At $110 per month, Starlink certainly doesn’t come cheap. Those rather steep prices are luckily offset by the quality of its service, which consumers appear to like.
Unfortunately, not everyone can afford to even pay the basic monthly subscription fee, especially after it was hiked from $99 per month to $110 back in March 2022.
An additional price hike was introduced to those living in limited capacity areas where Starlink is now charging $120.
Some have thus started to wonder whether Starlink reduce pricing sometime down the line.
In this article, we’ll explore why Starlink costs so much, how likely price hikes or reductions are, and whether Starlink may even become free.
Why Is Starlink So Expensive?
The simple answer is that deploying a constellation of thousands of satellites, which Starlink is predicated on, just doesn’t come cheap.
Now, Starlink can take advantage of cheaper launch costs since all of its satellites are deployed using SpaceX’s reusable Falcon 9 and Heavy rockets.
However, since a singular Falcon 9 still costs $67 million (that’s the price charged to customers, not the costs that SpaceX necessarily incurs), it remains a very expensive endeavor to get satellites into space.
Additionally, Starlink continues to lose money on its hardware terminals as well. The first batch of its dish was allegedly sold at a loss of $3,000.
Luckily, Starlink has since been able to drive the production cost down significantly, from $3,000 at launch to $1,500 per piece. A month later, SpaceX president Gwynne Shotwell said they got the production costs down to $1,300 apiece.
Nevertheless, Starlink would still lose money on each hardware set given that it now sells them for $599 in the United States where most of its customers are likely located.
Starlink, back in March 2022, adjusted its hardware pricing from $499 to $599 to combat some of those costs.
Starlink also has to invest substantial amounts of cash to build out the necessary infrastructure, including the 100+ ground stations it has set up to connect its satellites with user terminals.
Lastly, SpaceX allegedly lost over $20 million per month by supporting Ukraine with the shipment of its terminals. Those costs have since been partially offset by government-based and other types of aid.
Arguments For Why Starlink May Get Cheaper
There are a few reasons why Starlink could become less expensive going forward. The first one is simply grounded in past behavior the firm has shown around price.
Starlink underwent price cuts in a variety of different countries it operates in such as France, Germany, Japan, Mexico, and many others.
Now, the price cuts are likely introduced to boost the adoption of Starlink in those countries. In Germany, for example, it dropped the monthly price from €99 per month to €80 and now €65.
However, this price is still substantially above what other satellite internet providers, such as skyDSL (€39 a month), charge for their services.
Meanwhile, this isn’t necessarily the case in the United States. Both Viasat and HughesNet, Starlink’s biggest competitors in the United States, charge more for comparable plans.
Therefore, Starlink is not incentivized to cut prices in North America, simply because it’s somewhat the only viable option if you need fast and low-latency internet.
This could change with the emergence of new entrants, though. Amazon’s Project Kuiper, for instance, is set to launch sometime before 2026 and plans to offer high-speed internet for businesses and individuals alike.
And Amazon is certainly not shying away from competition given its entrances into groceries, healthcare, and so forth. Plus, the e-commerce giant can use the profits from its AWS cloud division to fund growth, for example by severely underpricing Starlink.
Another reason why Starlink may get cheaper is scale. As the firm refines its manufacturing processes, it is able to minimize production costs, which could then be used for price reductions.
Related: everything you need to know about Starlink
The above-mentioned reduction in hardware costs is just one example. Producing satellites should also get cheaper with scale and time.
SpaceX itself could benefit from scale economies, too, thus leading to lowering launch costs that again improve the economics of its overall business.
Lastly, Starlink continues to sign up a variety of different business customers, ranging from airlines to cruise ship operators. Maritime customers, for example, pay $1,000 per month alone (lowest tier).
I would assume that profit margins are substantially higher in the B2B segment and could thus be funneled back to the consumer segment of Starlink’s business.
Will Starlink Monthly Cost Go Up?
There’s definitely some past precedent that may point toward price increases, the most simple one being that Starlink raised prices in the past.
In the United States, Starlink increased the price of its residential plan from $99 per month to $110 a month back in March 2022. Hardware costs were also upped as I’ve mentioned in the previous chapter.
And in 2023, Starlink adjusted its US pricing once again. It now charges $90 per month for those located in areas with excess capacity and $120 in limited-capacity areas.
As of right now, Starlink is the only game in town when it comes to B2C LEO satellite internet providers (in B2B it competes against OneWeb), which means it is able to offer substantially better performance compared to geostationary operators like HughesNet.
If it remains the market leader, it could very well be possible that Starlink is tempted to raise prices knowing that consumers do not have another option to fall back on (if fiber or 5G aren’t available).
Additionally, further issues in the supply chain (e.g., computer chips) as well as continuously rising inflation could potentially lead to further price hikes.
On the other hand, Starlink’s contract is cancelable at any time, so there’s a natural ceiling to which prices can be raised.
Is Starlink Going To Be Free?
No, Starlink is never going to be free. While its stated goal is “to provide high-speed, low-latency connectivity across the globe,” it will do so at a price that enables the firm to turn a profit.
This is necessary not only to keep SpaceX alive but to ultimately fulfill Elon Musk’s goal of colonizing Mars. As such, he plans to use the profits Starlink generates to fund SpaceX Mars missions.
The SpaceX founder previously estimated that the firm would need to invest between $20 billion and $30 billion into Starlink’s constellation.
However, he also projected that positive cash flows could be reached anywhere from $5 billion to $10 billion, meaning any additional revenue is pure profit.
Continuous investments also need to be made to keep the service running. First and foremost, Starlink’s low-earth constellation (LEO) needs to be replaced every 5 to 6 years, so launch costs represent an ongoing expenditure.
Additionally, Starlink needs to continuously invest in customer support, research and development (as competitors like Amazon’s Project Kuiper or OneWeb enter the space), and site maintenance, among others.
Unfortunately, this means that Starlink is never going to be free. But, as I’ve outlined before, price cuts may certainly be a possibility.
Another factor that needs to be taken into account is that SpaceX is largely funded by venture capitalists.
SpaceX has raised over $10 billion in funding and the people backing it obviously expect some sort of return on their invested capital. Some of them may even be part of its board and would simply not approve of such a drastic move.
Sounds like a plan that makes sense.
Fingers crossed 🙂