Starlink's RDOF Denial Seen Showing Scalability Is Still Considered Questionable

The FCC denying Rural Digital Opportunity Fund (RDOF) program funding for SpaceX's Starlink (see 2208100050) points to satellite operators needing to be able to prove their systems' scalability and reliability if they want to participate in future broadband subsidization programs, experts told us. SpaceX and the FCC didn't comment.

The Starlink decision is "not a death knell" for low earth orbit (LEO) satellite operator participation, but the FCC "has started to cut through some of the hype," said Christopher Ali, incoming Pioneers Chair in Telecommunications at Penn State University. LEO "will have a role to play in the digital divide," but it's clearly not ready to be subsidized yet because it's unclear how viable it is at full scale, he said. Funding should be in "proven, future-proof technologies [and] Starlink isn't there yet," he said. Until Starlink can demonstrate its actual speeds at full scale, “we need to be very cautious about funding this technology, which is still in beta.”

Removing Starlink frees up geographies nationally for companies ready to deploy fiber, Ali said. So far, those areas have been ineligible for other grants through the Agriculture Department's ReConnect loan and grant program. Those areas now potentially could get fiber deployment through another RDOF round or the Commerce Department's broadband equity, access and deployment (BEAD) program or ReConnect, he said.

Whether satellite is ineligible for BEAD funding isn't clear. The BEAD notice of funding opportunity lumps together areas served exclusively by satellite, using entirely unlicensed spectrum or an unspecified tech that doesn't meet reliable broadband service criteria. "That said, I doubt it will stop Starlink from petitioning the NTIA to relax this rule," Ali said. "It will depend on if Starlink can provide it can provide meaningful speeds and affordable pricing at scale."

The BEAD notice prioritizes fiber and doesn't include satellite, but that doesn't preclude satellite participation, said NTCA Executive Vice President Mike Romano in an interview. "It's more the case satellite will have a place in some places where other technologies can't reach," based on demonstrated ability by satellite providers, he said.

The FCC decision didn't appear to be a categorical rejection of Starlink or satellite technology but reflects instead lack of confidence in the current state of their capabilities, Romano said. Any technology platform "can try to play [but] we have to look at what it can actually do rather than ... marketing promises," he said.

"Every state I have talked to wants to prioritize fiber builds and looks at satellite as a very last resort, so I think the FCC decision reinforces their existing views rather than changing them," New Street Research's Blair Levin emailed. The FCC move does clarify that states are free to include areas covered by Starlink, and LTD can't be part of the unserved areas eligible for high priority infrastructure bill funding, he said. "But again, I think a number of states were going to do so anyway and NTIA would have supported that position," he said.

A satellite industry executive said there's concern in the industry that the Starlink decision could have ramifications for other operators. Chairwoman Jessica Rosenworcel's statement identified both Starlink speeds and its terminal costs as hangups for the agency, and it's not clear how much weight each was given, he said. He said whether satellite operators have a role in state broadband programs could come down to each state's criteria and evaluation, and what one state does could be different from the next.

Satellites have fundamental advantages and disadvantages compared with terrestrial networks because they can cover any area more readily but will always be the lower-capacity, lower aggregate throughput solution, Rysavy Research's Peter Rysavy said. He said the FCC's hesitancy on Starlink is understandable: "As amazing as the technology is, they still have these inherent limits." He said receiver costs should come down as production ramps up.

The FCC "is being very cautious" that broadband speeds can be reached and sustained in RDOF, and LEO participation in state programs likely will depend on whether operators can provide sustainable bandwidth, said Julie Kunstler, senior principal analyst-broadband access for tech consultancy Omdia. The challenge is fiber deployment costs keep declining, and fiber tech is easily upgradeable and future-proof, she said.