Nearly four years ago, space company start-up AST SpaceMobile (ASTS 0.64%) made a bold proposal to investors in its SPAC IPO: For the low, low price of just $10 a share, you could invest in a company that would revolutionize communications by enabling any off-the-shelf smartphone to call any other off-the-shelf smartphone -- anywhere on the planet -- "direct-to-cell" (DTC) via satellite.

Development of this technology, said AST, would be "game-changing ... for global mobile connectivity." The company that made it a reality (AST) said it could sign up as many as 5 billion mobile subscribers for its services, and dominate a $1 trillion global mobile wireless services market, without ever needing to lay a mile of fiber optic cable on the ground, or build a single cellphone tower. Instead, all AST would need to do is build a few satellites, launch them into orbit, and invoke a magical technology to do something no one had ever done before.

The catch: AST wouldn't tell anyone exactly how it planned to do this, because "the technology is highly proprietary, and exactly how it works cannot be disclosed."

AST SpaceMobile to investors: Can you hear us now?

Suffice it to say, I was skeptical when I first heard AST's proposal back in 2021, and vowed, "I wouldn't touch this space IPO with a 62-mile pole." But today, I'm not so sure.

Over the past few years, you see, AST has consistently delivered on its promises, first placing an international cellphone call from Texas to Japan in 2023, using nothing more than a couple of Samsung smartphones and a satellite in space. AST then proceeded to build and launch (in September 2024) five BlueBird satellites to begin operating its network in the U.S.

Along the way, the company has signed multi-hundred-million-dollar contracts with Verizon Communications (VZ 0.47%), AT&T (T 1.16%), and most recently Vodafone (VOD 0.11%), to give their customers access to what AST calls the "first and only space-based cellular broadband network accessible directly by everyday smartphones." It's unfolded all five satellites in orbit, and requested permission from the FCC to begin beta service, perhaps as early as next year.

There's just one problem: SpaceX might beat it to the punch.

SpaceX, the market disruptor

Billionaire Elon Musk gave his first hint that he wanted to horn in on this new market, which AST created, back in 2022. That was when SpaceX announced a deal to build and launch "direct-to-cell" Starlink satellites so that T-Mobile US (TMUS -0.57%) customers could place emergency texts and calls from cellphone dead zones.

At the time, of course, AST had no operational satellites in orbit, and I thought SpaceX's move posed a more direct threat to satellite communications companies like Viasat, Globalstar, and Iridium -- which it did. But now that AST seems on the verge of launching DTC service, it's likely SpaceX has AST in its crosshairs -- and that AST is the competitor SpaceX intends to crush first.

And SpaceX is already moving to do that.

Image source: Getty Images.

SpaceX makes its DTC move

On Dec. 5, you see, SpaceX launched 20 new DTC-tailored Starlink satellites to orbit, where they'll join six other DTC satellites that have been undergoing testing since January.

As CEO Musk tweeted, SpaceX's "first orbital shell" of DTC satellites is now complete, enabling text service even in dead zones for T-Mobile customers. Future launches will carry even more DTC satellites to orbit, improving the service by adding voice and data capability in 2025 -- the same year AST will be trying to get its business rolling.

The first Starlink satellite direct to cellphone constellation is now complete. This will enable unmodified cellphones to have Internet connectivity in remote areas. Bandwidth per beam is only ~10Mb, but future constellations will be much more capable. https://t.co/wJHMGEzzE4

-- Elon Musk (@elonmusk) December 5, 2024

At the very least, this will tie AST for opening up service in 2025. And crucially, SpaceX is starting this contest with 5 times as many DTC satellites in orbit as AST has got -- supplemented by nearly 6,900 additional Starlink satellites in orbit. While the vast majority of Starlink satellites can't connect directly to cellphones, what they can do is help shoulder the communications load, as signals collected initially by the DTC satellites get distributed across the wider Starlink constellation.

Meanwhile, AST is busy selling stock to raise cash to launch 20 more BlueBird satellites, and 40 more after that, en route to a planned constellation of 168 satellites.

What it means for AST SpaceMobile

Sad to say, AST SpaceMobile -- which invented the idea of DTC cell service -- must now compete with the undisputed titan of the space industry, SpaceX, which has not just the intention, but also the resources necessary to take this market away from AST. Not only is SpaceX's satellite fleet 1,400 times as big as AST's, but SpaceX's market cap, and access to capital to build as many satellites as it needs, is also about 70 times as big. (Recent reports have SpaceX planning a fundraising round that would value it at $350 billion, versus AST's sub-$5 billion market cap.) 

It's not a fair fight. But fair or not, the plain fact is that in any contest with SpaceX and its enormous resources, AST SpaceMobile will be fighting uphill the whole way. If I had to place a bet in this contest, I'd almost certainly bet on SpaceX to win it.