Users of Starlink in South Africa are in for a significant setback as the satellite internet service provider has announced that it would be discontinuing operations by the end of the month.
Many South African consumers received an email from Starlink informing them that they had violated their terms and conditions, and as a result, their internet service would end on April 30.
The email made clear that it is against their agreements to use Starlink kits outside of the areas that are marked on the Starlink Availability Map. Users will therefore only be able to obtain updates through their Starlink account following the termination.
Elon Musk’s SpaceX company, Starlink, runs a network of low-Earth orbit satellites that provide high-speed internet access all over the world.
The Independent Communications Authority of South Africa (Icasa) has not granted Starlink a license to operate in South Africa, despite the company’s potential to revolutionize communications.
To be eligible for a license, an applicant must meet Icasa’s guidelines, which include that they must own 30% of their business from historically underrepresented groups.
To use Starlink services, many South Africans have to resort to inventive means, such as buying roaming packages from nations where Starlink had licenses.
But Icasa made it clear last November in a government gazette that utilizing Starlink in this way is prohibited.
Furthermore, the ‘Mobile – Regional’ plans are intended for transit and short-term travel, not long-term use in a particular area, as indicated by Starlink itself in the most recent communication to consumers.
If these plans are used consistently outside of the nation where service was ordered, service will be restricted.
Starlink suggested getting in touch with local authorities if anyone was interested in offering its services in their area.
Starlink: Linking Africa
There was a lot of excitement surrounding SpaceX’s satellite Internet service, Starlink, when it first entered Africa in 2022. However, now that the novelty has begun to wear off in the six markets where it has already entered (Nigeria, Rwanda, Malawi, Kenya, Mozambique, and Zambia), the excitement surrounding Starlink’s entry into Africa is progressively waning due to two major issues.
These are centered on legislation and price, which will impact its go-to-market strategy for Africa and ultimately decide its success in the continent.
Other conversations regarding Starlink’s services and suitability for Africa, particularly when it comes to speed and how it compares to current mobile offers (apart from 5G), have essentially come to the conclusion that Starlink is generally faster than what is easily accessible.
Regarding coverage, it’s also commonly acknowledged that Starlink is an excellent choice in both urban and rural regions.
Non-uniform pricing: What is the market willing to accept?
One important factor that needs to be given more consideration is pricing, which is unavoidably the foundation of any market success.
In addition to the relatively high terminal costs, there are pricing differences within the area; Mozambique and Kenya have some of the highest prices, while Nigeria has some of the lowest access and terminal costs.
The pricing may indicate that the company’s go-to-market approach in Africa differs from that of other areas.
Monthly access charges are lower, but terminal costs are greater than in other nations. As of June 2023, for instance, the US$150 terminal cost in Canada is nearly one-fourth that of the US$665 terminal cost in Kenya. In the meantime, monthly access in Kenya costs US$46, while it costs US$105 in Canada, more than twice as much.
One explanation for the different prices could be that developed markets can afford higher monthly costs if the entry costs are similar to or lower than those of current fixed and mobile services.
It is likely that a portion of the terminal’s cost will be added to monthly expenses in order to help realize a limited return on investment (ROI) time in developed countries, since Starlink needs to recover significant expenditures previously made in the manufacturing of equipment.
The price plan for Africa appears to be based on monthly fees that are either the same or less than comparable fixed and mobile solutions, plus the allure of unlimited usage. However, a significant segment of the market faces a clear adoption barrier due to the equipment cost, which is about four times more than in developed countries.
As such, determining the market niche that Starlink aspires to fill depends in part on the current pricing. Africa’s initial excitement has gradually subsided now that the price range and, more importantly, the terminal cost are known.
Nigeria, Kenya, Mozambique, Rwanda, Malawi, Zambia, and many more African nations are expected to roll out internet services from Starlink by 2024.
Starlink’s current situation limits its potential to fill a narrow gap between a few criteria.
Of course, undeveloped rural places would be one, but maybe only for wealthy people and distant industries like mining, agriculture, and tourism.
It is unlikely to replace current mobile options for the typical consumer in urban settings, but middle-class to upper-class residents in high-density, low-density neighborhoods that may not have fiber service may find it useful.
However, in urban areas, fixed options like fiber and mobile (for smaller businesses) already serve businesses fairly well; therefore, Starlink’s appeal might be restricted to verticals like banking that have branch networks and need reliable connectivity to deliver their services.
Consequently, in a situation where damage to terrestrial or underwater infrastructure is rather prevalent, redundancy would be one of the most important selection factors for backup connections.
With the exception of a small number of customers or companies who fall inside the previously mentioned criteria, the Low Earth Orbit (LEO) satellite service cannot be considered to pose a threat to either mobile or fixed carriers at this time at the existing cost.
Getting over regulatory obstacles
Behind the scenes, Starlink has had to negotiate various regulatory contexts in which a number of difficulties have had to be taken into consideration due to the regulatory side of things and the phased approach to entering important markets like Kenya and Nigeria.
Guidelines that specify ownership levels have presented challenges for Starlink in addition to ICT restrictions. This is particularly evident in South Africa, where regulators have mandated that Starlink abide by strict licensing and local investment regulations that call for a minimum of 30% local ownership, with the makeup of that ownership needing to satisfy many diversity criteria.
It has mostly entered the African market through a channel model, whereby it collaborates with already-established ICT market participants, such as certain Internet service providers (ISPs), to link clients.
Nevertheless, Starlink has to apply for licenses in order to operate as a satellite provider, and in certain markets, regulatory talks are still going on. These talks may cover topics like employment, taxes, exchange rates, and payment methods, all of which are relevant given the recent digital regulations that have been implemented throughout the continent.
Starlink has encountered difficulties in nations such as Senegal and South Africa, whose governments have outlawed the selling of equipment subject on Starlink adhering to current licensing protocols.
Similar circumstances existed in Zimbabwe, although more recently, that nation took a more accommodating position and is currently in the process of discussing a license with Starlink.
Although licensing and compliance seem to be the most obvious regulatory concerns, sector authorities should also take into account providing fair and equal opportunities for new and established companies. This is in addition to their individual missions to boost adoption in critical industries like healthcare and education and to reduce access gaps in rural areas.
Since Starlink’s existence depends on accessing untapped populations and regions, regulators need to give this considerable thought.
There may still be more regulatory issues as regulations continue to change globally and move from analog to digital. The International Telecommunications Union (ITU) is crucial to the simplification of satellite communications because it coordinates the use of spectrum (to prevent signal interference) and collaborates with member states, equipment, and service providers.
Prospects for the market in 2024
Starlink is expanding into a market in Africa where at least 40% of people have access to the Internet. The disconnected half, however, is within the grasp of current mobile and stationary players rather than in the current niche it seeks to protect.
The majority of organizations already have fixed and mobile connections, so Starlink’s commercial market opportunity may only be available to those who are expanding their operations due to corporate expansion, need redundancy, or require faster and more dependable speeds in order to serve cloud applications.
With aspirations to expand into over a dozen African markets in 2023 and 2024, Starlink should already be taking into account the lessons learned about pricing from its current markets and developing preparations to deal with a variety of regulatory environments.
In many African nations, Starlink has to apply for licenses to operate as a satellite provider. In addition, the company must deal with additional regulatory concerns pertaining to employment, taxes, exchange rates, and payment methods.
In 2024, there ought to be more price parity throughout the continent and a more defined approach to entering the market, which involves streamlining and consolidating distribution partnerships—like the one with Jumia—and viewing current suppliers as its avenue into the market. Additionally, it will aim to abide by several ICT and legal criteria, including ownership thresholds, license costs, and spectrum prices.
In the medium to long term, when the satellite operator adds more clients, prices may go down as it recovers its costs and begins to experience economies of scale.
In 2024, terminal costs should decrease but monthly access fees should remain comparable to current offerings. At this turning point, the supplier has the opportunity to start upending the market and expanding its current clientele by making itself more approachable to both companies and consumers.
