Asia's richest man challenges the world's richest man: Musk wins temporarily, but he may not have the last laugh

Source: Times Weekly Author: Liu Muxuan

It is not easy to completely win the India market.

A business war in which Ambani, the richest man in Asia, "challenged" Musk, the richest man in the world, quietly came to an end in India.

The business war revolves around India's satellite broadband spectrum allocation system, and whether Musk's satellite broadband service "Starlink" can enter the India market at low cost.

Deloitte, a consulting firm, expects India's satellite broadband market to grow by 36% annually to reach US$1.9 billion (13.5 billion yuan) by 2030.

Previously, Musk advocated that satellite broadband spectrum should be administratively allocated in accordance with international practice, and companies should obtain spectrum resources at a price pre-set by the government. This also means that if the spectrum resources are released immediately, Starlink, as the only satellite broadband system in the world capable of providing large-scale services, can enjoy this spectrum resources almost exclusively until the arrival of new entrants such as Amazon's Project Kuiper or Ambani's JioSpaceFiber.

But Ambani, chairman of Reliance, personally sent a letter to India's telecommunications minister Scindia protesting, arguing that the threshold for foreign satellite broadband services to enter the India market should be raised. Ambani advocates an auction system for spectrum, with the highest bidder getting. If successful, his protest will significantly increase the cost of Starlink's entry into the India market, offsetting Starlink's first-mover advantage as a technology leader.

On October 16, India's telecommunications minister Scindia said India would follow the trend given that broadband spectrum is administratively allocated in countries around the world. But satellite broadband spectrum is not available for free, and local regulators will oversee pricing for this resource.

This statement is equivalent to rejecting Ambani's protest, but it is not easy for Musk to completely win the India market.

Musk's problem: Starlink is too expensive

India, which is rich in IT talent, has a serious digital divide. The India market has ample demand for various network infrastructures, including Starlink's satellite broadband.

As of now, 35% of India's population still does not have access to the Internet, and broadband penetration in rural areas is only 3%. This is the result of India Prime Minister Narendra Modi's long-term investment in network infrastructure since he proposed "Digital India" in 2015.

Regarding this situation, Musk once said in a meeting with Modi in 2023 that Starlink is very useful for those remote villages that do not have the internet.

Compared with optical fibers and base stations, which are widely used on the ground, satellite broadband has the advantage of being able to ensure network and digital signals around the clock, conveniently and quickly, and can cover the signals on aircraft and yachts. For some remote areas of India where the cost of laying fiber is too high, Starlink may be the best choice at the moment, and only one set of signal receiving equipment is needed to access the Internet.

The most famous example of Starlink in recent years is that when a large amount of infrastructure in Ukraine was damaged, Musk paid out of his own pocket to let Starlink use Starlink in his wartime areas to ensure the network signal in these areas.

At present, Musk's Starlink has covered more than 100 countries and regions around the world, with more than 3 million users. Starlink is not only one of the earliest pioneers in the field of satellite broadband, but also the only industry leader with the ability to provide large-scale services.

But in the face of the India market, Starlink has a fatal problem: it is too expensive.

Although it can be tried for free for 30 days, the monthly network fee price of Starlink is still several times that of most national telecom operators. Remote areas are often relatively poor and backward, and people in these areas can hardly afford to buy Starlink services at their own expense.

According to the details revealed by the previous head of Starlink India, the preliminary monthly pricing fee of Starlink satellite 100 Gigabit broadband in India is 7425 rupees (about 628 yuan), and you need to pay 37400 rupees (about 3167 yuan) for special hardware when you use it for the first time.

Although this price is much cheaper than the monthly fee of $120 (about 855 yuan) and the hardware of $400 (about 2849 yuan) in United States, the monthly fee for terrestrial fiber broadband service provided by Ambani's Jio in India is 699 rupees (about 59 yuan), which is only about 7% of the price of Starlink, and it also includes door-to-door installation, and the hardware is free.

In addition, the theoretical upper limit of the network speed of terrestrial fiber broadband is 1000 megabytes, while the theoretical upper limit of the network speed of Starlink is only 220 megabytes.

Jio's satellite service, called JioSpaceFiber, has been tested in four remote areas in India and has not yet announced when the service will go live. But when it comes to the price of the service, Jio said it will continue to guarantee it as "highly affordable".

Ambani protests: To be a rule-maker

Previously, the key to the dispute between the two tycoons was the interpretation of India law.

The allocation system of satellite broadband spectrum under India law follows the administrative allocation system since the 2G era.

Administrative allocation treats spectrum as a natural resource and allows multiple operators to share spectrum, which can improve resource efficiency. For consumers, this allocation is also a big benefit, because operators who share spectrum are not easy to collectively raise prices.

For the India government, administrative allocation means that 1% of the average annual revenue of spectrum for each satellite service can be obtained as a tax revenue, while Ambani's promotion of auctioning spectrum means that the India government can receive a large amount of fiscal revenue at one time.

According to the Times of India, India satellite network industry experts were quoted as saying that the current administrative distribution system is in favor of Musk.

In the field of satellite services, Starlink has a first-mover advantage, with more than 6,000 satellites providing services in low-earth orbit, and Starship, built by Musk's own company SpaceX, is still launching Starlink satellites.

In contrast, peers are far behind. Ambani's Jio does not have the ability to launch satellites on its own and has chosen to partner with Luxembourg-based SES Astra, a nonprofit that CelesTrak says Reliance plans to use 38 satellites. And Amazon founder Bezos's Project Kuiper is not expected to launch a satellite until next year at the earliest.

Therefore, in order to stall for time and to "maintain a level playing field", Ambani proposed that the spectrum for satellite services in emerging areas should be auctioned.

It is worth noting that Ambani's proposal for an auction system is very straightforward.

After noting the controversy in the industry, India's telecommunications department publicly released a document to seek advice from various companies.

But Ambani's Reliance Group sent a direct letter to India's telecommunications minister Scindia, bluntly saying that the idea of administrative allocation of satellite broadband spectrum was "wrong", and in order to "ensure fair competition between satellite communications and traditional networks", suggested that India authorities auction off satellite spectrum and reissue the consultation paper.

Ambani also played the "nationalist card", specifically reminding India's telecommunications sector to be wary of "foreign competitors entering India's voice and data services market."

It is worth mentioning that the India Broadband Forum (BIF), an industry organization in this field, collectively opposes Ambani's call for a level playing field, arguing that Reliance's opposition is a misunderstanding of technology and law.

Statistics from India research firm Koan Advisory also showed that in the public consultation on satellite spectrum held by India's telecommunications sector, a total of 64 responses were from businesses, industry groups and other institutions, of which 48 were in favor of administrative allocation, 12 were in favor of auction, and the remaining four were neutral.

The risk of "foreign-funded cemeteries".

At present, the battle for satellite spectrum has temporarily come to an end, but Musk still needs to worry about India's repeated policies on foreign-funded enterprises.

Because when promoting Starlink's services before, Musk had suffered losses in India.

Since Starlink has almost single-handedly opened up the market for satellite broadband services, most countries have not yet developed policies for this new area. For example, in Sri Lanka, next door to India, Musk contacted the Sri Lankan government while opening appointments to local users online, and obtained all the permits for the Starlink service to be launched in only 2 months.

But in India, Musk's promotion methods are not working.

In 2021, Musk opened appointments directly online to India users and collected a deposit of $99 per person. At that time, the number of registrations quickly reached 5,000.

But soon, India's telecom department pointed out that Starlink did not apply for a license and demanded that it refund the deposits of all India users. In the end, Musk could only make concessions, return the refund and submit a formal license proposal at the end of 2022. Sanjay Bhargava, a Starlink India executive who previously announced that he would sell 200,000 terminals in India, also resigned.

Musk's Starlink was required to apply to India's National Centre for Space Promotion and Authorization (IN-Space) for permission to build a ground base station after obtaining a Global Mobile Personal Communications Service (GMPCS) license issued by India's telecommunications department.

In 2024, the India government will not continue to require Starlink to apply for a license, and it will be the "final stage" of spectrum allocation by India's telecommunications department.

Musk's experience is not alone, in fact, India is often called a "foreign capital graveyard" because of obvious local protectionist policies, and there are often policy duplications, fines and other situations.

For example, Xiaomi, which entered India in 2015 to set up a factory, was suddenly judged by the India Revenue Authority in January 2022 to violate the Foreign Exchange Management Act, fined 6.53 billion rupees (about 553 million yuan), and frozen725 million US dollars (about 5.16 billion yuan) of assets. Among them, Xiaomi used the funds earned in India to pay the patent fees of Qualcomm in United States, which is also considered a violation.

In 2014, Samsung from Korea was fined $200 million in taxes in India, and in 2023 it was fined more than $100 million for environmental violations. United States technology giant Apple also hit a wall for a time, as early as 2022, Apple was fined 1.1 billion yuan by the local government for monopolizing stores. In addition, a number of internationally renowned giants, including Google, Vodafone, Amazon, and Foxconn, have been planted in India's hands, which has also caused the outside world to worry about India's investment environment.

At the same time, India's homegrown corporate giants, including Ambani and his Reliance Group, are adept at using local protectionist weapons.

Ambani's Reliance Group is a supergiant spanning petrochemicals, telecommunications, biotechnology and retail, and has long benefited from India's local protectionism and solid political and business resources. In July this year, even India Prime Minister Narendra Modi personally came to celebrate the wedding of Ambani's youngest son, Anand.

In 2008, Shanghai Electric cooperated with Reliance Group to build the Shasheng Power Station Project in India, with a contract value of US$1.311 billion (about 9.3 billion yuan). However, after the plant was put into commercial operation in 2015, Fidelity delayed paying the final payment. After Shanghai Electric applied for arbitration in India, it was claimed by Reliance for RMB 2.1 billion. Although the claim was dismissed by the Mumbai court, Shanghai Electric did not declare the arbitration successful until 2023, with the collection progress reaching 90%.

In this competition with Musk for satellite spectrum allocation, Reliance Group said in a letter to India's telecommunications department that "the interests of India companies cannot be harmed" and that Starlink will replicate Amazon's success in India's e-commerce sector.

After entering the India market, Amazon was banned from selling its own products and was also required to keep data in India. Even so, Amazon defeated Reliance's e-commerce subsidiary to become the largest e-commerce platform in India at present.

(Intern Zhang Xuan also contributed to this article)

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