The FCC has rejected the application of Starlink to provide broadband to rural America at a cost of $885 million over ten years, nullifying a tentative approval back in 2020. The agency said SpaceX, and another company initially awarded $1.3 billion, had “failed to demonstrate that the providers could deliver the promised service.”
The Rural Digital Opportunity Fund is a $9.2 billion long-term effort to subsidize the rollout of internet service in places where private companies have previously decided it's too expensive or distant to do so. It was one of the most cherished projects of former FCC Chairman Ajit Pai, who for all his flaws seemed genuinely concerned with the “digital divide.”
At the time, companies could apply for small or large amounts to provide local or expansive services, and among the big early winners were Starlink and LTD Broadband, which applied for $885 million and $1.3 billion respectively to provide connectivity to regions in multiple states. Thousands of other applicants made smaller applications to fund more limited operations.
Since then the FCC has been evaluating whether these companies could follow through. In an email to TechCrunch, an FCC spokesperson explained that there was a lot of due diligence that needed to happen on both sides.
There were many steps following the initial announcement of winning bidders and a final determination on long-form applications. Winning bidders were required to demonstrate their financial, legal and technical ability to provide broadband service, and to fulfill public service obligations. These steps were intended to ensure that winning providers could actually deliver the services they signed up to provide, and that consumers would benefit from this use of universal service dollars.
LTD Broadband, for instance, was “a relatively small fixed wireless provider before the auction,” and its plan to suddenly become a billion-dollar operation practically overnight didn't pan out. It failed to get carrier status in seven of the 15 states it had promised to serve, and the FCC determined the company “was not reasonably capable of deploying a network of the scope, scale, and size required by LTD’s extensive winning bids.”
Sounds like LTD wasted everyone's time — but at least they only wasted their own money; the auction rules prevent a single dime from going out the door until the applicants receive final approval.
Starlink received a slightly less acerbic rejection, but it's hard to sugar coat losing the best part of a billion dollars.
“Starlink’s technology has real promise. 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,” said Chairwoman Jessica Rosenworcel in a press release.
This rejection is somewhat late in the coming, as such large amounts and proposals require extra scrutiny. But hundreds of other providers have received some $5 billion to bring broadband to millions of locations across 47 states since the plan went live. Somewhere, Ajit Pai smiles and nods.