Today, I’m talking with Walter Piecyk, a partner and analyst at LightShed Partners who covers tech, media, and telecom, about SpaceX’s recently announced plan to become a major wireless carrier.

Last week, SpaceX agreed to buy a big chunk of low-band spectrum to expand the Starlink network, spectrum that’s been traded around the telecom business for decades now. SpaceX’s ambitious plan is to use that spectrum to help build “the world’s most advanced mobile network.” subscribers, don’t forget Head here. Not a subscriber? You can sign up here.

Combined with news that the FCC approved the deployment of 15,000 next-gen Starlink satellites and the company’s previous agreement to purchase close to $20 billion worth of EchoStar spectrum last year, it’s now clear 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 that 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’s acquisition, and he’s correctly predicted that the company was headed in this direction for months now. So I wanted to dig into whether SpaceX can pull this off, why Walt thinks the existing telecom giants have really fumbled their response to SpaceX’s growing threat, and what happens when Elon Musk’s rocket company jumps headfirst into a business everyone loves to hate.

Okay: LightShed Partners’ Walter Piecyk on SpaceX’s plan to expand into mobile. Here we go.

Walter Piecyk, you’re a partner and a tech, media, and telecom analyst at LightShed Partners. Welcome to . Thanks for having me. I’m looking forward to it.

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. It’s going to be the fourth major mobile carrier in the United States and maybe the world. It 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. SpaceX bought 800 Mhz spectrum for $8 billion. They spent nearly $20 billion already on separate EchoStar spectrum. What is SpaceX trying to do here?

It’s definitely complicated, but maybe less complicated than trying to figure out how to put a data center out in space and making that work. Or something on the moon. But 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 evolved and as they saw the opportunity in telecom, they purchased some spectrum initially from EchoStar.

The feedback they got from investors at that time was very positive and they said, “Wait a minute, you should do more here.”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 with this mobile telephone service. So they bought more. They went back to EchoStar. That’s a key thing to pay attention to, in that they bought some spectrum and then they went back and bought some more.

Because with a lot of things that Elon Musk does, he learns as he goes. He bought the spectrum, got feedback, talked to people in telecom, and bought some more spectrum. Then we didn’t hear from them for a while. Now, you have this thing that happened last week where they bought some more spectrum, and I can go through the history of it if you care, but it’s long, wonky telecom stuff. This was originally the Nextel spectrum, if you remember that company.

I do. Actually, I do want you to go through the 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. Yes, spectrum auctions are complicated and what spectrum is good for what is deeply tied to the physics of the radio spectrum and all that.

But here it’s the 800 MHz spectrum from the Nextel service, the old push-to-talk, walkie-talkie service that Sprint had to divest as part of the deal to get sold to T-Mobile. They’ve been trying to sell it for ages. They sold it to this company, Grain Management. They’ve been sitting on it, and when Starlink showed up, Elon bought it. Nobody else wanted it. What did he see in the spectrum that no one else did?

When you realize that you need to build a terrestrial network to support what you’re doing with satellites, because satellites work fine if you’ve got your dish on the top of your house and you’re getting your broadband, but when you’re trying to connect with a phone that doesn’t have the same type of power or you’re going inside a home, you’re going to need better coverage.

Sirius Satellite also has supplementary towers. There are not that many of them, but sometimes when you get out of Sirius coverage, you will connect to a tower. When they bought that EchoStar spectrum and then got FCC approval, and if you looked into those details of that FCC approval and what was required, you would see that they can’t do this by satellites alone. There had to be terrestrial.

Then SpaceX, as Elon is wont to do, tries to send some diversions like, “We’re going to do Femtocell, we’re not going to do macrocell, this, that, and the other thing.”But they realized that they were going to build a terrestrial network. Now they finally realized, “If I’m going to offer mobile service, I need some form of a terrestrial network.”At the same time, the telcos are not going to help them out. They’re not going to give them a wholesale agreement.

Then when they go back and say the companies that had the lowest churn, what is the fundamental value you need in a terrestrial network? It’s low-band spectrum. Why? It travels further, you can get better coverage, and you have that connectivity.

So getting this low-band spectrum piece was just an important part, not to make the satellites work better, but to actually give them the spectrum assets that they need to build a terrestrial network. That’s why the stocks reacted, because people finally came to terms with the fact that Elon is actually going to build a terrestrial network.

I’m less interested in the stock and more interested in just the cost structure of how this works. If I rewind my brain to being a baby blogger at 100 years ago, the FCC told all the TV networks they had to stop broadcasting on 700 MHz and we were going to run an auction.

Verizon and AT&T bought big chunks of 700 MHz spectrum and that’s what 4G is built on. That’s the low-bandwidth spectrum that you’re talking about. It goes everywhere. This was a big victory that we reallocated 700 MHz, and 800 MHz was sitting right there the whole time. This is the Nextel spectrum. If it is so valuable, why wasn’t there a market for it until Elon showed up just now?

It was part of this transaction. T-Mobile ended up having to sell it because the government said, “If we’re going to allow you to take out the fourth competitor, which was Sprint, then in order to enable another fourth competitor out there, we need to have you guys give up some of your low-band spectrum.”Part of the deal that T-Mobile and Sprint had with the government was that they would sell it to EchoStar. Why? Because Charlie Ergen, CEO of Dish at the time — it’s EchoStar now — was going to be the fourth competitor.

This was the rationale that they gave in terms of the approval of the transaction. Dish needed low-band spectrum. The problem is Ergen went about his business, he was trying to build a network, and then he just couldn’t afford to buy that.

They had the rights to buy. Then at that point when Ergen failed on the bid to come up with the dollars to buy that spectrum, it enabled T-Mobile and actually forced them to put it up for auction. Now, your question: Why didn’t someone else show up then? Again, from SpaceX’s standpoint, as I mentioned at the start of this podcast, their strategy has been evolving over time.

In terms of the other telcos, they can’t really use it. There are some limitations that they have. But in hindsight, maybe Verizon or AT&T should have bought this 800 MHz spectrum for whatever it was, let’s call it $8 billion. They’re probably losing more in enterprise value over the concerns of what’s happening with SpaceX than what it cost them just to buy it in what’s known as foreclose. They basically just take it, even if they don’t use it or do whatever they need to meet those build out requirements and stop SpaceX from having unnecessary assets. I don’t think even these companies were taking Elon seriously and thinking that he would actually build the network.

Do you think that’s colored by the failure of Dish? We covered the promises of Dish Network to build a fourth wireless carrier in this country so closely. Their attempt was predicated on some amount of technology innovation.

They were going to build this thing called an O-RAN network, which had a more competitive supplier base instead of just Nokia or Siemens or whoever, and they were going to run it on AWS and that was going to reduce costs. Man, eventually they supported one Motorola handset in Vegas and even that was backstopped by AT&T. They literally could not do it. These promises never came true. Dish is a different company and Charlie Ergen’s a different CEO and their ability to just throw money at a problem until it’s solved is very different from Elon.

But if they couldn’t innovate to make a cheaper, faster network, what’s the evidence that Starlink can stand up an entire terrestrial network at a cost basis that allows them to compete selling service to consumers, while they’re also standing up an entire network in space? Because that feels like adding up a lot of cost.

I’m going to go back even deeper than that. Remember when Sprint was struggling, Masayoshi Son from SoftBank was claiming the same thing. They were going to cut their CapEx to nothing and they were going to use these small cells. They innovated how wireless was going to get delivered. That failed. Obviously, they had to get bailed out through the purchase when T-Mobile bought Sprint effectively for just the spectrum.

That network got completely decommissioned. To your point, Dish got a network built, but they couldn’t resonate in the market. The difference between Dish and SpaceX is Elon’s ability to get customers. That’s where Dish truly failed. They built the network. The network worked fine. They had the wholesale agreements that they needed.

I’ll push back on you a little bit there. I have a very funny email from a Dish PR person from several years ago where they said, “We’d like to issue a correction to your story. Our network does exist.”That was the level that they were competing at, where they had to insist to us that the network was real, even though we could not find it in our tests in the various cities they claim.

Maybe there was a network, they built some amount of network, but they had not built anything that competed at the national scale with the big three.

Absolutely. It’s not like your phone. The phone that I was using, I had an iPhone that it was mostly going to roam onto the AT&T and T-Mobile wholesale agreements that existed. The theory is you get the customers, you have a go-to-market strategy, and then you backfill the network. This is probably going to be something similar.

You can even go back to when John Legere first took over T-Mobile. They had a crappy network, and then Legere promised, “We’re going to build it,” taking on customers saying that the network was great before the network was great. Then it caught up because they actually finally got the Germans, Deutsche Telekom, to give them the money to invest in the network.

The same thing can happen here where SpaceX will sell something that’ll probably rely on other assets that are out there, even if the telcos themselves are circling the wagons. They have the satellites for certain benefits in terms of coverage and then they can build the capacity over time. The point is it’s going to take time. You can’t just turn on a network overnight and start selling service on that.

This has always been my framework of how to think about telecom companies. You can try to run the network cheaper or you can run some kind of different technology to make that cheaper. Or you can just spend and have the best network, which was the Verizon strategy for years and years and years.

Then you’ve got to acquire and manage your customers. That was the T-Mobile strategy. That was John Legere. He was just nicer to people than AT&T was, and he picked up a lot of customers and that drove some investment.

Then you’ve got to get some devices. You have to have the iPhone. We can set that aside because it feels like that era of competition is over. We’re not doing exclusive devices anymore. But those are the two. I’m just looking at the network here. It does not seem to me, from the outside, that Starlink is proposing to build a cheaper network.

It feels like they’re proposing to build a vastly more expensive network because they need the satellites. They’re going to launch 15,000 more satellites to support this network. Then they’re going to build a terrestrial network by investing in spectrum on the ground and building some set of base stations.

Then they’re going to have to convince one of the big three to let them roam over as some sort of mobile virtual network operator (MVNO). The big three do not want to do that. So they’re going to overcharge them for that. I’m just stuck at that being a lot of cost, even if you’re Elon Musk and you can make some set of people buy whatever you’re selling.

The third thing you said is obviously the most challenging. That’s the tent and the pole that prevents you from launching services sooner rather than later. But without necessarily getting a wholesale agreement, there might be other ways. Roaming agreements exist out there. There are roaming partners that exist that these telcos still rely on. It’s very expensive. It’s not something you can build a high-margin business on, but it perhaps provides an entry to the market sooner rather than later.

As Apple has pitched in terms of satellite connectivity, some people are in the middle of the Utah desert texting because they’re injured. There’s value there. But it’s the soccer field. We have, maybe not in the cities, but in the suburbs, plenty of areas that the telcos have effectively given up on trying to provide coverage because of NIMBY-ism, meaning people just don’t want these cell sites. This satellite coverage can give you not just this basic text messaging that Apple has been doing through the Globalstar constellation, but a true cellphone-type experience.

So that’s a positive. The second differentiation is the fact that these telcos have 60 percent earnings before interest, taxes, depreciation, and amortization (EBITDA) margins. So there’s a lot of fat there that can be eaten off of, that when you’re selling other services in terms of Elon, like home broadband, maybe this becomes an entree in terms of pushing Grok and people’s usage. You don’t necessarily need 60 percent margins, in this case, for him to justify building this network.

They also talk about other data connectivity that these satellites are going to enable. Again, in the current constellation, you need a lot of power and you need a dish. But if you don’t have that, if you have the cell phone-type power, then the internet of things (IOT) and other types of opportunities that exist there become another revenue opportunity that they look at.

It’s just funny. The IOT story — that’s what all these companies promised us about 4G. That’s what they all promised us about 5G. There’s something about this business that just rhymes every time. They’re going to do self-driving cars and robot surgery. I’m confident we’re going to hear about self-driving cars and robot surgery when it comes to Starlink and Tesla and Optimus.

There’s something about these applications for next generation networks that just recurs, and we hear about them all the time. Then I think about our consumer audience at , and they want long battery life and fast service and [connectivity] all the places they go. I’m not sure how that squares with your phone is going to connect directly to a satellite in the middle of a soccer field. There’s something about that that also seems challenging.

It’s just the performance if your phone does connect to the satellite on the soccer field and it works. A lot of the things that people said wouldn’t work on Starlink in terms of airplanes or even getting customer-premises equipment (CPE) down below a certain price, they’ve delivered on. Obviously, Elon sometimes delivers on them a little later than some of his initial optimistic promises, but they ultimately get delivered on.

There is the ability with these new constellations to give you that type of connectivity on these spaces. Is that enough to differentiate with consumers? I don’t know. The telcos have attacked this by saying, “No one cares about our direct-to-device (D2D) services.”Well, your D2D services are not good. It’s just sending basic text messages. What they’re talking about is giving you that blanket coverage where you get what you expect from your cell phone wherever you go.

That’s fine, but you still have to give it to the person in the middle of the building where their cell phone works today and provide the volume at a cost that is going to be attractive to that consumer. So those are longer-term things that are going to require some amount of terrestrial network build. Then the question is: how much? A lot of the attacks that have been out there have been referencing $100 billion, $200 billion. I get that.

Why? Telcos each spend $10 billion to $15 billion a year, but they are maintaining massive customer bases. To get that initial network up where you have that usage, where you use that low-band spectrum to get into buildings, is not those types of numbers. You’re probably talking like $10 billion, $15 billion for that initial build in terms of CapEx.

The dynamic there is really interesting. I’m just thinking about AT&T when the iPhone came out. The network immediately got overloaded because there was a surge of customer demand that took four years to truly resolve. Part of that resolution was just putting the iPhone on the other carriers.

How do you think that will play out for Starlink here? Because right now, Starlink customer service is not the best in the industry. Their actual service, people love it. And then when they need service, it’s a bunch of automated systems and people complaining on Reddit. So there’s some challenge there if you’re running a consumer business at this scale.

For consumer businesses, think about all the advertising that’s done. The fulfillment, dealing with the phones, phone subsidies, and that’s a big part of the financing. How many customers are we talking about? So for the amount of spectrum that they have now in the network that I’m talking about for $10–$15 billion, you’re not taking 50 percent share overnight. I don’t think that would be that expectation from day one.

But then the theory of telco is that when you do that initial CapEx build, you have your initial spectrum purchases — $10, $20, maybe $30 billion — another $10 or 15 billion in terms of CapEx. If you are successful and you do get that five or 10 million customers, the opportunity to invest more happens. If you go back to the old days when the cable view of wireless was going to be, “We’re going to get these MVNOs. We’re going to drive the wireless companies into the dirt and then we’re just going to buy them.”

That happened in at least one European market, and that was the cable bull thesis that was occurring. You could have the same bull thesis emerge from the SpaceX bulls here where they’re going to say, “We’ll get those first five or 10 million customers. We’ll drive them into the ground. Verizon’s going to be so desperate for any type of revenue because their revenue declined. They’re just going to hand them a wholesale deal and then they’ll start selling spectrum. There’s going to be a spectrum auction with the FCC.”

You can see how the narrative can build based on, “An initial CapEx that’s not that big, get in the market, and then if it’s successful, we start investing more.”Let’s talk about the terrestrial network for one more turn. I heard you throw a little water on the idea that they’re going to build femtocells. That is what Elon and Gwynne Shotwell have been saying — that they don’t need to build the traditional kind of terrestrial network that AT&T and Verizon and T-Mobile have, where you have a lot of fiber back haul, the big sites that require all kinds of zoning permits and everything. That they can basically just put small cell stations next to Starlink dishes, put them anywhere they want, and blanket the world with them. And Starlink itself will be the backhaul.

I sense some problems with this. Starlink is not 100 percent reliable all the time. If you have a network that is not 100 percent reliable all the time, you’ve got some problems, so maybe you have to backstop it somehow. But you don’t think that’s what they’re doing. You think they’re going to build a regular terrestrial network.

I’m sure that’ll be a part of it, but you need macro towers for that type of coverage and penetration and power. Not to explain physics to SpaceX, they probably know it better than anybody, but what you’ll see is as they talk more about this low-band spectrum that they purchase, when we get on the conference calls of these tower companies, you’re going to find out that you’re going to see a lot of those antennas show up on towers.

It’s just natural. You can talk about femtocells, but it’s hard to see that the network’s going to get built without macro towers.

One of the weirder aspects of the telecom industry, as it’s constituted in the United States right now, is that cell carriers own some of their towers and operate some of their towers. And then there are these crazy third parties that literally have names like TowerCo that operate a bunch of the other towers.

Are those captured? Do you think SpaceX can get deals with those companies, or are they beholden to their big partners?

These are huge real estate investment trusts (REITs). American Tower is the biggest one. It’s probably one of the largest companies in this. When you consider any REITs, there are other companies out there. They have these towers. They have space in many cases where basically SpaceX can just go and get an additional antenna. It’s a lot easier to do that now than when the wireless companies were initially building this stuff and having to erect their own towers.

In addition, EchoStar is going through a bankruptcy. They have a lot of radios that could be used, that could be bought on the cheap, that could expedite SpaceX’s entrance in the market. They haven’t shown interest in that yet. The EchoStar bankruptcy process hasn’t yet concluded, but EchoStar can still be a potential partner here by selling them radios that are already on towers.

You’ve lifted the amount of time. Those radios use the spectrum that SpaceX is purchasing, so it can be a quick fix for them to enter the market. Who knows if they do that? They may have their own view like Masayoshi Son did on how to build this new cheap network.

Is there a way to read this as just they’re slowly buying EchoStar or whatever EchoStar tried to do?

EchoStar has some remaining spectrum that Verizon really needs. At this point, there is some strategic sense to just buy EchoStar outright — because EchoStar is getting stock that was issued to them at a discount. If you’re buying them, you’re effectively buying in your own stock.

You don’t have to issue the cash to the company and you’re getting whatever cash proceeds that EchoStar is getting from some of its spectrum sales. They can actually get incremental cash on the balance sheet and buy their stock in. We’ll see if that plays out. By the way, then you don’t have to also deal with Dish, which sometimes can be challenging.

T-Mobile’s in the mix here. I want to talk about Verizon, you’ve mentioned them several times, but T-Mobile is Starlink’s current partner for direct-to-device cell connectivity. Are they just getting rocked? Are they going to be a part of this? How’s that going to work?

If you think about the start of that, that was former T-Mobile CEO Mike Sievert up on stage with Elon announcing this thing and everyone’s very happy. Then Deutsche Telekom decided it needed a different CEO at some point. You had that transition where Mike retired and you brought in a new CEO, and there might just be a different view on how that relationship works.

I’m guessing that it’s been very frustrating for SpaceX to deal with them and certainly they would probably want to avoid any exclusivities going forward. They may need to if they want to sign one of these wholesale agreements that we talked about before.

It just seems like, as you mentioned, SpaceX and Starlink went after a little bit of the consumer market here. They bought some spectrum. They got a good reaction to it. Now they’re going to go after the whole thing and their existing telecom partner is thrown by the wayside.

If you look at the three big telecoms in the United States, they are circling the wagons. They’re saying this is never going to work. They’re never going to sign the MVNO agreements. They’re putting together their own satellite pool. There’s something here where they are panicked by the existence of meaningful competition in a way that does not usually happen in telecom.

Yeah, I agree with that. I don’t know if it’s SpaceX leaving them or T-Mobile leaving SpaceX, but that relationship which started out so happy with the old CEO is certainly not positive. T-Mobile executives have been throwing shade at SpaceX incessantly over the past couple of months. They formed a joint venture (JV) together.

It reminds me of when fixed wireless first hit the cable market and Chris Winfrey talked about it derisively as “cell phone internet” and played it down. Ultimately, that’s what’s really bit them and why cable stocks are in the position they’re in today, given the amount of customers that they’re losing to cell phone internet.

There are some similarities now in terms of how these executives are downplaying what they can do. Is it going to be costly? Is it going to be complex? Sure. But so is Terafab and so are so many other things. So is making an autonomous vehicle or catching a rocket with chopsticks. That’s the reality that they have to deal with. Investors have seen what this management team has done before in other areas and are just applying it here. Whether that’s fair or not, time will tell.

I’m actually very curious about that because I know you cover the company and I know you cover the industry. There’s some part of SpaceX that is just a meme stock. People love Elon. There’s some part of Tesla where it’s not valued like a car company, it’s valued like a software company, even though it is very much a car company. We’ve yet to see where the software multiples might come from for Tesla.

The same is true of SpaceX: huge IPO, but people are buying the physics miracle of the rockets launching and landing. They’re buying the promise of Mars. They’re buying the promise of AI, whatever that promise is, however frothy that market is. Those are valued against hopes and dreams.

Telecom is not. It’s well known. You can be a telecom analyst and you can examine the value of the spectrum. You understand the build-outs. The customers are not confusing. Consumers are going to pay some amount of money. There are other competitors that are built in at scale. Why do you think SpaceX would chain itself to a business that is easy to value when all of its other businesses are their dreams? You can’t value dreams. It’s just whatever is the biggest number.

I don’t think it’s an either-or. When you look at people’s attempts to justify the valuation of SpaceX, a lot of that value is going to land on data centers in space and the data centers on the ground. That’s where a lot of the value is in Starlink.

But that’s not the launch business, which theoretically is their business. It’s not even the AI provision business. We’re describing them as a hyperscaler.

Yeah, exactly. The AI and those are other big chunks of it. There are a lot of different stories here, but it doesn’t mean that they don’t pursue this if they have connectivity and constellations. They’re talking about connectivity in space because they believe that there’s going to be a demand for connectivity between the data centers, whether it’s theirs or others and their constellations. There are already data centers that I think are using their constellation to connect.

When they looked at it, it was just another part of the narrative that you build in terms of SpaceX and justifying the valuation. Because what do all of these things need? Whether it’s robotaxis, whether it’s data centers in space, they need money and money needs a narrative. This is just another one of the narratives to stack on top to say, “Here’s how we can drive incremental value.”The value, if you look at the enterprise values of these telcos in the United States, you’re talking about a trillion dollars.

That’s a trillion dollars of enterprise value. They’re obviously not going to capture a trillion dollars because part of it is shrinking the telcos down at the same time as getting whatever that stake is and the CapEx related to it.

The fair question is, if capital gets more scarce, how do you allocate between these different things? Don’t you want to push Terafab forward a little bit more or get those terrestrial data centers built so that you can start monetizing the billions of dollars that you’re getting there versus diverting whatever the dollars are here for the telco?

That is a reasonable thing. The problem for the telcos is even if that’s happening at SpaceX and this gets delayed a year, that doesn’t help them. The overhang of when that’s going to occur — whether that’s a year, two years, three years — is always going to be there. They’re not going to say, “We’re just giving up on going after this.”It’s just going to be a capital allocation issue in the near term that’s going to delay when the actual impact hits the telcos in the United States.

How much of this is just that Elon needs to supply connectivity to his own cars and his own factories and his own robots and he’ll just be his own best customer?

I don’t think that’s it. They think they really want to build a revenue business out of it. In fact, they’re going to use the cars as hotspots where they’ll put Starlinks on there and then use them as distribution points. That’s going to be part of the play.

I do want to end by talking about the existing telcos and what competition might do to them because I think that’s a fascinating dynamic. They are clearly not ready for an actual aggressive competitor.

But I want to stick with what you just said for a minute. If I pull that apart, it sounds like what you’re describing is the reality of the SpaceX business, which is that Starlink is the thing that makes profits. Everything else is incinerating money, but investors seem happy with that because the potential payoffs might be huge.

If you take the Starlink profits, you have to make a decision about whether to reinvest them into Starlink, and now Starlink’s mobile business, or into AI or into the launch business or into going to Mars. Regardless of how that allocation happens on what timeline, at some point, enough money will go back into Starlink Mobile to pose a real threat to AT&T, Verizon, and T-Mobile, and that is just a matter of time.

You nailed it, and that is the issue. Capital becomes the biggest benefactor right now to the telecom companies. How does that capital get allocated? That’s in terms of reportive results. They’re 100 percent right on that. But in terms of the stocks, that concern is not going to go away because there will be incremental data points. Maybe one of these telcos has a problematic quarter or two. These are not founder CEOs where they have to do something quickly.

It’s easy to get a lot of wholesale revenue on the books by doing a deal with SpaceX. These are the types of things that they’re going to have to deal with in terms of that long-term risk. Cable’s got this. Look at Uber. Uber’s got the same issue. The threat of Waymo and robotaxis is what keeps that stock where it is.

Waymo with their 3,000 or 4,000 cars are obviously not impacting the two million drivers that Uber has in the United States. But the threat of where Waymo’s going to be two years from now, or three years from now, or the threat from Tesla’s robotaxis… that’s what investors care about and that’s going to obviously impact these companies.

Put that in the context of SpaceX being a public company for me. Is it just that we’re going to get next quarter’s results of SpaceX and we’re going to see that xAI is still burning money at enormous rates, but Starlink Mobile made a little bit more money? And that’s going to keep everybody happy for a minute?

I don’t know. I don’t think we have enough history yet in terms of what moves SpaceX stocks one way or another. To your point, you have a lot of believers, regardless of what’s printed, who are always going to say, “Who cares about this quarter?”Tesla’s got the same issue. Who cares how many cars that they actually sell because it’s all about the robotaxis and the robotaxi business is about to start scaling.

Those very positive people won’t care. Then there are going to be the negative people who, no matter how much traction you see them get in, whether it’s Starlink or progress on the build of space compute, are going to say, “He’s never going to deliver. This is never going to happen.”You’re just going to have those fighting battles back and forth.

The primary issue is going to be whether they can raise capital off of that. And in what ways? Because if you’re burning cash, at some point you need to bring in cash. If these businesses aren’t generating enough cash because you’re consuming it with the other growth initiatives, you still have to figure out ways to continue to issue cash or issue stock to get more cash on the balance sheet.

If I was going to offer that most cynical read, I would say the only business where they can see expanding the service will result in more profits to offset their losses elsewhere is Starlink. They don’t have another business that looks like that.

Just to be clear, Starlink is the broadband business that’s generating the cash flow. This mobile business would be cash negative initially before you get into that positive cash position. You have to look at the robotaxi business, there’s going to be a lot of CapEx initially, but these cars are pretty cheap. That theoretically could be a cash generator. But that’s a different company.

But we know that, just like I mentioned earlier, it could make buying EchoStar make sense because you’re buying effectively cash in your own stock on the cheap. There are different ways to put cash obviously on the balance sheet in $10 or $20 billion chunks.

Obviously the structure of these companies — they’re all Elon’s companies in the end, and he’s managed them as closely as anyone can manage big public companies. But to make it as dumb as possible, say you have a dollar and if Gwynne Shotwell has a dollar and she wants to light the dollar on fire, she’ll put it in xAI against some return somewhere that might be $50 trillion total addressable market (TAM) or whatever their prospectus said.

Or you could put the dollar into Starlink Mobile in the build-out and you will probably return $1.10. That is what that business looks like because they will get some customers away from AT&T and Verizon. They’re already running that thing profitably.

The idea that they need to show some return somewhere, it feels like that’s why they’re making this move. Not because it makes the most financial sense, it just makes the most financial sense in the context of SpaceX.

You may be right. The problem with that belief is that it’s going to take time for them to get that dollar of profit out of the mobile business. They still have to build the network. They still have to sign up customers. You’re going to be negative EBITDA for a while. If you have two different businesses and you think the returns are significantly higher or more interesting to your investors to get to that next catalyst for space compute or Optimus or whatever it is, that is going to play a role.

What does Elon happen to care about the most at that moment? What is more interesting to him to do? Isn’t space compute a little bit more interesting to allocate those dollars than taking some mobile customers from AT&T?

Although the man’s addicted to his phone and I bet he hates seeing that AT&T logo in the corner. There’s just a part of that that’s always with these guys.

Let’s talk about the existing telecoms. They do seem a bit panicked. For a time, they were juggernauts. These were unstoppable businesses as mobile was growing. They poured a bunch of money into the 5G transition.

I’ve described the telecom industry as a bunch of lobbyists. Boy, did the lobbyists win the 5G transition. Boy, did they collect all the favors and all the capital they could to build out these networks and then reality hit them in the face. We beat China to some kind of network and then the thing that we were supposed to win did not happen.

Now we’re doing it again with AI, but that’s a different conversation. But that was the narrative with 5G: If we didn’t beat China to 5G, Who knows what, but we got to cut all the corners to build this network and spend all the money. It just didn’t pay off.

You’re an analyst, you’re in the trades. I skim the trades and boy are all these CEOs saying, “We’ve got to generate some revenue with these networks now.”You mentioned Mike Sievert is gone, the old CEO of Verizon’s gone. It just didn’t pay off for these guys.

Yeah, 5G didn’t deliver. Some of the promises were BS from the beginning. You talked about this earlier regarding autonomous cars. You’re not going to rely on the network to make that millimeter-second decision of whether you’re going to hit the car in front of you or not. Remote surgery, even if that was a thing, how is that a scalable business where you’re generating hundreds of billions of dollars of revenue?

These were all silly. Sievert used to be the guy saying, “People would say the same thing about LTE, there’s no application.”That was not even true. If you remember, the application was video and we knew that LTE was going to enable video and that’s exactly what happened.

You’re 100 percent right. This was just a way for them to get more spectrum because they were going to still have data growth on their networks. Capturing more spectrum to be able to handle the existing growth, and that’s cheaper to get spectrum, even at tens of billions of dollars, than it is to try and build the network for that capacity.

If they had just said, “We’re going to spend all this money and at the end of it, tens of thousands of people will be able to livestream Taylor Swift during the Eras tour on every one of those stops,” Americans would have said, “Go, go faster. Yes, we understand what that is.”That is truly the thing they enabled. It’s very cool. It’s millimeter wave in stadiums and that’s cool. I don’t know if there’s another one. That said, they are on their back foot. They did spend a lot of money. This is around the time when, in my history as a journalist, they would start talking about 6G, and they want to, but they know they shouldn’t, so they don’t.

They’re having the meetings. They are certainly not as loud about the next round of investment as they would normally be in the cycle. Now they have a competitor. Your analysis is that Verizon is by far the weakest here. They have the most to lose. Explain why that is.

One other thing to mention is you have a very active FCC chair that would like to raise, and put on his resume, $100 billion from spectrum auction. You’re right, they’re going to talk about 6G again and have to come up with some type of revenue stream to justify getting this money. It’s going to be a lot harder though. They’re already pretty levered. They’ve got a new competitor.

In terms of Verizon, the issue is that AT&T has seen this thing developing for some time. They’ve built a fiber network. There’s only so much that wireless can do where a fiber network is ultimately your best connection. If you think about customers that own fiber and wireless, very high-value, very low-churn customers. That’s been their strategy. They’re plodding along. They’re going to get their two or three percent revenue growth and just pay their dividend and do their thing. That is the standard telco.

T-Mobile didn’t have that. They’ve got the dynamics — a lot of politics right now between Deutsche Telekom wanting to own it and not wanting to pay a high price and how that all plays out. Verizon just made a lot of bad strategic bets on spectrum. Obviously, AT&T had their own issues, but at least they got out of DirecTV and Warner quick enough and turned the ship.

But Verizon bought millimeter wave spectrum when they could have bought EchoStar and bought spectrum… even now they’re spectrum-constrained compared to their competitors and they need to go out and spend $10–$15 billion on the EchoStar spectrum. You have a new CEO in there who is not really a telco guy who’s just doing his thing, saying, “We’re just going to cut costs.”The EBITDA is going to look good because they’re just firing a bunch of people and there’s going to be a result.

There is going to be an impact of firing that many people in the organization. It may appease investors to make the EBITDA look good for the next couple of quarters. But at some point you have to show and have a strategy for some type of revenue growth. What is Verizon’s differentiation in the market right now? They have none. They’re the most in the crosshairs of where SpaceX and even the cable companies can continue to eat away at those customers.

That is surprising to me. It’s just my own history. I grew up in the midwest. I went to college in the midwest. That was Cingular territory and it became AT&T. When I moved to New York in 2010, Verizon was the gold standard network in the Northeast. It was the one everyone had. It cost the most money because it was the best network. The iPhone coming to Verizon a couple of years later was a huge deal.

Verizon’s network was so powerful at that time that they could try to force the Blackberry Storm down people’s throats. They were confident enough that their network was the thing holding people to them, that that was a worthwhile strategy. Obviously, it didn’t work. They made the wrong bet. You’re saying they made the wrong bet on millimeter wave. They made the wrong bet on other spectrum acquisitions. The one that I’m not quite tracking is media.

They did buy a bunch of dumb stuff. At one point they owned Tumblr, which is just one of the most confusing media outcomes of all time. But that stuff was all cheaper and easier for them to flip or shut down than AT&T buying all of Time Warner and putting out a 4:3 black-and-white movie. How did AT&T survive that? But you’re saying Verizon can’t survive owning Yahoo?

That’s a fair pushback, in that the media impact to Verizon was a lot less than AT&T. But these again were separate businesses. Obviously, it was a capital allocation issue for a period of years.

But the decisions on the spectrum front and the competitive front, and T-Mobile’s impact, John Legere’s impact in taking away the claim of having the best network, left them in a spot where they basically said, “We’ll just keep increasing price on our customers and we’ll get that 2 or 3 percent revenue growth.”And they just lost the narrative of what they meant to customers. I don’t really think under the new CEO that’s been regained.

Do you think their ability to say they have the best network is just gone?

That’s completely gone. That’s the crazy thing about this. The networks are effectively commoditized. These networks are basically the same. And they’re getting 60 percent margins.

That’s the whole thing with Dish Wireless — even if it wasn’t on their network and you guys tested it, it wasn’t on their network, you could have been buying AT&T’s network at half price. It’s crazy the average revenue per user (ARPU) and the margins that these guys get for what is effectively a commoditized market. That’s why the AT&T strategy is interesting because at least they’re trying to bundle that with a high-value fiber network. But for the other guys, it’s just commoditized wireless.

I would actually say the other strategic mistake Verizon made along the way was they got away from Fios. They decided it wasn’t worthwhile. It seems like they’re trying to reinvest in that now and go after that AT&T strategy.

Given their lack of spectrum, they can only take fixed wireless so far. You’re right. I wouldn’t be surprised if they got back to investing in fiber. The difference, obviously, with Fios is that you have union issues and a lot of cost structure issues that they were dealing with.

But the pivot to doing more fiber and perhaps laying off the fixed wireless, which is straining the network, is probably the right decision for them and what you’ll see happen going forward.

I want to end on just a big picture question here. We have covered so many crazy telecom mergers and it always feels like the right answer is to put more competition in the system.

We’ve mentioned John Legere several times in this conversation. He only got that job and T-Mobile only got to exist the way it does because AT&T was prevented from buying T-Mobile. They paid a breakup fee, which subsidized a huge portion of that early growth and those early strategic moves that Legere was able to make.

But that was good for the market. Consumers got a CEO who tried to change the market and have better customer experiences, reinvested that money in the network. That was good. The existence of Dish Network is T-Mobile trying to buy Sprint and instead of blocking the deal, we imposed some wild structural remedies and Makan Delrahim, who ran antitrust in the first Trump administration, rightly or wrongly engineered the outcome of Dish Network existing.

That was Delrahim’s preferred outcome: “We’re going to let this happen, but we need to have four carriers. Charlie Ergen is my guy. We were going to stand up a fourth one.”From my perspective, it just seemed obvious that he was never going to do that. And he didn’t.

Maybe I was correct to make that bet, but it just seemed obvious that Dish Network was going to hold onto a bunch of spectrum, watch the prices rise and then flip it when it turned out they never built their network. They had to hit targets with the FCC that they just weren’t hitting over time. Now, we have a true fourth competitor, or at least an aggressive competitor of the market in Elon, who’s probably going to try to actually do this thing and these companies are running scared.

Is this just evidence that we should have four carriers in the United States? And that when inevitably Verizon tries to buy T-Mobile, we should just say, no, the right answer is four and we’re not going to go to three again. Under Chairman Wheeler, which goes way back, four was the number. Wheels and I were buds.

If you called him now, he’d say, “I told you it should have been four and it’s going to go back there.”Obviously, in the new administration, they didn’t believe that that was the case. You see Chairman Carr pointing to prices, how he sees them being down and the competition that’s happened in fixed wireless.

But you always want more competition in a market. It drives innovation and it lowers prices and margins are approaching 60 percent in the wireless business. I can’t say we’ve had a tremendous amount of innovation, which gets back to what the telcos are doing in fear by refusing to give SpaceX a wholesale agreement.

That’s their right. But at some point, if the FCC’s mandate is to act in the public interest, we have a current administration — and who knows who gets in during the next administration — but if these telcos are going to push back so hard on what the fourth competitor, in this case SpaceX, is going to do, the FCC can probably get involved in some ways. That is the risk that they run by being so vocally against Elon Musk in the market.

You talk about the ultimate consolidation. It’s funny. We should save all these quotes now where they’re saying, “Elon can’t be a competitor because he only has 80 MHz of spectrum.”Because then when they want to merge with someone, they’re going to claim, “No, he’s actually a competitor.”They’re going to deny that as a competitive threat.

There’s nothing funnier than a giant telecom insisting that a thing that is not a competitor is their competitor. They all do it.

Last question. Again, this is just the big think rattling around my head. We might be on a cusp of an entire paradigm shift in what mobile devices even are. If you look at Meta, they’re going to put up the Muse charm and maybe we’re all going to talk to little cartoon AIs all day that run agents in a data center. Our use of mobile bandwidth to watch video will go down because we’re not even carrying phones anymore. Is that a risk here? Is anybody thinking about this?

We think about this every day at LightShed, in terms of all the different ways that AI [exists] and how we interact with our information and how we interact with commerce and using agents. Muse has obviously been something we’ve been waiting for from someone and there’s going to be other versions of that. But you’re right. It could decrease [phone usage], and it’s an Apple risk.

It decreases the importance of the status of holding an iPhone if you’re just not interacting with your data in the same way. If that happens, that whole paradigm in terms of the telcos and providing the subsidies changes. Whenever there’s change, there’s an opportunity for disruption and for margins to be contracted. It does change things and maybe SpaceX could play.

Elon’s been asked about making a device. I know Qualcomm, when you meet with those guys, says, “We have 40 different guys out there making devices.”I don’t think he’s going to add one more thing to his list, but again, let’s get back to what we’ve talked about during this podcast and narrative.

Will Terafab happen? Will data centers in space happen? It may not happen, but you can maybe talk about building a phone and then that becomes one more issue that the telcos have to deal with in terms of dealing with their customers. Why am I using this iPhone when I should be using this completely different device, whether it’s coming from OpenAI or Anthropic or maybe SpaceX?

The idea of Elon shipping a mid-range Android phone with the Play Store on it is so deeply funny to me. I truly hope it happens because that’s the product you can make today. Maybe there’s a paradigm shift and there’s a different set of products.

But right now you need to have Instagram and there’s really only one path to getting Instagram, which is shipping an Android phone with the Play Store on it. We just saw Amazon essentially capitulate with their new tablets.

If you’re focused on the future, you have to concede to the present. I truly do not believe we will see a mid-range Android phone from SpaceX. But you’re saying they might start talking about it.

No, I agree with you. I’m just saying when you’re trying to build narratives, why not throw that in the hopper? The bigger issue is someone’s going to build something that may resonate with… We’ve gone a long time. We’re spending $1,000 for these phones that are giving us some basic swipe functionality. They’re going to change in terms of how you use them.

This is a bigger and more obvious issue for Apple than anybody else, but it does change how the telcos are going to act and the role that they’re going to play and where that margin should be. They gave up a lot of value to Apple at some point during this continuum of the wireless industry. We’re going through another paradigm change, so we’ll see how those value splits play out.

Walter, we’re going to have to have you back soon because it feels like these things are going to happen fast. I was very happy to nerd out about telecom with you. Thanks for being on . I appreciate it. Thank you.