By Ryan Tracy and Brody Mullins | WSJ.com March 12, 2020 5:30 am ET
WASHINGTON—Elon Musk’s SpaceX is seeking to qualify for federal subsidies to provide broadband service to rural areas, over the objections of competitors who say its satellite-based technology is unproven.
The company, formally known as Space Exploration Technologies Corp., has convinced the Federal Communications Commission to propose a policy change that would improve its chances of winning federal funds to expand internet service in far-flung parts of the U.S., records show.
The FCC has yet to decide whether the company will be awarded funding. SpaceX, based in Hawthorne, Calif., didn’t return requests for comment. But in a Feb. 20 letter to the FCC, SpaceX said its satellite system has demonstrated it can provide high-speed internet.
The FCC has earmarked $16 billion to improve internet service in rural areas over the next 10 years. The money, generated by fees on Americans’ phone bills, is set to be doled out in an October auction to low bidders offering the best service in locations across the country.
For SpaceX, federal subsidies could support the closely held firm’s plan to deliver high-speed internet by satellite across the globe—a venture considered crucial to its bottom line.
In meetings with FCC staff last month, representatives of SpaceX said it should qualify for the money alongside companies that already provide broadband in remote areas through fiber-optic cable, according to a lobbying disclosure filed by SpaceX with the FCC.
Rural phone and electric companies that provide broadband via fiber-optic cable say granting funds for SpaceX’s satellite technology is a gamble because the company doesn’t have a record of providing broadband to consumers.
“We don’t let people speculate with the public’s money,” said Jonathan Chambers, a former FCC official and partner at Conexon LLC, which contracts with rural electric companies to build fiber-optic cable broadband networks.
The pushback has reached Capitol Hill, where congressional aides and lobbyists have been discussing how to pressure the FCC to keep SpaceX out of the auction, according to emails reviewed by The Wall Street Journal.
“This will be a political disaster if Elon F’ing Musk gobbles up billions of dollars of the public’s money,” a congressional aide told industry lobbyists last week in one of the emails.
In its letter to the FCC, SpaceX said its technology would expand choices for rural consumers.
“A prohibition on SpaceX from participating in the auction at the levels that match the true capabilities of its system could have the unintended consequence of denying consumers in rural areas the best possible service and choices,” wrote David Goldman, SpaceX’s director of satellite policy.
The FCC subsequently asked for public input on SpaceX’s idea as part of a notice about proposed rules for the distributing the funds.
“The goal of Chairman [Ajit] Pai’s Rural Digital Opportunity Fund is to use the agency’s limited universal service dollars to bring the fastest broadband networks possible to as many Americans as we can,” the statement said.
SpaceX’s pitch is based on Starlink, a system of low-Earth-orbiting satellites it is launching to deliver internet service around the globe.
Because the Starlink satellites are closer to Earth than traditional satellites, the signal doesn’t have to travel as far. SpaceX says this will allow it to lower the latency, or lag time, of satellite transmissions and offer service on par with fiber-based networks.
A public draft version of the FCC’s proposed auction procedures, dated Feb. 7, contained language prohibiting satellite companies from qualifying as low-latency services, making their bids less attractive than bidders with land-based networks.
SpaceX met with FCC staff on Feb. 18 and 19, it said in the letter to the FCC, arguing that low-Earth-orbiting satellites generate low-latency signals.
“Low-latency service is not an aspirational feature of a proposed system—it results from the laws of physics,” Mr. Goldman said in the Feb. 20 letter.
In the version of the proposal the FCC approved on Feb. 28, the agency left open the possibility that low-Earth-orbit satellite services could qualify as low-latency and asked for public comments on SpaceX’s assertions.
The agency could ultimately decide that SpaceX’s technology isn’t proven enough to qualify for public funds. Besides latency, the FCC is proposing other criteria to judge bidders, including network capacity. It also has proposed a case-by-case review of firms with nascent technologies.
On the other hand, if the FCC were to adopt SpaceX’s suggestions, that could allow the company to bid in the auction on equal footing with more established technologies, such as fiber-optic cable.
A trade group called NTCA—The Rural Broadband Association, and the National Rural Electric Cooperative Association, whose members sometimes offer internet service along with electricity, said they are lobbying congressional offices and the FCC against SpaceX’s proposals.
NTCA emailed congressional offices last week urging them to contact the FCC and share concerns about low-Earth-orbit satellite companies participating in the auction.
“While this is just a proposal, if adopted, it literally could allow satellite providers to win the entire auction,” a NTCA lobbyist wrote in an email reviewed by the Journal. In an interview, NTCA Senior Vice President Michael Romano said the proposals could allow satellite companies to bid anywhere in the auction, rather than win the entire auction.
