It was quite a surprise when I got briefed late last week on the new satellite joint venture formed by AT&T, T-Mobile, and Verizon. There was no context offered in advance, but all three carriers were present at the event, so I knew it had to be about something serious. It turns out that this new joint venture is split equally among the three carriers, who seem to be hedging against SpaceX’s ambitions beyond delivering direct-to-device (D2D) satellite service. Indeed, there have been rumors that SpaceX has been searching for an MVNO (mobile virtual network operator) partner so it can stand up its own service.

Judging by a tweet from SpaceX’s president and COO, Gwynne Shotwell, there’s a clear sense of competition between SpaceX and the carriers. The carriers have a lot of the spectrum and most of the customers, while SpaceX has satellites and hype — and is gaining spectrum. However, the reality is that SpaceX still needs terrestrial providers to complement its satellites because satellites have significantly less capacity and cannot handle as many concurrent users as the cellular networks can today. But the carriers don’t want to be left out of the D2D space, especially with Amazon acquiring Globalstar and SpaceX continuing to grow the size and capabilities of its network.

There have been a lot of reactions to the announcement of this joint venture across the industry, with some suggesting that the existing carrier and satellite provider relationships will be dissolved. There’s no clarity about any of that thus far, especially considering the conversation I had with representatives of the carriers who said that each operator will still be able to maintain and strike its own partnerships. SpaceX’s head of satellite policy David Goldman even made claims on Twitter that the JV is more of a press release than a deal and might need U.S. Department of Justice review. I believe that SpaceX is just as spooked by this JV as the big operators are by SpaceX’s ambitions. Meanwhile, AST SpaceMobile and Blue Origin have come out with statements in support of the new JV, which makes sense considering the current battle lines of competition with SpaceX in D2D.

Is This Unprecedented Satellite JV Really About Coverage?

While none of the operators have said this outright, I do believe the new venture is partly a way to hedge against SpaceX and partly to ensure that D2D takes off in the U.S. The way the JV was pitched to the assembled press and analysts was that it would help plug coverage gaps between the three carriers. This seems to be a problem only for Verizon and AT&T, which don’t have a partnership with SpaceX like T-Mobile does after the recent announcement of their joint SuperBroadband offering. The launch event and press release for the joint venture both talked a lot about accelerating American leadership in D2D, which, to me, sounds like an effort to create more market competition. The press release even explicitly states how consumers will benefit: “This will enhance competition as consumer choices grow in satellite service.”

From a technical perspective, the JV will combine the IP that the carriers have developed with terrestrial spectrum to create a more unified entity for D2D mobile access. I believe this will translate into more standardized approaches across all three carriers as well as their satellite partners, including SpaceX, AST SpaceMobile, and even Amazon Leo. The operators were very quick to state that they are happy with their existing satellite partners, but that this JV is about making the D2D experience better and easier for both consumers and satellite operators.

D2D Satellite Remains Highly Competitive

Based on the work that I’ve seen T-Mobile do with SpaceX, it’s clear that the company developed a lot of IP to ensure not only that Android and iOS devices worked seamlessly on Starlink’s network, but also that the handoffs were smooth and seamless (as I wrote last year). Meanwhile, Verizon brings its partnership with Amazon and Skylo, while AT&T brings its expertise in working with AST SpaceMobile and utilizes NTN to power its offering. All of the carriers bring their own spectrum, which is one of the most valuable parts of this joint venture, as it could enable their customers to use shared spectrum for satellite communications — and make that spectrum available to satellite providers in a more coordinated way. This might also enable the three operators to unify smaller bits of spectrum they are not currently using, even though they did not say that specifically. They also did not comment on the FCC’s role in approving this JV because it’s unclear whether the FCC needs to approve the transfer or the use of spectrum. There’s no word on monetization yet, either.

We’re still very much in the early days of satellite communication (including D2D) as a consumer technology. Constellations deployed by Amazon Leo, AST SpaceMobile, and others are still in their infancy and have a lot of launches to complete before they can truly compete with SpaceX’s Starlink service.

I believe this JV will make it easier for satellite providers to compete with SpaceX by leveraging cellular operators’ networks and customer bases, potentially complementing each other as they build out their satellite coverage. While I wouldn’t necessarily categorize this as a David-versus-Goliath fight, as SpaceX’s Shotwell has, I do think it’s going to be a very interesting next few years in this space, with competition ultimately driving us towards a better future where satellite D2D becomes standard for public safety, at a minimum — and a lifeline for people in rural areas.

That said, I also believe we’re in a place where hype around D2D has been a bit overblown, especially given Ookla’s latest report showing very low utilization — averaging around 1%. There will be plenty of applications for D2D in rural areas and for public safety, but the average person living in a city or suburb with typical 5G cellular coverage is unlikely to need these services unless there’s a disaster, or they go off-grid for something like camping or hiking. My expectation is that D2D satellite services will eventually become mandatory for public safety, but for day-to-day use, I think D2D adoption will remain below 10%. Interestingly enough, a lot of the D2D hype also aligns with Elon Musk–fueled enthusiasm for orbital data centers, both of which seem very well aligned to increase the value of the SpaceX IPO, which is now expected around June 12. While I can’t say that these are the only reasons for the current market sentiment, I do suspect that talk on these topics will return to reality once SpaceX actually IPOs.