Cord-cutting — meaning canceling cable TV plans in favor of streaming TV over the internet — is becoming an epidemic in the U.S.
According to the latest statistics from Statista.com, by the end of last year, 31.2 million Americans had already “cut the cord,” up 27% from 2019. That number is expected to grow another 14% this year, 11% in 2022, 9% in 2023, and 8% in 2024, growing but decelerating as cable customers run out of cords to cut, and the nation transitions slowly but surely to an “everything over the internet” model for TV viewing.
Of course, cable providers such as Comcast (NASDAQ:CMCSA), Verizon (NYSE:VZ), and AT&T may take some comfort in the knowledge that they also sell internet access. Even if cable subscriptions dwindle, at least internet subscriptions should rise.
But will they? Because according to the latest data from a poll conducted by Reviews.org, cable monopolies may face an even bigger threat than cord-cutting: SpaceX Starlink.
As we’ve previously discussed, SpaceX’s new “Starlink” satellite broadband internet project is up and running, rolling out beta access in the U.S. in October for $99 per month, expanding into Canada in November, and then winning an $885 million subsidy — and 642,925 new customers — from the FCC in December.
Those lucky 642,925 could soon have company. After surveying 500 internet subscribers aged 18 and over, Reviews.org estimates that 64% of Americans would consider ditching their current internet service providers (such as the aforementioned Comcast, Verizon, or AT&T) and switching to Starlink. More than that, 51% of Americans plan to switch to Starlink as soon as the service becomes available to them.
And it will be available to more people soon: Access to Starlink service is expanding with each launch of a SpaceX Falcon 9 “Starlink” mission to orbit. The most recent batch of 60 Starlink satellites departed on Wednesday, pushing the number of Starlink satellites in orbit past 1,000. By the end of 2021, Starlink says it will be able to offer broadband access all around the world — the rest of the U.S. included.
Caveats and provisos
Assuming internet users follow through on what they say they would do hypothetically and actually sign up for Starlink, this could be bad news for incumbent internet service providers (ISPs). At the same time that their cable TV revenues are dwindling, their internet broadband businesses might encounter a “giant sucking sound” coming from the direction of Starlink.
This would, however, be very propitious for investors hoping to get in on an eventual Starlink IPO, which SpaceX says it has planned. (No date has been set yet.) But before you get too excited, a few facts need to be highlighted.
First, sample error. Reviews.com estimates that because of the small size of its survey, there’s a sample error of plus or minus 4.5%. Still, the organization says it has “a 95% level of confidence” the data are correct. Worst case, even if Reviews.org overestimated consumer desire for Starlink by 5%, that still suggests incumbent ISPs could lose as much as 46% of their business to Starlink.
Second, price. One curious bit of data in Reviews.org’s report is that “44% of survey respondents say they’d pay the $99/month price tag for Starlink internet if they were given an option to make payments on the $499 equipment fee” (emphasis added). This caveat suggests that the stated “51%” interest in switching to Starlink isn’t without caveats. Consumers are at least a little bit concerned about Starlink’s price — as they should be.
Finally, speed and reliability. After all, in its beta state, some Starlink customers are getting as little as 50 mbps in speed for their $99 per month — and must endure “brief periods of no connectivity at all.” In remote, rural markets that’s probably still superior to what current terrestrial ISPs are offering. But for urban customers, well, Comcast charges as little as $50 for 200 mbps in metro locales — half the price for four times the speed of Starlink. No matter how much consumers may hate their local cable monopolies, after weighing the pros and cons, they may well decide to stick with “the devil they know” — especially given Starlink’s $499 upfront equipment cost.
Granted, as it builds out its satellite constellation, Starlink says internet speeds will increase. Ultimately, SpaceX hopes its satellite internet service will provide 1-gigabit speeds to customers. At that speed, Starlink’s $99 monthly price would be much more competitive with the $85 that Comcast charges for gigabit service.
At that point, the writing could be on the wall for terrestrial ISPs, and success would be all but assured for a Starlink IPO.
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