FCC Cancels $886 Million in Funding for SpaceX's Starlink

The FCC is canceling $886 million in funding for Starlink to expand access in rural areas, citing the satellite internet system’s cost and doubts over whether it can supply fast enough speeds.

The agency today announced it had rejected “long-form applications” from both SpaceX and an ISP called LTD Broadband to secure funding from the FCC’s Rural Digital Opportunity Fund.

“The Commission determined that these applications failed to demonstrate that the providers could deliver the promised service,” the FCC said in a statement.

FCC Chairwoman Jessica Rosenworcel added: “We cannot afford to subsidize ventures that are not delivering the promised speeds or are not likely to meet program requirements.”

In December 2020, the FCC tentatively awarded $886 million to SpaceX to help its Starlink service supply high-speed broadband to 642,925 locations in 35 states. However, it came with a requirement that SpaceX provide a long-form application about how Starlink would meet its obligations before the federal funding could be fully secured.

The FCC’s goal with the Rural Digital Opportunity Fund is to supply gigabit internet speeds to over 85% of the selected rural locations and at least 100Mbps download speeds for all 99.7% of the locations in the coming years.

The FCC announcement signals the US regulator isn’t confident SpaceX can meet those goals when Starlink's current advertised speeds reach between 50Mbps to 200Mbps. The other problem is the high cost of Starlink equipment. The service costs US consumers $110 per month for access, along with a $599 one-time fee for the Starlink dish itself.

“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.”

In the FCC's formal notice on the decision, the commission also described Starlink as "nascent LEO (low-Earth orbiting) satellite technology" that faced "recognized capacity constraints." In addition, the FCC received data from Ookla's Speedtest.com that showed "Starlink’s speeds have been declining from the last quarter of 2021 to the second quarter of 2022."

SpaceX did not immediately respond to a request for comment. But the company’s Starlink internet system has struggled to supply consistently high-speed internet for some users across the US. Certain customers have experienced speeds under 5Mbps during peak usage hours.

The problem appears to be the result of network congestion or too many users consuming capacity over the Starlink network. To resolve the issues, SpaceX is working to launch more satellites into orbit, but that’ll take time and require regulatory approval.

Last month, rival Viasat also pressured the FCC to deny SpaceX the $886 million in funding. “As the number of Starlink subscribers increases, the system will become even more capacity-constrained, which is likely to impair network performance and constrain speeds for end users,” Viasat wrote. In response, SpaceX told the FCC that Viasat was trying “impede competition at all costs to protect its legacy technology.”

Not everyone at the FCC agrees with its decision to deny the funding to SpaceX. In a statement, FCC Commissioner Brendan Carr said "we should be making it easier for unserved communities to get service, not rejecting a proven satellite technology that is delivering robust, high-speed service today.

"To be clear, this is a decision that tells families in states across the country that they should just keep waiting on the wrong side of the digital divide even though we have the technology to improve their lives now," he said, adding he only learned of the FCC's decision while on a work trip in Alaska.

As for LTD Broadband, the FCC concluded that the company “was not reasonably capable of deploying a network of the scope, scale, and size required by LTD’s extensive winning bids.” The FCC had originally intended on awarding LTD Broadband $1.3 billion to expand in high-speed internet access in 15 states.