There was an announcement on SpaceX’s first-ever earnings call that got the attention of the wireless industry. SpaceX said on the call that Starlink would enter the terrestrial cellular business by building a large number of cell sites provisioned with satellite backhaul. The company would leverage the power of its next-generation V3 satellites, along with an increasingly large fleet of satellites, to provide backhaul to feed cell sites.

It’s impossible to know if the company is serious about this. Elon Musk has always made exaggerated claims about what he will do in the future, and many of them never came to fruition. On the same call, Elon also said that the company plans to build factories on the moon.

A Crowded Market

There are a number of obstacles that stand in the way of SpaceX pulling this off. First is the basic question of why anyone would wade into the U.S. cellular market, which has become increasingly competitive. Starlink could probably only gain significant numbers of customers by lowering prices, and that brings into question how profitable this might be.

Cellular networks in cities have already boosted cellular data speeds to 300 Mbps or faster, so Starlink wouldn’t have any technological advantage. Perhaps the real goal of the company is not the U.S. market, but populous countries like Nigeria, which have inferior cellular networks and a population that relies on cellular much more than on landline broadband.

The Spectrum Problem

At least for now, Starlink doesn’t have enough spectrum to pull this off. They are acquiring 65 MHz of spectrum from EchoStar, which is not nearly enough to compete for terrestrial cellular service. However, after the recent IPO, the company is awash with cash and could buy more spectrum. In the OBBB, Congress mandated the FCC to find 800 MHz of midrange spectrum for auction, so there will be plenty of spectrum coming into play over the next decade.

Another big question for me is the overall bandwidth needed to feed a cellular network. Most cell sites today are fed with 5-10 Gigabit backbone connections. The new Starlink constellations will have a greatly increased amount of capacity. Still, the backhaul to hundreds of thousands of cell sites would have to eat into the overall capacity of the satellite constellation. SpaceX must be counting on being able to grow far beyond the current 15,000 satellites approved by the FCC; in fact, they have requested permission to expand the constellation to 100,000 satellites. The increasing use to support cellular would also mean the need for many more earth stations to feed the network.

Perhaps the biggest obstacle would be getting started. The three big carriers all have roaming agreements with each other, but they might decide not to make it easy for a new competitor to enter the market. Very few people would buy a cellular service that wouldn’t work when they travel to other parts of the country. There was speculation after SpaceX made this announcement that the real purpose was to pressure the big cellular companies into giving the company an MVNO deal (resold cellular) so it could combine terrestrial resold cellular with satellite cellular. That’s an interesting dilemma for the big cellular companies, because if SpaceX had an MVNO, it could then selectively build cell sites over time.

SpaceX will likely never stop surprising the market with big ideas that are outside of the box. While this one is certainly doable, it wouldn’t be easy unless one of the big cellular companies blinks and lets SpaceX into the cellular business through the backdoor of an MVNO. But you can never say that SpaceX wouldn’t do this even without that easy on-ramp.