The landscape of internet connectivity is undergoing a significant transformation. As the dominant force in traditional broadband, fiber, and wireless communications in the US, AT&T Inc (T.US) appears increasingly vulnerable to sustained competitive pressure from satellite-based low Earth orbit (LEO) constellation networks, with Space Exploration Technologies Corp's Starlink at the forefront. This growing threat of customer migration to more competitive telecom alternatives has prompted the Wall Street investment firm Oppenheimer to downgrade the telecom giant's rating from "Outperform" to "Market Perform" and withdraw its previous $32 price target.
The downgrade reflects Oppenheimer's heightened concerns about the impact of Starlink and other LEO satellite broadband services on AT&T's broadband subscriber growth, average revenue per user (ARPU), and long-term capital expenditure returns. The firm has shifted its view on AT&T from a bullish framework with clear upside to a more neutral, cautious stance of "waiting for risks to be repriced."
Market Momentum and Growth Trajectory
The satellite internet sector is entering a high-growth phase. According to Fortune Business Insights, the global satellite internet market is projected to grow from $9.53 billion in 2026 to $33.4 billion by 2034. Similarly, a ResearchAndMarkets report estimates the market could expand from $5.1 billion in 2024 to $24.6 billion by 2030, representing a compound annual growth rate of approximately 29.9%. These studies collectively highlight that LEO satellite broadband is transitioning from a narrative of aerospace innovation to a tangible stage of market share redistribution within communication infrastructure and profit generation.
Starlink is likely to continue eroding the market share of traditional telecom operators like AT&T in areas such as low-density broadband, edge cable networks, certain fixed wireless access (FWA) alternatives, enterprise backup links, and the emerging direct-to-cell market. However, it is not expected to completely replace traditional broadband/fiber and wireless cellular networks in the near term.
Starlink's Central Role in SpaceX's Valuation
For SpaceX, the imminent public offering candidate with a potential valuation nearing $2 trillion, Starlink is one of the most crucial commercial assets in its valuation framework. A Payload forecast report suggests Starlink's revenue could reach approximately $11.4 billion in 2025, accounting for about 60% of SpaceX's total revenue. By 2026, Starlink's revenue is projected to surge by 80% to $18.7 billion, making up roughly 79% of SpaceX's total. If this trend accelerates, SpaceX would evolve beyond a rocket launch company into a "global LEO communications operator and commercial space infrastructure platform."
Oppenheimer has even revised its 2035 global space-related revenue forecast upward significantly from $500 billion to $800 billion, suggesting SpaceX will disrupt the approximately $1.6 trillion US communications industry. The firm emphasizes this as a positive catalyst for SpaceX's record-breaking IPO and long-term valuation enhancement.
Analyst Warning on Underestimated Threats
Oppenheimer's senior analyst, Timothy Horan, expressed concern that the traditional telecom industry, including AT&T, is underestimating the persistent and substantial risk posed by satellite internet, much like the cable TV industry initially underestimated FWA. He warns the industry might mistakenly view this technology as merely a complementary mobile service or a low-quality fixed broadband alternative suitable only for the most remote markets.
Horan's compiled data indicates an inevitable industry trend shifting from fiber and FWA towards satellite internet systems. He predicts the latter could gain over 2 million new subscribers annually and eventually capture up to 10% of the market by 2030. He notes that while Starlink's pricing is currently comparable to traditional broadband, prices are expected to fall rapidly as next-generation V3 satellites, offering up to ten times the capacity, come online.
Given AT&T's long-term lag in expanding FWA capabilities, Horan anticipates the company will be a "heavy spender" in the upcoming AWS-3 spectrum auction. He also foresees significant headwinds for AT&T's ARPU growth, with the driver of service revenue shifting from ARPU to subscriber volume. This ARPU pressure will be amplified by stronger wireless competitors like T-Mobile US Inc (TMUS.US) and Verizon Communications Inc (VZ.US), both of which have far superior cost structures, according to Horan.
Current Market Sentiment and Technical Disruption
While Wall Street analysts largely maintain a "Buy" or equivalent rating on AT&T, Seeking Alpha's AI-powered quantitative model rates the stock as a "Hold" with a score of 3.42 out of 5, citing high profitability but very low growth prospects.
The disruptive potential of LEO satellites lies in their revolutionary shift from traditional high-orbit, high-latency, low-capacity models to networks built on near-Earth orbits, massive constellations, frequent reuse, low latency, and rapidly iterating architecture. Starlink, already a dominant player in the LEO internet market with reported users exceeding 9-10 million, is poised for further capacity gains with its V3 satellites.
This capacity improvement is economically critical. As per-satellite throughput increases, launch costs are internalized by SpaceX, and terminal costs decline, Starlink's marginal supply cost and pricing flexibility will improve, potentially undercutting some traditional broadband packages. By offering "trenchless, no-last-mile-construction, rapid deployment" broadband, it can compress traditional operators' pricing power in edge markets.
Limitations and the Evolving Competitive Landscape
However, most professionals, including Oppenheimer's analyst, agree Starlink will not "fully replace" ground-based networks like those of AT&T, Verizon, or T-Mobile in the short term. Real-world constraints remain, including spectrum resources, per-satellite coverage capacity, weather factors, terminal costs, indoor coverage, high-density urban capacity, and regulatory coordination. Studies indicate LEO constellations offer strong value in low-user-density areas, but per-user capacity declines rapidly as density rises. Weather, such as rain, can also significantly reduce Starlink's throughput.
Starlink's strength lies in "global, any-angle coverage" and "rapid deployment," not in replacing fiber and cellular networks in all high-density urban scenarios. The true game-changer will be the combination of "satellite broadband + direct-to-cell + ground operator competition." The direct-to-cell satellite communication market is forecast to grow from $3.56 billion in 2026 to $26.57 billion by 2034 (CAGR ~28.54%), indicating satellites will serve not just as home broadband alternatives but also as a complementary layer for mobile networks, covering emergency communications, remote areas, maritime, aviation, IoT, and weak-coverage zones.
Traditional operators face a choice: partner with satellite companies to extend their networks or risk being bypassed by new players like Starlink and AST SpaceMobile, which could directly siphon off high-value users in areas like international roaming, enterprise connectivity, and IoT.
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