Starlink and LTE Broadband have lost federal subsidies worth more than $2 billion, after the Federal Communications Commission rejected their respective applications to provide high-speed broadband services in rural areas across the United States through the Rural Digital Opportunity Fund (RDOF).

RDOF provides $9.23 billion in subsidies to be doled out over a decade, in support of high-speed rural broadband deployment. Preliminary awards were made as a result of an auction process in which service providers bid for RDOF projects; Starlink won around $885.5 million in work and LTD Broadband won more than $1.32 billion. LTD was the largest winning bidder in the auction, despite being a “relatively small fixed wireless provider before the auction,” as the FCC put it. At the time of the auction, Starlink had not yet launched its commercial service.

“The Commission determined that these applications failed to demonstrate that the providers could deliver the promised service,” the FCC said. “Funding these vast proposed networks would not be the best use of limited Universal Service Fund dollars to bring broadband to unserved areas across the United States,” the Commission concluded.

Neither company was guaranteed the work and funds until after a lengthy post-auction FCC review process that looked at whether they could actually deliver the rural networks that they were promising to build.

“After careful legal, technical, and policy review, we are rejecting these applications. Consumers deserve reliable and affordable high-speed broadband,” said Chairwoman Jessica Rosenworcel. “We must put scarce universal service dollars to their best possible use as we move into a digital future that demands ever more powerful and faster networks. We cannot afford to subsidize ventures that are not delivering the promised speeds or are not likely to meet program requirements.

“Starlink’s technology has real promise,” continued Rosenworcel. “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.”

According to Ookla analysis, Starlink achieved a median download speed of 100 Mbps in the U.S. in the fourth quarter of 2021. But by the first quarter of 2022, that was down to around 91 Mbps, while upload speeds saw a year-over-year decline of 33% compared to the first quarter of 2021. Starlink performance also “[varies] widely at the county level,” Ookla has found: “Widely”, meaning a 130-Mbps difference between the fastest and slowest median speeds was found during testing in late 2021.

In the case of LTD, the FCC says that the company failed to achieve eligible telecommunications carrier (ETC) status in seven states on the timeline expected by the FCC, which meant that it was ineligible for RDOF funding in those seven states. “Ultimately, the FCC review concluded that LTD was not reasonably capable of deploying a network of the scope, scale, and size required by LTD’s extensive winning bids,” the agency said.

The RDOF process has been a rocky one, between the controversy over small, untried providers winning hundreds of millions of dollars in subsidies for multi-state networks as well as accusations that areas receiving RDOF funds were already sufficiently served by broadband. The FCC ultimately came up with a Rural Broadband Accountability Plan, announced earlier this year, in order to better monitor and ensure that the promised universal service networks could be, and were being, delivered. That plan included, for the first time, making public some of the FCC’s verification data on the performance of the delivered networks, including speed and latency testing, through the website of the Universal Service Administration Company, which is the non-profit administrator of the FCC’s Universal Service Fund (USF). It also included closer scrutiny of “large and higher-risk” support recipients.

Gary Bolton, president and CEO of the Fiber Broadband Association, released a statement praising the FCC’s rejection of Starlink in particular as “exciting and stunning news.” The association and NTCA had commissioned a study by Cartesian in early 2021 which found that even in a low-usage scenario, Starlink would not meet its minimum bandwidth requirements for 56% of its RDOF subscribers by 2028, and the impacts would be worse if RDOF usage was higher. “We could not be more pleased that this contribution has been successful in convincing the agency of the limited capabilities of satellite broadband networks,” Bolton said.

Satellite competitor Viasat had also submitted to the FCC its own technical analysis that it said demonstrated in multiple ways that even if SpaceX deployed its full planned number of satellites, “significant shortfalls in Starlink capacity exist” due to a combination of limitations on spectrum re-use and the geographic density of the areas it bid on and provisionally won in the RDOF process. Starlink responded by scoffing at the analysis and said it was full of factual errors and incorrect assumptions.

The FCC said that it has already authorized RDOF program funds of more than $5 billion to bring “primarily fiber gigabit broadband service” to more than 3 million locations in 47 states.

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