robot surgery. I\u2019m confident we\u2019re going to hear about self-driving cars and robot surgery when it comes to Starlink and Tesla and Optimus.<\/strong><\/p>\n<\/div>\n There\u2019s something about these applications for next generation networks that just recurs, and we hear about them all the time. Then I think about our consumer audience at<\/strong> The Verge<\/em><\/strong>, and they want long battery life and fast service and [connectivity] all the places they go. I\u2019m not sure how that squares with your phone is going to connect directly to a satellite in the middle of a soccer field. There\u2019s something about that that also seems challenging.<\/strong><\/p>\n<\/div>\n It\u2019s just the performance if your phone does connect to the satellite on the soccer field and it works. A lot of the things that people said wouldn\u2019t work on Starlink in terms of airplanes or even getting customer-premises equipment (CPE) down below a certain price, they\u2019ve delivered on. Obviously, Elon sometimes delivers on them a little later than some of his initial optimistic promises, but they ultimately get delivered on.<\/p>\n<\/div>\n There is the ability with these new constellations to give you that type of connectivity on these spaces. Is that enough to differentiate with consumers? I don\u2019t know. The telcos have attacked this by saying, \u201cNo one cares about our direct-to-device (D2D) services.\u201d Well, your D2D services are not good. It\u2019s just sending basic text messages. What they\u2019re talking about is giving you that blanket coverage where you get what you expect from your cell phone wherever you go.<\/p>\n<\/div>\n That\u2019s fine, but you still have to give it to the person in the middle of the building where their cell phone works today and provide the volume at a cost that is going to be attractive to that consumer. So those are longer-term things that are going to require some amount of terrestrial network build. Then the question is: how much? A lot of the attacks that have been out there have been referencing $100 billion, $200 billion. I get that. Why?<\/p>\n<\/div>\n Telcos each spend $10 billion to $15 billion a year, but they are maintaining massive customer bases. To get that initial network up where you have that usage, where you use that low-band spectrum to get into buildings, is not those types of numbers. You\u2019re probably talking like $10 billion, $15 billion for that initial build in terms of CapEx.<\/p>\n<\/div>\n The dynamic there is really interesting. I\u2019m just thinking about AT&T when the iPhone came out. The network immediately got overloaded because there was a surge of customer demand that took four years to truly resolve. Part of that resolution was just putting the iPhone on the other carriers.<\/strong><\/p>\n<\/div>\n How do you think that will play out for Starlink here? Because right now, Starlink customer service is not the best in the industry. Their actual service, people love it. And then when they need<\/strong> customer<\/em><\/strong> service, it\u2019s a bunch of automated systems and people complaining on Reddit. So there\u2019s some challenge there if you\u2019re running a consumer business at this scale.<\/strong><\/p>\n<\/div>\n For consumer businesses, think about all the advertising that\u2019s done. The fulfillment, dealing with the phones, phone subsidies, and that\u2019s a big part of the financing. How many customers are we talking about? So for the amount of spectrum that they have now in the network that I\u2019m talking about for $10\u2013$15 billion, you\u2019re not taking 50 percent share overnight. I don\u2019t think that would be that expectation from day one.<\/p>\n<\/div>\n But then the theory of telco is that when you do that initial CapEx build, you have your initial spectrum purchases \u2014 $10, $20, maybe $30 billion \u2014 another $10 or 15 billion in terms of CapEx. If you are successful and you do get that five or 10 million customers, the opportunity to invest more happens. If you go back to the old days when the cable view of wireless was going to be, \u201cWe\u2019re going to get these MVNOs. We\u2019re going to drive the wireless companies into the dirt and then we\u2019re just going to buy them.\u201d<\/p>\n<\/div>\n That happened in at least one European market, and that was the cable bull thesis that was occurring. You could have the same bull thesis emerge from the SpaceX bulls here where they\u2019re going to say, \u201cWe\u2019ll get those first five or 10 million customers. We\u2019ll drive them into the ground. Verizon\u2019s going to be so desperate for any type of revenue because their revenue declined. They\u2019re just going to hand them a wholesale deal and then they\u2019ll start selling spectrum. There\u2019s going to be a spectrum auction with the FCC.\u201d<\/p>\n<\/div>\n You can see how the narrative can build based on, \u201cAn initial CapEx that\u2019s not that big, get in the market, and then if it\u2019s successful, we start investing more.\u201d<\/p>\n<\/div>\n Let\u2019s talk about the terrestrial network for one more turn. I heard you throw a little water on the idea that they\u2019re going to build femtocells. That is what<\/strong> Elon and Gwynne Shotwell have been saying<\/strong><\/a> \u2014 that they don\u2019t need to build the traditional kind of terrestrial network that AT&T and Verizon and T-Mobile have, where you have a lot of fiber back haul, the big sites that require all kinds of zoning permits and everything. That they can basically just put small cell stations next to Starlink dishes, put them anywhere they want, and blanket the world with them. And Starlink itself will be the backhaul.<\/strong><\/p>\n<\/div>\n I sense some problems with this. Starlink is not 100 percent reliable all the time. If you have a network that is not 100 percent reliable all the time, you\u2019ve got some problems, so maybe you have to backstop it somehow. But you don\u2019t think that\u2019s what they\u2019re doing. You think they\u2019re going to build a regular terrestrial network.<\/strong><\/p>\n<\/div>\n I\u2019m sure that\u2019ll be a part of it, but you need macro towers for that type of coverage and penetration and power. Not to explain physics to SpaceX, they probably know it better than anybody, but what you\u2019ll see is as they talk more about this low-band spectrum that they purchase, when we get on the conference calls of these tower companies, you\u2019re going to find out that you\u2019re going to see a lot of those antennas show up on towers.<\/p>\n<\/div>\n It\u2019s just natural. You can talk about femtocells, but it\u2019s hard to see that the network\u2019s going to get built without macro towers.<\/p>\n<\/div>\n One of the weirder aspects of the telecom industry, as it\u2019s constituted in the United States right now, is that cell carriers own some of their towers and operate some of their towers. And then there are these crazy third parties that literally have names like TowerCo that operate a bunch of the other towers.<\/strong><\/p>\n<\/div>\n Are those captured? Do you think SpaceX can get deals with those companies, or are they beholden to their big partners?<\/strong><\/p>\n<\/div>\n These are huge real estate investment trusts (REITs). American Tower is the biggest one. It\u2019s probably one of the largest companies in this. When you consider any REITs, there are other companies out there. They have these towers. They have space in many cases where basically SpaceX can just go and get an additional antenna. It\u2019s a lot easier to do that now than when the wireless companies were initially building this stuff and having to erect their own towers.<\/p>\n<\/div>\n In addition, EchoStar is going through a bankruptcy. They have a lot of radios that could be used, that could be bought on the cheap, that could expedite SpaceX\u2019s entrance in the market. They haven\u2019t shown interest in that yet. The EchoStar bankruptcy process hasn\u2019t yet concluded, but EchoStar can still be a potential partner here by selling them radios that are already on towers.<\/p>\n<\/div>\n You\u2019ve lifted the amount of time. Those radios use the spectrum that SpaceX is purchasing, so it can be a quick fix for them to enter the market. Who knows if they do that? They may have their own view like Masayoshi Son did on how to build this new cheap network.<\/p>\n<\/div>\n Is there a way to read this as just they\u2019re slowly buying EchoStar or whatever EchoStar tried to do?<\/strong><\/p>\n<\/div>\n EchoStar has some remaining spectrum that Verizon really needs. At this point, there is some strategic sense to just buy EchoStar outright \u2014 because EchoStar is getting stock that was issued to them at a discount. If you\u2019re buying them, you\u2019re effectively buying in your own stock.<\/p>\n<\/div>\n You don\u2019t have to issue the cash to the company and you\u2019re getting whatever cash proceeds that EchoStar is getting from some of its spectrum sales. They can actually get incremental cash on the balance sheet and buy their stock in. We\u2019ll see if that plays out. By the way, then you don\u2019t have to also deal with Dish, which sometimes can be challenging.<\/p>\n<\/div>\n T-Mobile\u2019s in the mix here. I want to talk about Verizon, you\u2019ve mentioned them several times, but T-Mobile is Starlink\u2019s current partner for direct-to-device cell connectivity. Are they just getting rocked? Are they going to be a part of this? How\u2019s that going to work?<\/strong><\/p>\n<\/div>\n If you think about the start of that, that was former T-Mobile CEO Mike Sievert up on stage with Elon announcing<\/a> this thing and everyone\u2019s very happy. Then Deutsche Telekom decided it needed a different CEO at some point. You had that transition where Mike retired and you brought in a new CEO, and there might just be a different view on how that relationship works.<\/p>\n<\/div>\n I\u2019m guessing that it\u2019s been very frustrating for SpaceX to deal with them and certainly they would probably want to avoid any exclusivities going forward. They may need to if they want to sign one of these wholesale agreements that we talked about before.<\/p>\n<\/div>\n It just seems like, as you mentioned, SpaceX and Starlink went after a little bit of the consumer market here. They bought some spectrum. They got a good reaction to it. Now they\u2019re going to go after the whole thing and their existing telecom partner is thrown by the wayside.<\/strong><\/p>\n<\/div>\n If you look at the three big telecoms in the United States, they are circling the wagons. They\u2019re saying this is never going to work. They\u2019re<\/strong> never going to sign the MVNO agreements<\/strong><\/a>. They\u2019re putting together<\/strong> their own satellite pool<\/strong><\/a>. There\u2019s something here where they are panicked by the existence of meaningful competition in a way that does not usually happen in telecom.<\/strong><\/p>\n<\/div>\n Yeah, I agree with that. I don\u2019t know if it\u2019s SpaceX leaving them or T-Mobile leaving SpaceX, but that relationship which started out so happy with the old CEO is certainly not positive. T-Mobile executives have been throwing shade at SpaceX incessantly over the past couple of months. They formed a joint venture (JV) together.<\/p>\n<\/div>\n It reminds me of when fixed wireless first hit the cable market and Chris Winfrey talked about it derisively as \u201ccell phone internet\u201d and played it down. Ultimately, that\u2019s what\u2019s really bit them and why cable stocks are in the position they\u2019re in today, given the amount of customers that they\u2019re losing to cell phone internet.<\/p>\n<\/div>\n There are some similarities now in terms of how these executives are downplaying what they can do. Is it going to be costly? Is it going to be complex? Sure. But so is Terafab and so are so many other things. So is making an autonomous vehicle or catching a rocket with chopsticks. That\u2019s the reality that they have to deal with. Investors have seen what this management team has done before in other areas and are just applying it here. Whether that\u2019s fair or not, time will tell.<\/p>\n<\/div>\n I\u2019m actually very curious about that because I know you cover the company and I know you cover the industry. There\u2019s some part of SpaceX that is just a meme stock. People love Elon. There\u2019s some part of Tesla where it\u2019s not valued like a car company, it\u2019s valued like a software company, even though it is very much a car company. We\u2019ve yet to see where the software multiples might come from for Tesla.<\/strong><\/p>\n<\/div>\n The same is true of SpaceX: huge IPO, but people are buying the physics miracle of the rockets launching and landing. They\u2019re buying the promise of Mars. They\u2019re buying the promise of AI, whatever that promise is, however frothy that market is. Those are valued against hopes and dreams.<\/strong><\/p>\n<\/div>\n Telecom is not. It\u2019s well known. You can be a telecom analyst and you can examine the value of the spectrum. You understand the build-outs. The customers are not confusing. Consumers are going to pay some amount of money. There are other competitors that are built in at scale. Why do you think SpaceX would chain itself to a business that is easy to value when all of its other businesses are their dreams? You can\u2019t value dreams. It\u2019s just whatever is the biggest number.<\/strong><\/p>\n<\/div>\n I don\u2019t think it\u2019s an either-or. When you look at people\u2019s attempts to justify the valuation of SpaceX, a lot of that value is going to land on data centers in space and the data centers on the ground. That\u2019s where a lot of the value is in Starlink.<\/p>\n<\/div>\n But that\u2019s not the launch business, which theoretically is their business. It\u2019s not even the AI provision business. We\u2019re describing them as a hyperscaler.<\/strong><\/p>\n<\/div>\n Yeah, exactly. The AI and those are other big chunks of it. There are a lot of different stories here, but it doesn\u2019t mean that they don\u2019t pursue this if they have connectivity and constellations. They\u2019re talking about connectivity in space because they believe that there\u2019s going to be a demand for connectivity between the data centers, whether it\u2019s theirs or others and their constellations. There are already data centers that I think are using their constellation to connect.<\/p>\n<\/div>\n When they looked at it, it was just another part of the narrative that you build in terms of SpaceX and justifying the valuation. Because what do all of these things need? Whether it\u2019s robotaxis, whether it\u2019s data centers in space, they need money and money needs a narrative. This is just another one of the narratives to stack on top to say, \u201cHere\u2019s how we can drive incremental value.\u201d<\/p>\n<\/div>\n![\"\"](\"https:\/\/platform.theverge.com\/wp-content\/uploads\/sites\/2\/chorus\/uploads\/chorus_asset\/file\/24792604\/The_Verge_Decoder_Tileart.jpg?quality=90&strip=all&crop=0%2C0%2C100%2C100&w=2400\"\/)
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