[Starlink] SpaceX ordered to explain pricing strategy

[Daniel AJ Sokolov]

Hello,

the Canadian regulatory authority CRTC has ordered SpaceX to reveal how 
its Starlink prices "may change within the next two years".

However, SpaceX will likely file this under seal, meaning it will not 
become public information.

Technically, the order only refers to prices charged in the Far North of 
Canada (The Yukon, the Northwest Territories, Nunavut, Northern 
British-Columbia and one community in Alberta). But as long as 
Starlink's prices are global, this geographical restriction in the order 
is meaningless.

The order is part of CRTC proceeding 8646-N1-202108175, and SpaceX' 
answer is due today, April 8.
Docket at 
https://services.crtc.gc.ca/pub/instances-proceedings/Default-Defaut.aspx?S=C&PA=T&PT=PT1&PST=A
(incomplete due to various 404 errors)

The order to SpaceX has came about after I filed a procedural request in 
this proceeding.

Here is the background:

In most of Canada's Far North, a company named Northwestel has a 
monopoly on landline internet. Also, Northwestel owns the backbone to 
large parts of the area. Northwestel is actually Bell Canada, but with 
much higher rates. It's only been a bit over year that Northerners can 
even buy unlimited internet access, and it is not cheap. (Northwestel 
also has a resale agreement with OneWeb.)

In some areas, one small competitor is trying to hold on: SSi Micro.

They and a few others would want to buy wholesale data transfer from 
Northwestel at regulated prices, so they can mount some competition.

Because Northwestel has a monopoly, they are not allowed to sell 
internet access below cost, and they have to obtain permission from the 
CRTC to change rates. Rates must be "just and reasonable" under the law, 
for whatever that means. The CRTC proceedings to permit rate changes are 
unreasonably slow - a real problem for Northwestel.

However, Northwestel would also love to sell below cost, so they can 
extinguish the little competition they have, and make sure no new 
investor even thinks about entering the market. Northwestel runs a very 
profitable cable TV operation, and they charge business users more than 
double the residential rate for internet access - so they have plenty of 
revenue to cross-subsidize internet, if they would be allowed to do so.

In January, Northwestel applied to the CRTC for permission to change 
this regime. Explicitly, Northwestel wants to be allowed to sell 
residential internet access below cost (cross subsidized from cable TV), 
and to reduce rates or increase data allowances or increase bandwidth at 
any time without another CRTC proceeding.

This, Northwestel argues, is necessary, otherwise Starlink will eat 
Northwestel's lunch. Because Starlink is awesome and cheaper.

Such permission, of course, would be great for consumers in the shortrun 
and awful in the long run. Because it would kill competition.

Most participants in the consultation to Northwestel's application fail 
to understand that. They are jubilant for potentially lower internet rates.

In my filing in February, I asked the CRTC to deny Northwestel's 
application. It is bad policy in the long run.

Also, Northwestel has many options to fight against the (perceived) 
competitive threat from Starlink. Currently, the cheapest unlimited use 
access is a 100 MBit/s down and 12.5 MBit/s up line. They offer plans 
with less bandwidth, but all of those have a usage cap. And overages are 
crazy expensive. It's a topsy-turvy world, where the rich users with fat 
pipes, who can put huge stress on the network, get a free-for-all, 
whereas less affluent users with thin pipes get charged extra per GByte.

In addition, I argued that Starlink does not have the capacity to be a 
real competitor to Northwestel's fat pipes - unless one takes the 
Premium version. Now Starlink Premium is geared at businesses and govs, 
for which Northwestel does NOT ask for permission to lower rates.

Plus other arguments. If you are so inclined, you can find my submission 
in the aforementioned docket under "Interventions".

There, I also pointed out that Starlink's current price point is 
unsustainable, and that they will have to raise prices.

Low and behold, while everyone was waiting for the CRTC's decision on 
Northwestel's application, Starlink increased prices.

So I filed a procedural request to obtain permission to add that 
information to the docket (after the official deadline to add 
Interventions do the docket).

The CRTC has granted my request, added Starlink's price increase to the 
docket, and has ordered SpaceX to explain their pricing plans for the 
next two years by today. Other parties will have until April 18 to 
comment on SpaceX' submission - which may be difficult, because I expect 
all interesting bits to be filed under seal.

Cheers
Daniel