Why Elon Musk wants to sell you cell service

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Nilay Patel (0:26)

Hello and welcome to Decoder. I'm Nilay Patel, Editor-in-Chief of The Verge, and Decoder is my show about big ideas and other problems. Today I'm talking about Walter Piecyk, a partner and analyst at LightShed Partners who covers tech, media and telecom, about SpaceX's recently announced plans to become a major wireless carrier. Last week, SpaceX agreed to buy a big chunk of low-band spectrum to expand the Starlink network. That spectrum has been traded around the telecom business for decades now, but SpaceX's ambitious plan is to build, quote, the world's most advanced mobile network. Combined with the news that the FCC approved the deployment of 15,000 next-gen Starlink satellites and the company's previous agreement to purchase $20 billion worth of EchoStar spectrum last year, it's now clear that SpaceX is serious about competing with AT&T, Verizon and T-Mobile. I've covered the telecom business for a long time, and I've always known these companies can say they want to do something until they run into the harsh reality of how expensive it is to actually do it. The telecom graveyard of pivots, bad ideas and failed acquisitions is vast. Walt has been closely monitoring SpaceX acquisitions though, in recent years, he's correctly predicted that SpaceX was headed in this direction for months now. So I wanted to dig in to whether SpaceX can pull this off, while Walt thinks the existing telecom companies have really fumbled their response to SpaceX's growing threat and what happens when Elon Musk's rocket company jumps headfirst into a business that everyone loves to hate. Before we get going, do me a favor and subscribe to Decoder on YouTube, where we put out new episodes every Monday and Thursday. Okay, LightShed Partners, Walter Piecyk, on the harsh reality of SpaceX's mobile wireless plans. Here we go.

Walter Piecyk, your partner, a tech media and telecom analyst at LightShed Partners. Welcome to Decoder.

Walter Piecyk (2:09)

Thanks for having me. Looking forward to it.

Nilay Patel (2:12)

I'm excited to talk to you. I feel like we've been tweeting or posting around each other for many, many years, but I'm a telecom nerd at heart. I've been covering the space for ages. SpaceX is going to make a big splash. They're going to be the fourth major mobile carrier in the United States, maybe the world. They've bought some spectrum to do it. It's EchoStar spectrum by way of private equity. It is at once very simple and also very complicated. Give us the state of the state. I mean, they bought 800 megahertz spectrum for $8 billion.

They spent $20 billion already on EchoStar spectrum. What are they trying to do here?

Walter Piecyk (2:44)

I mean, it's definitely complicated, but maybe less complicated than trying to figure out how to put a data center out in space and make it not work or something on the moon. But I think, you know, they don't typically want to own spectrum and spend for spectrum. If you think about how Starlink was built, satellite companies don't typically pay for spectrum. And then as the business evolves and as they saw the opportunity in telecom, they purchased some spectrum initially from EchoStar. And I think the feedback they got from investors at that time was very positive. And they're like, wait a minute, you know, we should do more here. Like, this is a trillion dollar enterprise value business in the US alone. Obviously, they have global aspirations, both for Starlink as well as what they're doing, you know, with this, you know, mobile telephone service. So they bought more, they went back to EchoStar. And that's a key thing, I think, to pay attention to, in that they bought some spectrum and then they went back and bought some more. Cause I think like a lot of things that Elon does, he learns as he goes, right? So he bought the spectrum, got feedback, talked to people in telecom, bought some more spectrum. Then we didn't hear from them for a while. Then you have this thing that happened last week, where they bought some more spectrum, some stuff that was part of, I can go through the history of it if you care, but it's a long, wonky telecom stuff. This was originally the Nextel spectrum, if you remember that company.

Nilay Patel (4:06)

I do, actually, I do want you to go through that history, because I think the telecom business is best understood as a bunch of lobbyists trying to make everything more complicated than it should be.