The FCC just released the results of its Phase I auction of the Rural Digital Opportunity Fund, which sounds pretty stiff but involves distributing billions to broadband providers making solid internet connections to underserved rural areas “on the wrong side of the digital divide”. That includes $ 885 million for SpaceX, whose Starlink satellite service could pave the way for places where fiber-laying is not an option.
Only three other companies raised more funds: Charter with $ 1.22 billion; LTD Broadband, a Minnesota and Iowa provider, with $ 1.32 billion; and the Rural Electric Cooperate Consortium for $ 1.1 billion. These are all traditional wireline broadband services and a quick review of the list of grant recipients suggests that no other satellite broadband provider made the cut (180 bidders in total were supported).
The $ 9.2 billion auction (although the details of the process itself are not relevant) essentially asks for bids for how much a company can serve a given area, ideally 100 megabits downstream and 20 megabits upstream . Local businesses can raise the hundred grand it takes to fund a fiber optic line that now has copper, and large corporations from multiple states could promise to undertake large development projects for hundreds of millions of dollars.
SpaceX’s Starlink has the advantage that it doesn’t require any major construction projects to reach the people in the Boonies. All that is needed is a dish and for your home to be in the area currently covered by the rapidly growing network of satellites in near-earth orbit. This means that the company can undercut many of its competitors – at least in theory.
Starlink hasn’t had a major rollout yet, just small test deployments which, according to SpaceX, went very well. The first wave of beta testers for the service is expected to pay $ 99 per month plus a one-time installation fee of $ 500. However, the cost of the commercial service is unclear (likely a little lower).
In order to secure the $ 885 billion in the FCC auction, SpaceX would have to demonstrate that it can provide solid service to the areas it claims at a reasonable price so that we can assume the cost to be in line with terrestrial broadband offerings . No other satellite broadband provider is in this price range (Swarm offers IoT connections for $ 5 / month, but that’s a completely different category).
The FCC doesn’t just knock on Elon Musk’s door with a large check, however. The company must demonstrate “regular expansion requirements” at the promised locations. From this point on, the funds are paid out. This will take several years and should help the young internet provider stay alive while facing the rigors and uncertainties of starting up. By the time the FCC cash runs out, the company will ideally have millions of subscribers backing it up.
This is “Phase I” of the auction and targets the areas that most urgently need a new internet service. Phase II will cover “partially serviced” areas that may have a good provider but no competition. Whether SpaceX will (or want to) be able to get a boost there is unclear, although the confidence with which the company is approaching the market suggests it might make a limited game for those slightly tougher target markets.
The push to expand the rural broadband network was a particular focus for outgoing FCC Chairman Ajit Pai, who had this to say about his success to date:
We structured this innovative and groundbreaking auction to be technology neutral and prioritize bids for high-speed, low-latency bids. We aimed to maximize the leverage of tax dollars and networks that meet the growing broadband needs of consumers. The results show that our strategy worked. This auction marked the biggest step ever taken to bridge the digital divide and is another major achievement for the Commission in its ongoing commitment to universal service. I thank our staff for working so hard and for so long to get this auction off on time, especially during the pandemic.
The full list of auction winners can be found in the FCC press release here.