- Ahead of the SpaceX IPO, investment analysts are questioning whether Starlink will strike an MVNO with a facilities-based mobile operator
- The CEOs of AT&T and T-Mobile were asked if they were interested in an MVNO with Starlink/SpaceX and both answered “no”
- The question didn’t come up during Verizon’s earnings call with CEO Dan Schulman, but a spokesman told Fierce that it’s not interested
Two out of three mobile operators – AT&T and T-Mobile – said during Q1 earnings calls that they’re not interested in doing an MVNO with Elon Musk's SpaceX/Starlink.
That leaves Verizon. The question didn’t come up during CEO Dan Schulman’s call with investment analysts earlier this week.
However, a spokesman for the company confirmed that Verizon’s stance adds up to another “no” from the Big 3.
Verizon’s answer is significant because a prevailing theory is that if one of the Big 3 operators were to do a deal with Starlink, that would be the beginning of the end of the terrestrial wireless industry as we know it today.
Verizon weighs in
Here’s what Verizon had to say about it.
"Satellite communications can provide a complementary service where terrestrial builds may be impossible or impractical. Verizon has a clear commercial approach when we evaluate an MVNO partner,” a Verizon spokesman told Fierce.
The reasoning sounds similar to what the CEOs at AT&T and T-Mobile said, referring to an ability to grow their customer base, among other things.
“The partner must provide us with meaningful access to an untapped market segment, expand our customer base, or improve our customer experience. We don't believe an MVNO with Starlink meets those criteria," he said.
For direct-to-device (D2D) services where customers’ phones switch to satellite connectivity when there’s no terrestrial coverage, Verizon has existing relationships with AST SpaceMobile, Skylo and Globalstar, the latter of which supports Apple’s D2D offer. Amazon is in the process of acquiring Globalstar.
Is Verizon interested in adding any more low Earth orbit (LEO) players to the mix? Like, perhaps Amazon Leo?
“We have nothing to share at this time, but we’re always open to having discussions with companies that may bring value to our network, customers and shareholders,” the spokesman said.
Verizon joins T-Mobile, AT&T
To recap, T-Mobile CEO Srini Gopalan reiterated during his company’s earnings call on Tuesday that he’s not interested in an MVNO with SpaceX/Starlink, saying such a deal wouldn’t expand its total addressable market (TAM).
“We’ve got a very clear philosophy or approach to MVNOs,” he said. “MVNOs make sense for us when it’s a TAM expansion. A TAM expansion happens because there’s a new customer base that we couldn’t target earlier.”
An example of that is the MVNO that T-Mobile did with cable in the business market. “It’s not obvious to me how an MVNO with SpaceX or any other LEO operator fulfills those conditions,” Gopalan said.
Last week, AT&T CEO John Stankey was asked whether he’d consider an MVNO with an emerging player.
AT&T’s approach to MVNOs is to do deals where it’s an extension into a customer segment that it’s not doing a good job of penetrating or “somebody can do it in a more creative way,” he said.
“We don’t just give traffic away without certain conditions and capabilities and requirements as to how they do business with us and how that capability is instantiated in the market,” he said.
Within that context, “do I think that I'm looking at satellite LEO right now and saying that that's a place that an MVNO relationship would open up access to customers I don't have today? No, I don't think that's the case,” he said.
MVNO deal or no deal?
The questions about whether one of the Big 3 operators would enter into an MVNO with Starlink is getting increased investor interest ahead of SpaceX’s IPO.
In a note for investors this week, New Street Research’s Blair Levin provided a historical perspective and examined various paths Starlink could take to get an MVNO deal – with or without an operator’s blessing.
“We don’t know whether Starlink is now or will in the future be interested in an MVNO, but if it becomes interested, there are paths to increase its leverage in such a negotiation,” Levin said.
For one, Musk could use his political influence with the Trump Administration to get the Federal Trade Commission (FTC) involved.
“If none of the big three carriers offered Starlink an acceptable MVNO, we don’t doubt that Musk would have the ability to call on the FTC to announce an investigation against them on the grounds of a ‘concerted refusal to deal,’” Levin said.
Another possibility is SpaceX/Starlink could use spectrum that it acquires through an auction or secondary markets as a bargaining chip to obtain an MVNO, similar to how cable companies ended up in their MVNO deal with Verizon.
The prospect of defection
Then, there’s the “prisoner’s dilemma” scenario. “One path for Starlink to obtain an MVNO is to cause ‘a defection,’ in the parlance of a prisoner’s dilemma, as Google did with Google Fiber,” Levin said.
In game theory, the prisoner’s dilemma involves two rational agents, each of whom can either cooperate for mutual benefit or betray their partner, i.e. defect, for individual gain. “The dilemma arises from the fact that while defecting is rational for each agent, cooperation yields a higher payoff for each agent,” he said.
Here, Starlink could, at a minimum, make a proposal to the three facilities-based wireless providers for an MVNO deal. “While AT&T may not want to do such a deal, its sentiment might change if it believes that either Verizon or T-Mobile would defect and make a deal,” Levin wrote. “Similarly, even if none of the companies want to offer Starlink a deal, a government investigation might cause one of the companies to defect.”
The question is: Will everyone remain rational, or is this game just getting started?