Telstra has signed a new deal that could see it compete directly with Elon Musk’s Starlink system. 

Telstra chief executive officer Andrew Penn has announced a memorandum of understanding with UK-based OneWeb for Australia’s own low-Earth orbit (LEO) satellite internet service.

LEO technology could provide faster internet at lower prices for rural and regional areas outside of the fixed-line network.

Elon Musk's SpaceX company already offers a LEO system called Starlink, and reports say remote Australians have been flocking to the service since it was launched. 

That means fewer customers for NBN's Sky Muster, which uses a different kind of satellites that suffer from more lag than LEO systems. 

Starlink can provide download speeds between 100Mbps and 200Mbps, while Sky Muster services have maximum download speeds of 25mpbs and 50mbps, depending on the user’s plan. 

However,  Starlink customers pay $848 for hardware plus ongoing fees of $139 a month, while Sky Muster has no hardware fee and costs about $34.95 a month for the most basic package. 

Telstra says it cannot refer customers to the Sky Muster because it has not “delivered the quality that people have expected from that service and paid for the service … and we end up having to then deal with the complaints and the issues associated with the service”. 

It has partnered with OneWeb, which is part-owned by the UK government but is much smaller than Elon Musk’s Starlink. OneWeb has launched less than 500 satellites, while Starlink has launched more than 2,000 satellites. 

It is unclear when OneWeb might be available in Australia.