[Starlink] SpaceX ordered to explain pricing strategy

[David Lang]

Why are you so sure that Starlink's current prices are unsustainable?

That's an assertion that requires prove, not just assumed.

David Lang

On Fri, 8 Apr 2022, Daniel AJ Sokolov wrote:

> Date: Fri, 8 Apr 2022 01:59:21 -0700
> From: Daniel AJ Sokolov <daniel at falco.ca>
> To: starlink at lists.bufferbloat.net
> Subject: [Starlink] SpaceX ordered to explain pricing strategy
> 
> 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
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