By Jackie Wattles, CNN Business
In a high-stakes decision, federal regulators announced Wednesday that SpaceX would not receive nearly $900 million in grants awarded to the company in December, citing the fact that its satellite service is “still in the process of developing its technology.” ” and that the company “has failed to demonstrate that [it] could provide the promised service.
The Federal Communications Commission had earmarked the funds for SpaceX’s Starlink internet service as part of the agency’s largest-ever grant program to quickly get internet access to people across rural America, where three in five say that high-speed Internet access is still a pressing issue.
SpaceX was to receive a total of $856 million, one of the biggest chunks of the $9 billion auctioned.
But that won’t happen again.
“After careful legal, technical, and policy review, we deny these requests,” FCC Chairman Jessica Rosenworcel said in a statement. “Consumers deserve reliable and affordable broadband. We have to put little [subsidy] dollars to their best possible use as we move towards a digital future that demands ever stronger and faster networks. We can’t afford to subsidize companies that don’t deliver promised speeds or aren’t likely to meet program requirements. »
The FCC also observed data that “indicates that Starlink speeds declined from the last quarter of 2021 to the second quarter of 2022.”
SpaceX said it already has more than 400,000 customers around the world, and the company has invested resources into building the service. It has already launched nearly 3,000 satellites, which work in tandem to transmit Internet access to the ground. It’s a far different approach to traditional high-speed internet, which relies on underground fiber optic cables.
As part of the same announcement, the FCC also said it was denying a $1.3 billion award to LTD Broadband, citing the internet service provider’s failure to obtain status and approvals. suitable for service in seven states.
In addition, the Wireline Competition Bureau, which develops telecommunications policy, “has determined that, based on the totality of detailed applications, the large service areas reflected in their winning bids and their inadequate responses to the Bureau’s follow-up questions, LTD and Starlink are not reasonably capable of complying with the Commission’s requirements,” the FCC said in a public notice.
Allowing SpaceX to participate in the grant program in the first place was controversial. Traditional telecommunications companies and some broadband advocates have argued that SpaceX’s Starlink network is too new and unproven. Essentially, giving the company grants was a bet that SpaceX’s Starlink service will work exactly as the company promises and will be affordable for rural Americans.
Rosenworcel cited the cost of Starlink as part of the reason for the denial.
“Starlink’s technology is really promising,” she said. “But the question before us was whether to publicly subsidize its still-in-development technology for consumer broadband – which requires users to purchase a $600 dish – with nearly $900 million in universal service fund until 2032.”
The FCC’s $9 billion grant program, called the Rural Digital Opportunity Fund, was funded by fees that are regularly levied on Internet customers in the United States. The idea is to siphon off funds from urban areas where connectivity is plentiful and use them to subsidize the high costs of expanding internet infrastructure to more remote locations.
The Federal Communications Commission estimates that 21 million Americans – about 1 in 15 people – still do not have high-speed Internet access. The actual number could be much higher, possibly even double the FCC’s estimate, according to a BroadbandNow study.
For its part, SpaceX has been able to raise more than double that $900 million figure through routine fundraising so far in 2022. Although SpaceX has other expensive projects to fund, including Including a rocket called Starship that is expected to play a key role in NASA’s next moon landing, the company is valued at more than $125 billion, according to analyst firm Pitchbook.
SpaceX did not respond to a request for comment and does not generally respond to press inquiries. LTD did not immediately respond to a request for comment.
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