Why Satellite Internet Is Unlikely to Disrupt Incumbent Indian Telecom Companies

Elon Musk, who met Prime Minister Modi recently, spoke about his plans to bring Starlink to India. Starlink is a satellite internet service that Musk founded, which has upwards of 4000 satellites circling the earth. 

Besides Starlink, Amazon is also trying to get its satellite internet service up and running by 2024. 

While some see it as a new round of competition in the sector, it is unlikely to have major ramifications for existing telecom operators.

Unlike regular internet connections, which rely on cable networks, a satellite internet network uses satellites to connect to the internet. As a result, it is available everywhere, unlike regular networks, which need to build on-ground infrastructure to connect an area to the network. 

A dish receiver at the user’s end receives and transmits signals, allowing the user to connect to the internet. Hence, satellite internet helps users from rural and unconnected areas access the internet.

Why is the Telecom Sector Divided Over Satellite Internet?

Musk’s Starlink has not gained a foothold in India despite having a subsidiary in India for the last two years. 

The company planned to roll out upwards of 2 lakh units by 2022 and even began bookings for the service. However, the government intervened and said Starlink had no license to offer internet services in India. 

The issue hasn’t been resolved yet, and telecom companies are divided on the issue of the process based on which spectrum will be allocated. While some prefer auctions, a majority prefer licensing. However, low-cost licenses would mean multiple competitors in the space. 

On the other hand, auctions could push out small players who might not be able to fight with the might of larger players. An auction would also put players like Starlink at a disadvantage since it would set a precedent for other countries to follow. 

Amazon, OneWeb (backed by Bharti Airtel), and Starlink have vehemently opposed an auction. They have argued that auctions would result in higher spectrum prices, and hence, rural customers who are the beneficiaries of the satellite network would have to pay up higher prices. They also believe that these auctions could artificially limit competition in the sector. Reliance Jio, in contrast, is arguing for an auction route.

Why is Satellite Internet Likely to Have Limited Adoption (Without Government Help)?

For one, more than 52 per cent of India’s population is already connected to the internet. However, this underestimates the true penetration. 

If one excludes 25% of India’s population that is under the age of 14, the 52 per cent penetration translates into nearly 70 per cent penetration for the population above 14. 

It is unlikely that a large chunk of this internet-using population would shift to a service that is significantly costlier and slower. 

The cost of connecting to the Starlink network is quite high. Starlink was charging Rs 7000 as an initial deposit, a price that many rural Indians would be unable to pay – unless subsidized by governments. 

At the same time, satellite connections are usually costlier on a subscription basis and have slower internet speeds. Further, telecom companies continually spend on capex to add more network infrastructure on the ground.

The cost of a connection, combined with higher latency and high existing penetration, would help protect the incumbents’ turf. Hence, the popular narrative of a telecom war appears to be an exaggeration.

Nevertheless, Indian companies are investing in space to protect their turf. 

Both Airtel and Jio have partnered with external players to help them on the satellite front.

 Airtel is backing OneWeb and has partnered with Hughes Network Systems to provide satellite broadband in India. 

Jio, on the other hand, has partnered with SES to offer its satellite internet services in the country. 

The rollout and reception of the satellite internet service in India remains to be seen.