Starlink Hiked Prices. Is It Time to IPO?

SpaceX is raising prices , and not just on its space rockets -- but on Starlink satellite internet service, too.

A review of changes to SpaceX's website shows that sometime between May 6 and June 7 of this year, SpaceX raised the price on Falcon 9 rocket rides from $67 million to $69.75 million, a 4.1% increase. At about the same time, subscribers to the company's Starlink broadband internet service noticed some even more significant hikes in the prices they were being asked to pay.

Image source: Getty Images.

Biggest price hikes hit SpaceX Mobile Global

Beginning with the biggest number, CNET reported in late May that Starlink will hike prices 100% on its Mobile Global service tier. This tier, popular with boat owners, digital nomads, and globetrotters in general, used to buy a user unlimited access to Starlink satellites from any location on Earth for $200 a month. But as Starlink began warning users in May, Mobile Global prices will double to $400 a month beginning on Aug. 26.

Why the change? As far back as 2022, Elon Musk warned Starlink customers that Starlink capacity is not infinite, and too many users would overwhelm the network:

These capacity limitations may be beginning to bite, forcing Starlink to choose between throttling internet speeds on heavy users, or limiting traffic in a more roundabout way -- by raising prices to scare off some subscribers. In fact, Starlink may be adopting a both-and approach, raising prices on Mobile Global and at the same time nudging mobile users into a cheaper, more limited plan it calls Mobile Priority.

According to Starlink's service plans page, the lowest tier of Mobile Priority costs more than Mobile Global ($250 versus $200 a month), and also caps usage at 50 GB of traffic per month before transmission speeds start slowing down.

Further reinforcing the theory that this price increase aims to curtail heavy use of the service, Starlink no longer advertises the Mobile Global service tier on its website, and seems to be trying to phase it out.

Paying up for a popular product

Most Starlink customers, of course, have little need to lug a Starlink antenna all around the world -- and little desire to pay $250 (much less $400) for broadband internet. Starlink's target audience, after all, is rural customers who want to replace slow, obsolete landline connections such as DSL with faster satellite internet at a reasonable price.

But depending on where they live, their prices may be going up as well.

Last year, Starlink rejiggered its base Starlink price to give a temporary price break to such subscribers in areas with limited usage and therefore "excess capacity." Instead of paying $110 a month, they'd pay just $90. Conversely, customers in areas with high usage resulting in "limited capacity" would pay a higher monthly cost -- $120.

Problem is, as time goes by, areas with limited usage fill up with new users, reducing excess capacity and causing limited capacity. Want to guess what happens to rates then?

That's right. Users start paying full freight, and so their prices jump from $90 to $120 a month, a sudden 33% increase that apparently went live on June 10, according to an article in PC Magazine . Most likely, this will be a dynamic process going forward, too, with areas of limited usage and excess capacity gradually filling up, and users who have enjoyed a price break gradually getting hit with the full $120 cost of service.

What it means for investors

That's bad news for Starlink customers, who may feel like they've been drawn in with a low introductory rate, only to get hit with a 33% rate hike. But it may be great news for would-be investors in a Starlink IPO.

CEO Elon Musk is already on record saying he plans to IPO Starlink once its revenue growth is "reasonably predictable."

Industry news site Payload says the SpaceX subsidiary is in fact already growing faster than SpaceX itself , with sales probably rising 62% this year, helping to generate $600 million in free cash flow (according to Quilty Analytics). And now SpaceX is demonstrating it has the pricing power to raise rates as much as 33% -- or even 100% -- basically at will?

I don't know about you, but that sounds like some pretty predictable revenue growth to me.

To me, it sounds like SpaceX is getting ready to IPO Starlink .

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