The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

By Jennifer Johnson

LONDON, Feb 11 (Reuters Breakingviews) - CEOs in the slow-growing, debt-heavy telecom sector are hardly short of problems. Elon Musk is giving them another one. The SpaceX boss’s satellite-internet business, Starlink, is signing up millions of broadband customers worldwide. The big question is whether the X owner and ally of U.S. President Donald Trump is too politically contentious abroad, prompting a regulatory backlash against his company.

With almost 7,000 satellites in orbit, according to Harvard astronomer Jonathan McDowell, Starlink more than doubled its worldwide internet subscriber count to 4.6 million in 2024. The division of Musk’s SpaceX also said it had tripled the volume of its internet traffic, which beams down from space rather than travelling through underground cables or mobile networks. Jeff Bezos’ Amazon.com AMZN.O is trying to catch up with a similar satellite-based competitor, Project Kuiper.

For some of the major incumbents – like $130 billion U.S. cable giant Comcast CMCSA.O or France’s $30 billion Orange ORAN.PA – there are reasons to remain relaxed. It’s tough for an object orbiting the Earth to deliver a faster or more reliable connection than a fibre-optic cable in the ground. Customers in fibre-rich places arguably have no reason to switch to Starlink’s service, which can cost $120 per month plus several hundred dollars in upfront equipment purchases.

That’s why many industry watchers argue that Starlink only makes sense in poorly served rural areas. In these places, broadband companies like Britain’s $20 billion BT BT.L could even use Musk’s service to pad out their networks, meaning they don’t need to dig up remote parts of the country. Starlink could end up as an ally for mobile operators too: T-Mobile US TMUS.O, the $280 billion group controlled by Deutsche Telekom DTEGn.DE, is launching a satellite-to-cell service that uses the SpaceX division’s constellation.

There are holes in the telco optimists’ argument, however. First, it ignores the fact that some of the world’s biggest telecom markets still lack adequate residential broadband. Take India, where there are only 41 million fixed-line internet subscribers compared with 904 million wireless users, according to the country’s telecoms regulator. In other words, most people depend on mobile data for internet, meaning there’s a gap in the market for home broadband providers like Starlink.

That explains why Indian telco behemoth Jio, part of Mukesh Ambani’s $190 billion Reliance Industries RELI.NS, is worried. Ambani wrote a letter to regulators in November calling for a review of Starlink and Kuiper’s potential reach ahead of a satellite spectrum award. The government is proceeding with a plan to allocate spectrum administratively, rather than auctioning it off, effectively lowering the barriers to entry for foreign players like Starlink. The concern among Indian telcos now is that Musk’s early lead in space will allow him to mop up broadband subscribers in the world’s most populous country.

That fear seems well-founded given how quickly Starlink has taken off in other markets. After launching in Nigeria in 2023, the company became the country’s third-largest internet provider in less than a year. Its Kenyan customer base more than doubled in a few months between June and September 2024. By November, it had to halt new signups in some areas of the east African country due to high demand.

But it’s not just emerging-market telcos that should be worried. Musk, who tends to swing for the fences with his business ventures, is clearly targeting the United States. Research outfit Quilty Space reckons 57% of Starlink’s residential subscribers are in its home region. North America also boasts the world’s highest average revenue per unit, or ARPU in industry parlance, at around $115, according to Quilty’s analysis.

From Starlink’s perspective, the United States possesses an enticing combination of qualities: it trails broadband leaders like South Korea and France, with just 57% households able to connect to fibre, according to the Fiber Broadband Association. At the same time, consumers are rich enough, relatively speaking, to pay a premium for satellite internet.

And even in Britain, which is belatedly making progress on fibre with three-quarters of households now covered, there are reasons for Starlink to make a play. A satellite only earns its keep if it’s being used in the country over which it happens to be hovering at any given moment. Musk’s incentive is therefore to avoid having any dark spots on Starlink’s customer map – it’s better to get some revenue than none at all.

Researchers at Enders Analysis believe Starlink could address some 3.5% of the UK broadband market by 2027, equivalent to around 1 million subscribers. That’s not disastrous for the incumbents, but nor is it helpful in an industry with heavy investment requirements, and which has historically struggled to earn returns above its cost of capital. It’s also possible that future improvements in satellite technology could narrow the performance gap with fibre. The fact that Musk has a track record of sustaining heavy losses in search of market dominance should also worry rich-world incumbents.

Starlink’s global nature means it could end up as one of the world’s largest internet providers even if it only grabbed a small slice of each market. According to data from the World Bank, there were some 1.5 billion fixed broadband subscribers globally in 2023. Holding that figure steady, and assuming Musk claims 3.5%, implies 50 million subscribers. At Quilty’s estimated global average ARPU of $90 per month, Starlink would eventually pull in around $57 billion in annual revenues.

For comparison, the domestic broadband division of Comcast brought in $26 billion of revenue last year, with an added $10 billion from serving businesses. Analysts estimate that the fixed-line business of Deutsche Telekom clocked up $23 billion of 2024 sales.

For now, the immediate obstacle to Starlink’s worldwide growth appears to be Musk, whose controversial political stances risk alienating governments and potential customers. Before Trump paused his proposed Canadian tariffs, the government of Ontario threatened to rip up a Starlink contract worth $68 million. Opposition parties criticised Italian Prime Minister Giorgia Meloni for considering a five-year deal with SpaceX, which Reuters reported could be worth 1.5 billion euros ($1.6 billion) in total.

That example may comfort incumbent CEOs. But it’s also possible that regulators and governments, like India’s, will continue to prize extra broadband competition enough to let Musk in. Even if they don’t, Bezos’ Project Kuiper could one day perform a similar role to Starlink but with less political controversy. The fundamental problem for global broadband providers is that deep-pocketed tech moguls have set their sights on offering satellite broadband, and there’s no sign of them slowing down.

Follow @jenjohn_ on X

(Editing by Liam Proud and Oliver Taslic)

((For previous columns by the author, Reuters customers can click on JOHNSON/Jennifer.Johnson@thomsonreuters.com))