Sunday, September 04, 2022

SpaceX introduces affordability based Starlink pricing

GDP per capita, 2022 (Source)

These are the first Starlink price or service changes, but they won't be the last.

When SpaceX announced the price of the Starlink service, Elon Musk said it would be the same everywhere but I wrote that eventually it would be priced to be affordable in different nations. (If you predict enough things, you are bound to get something right).

The fixed cost of a satellite Internet constellation is high -- satellites are expensive to make and launch -- but the cost of adding and servicing a new customer is low and the market is global. At the initial price of $500 for the terminal and $99 per month for the service, there would be unused capacity in poor nations and contention for limited capacity in wealthy nations.

Earlier this summer, we were seeing complaints that Starlink sales were straining capacity in parts of the U.S. and Canada, and last month SpaceX announced variable pricing and an optional service cap in France. That was dubbed a pilot study, but since then the variable pricing dam burst, and customers in many nations received notification of permanent price cuts because of "local market conditions" and "parity in purchasing power." 

A 56% service price cut in Brazil
This change has been discussed on Reddit and a user established a crowd-sourced database of Starlink terminal and service charges by nation. As of this writing, the database contains complete records for thirty-nine nations. The average terminal price, including shipping, is $493.99, and the average monthly service charge is $72.65. In eight nations, the service charge has been cut by over 50%. In general, service charge cuts are greater than terminal price cuts since SpaceX is already subsidizing terminal purchases. (The database is currently a shared Excel spreadsheet, but I would like to see a cleaned-up version as a page on Wikipedia or better yet on the Starlink Web site).

These are the first Starlink price or service changes, but they won't be the last. The technology, the product mix, and the market will continuously change, and SpaceX will eventually encounter competition in the non-residential satellite broadband market. They will need data-driven Ph.D. marketing managers to set prices, not MBAs.

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