spacex snags $885m from fcc to serve rural areas with starlink

The Federal Communications Commission (FCC) recently announced the results of its Rural Digital Opportunity Fund Phase I auction – an initiative designed to distribute substantial funding to broadband providers with the goal of delivering reliable internet access to underserved rural communities currently lacking sufficient connectivity.

A significant portion, $885 million, has been allocated to SpaceX, whose Starlink satellite internet service presents a potentially transformative solution for locations where establishing fiber optic infrastructure is impractical.

Only three other companies received larger funding commitments: Charter with $1.22 billion, Minnesota and Iowa-based LTD Broadband with $1.32 billion, and the Rural Electric Cooperate Consortium, a collective of utility companies, with $1.1 billion. These recipients all propose traditional, wireline-based broadband solutions, and a review of the grant recipients indicates that no other satellite broadband providers were selected in this round (a total of 180 bidders received support).

The $9.2 billion auction process (the details of which are not central to this discussion) centers on soliciting bids based on the cost of providing service to specific areas, ideally offering speeds of 100 megabits per second downstream and 20 megabits per second upstream. Smaller, local companies can utilize funding to upgrade existing copper lines to fiber, while larger, multi-state providers may propose extensive infrastructure projects requiring hundreds of millions of dollars.

SpaceX’s Starlink benefits from not necessitating significant construction to reach remote areas. The service requires only a satellite dish and a location within the coverage area of the company’s expanding network of low-Earth orbit satellites. This allows the company to potentially offer more competitive pricing compared to other providers.

While Starlink has only conducted limited test deployments to date, SpaceX reports these initial trials have been highly successful. Early beta testers will pay $99 monthly, along with a $500 one-time installation fee; however, the eventual cost of the commercial service remains uncertain, though it is likely to be somewhat lower.

To receive the $885 million from the FCC auction, SpaceX must demonstrate its ability to deliver dependable service to the designated areas at a competitive price point. Consequently, service costs are expected to align with those of conventional terrestrial broadband options. Currently, no other satellite broadband provider offers service at this price level (Swarm provides IoT connectivity for $5 per month, but this is a distinct service category).

The FCC will not immediately provide SpaceX with the full funding amount. The company is required to meet “periodic buildout requirements” and demonstrate progress at the promised locations, at which point funds will be released. This phased disbursement is intended to support the new internet provider during the challenges and uncertainties of its initial operations, with the expectation that it will achieve a substantial subscriber base by the time the FCC funding is exhausted.

This represents “Phase I” of the auction, focusing on areas with the greatest need for new internet service. “Phase II” will address “partially-served” areas that may have one existing provider but lack competition. It remains to be seen whether SpaceX will participate in this second phase, although the company’s assertive approach to the market suggests it may pursue opportunities in these more established areas.

Expanding rural broadband access has been a key priority for outgoing FCC Chairman Ajit Pai, who commented on the auction’s positive results.

You can find a complete list of auction winners in the FCC’s press release.