FCC cancels Starlink’s $886 million grant from Ajit Pai’s mismanaged auction

The Federal Communications Commission (FCC) has rejected Starlink’s application to receive $885.51 million in broadband funding, essentially canceling a grant awarded by the FCC during then-Chairman Ajit Pai’s tenure. Starlink was tentatively awarded the Rural Digital Opportunity Fund (RDOF) grant in December 2020. But the satellite provider still needed FCC approval of a long-form application to receive the money, which is intended for areas with little or no high-speed broadband access. We wrote about potential problems with the SpaceX grant a week after the FCC’s reverse auction, in which ISPs bid on grants organized by census blocks. Consumer advocacy group Free Press accused Pai of “subsidiz[ing] broadband for the rich,” pointing out that Starlink was awarded money in urban areas including locations at or adjacent to major airports. Today, Chairwoman Jessica Rosenworcel’s FCC announced that it rejected the long-form applications from both Starlink and LTD Broadband. The FCC said that both Starlink and LTD “failed to meet program requirements,” submitted “risky proposals,” and that their “applications failed to demonstrate that the providers could deliver the promised service.”

FCC cites $600 dish cost

The Starlink grants were supposed to fund broadband to 642,925 homes and businesses in 35 states. Losing the grants may not impact the actual availability of Starlink much because the satellite service isn’t geographically restricted in the same way as wireline networks. “After careful legal, technical, and policy review, we are rejecting these applications. Consumers deserve reliable and affordable high-speed broadband,” Rosenworcel said. “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. We cannot afford to subsidize ventures that are not delivering the promised speeds or are not likely to meet program requirements.” The grants were meant for specific census blocks even though Starlink doesn’t have to build the typical infrastructure needed when ISPs expand into new geographic areas. Starlink relies on its own satellites in low Earth orbits, the user terminals that each customer buys, and ground stations scattered around each country in which it operates. (SpaceX has said that laser links on Starlink satellites reduce the need for those ground stations.) Rosenworcel cited concerns about the Starlink technology and the $600 price each customer must pay in up-front hardware costs. “Starlink’s technology has real promise,” Rosenworcel said. “But the question before us was whether to publicly subsidize its still-developing technology for consumer broadband—which requires that users purchase a $600 dish—with nearly $900 million in universal service funds until 2032.”

Starlink called “nascent” tech with “capacity constraints”

In a public notice that provided more detail, the FCC called Starlink a “nascent LEO satellite technology” with “recognized capacity constraints.” The FCC questioned Starlink’s ability to consistently provide low-latency service with the required download speeds of 100 Mbps and upload speeds of 20 Mbps. The FCC also cited Ookla speed test data showing declining Starlink speeds in the second quarter of 2022, “including upload speeds that are falling well below 20 Mbps.” The FCC Wireline Competition Bureau said it received “inadequate responses” to follow-up questions from both Starlink and LTD. As a result of the ruling, both ISPs are now “in default on all winning bids not already announced as defaulted,” the FCC said. LTD was slated to get even more money than Starlink—over $1.3 billion. The FCC’s rejection of LTD was less surprising, as the company had failed to meet filing deadlines. LTD’s failures were detailed in a recent Wall Street Journal article. “Although LTD was a relatively small fixed wireless provider before the auction, it was the largest winning bidder in the auction, submitting winning bids in 15 states,” the FCC said. “Subsequently, it failed to timely receive eligible telecommunications carrier status in seven states, rendering it ineligible in those states for support. Ultimately, the FCC review concluded that LTD was not reasonably capable of deploying a network of the scope, scale, and size required by LTD’s extensive winning bids.”

FCC started auction “cleanup” over a year ago

Rosenworcel made it clear over a year ago that she believes the auction was mismanaged, announcing in July 2021 that the agency must “clean up issues with the program’s design originating from its adoption in 2020.” The FCC cited “complaints that the program was poised to fund broadband to parking lots and well-served urban areas.” At the time, Rosenworcel’s FCC asked Starlink to voluntarily give up funding in about 6 percent of the 113,900 census blocks where it tentatively won FCC grants. Now SpaceX isn’t getting anything out of the auction. We contacted SpaceX and LTD Broadband today and will update this article if we get any response. The auction originally awarded $9.2 billion to 180 broadband providers. Rosenworcel has doled money out on a rolling basis as providers secure final approvals. “To date, the RDOF program has authorized more than $5 billion in funding to bring primarily fiber gigabit broadband service to over 3,000,000 locations in 47 states,” the FCC said today. “With support from this program, hundreds of carriers have already begun deploying these future-proof networks to connect unserved areas.” Update at 8:15pm ET: LTD Broadband CEO Corey Hauer provided a statement. “We are extremely disappointed in the FCC staff decision. I don’t believe the FCC fully appreciated the benefits LTD Broadband would bring to hundreds of thousands of rural Americans. We are continuing to review the letter and are evaluating our next steps,” Hauer said.