Starlink’s RDOF Loss Could be a Catalyst for Change
On Dec. 12, news of the FCC’s final decision to reject Starlink’s appeal to qualify for $886M in federal subsidies to connect rural and unserved communities caused an uproar within the space sector and sparked heated political debate.
Like all large government subsidy programs, the devil’s in the details. Tweets and headlines bemoaning Starlink’s exclusion from the Rural Opportunity Development Fund (RDOF) sidestep how it was among $3B of early defaults and clawbacks. So before the indignation flames out and gives way to the next controversy, the industry should channel that energy to convince the FCC and National Telecommunications and Information Administration (NTIA) that satcom can play an integral role in bridging the digital divide.
Simply put, federal subsidy programs like RDOF and BEAD are optimized for laying fiber despite empty promises of tech neutrality. Something that satcom operators and groups like the Satellite Industry Association (SIA) have pointed out for years.
Technology is Advancing Too Fast to Ignore
The competitive landscape is evolving at a whiplash-inducing clip. Third-generation HTS satellites from Viasat and Hughes offer 100Mbps plans, while SpaceX and Amazon aspire to connect tens of millions of households globally with high-throughput, low-latency broadband. Emerging direct-to-device (DTD) services from AST SpaceMobile and Starlink could soon provide voice and broadband connectivity to isolated areas where fiber isn’t even an option.
RDOF can either be a tribal war or a battle call.
But first, we need to understand how we got here.
What is the Rural Opportunity Development Fund (RDOF)?
In January 2020, the FCC adopted a $20.4B Rural Opportunity Development Fund (RDOF) reverse auction to deliver rural, high-speed broadband to unserved areas throughout the United States. Building off the FCC’s previous 2018 CAF II Auction (a free Quilty Space report outlines the history of CAF here), the two-phase, 10-year program:
• Initially allocated $9.2B (later revised to $6B) of an available $16.1B in Phase 1 funding to bring high-speed broadband to 5.2M unserved homes and businesses across 49 states and the Commonwealth of the Northern Mariana Islands.
• Required a minimum supported speed increase from 10/1 Mbps to 25/3 Mbps.
• Included areas that lacked an unsubsidized provider of 25/3 Mbps broadband.
• Implemented a framework (weighting system) that prioritized bids with faster broadband speeds and lower latency.
• Set aside all remaining funds – no less than $4.4B – for the Phase II auction to address areas not addressed by Phase I.
Under Scrutiny from Day One
RDOF was launched shortly before the now-former Chairman, Ajit Pai, departed from his post at the FCC. The program received full support from Commissioners Michael O’Rielly and Brendan Carr and partial approval from Jessica Rosenworcel and Geoffrey Starks. As Pai’s successor, Chairwoman Rosenworcel’s dissent is especially important to revisit as her concerns at the onset foreshadow her actions later on. Among them:
• Inaccurate service maps* that needed to be updated and fixed before allocating $16B based on flawed census data.
• Cost as a barrier to adoption: “The FCC could have asked funding recipients to offer a low-cost service for consumers when they are receiving billions in support from the government. But if you comb through the text of this decision, you’ll find we took a pass. That’s unfortunate…we need to recognize that price is a barrier for many people.”
And while the dissent initially fell along party lines within the FCC, on Jan. 19, 2021, U.S. Rep. Tim Walberg (R-MI) led a bipartisan effort with 159 other representatives and senators, urging “transparency and accountability” in a letter addressed to Chairman Pai. “We ask that the FCC redouble its efforts to review the long-form applications. We urge the FCC to validate that each provider, in fact, has the technical, financial, managerial, operational skills, capabilities, and resources to deliver the services that they have pledged…”
How Did it Work?
RDOF’s Auction 904 kicked off with a short-form application. In it, bidders provided a program overview and selected one of four performance tiers that were reviewed as the first step to winning provisional awards that would be granted only after the FCC evaluated a more detailed long form that applicants submitted if qualified.
Regardless of which performance tier was chosen, all long-form applicants needed to:
1. Obtain Eligible Telecommunications Carrier (ETC) certifications.
2. Submit detailed technology, system and spectrum access descriptions.
3. Provide proof of project funding.
4. Basically show the FCC how they would meet their goals and still be solvent through 2032.
Determination of whether an applicant was qualified to receive RDOF support was based upon the info provided in that long-form application (i.e., the short-form application didn’t obligate any funds).
Enter Starlink: RDOF’s only LEO Satellite Broadband Applicant
Despite failing to meet certain short-form criteria (including two years of providing voice or broadband services), and having only 700 satellites on orbit that were still in beta testing and not yet commercially deployed, Starlink bid on the “Above Baseline” and “Low Latency” performance tier across multiple census areas, requiring them to:
• Provide broadband satellite service to 642,925 rural homes and businesses across 35 states.
• Meet or exceed requirements of 100/20 Mbps speed, with an 80/80 availability, monthly usage allowance of 2TB per location, and ≤100ms latency.
• Offer at least one broadband and voice service at rates that are reasonably comparable to rates for similar services in urban areas.
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Short-Lived Triumph for Starlink
Disregarding the possibly biased research published by fiber broadband lobbyists that challenged Starlink’s RDOF inclusion, Starlink’s most vocal opponent was actually another satcom operator.
On April 5, 2021, Viasat filed with the FCC a 43-page technical analysis, challenging SpaceX’s ability to provide “Above Baseline” service in the areas awarded to Starlink in Auction 904. Viasat argued that even if Starlink could meet the speed and latency requirements for its RDOF areas with more powerful satellites or a bigger constellation, it would violate equivalent power flux density (EPFD) limits by doing so. Any satellite emitting RF energy towards Earth must comply with power limits set by the ITU, and Starlink is forced to use NCO=1 (only one co-frequency beam on a single cell). What does all that mean? Basically, the bandwidth available to SpaceX in each geographic area — and thus the speeds Starlink can achieve for a given number of subscribers in that area — is ultimately constrained by its NGSO license.
Viasat filed at least four letters with the FCC using third-party data to substantiate Starlink’s shortcomings, including one in June 2022 that stated SpaceX never actually disputed any of its technical findings, including how it would remain EPFD compliant. SpaceX’s mind-your-own-business rebuttals were mostly written in the spirit of “Hey Viasat, you’re just jealous because Ookla says we are faster than you.”
Viasat did not pursue RDOF funding.
Starlink Not the Only One
In July 2021, Chairwoman Rosenworcel sent dozens of letters asking preliminary RDOF awardees to doublecheck their census blocks and give up portions of their funding based on the determination that those areas were already being served by one or more service providers offering at least 25/3 Mpbs broadband service. Starlink was asked to surrender about six percent of the 113,900 census blocks where they tentatively won RDOF grants. Research by consumer-advocacy group Free Press was one of the catalysts that led to that auction cleanup effort. The group found that "nearly 13% of the money awarded to Starlink — $111 million — is to provide service in urban areas,” including "the Jersey City Target store.”
Starlink never modified its bid.
FCC Claws Back Nearly $2.2B in Phase 1 Funding
In August 2022, the FCC announced they were rejecting the long-form applications of fixed wireless provider LTD Broadband and Starlink, citing inadequate responses to follow-up questions and failure to demonstrate they could deliver the promised service.
For its part, LTD Broadband neglected to obtain eligible telecommunications carrier (ETC) status in seven of 15 states. Further FCC review concluded that LTD could not deploy a network of the scope, scale, and size required for its $1.3B winning bid.
Regarding Starlink, Chairwoman Rosenworcel said the company’s offering held 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.”
Starlink appealed the decision.
Was Starlink’s Exclusion Justified?
While it makes for salacious Tweets, political bias against SpaceX is a bit of a stretch. Elon Musk’s company has inked $9.4B in deals with the USG – with $2.5B awarded in 2023 alone.
Starlink’s long-form application for Auction 904, now marked “incomplete” on the FCC website, is only partially public. We can see that Starlink only obtained ETC status in 23 of its 35 states. The technical concerns publicly filed with the FCC by Viasat and others arguably contributed to the FCC’s hesitance in committing to an award that accounted for 10% of its entire Phase I outlay.
There is no way of knowing if the outcome would have differed had Starlink bid on a lower performance level or fewer locations. Or if they had offered discounts for RDOF recipients to make Starlink more “affordable.”
We do know that Hughes won $1.3M in RDOF funding to provide broadband and voice services in Rhode Island in two performance tiers – “Low Latency Baseline” and “High Latency.”
Commissioner Carr’s impassioned statement that Starlink was under no obligation to achieve its performance milestones until 2025 is technically correct. But that assumes the burden of convincing the Commission that it could was already met.
As far as leaving rural communities on “the other side of the digital divide,” a few other rural broadband funding programs are poised to fill that void. The NTIA Broadband Access Equity and Deployment (BEAD) program has $42.5B available for rural broadband funding, and the areas for which SpaceX has been rejected could be eligible for BEAD funding. It is worth noting that the NTIA considers areas “unserved” if they “rely on satellite technologies to deliver service.”
Which brings us to the crux of the matter.
A New Year’s Resolution for Satcom
Starlink’s inability to remain in the RDOF game makes sense when you see how the rules were designed for a different player.
Satcom operators and the industry at large should use Starlink’s exclusion from RDOF as a catalyst to pressure federal agencies like the FCC and NTIA to revisit the structure of broadband funding programs, many of which were modeled after the nearly century-old Rural Electrification Act of 1936.
The U.S. is long overdue for developing a satellite-specific broadband subsidy. Terrestrial telcos and their supporters have sidelined satellite for years. Soon, they will find it impossible to blacklist space-based connectivity as Amazon, OneWeb, and DTD providers expand their reach. So, with $14B in RDOF subsidies left to ponder and lingering rage from a Starlink snub, 2024 might just be the perfect time to speed up that conversation.
*RDOF Phase II will not occur until the Broadband Data Collection (BDC) and new broadband map can be used as a guide to navigate Phase II eligibility. Phase II is meant to cover locations in census blocks that are partially served, as well as locations not funded in Phase I. As of now, the FCC does not have an update as to when this next auction will occur.
SOURCE: https://www.fcc.gov/document/fcc-reaffirms-rejection-nearly-900-million-subsidy-starlink