SpaceX slams FCC after subsidy rejection

Elon Musk's SpaceX said it is "disappointed and perplexed" by the Federal Communications Commission (FCC)'s decision not to reinstate $886 million worth of subsidies.

Nick Wood

December 15, 2023

4 Min Read

The rocket company's Starlink unit was initially awarded the cash from the Rural Digital Opportunity Fund (RDOF) in late 2020, by the previous administration.

Under the scheme, the low Earth orbit (LEO) satellite provider planned to use the money to extend broadband coverage to nearly 643,000 premises in 35 states.

However, following closer scrutiny of Starlink's long-form application, the FCC last August reversed its decision.

FCC chairwoman Jessica Rosenworcel explained at the time that Starlink's technology had great promise but considered it to still be developing, and that the watchdog needed tried-and-tested broadband tech. She also pointed out that Starlink customers would be required to spend $600 on a dish.

"We must put scarce universal service dollars to their best possible use as we move into a digital future that demands ever more powerful and faster networks," she said. "We cannot afford to subsidise ventures that are not delivering the promised speeds or are not likely to meet programme requirements."

The FCC also cited Ookla speed-test data which indicated that Starlink's connection speed was slowing down – upload speeds in particular were falling well short of 20 Mbps.

The regulator said it can't go spending the public's money on "risky proposals that promise faster speeds than they can deliver, and/or propose deployment plans that are not realistic or that are predicated on aggressive assumptions and predictions."

Unsurprisingly, SpaceX strongly disagreed with the FCC's assessment and launched an appeal.

This week though, the FCC's commissioners voted 3-2 along party lines in favour of upholding its decision.

Rosenworcel reiterated the FCC's "responsibility to be a good steward of limited public funds meant to expand access to rural broadband, not fund applicants that fail to meet basic programme requirements."

The FCC insisted that it followed a rigorous process when it determined that Starlink had failed to demonstrate that it could deliver the promised service.

SpaceX legal VP Christopher Cardaci has made his employer's feelings known in a letter to FCC secretary Marlene Dortch.

"The [Wireline Competition] Bureau's decision arbitrarily penalised SpaceX – and only SpaceX – for meeting RDOF speed requirements years before SpaceX had any obligation to do so," he wrote. "The arbitrariness of applying this unstated standard exclusively to SpaceX was only compounded by the Bureau's reliance on Ookla nationwide speed tests without any notice that it planned to use such tests and even though those nationwide averages included areas that would not be served by RDOF."

SpaceX also claims that other successful RDOF bidders have warned they cannot meet their RDOF obligations and are asking the Commission "for more money, more time, and even exceptions to consumer safeguards."

It does seem odd to judge a network before it has been fully deployed when the deadline for doing so isn't for another couple of years.

Dissenting commissioner Brendan Carr pointed out in a statement that "the FCC is still holding Starlink to a standard that it has made up on the fly.

"I am not aware of any other circumstance in which the FCC has looked at current speed benchmarks to determine whether an awardee is reasonably capable of meeting a speed benchmark that kicks in years down the road," he said. "Indeed, if the FCC were to apply this novel Starlink speed test standard to any of the other 2020 awardees, it would show that those entities are not reasonably capable of meeting their 2025 obligations either because they have not built out to those areas yet. Applying a speed test to those providers would show speeds of 0/0 Mbps."

He claimed the decision to disqualify SpaceX was motivated by Musk's political opinions and the way he expresses them on X-formerly-known-as-Twitter.

Nathan Simington, the other dissenting commissioner, concurred.

"In 2022, many RDOF recipients had deployed no service at any speed to any location at all, and they had no obligation to do so. By contrast, Starlink had half a million subscribers in June 2022 (and about two million in September 2023)," he pointed out.

"The majority [commissioners'] only response to this point is that those other recipients were relying on proven technologies like fibre, while SpaceX was relying on new LEO technology," he said. "But the Commission knew that LEO-based service was new when it allowed LEO providers to participate in RDOF and when it accepted SpaceX's short-form application."

It's worth noting on that last point that it was the previous, Ajit Pai-led FCC that allowed LEO providers to bid for RDOF subsidies.

This decision by the FCC does seem harsh on SpaceX, particularly given it has a network up and running whereas the other bidders have only pledged to roll out networks.

The FCC is worried about technology, but companies also need to prove they are financially capable of taking on the risks associated with network deployment, which SpaceX has also proven.

The watchdog now needs to make sure the other RDOF bidders deliver on their commitments or it will be well and truly hauled over the coals.

About the Author(s)

Nick Wood

Nick is a freelancer who has covered the global telecoms industry for more than 15 years. Areas of expertise include operator strategies; M&As; and emerging technologies, among others. As a freelancer, Nick has contributed news and features for many well-known industry publications. Before that, he wrote daily news and regular features as deputy editor of Total Telecom. He has a first-class honours degree in journalism from the University of Westminster.

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