FCC rejects Starlink, LTD Broadband bids for satellite connectivity subsidies

US regulator deals blow for bid by consortium headed by Elon Musk-led satellite company to gain financial stimulus under Rural Digital Opportunity Fund

Satellite broadband is flourishing across all continents, but in what could be a major blow to its development in the US, the nation’s communications regulator, the Federal Communications Commission (FCC), has rejected the long-form applications of LTD Broadband and Elon Musk-owned Starlink to receive support through the Rural Digital Opportunity Fund (RDOF).

RDOF represents the FCC’s efforts to bridge the digital divide in the US and is designed to ensure that networks in the US stand the test of time by prioritising higher network speeds and lower latency, so that those benefitting from these networks will be able to use tomorrow’s internet applications as well as current ones. With support from the programme, hundreds of carriers have already begun deploying these future-proof networks to connect unserved areas.

On 1 August 2019, the FCC adopted a Notice of Proposed Rulemaking (NPRM), proposing to establish the $20.4bn Rural Digital Opportunity Fund to bring high-speed fixed broadband service to rural homes and small businesses that lack it.

On 30 January 2020, the Commission adopted the Rural Digital Opportunity Fund Report and Order, which establishes the framework for the Rural Digital Opportunity Fund, building on the success of the CAF Phase II auction by using reverse auctions in two phases. The Phase I auction, which began on 29 October 2020 and ended on 25 November that year, awarded support to bring broadband to more than five million homes and businesses in census blocks that were entirely unserved by voice and broadband with download speeds of at least 25 Mbps. Phase II will cover locations in census blocks that are partially served, as well as locations not funded in Phase I.

To date, the RDOF programme has authorised more than $5bn in funding to bring primarily fibre gigabit broadband service to more than three million locations in 47 states. In the initial auction results announced on 7 December 2020, LTD Broadband won $1,320,920,718.60, and Starlink won $885,509,638.40.

Yet in assessing the bids from LTD Broadband and Starlink, the FCC determined that their applications failed to demonstrate that the companies could deliver the promised service. It noted that funding these proposed networks would not be the best use of limited Universal Service Fund dollars to bring broadband to unserved areas across the US.

“After careful legal, technical and policy review, we are rejecting these applications,” said FCC chair Rosenworcel. “Consumers deserve reliable and affordable high-speed broadband. 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 subsidise ventures that are not delivering the promised speeds or are not likely to meet programme requirements. Starlink’s technology has real promise, but the question before us was whether to publicly subsidise its still-developing technology for consumer broadband – which requires that users purchase a $600 dish – with nearly $900m in universal service funds until 2032.”

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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. Subsequently, it failed to 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 its winning bids.

The FCC separately announced that it was ready to authorise $21,112,263 in broadband funding to three companies to deploy gigabit service to almost 15,000 locations in four states: Tennessee, Texas, Utah and Wyoming.

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