04.05.20

SpaceX and the FCC’s $16B problem

Posted in Broadband, Financials, Operators, Regulatory, Services, SpaceX at 11:41 am by timfarrar

Eight and a half years ago, I wrote a blog post that got a lot of attention inside the FCC, comparing LightSquared’s request for a license that would give it a $10B windfall to the relatively small beer of the $535M Solyndra loan scandal. Despite knowing that LightSquared’s promise of an integrated satellite-terrestrial network was nonsense (not least because LightSquared had already told the FCC in November 2010 that the wholesale cost of its satellite data would be $10 per Mbyte), the FCC and White House offered strong backing for LightSquared right up until summer 2011 when political pressures became too great and their support was withdrawn.

Now it appears that the FCC’s LightSquared debacle could be exceeded by an even greater debacle in the satellite sector, because SpaceX is seeking to participate in the upcoming Rural Digital Opportunity Fund auction later this year, which will offer up to $16B of funding over 10 years to service providers that commit to offer voice and broadband services to fixed locations in eligible unserved high-cost census blocks. While the Wall St Journal highlighted competitors’ complaints a few weeks ago, SpaceX has now upped its demands even further, suggesting in a March 27 letter to the FCC that “the laws of physics” dictate that SpaceX should be allowed to bid in the highest performance tiers (which carry the most money per potential customer) because “far from [being] untested or hypothetical, SpaceX has already launched over 360 satellites and demonstrated that its network is capable of offering high-speed, low-latency service”.

That of course is complete nonsense, because the laws of physics aren’t the only factor determining the latency of a LEO constellation, especially one that is (or apparently was in SpaceX’s case) supposed to have onboard processing and crosslinks. For example, Iridium’s latency on voice calls is not actually much better than a GEO satellite network and certainly exceeds “the Commission’s 100-millisecond threshold for low-latency services” (this paper estimated it at “between 270-390 milliseconds”). In fact one should regard claims of extremely low (and improved) latency for Starlink’s current satellites as indicating that in reality some of the most important design features, such as onboard processing, have likely been discarded.

To date SpaceX has certainly not demonstrated anything whatsoever about the performance of its planned commercial voice and broadband services for consumers. Notably SpaceX has still not published details of its terminals (except to advise that the antennas will need mechanical steering, raising the cost significantly), and last year’s testing by the US Air Force onboard a plane did not even use a SpaceX antenna. Moreover, that test did not involve most of the operational elements needed to offer a scalable commercial service, such as provisioning and sharing of capacity between multiple users, because SpaceX simply dedicated an entire satellite to one user terminal.

In particular, SpaceX makes great sounding (but carefully worded) claims in its submission to the FCC that “SpaceX also specifically designed Starlink to provide high-speed broadband service, using advanced phased-array antennas that allow the system to automatically optimize service to certain locations and dynamically adjust its throughput per user” when in fact many features of the supposed “design” have not actually been implemented in practice. While some of those discarded design features, such as crosslinks, are well known, I’m told that to date the satellites also don’t have any ability to dynamically reallocate capacity between beams, because that was apparently “too hard”. Perhaps that’s not surprising, when SpaceX is writing the software itself, rather than looking to companies with actual experience in designing scalable satellite broadband networks, like Hughes and Viasat.

But what is truly outrageous in SpaceX’s submission is the suggestion that the FCC should now let SpaceX participate in an auction to win $16B of ratepayers’ money without ever providing service to a single consumer, because SpaceX has now pushed back the launch date until after the FCC’s planned October 2020 auction date. The latest letter states simply that (even if you are foolish enough to take Elon Musk’s ever-optimistic timelines at face value) “SpaceX will now begin to offer its Starlink broadband service for consumers—first in the United States and Canada—by the end of 2020″. Of course now that Starlink’s primary competitor, OneWeb, has gone into bankruptcy, the urgency of pushing Starlink forward as quickly as possible has diminished (not to mention SpaceX being short of money itself), and why would SpaceX now want to risk consumers experiencing a service that in the early days may not work very well, if at all, before the FCC auction takes place?

But as I pointed out a couple of weeks ago, bidders are not required to actually provide service to any specific number of customers at all in order to receive the RDOF funding, and instead are simply expected to use the funding to subsidize their buildout and make it available. So SpaceX could then take the FCC’s money, never provide service to a single customer that the money was meant to help, and reallocate its capacity to serve other users like the DoD anywhere within the country or even the rest of the world.

Perhaps the FCC and Congress, like the rest of us, are pre-occupied with the coronavirus, and think this issue should not be at the forefront of our concerns right now. But when Elon Musk has convinced many gullible people that Starlink will “catalyze enormous positive change, bringing, for the first time, billions of humans into our future global cybernetic collective” and so it would be “stupid to put one more federal dime into rural broadband when Starlink could solve the whole problem by later this year” it remains possible that SpaceX will be able to get away with this nonsense and walk away with billions of dollars of funding that were intended to help close the homework gap while we are all distracted.

1 Comment »

  1. TMF Associates blog » Solving real problems doesn’t mean bailing out fake business plans said,

    April 13, 2020 at 1:41 pm

    [...] I’m not talking about SpaceX and the RDOF auction, I’m returning to a topic I haven’t written about for years (but also provided plenty [...]

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