Is Direct-to-Device Becoming a Battle for Control of Mobile Networks?

As SpaceX expands its spectrum holdings and explores terrestrial network infrastructure, the line between satellite providers and traditional mobile operators is beginning to blur. What started as a partnership to extend cellular coverage could evolve into direct competition for customers, network control and market share.

In this Q&A, ABI Research industry analyst Rachel Kong examines SpaceX’s ambitions to become a full-fledged mobile carrier, the implications for AT&T, Verizon and T-Mobile, and whether other satellite operators have the resources to follow its lead.

Q: With SpaceX and Amazon Leo investing heavily in spectrum and D2D capabilities, are satellite companies evolving from partners of mobile operators into potential competitors? How could this change the structure of the telecom industry?

A: There is certainly this possibility, and SpaceX is already taking aggressive action. In late October, it was announced that SpaceX is in discussions with at least one major cellular infrastructure company to access 80,000 cell sites for its new network. SpaceX is already a dominant player in the space domain, and terrestrial connectivity is something Elon Musk and the team are working towards for Starlink Mobile to become a major mobile carrier in the U.S. In addition, building on the EchoStar spectrum acquired last year, SpaceX struck a deal with Grain Management for its nationwide portfolio of up to 14 MHz of paired spectrum in the 800 MHz band that is subject to regulatory approval. Given Elon Musk’s vertically integrated model, heavy capital scale, and unmatched launch cadence, SpaceX is clearly heading down a path to compete directly with traditional telecom giants like AT&T, Verizon, and T-Mobile.

However, I don’t believe the rest of the direct-to-device (D2D) satellite operators possess the scale or vertical integration to follow suit. Competitors like AST SpaceMobile, Skylo, Iridium, Globalstar, and newer entrants like Equatys will essentially continue to rely on MNOs/ device vendors as their primary G2M strategy for consumer connectivity. In this case, MNOs possess a strong competitive edge as they control the customer relationship and billing. Rather than competing against each other like how they do traditionally, the telecom industry will form defensive blocs (which has already started), collaborating with the rest of the satellite operators to counter the threat posed by SpaceX.

Q: Who stands to control the customer relationship as satellite and terrestrial networks become more integrated? Will mobile operators maintain their traditional position, or could satellite providers gain greater influence over pricing, services and distribution?

A: As satellite and terrestrial networks become more integrated, with mega-constellations scaling up and D2D connectivity becoming a standard feature in consumer smartphones, SNOs will secure much greater bargaining power in commercial negotiations in terms of pricing and services. Consumers increasingly crave ‘always-on connectivity,’ and this feature is quickly expanding beyond just premium models. As the technology evolves, MNOs will struggle to maintain their traditional dominance, especially as other SNOs potentially follow SpaceX’s playbook – with competitors like Amazon Leo likely eyeing similar moves. But this is only possible if other SNOs go to the extent of SpaceX’s strategy – such as acquiring spectrum assets worth billions of dollars that are suitable to provide the connectivity needed. Currently, the rest of the SNOs are locked into the wholesale model and customer relationships largely lie in the hands of MNOs, especially as each local operator in different regions have their own regulations and are prioritized by the respective countries.

Q: Could satellite operators build viable hybrid mobile networks without replicating the extensive terrestrial infrastructure of existing carriers? What technical and economic challenges would determine their success?

A: No, because space-based networks inherently lack the capacity and penetration needed for total coverage, particularly indoors and without a direct line of sight to the sky. SpaceX is attempting a workaround by deploying femtocells and small stations via its existing Starlink hardware footprint, essentially trying to bypass tens of billions in traditional tower CAPEX. Even so, its recent moves tell a different story. The company has actively pursued talks with major tower operators to access up to 80,000 cell sites, proving that even a market leader recognizes the absolute necessity of securing terrestrial tower and small-cell architecture to handle dense urban traffic and indoor penetration. Ultimately, a purely space-based operator cannot become a true standalone carrier without bridging the gap to the ground, whether through aggressive physical buildouts or deep integration with existing terrestrial infrastructure.