Earlier this week, the FCC released a Public Notice that proposed the most significant change to date to Chairman Pai’s signature broadband policy, the Rural Digital Opportunity Fund (RDOF). A few weeks ago, the Chairman’s office had proposed RDOF auction procedures, which had clearly precluded bidding at the Gigabit tier in the auction by copper-based DSL, fixed wireless, geostationary and low-earth orbiting satellites. The reason, clear as a pre-SpaceX night’s sky, was that none of those technologies have provided Gigabit services in rural areas, as evidenced by the FCC’s 477 data. The 477 data are the reports submitted semi-annually under penalty of perjury by all internet service providers. No copper, no wireless, no satellite provider offers rural Gigabit service. As the Commission explained, only fiber-to-the-home technology offered proof that it could deliver Gigabit service by, well, delivering Gigabit service.
Then, a funny thing happened on the way to the vote. Several days before the Sunshine Period, Space X’s counsel visited the office of his former employer, Commissioner Rosenworcel, and the staff for Commissioner O’Reilly. Space X, offering no evidence except a cartoonish powerpoint, asserted it could deliver high-speed broadband service at low latency and should be able to bid at the highest tier of the auction. And that was that. The FCC reversed course and voted on an initial Public Notice to allow Space X to access $16 billion of public funds in a manner that could block most bidders from securing funding in the auction.
Tim Farrar has an amusing piece on the economics of SpaceX and Starlink at http://blog.tmfassociates.com/. You’re probably thinking that Elon Musk doesn’t need the public’s $16 billion, but maybe he does. The arithmetic of Starlink’s business plan, like that of Iridium years ago, seems to be based on a static view of the terrestrial broadband industry.
SpaceX has launched 300 satellites to date and plans to launch 10,000 or maybe 40,000 or maybe some other astronomical number. We don’t know because they don’t know. Let’s say they dramatically increase the pace of launches and deploy 10,000 satellites by the first RDOF milestone, and each can do 20 Gbps. (20 1-Gigabit beams would be quite a feat but let’s give them the benefit of the doubt.) Using some napkin math, the earth is 197 million square miles of which less than 4 million square miles is the U.S. so only 2% of satellites are over the U.S. at a given time.
That would mean 4 Tbps combined for the entire country. Let’s say SpaceX served only RDOF territory, or 6 million homes. That would mean only 640 kbps per home and, to meet the required speed of 1 Gbps, an oversubscription ratio of 1,500 to 1. Even this is a stretch because it assumes that demand is spread out evenly. In reality, people live in clusters, so in each rural area you will have more houses competing for the same few satellites overhead and oversubscription could be closer to 5,000 to 1.
Which is completely farcical.
I expect SpaceX would dispute many of my assumptions. SpaceX’s plans are confidential and proprietary, as they should be. But they are asking for preferential treatment in getting access to $16 billion of public funds. So, I’ll stick with my assumptions until SpaceX makes its plans public in something more detailed than a powerpoint. The difference between the treatment of SpaceX and every other technology to be used by bidders in the auction is that every other bidder must be using technology that has already been deployed, is already operational, is already in service with real plans and real customers and real experience, which can then be examined by the public through the marketplace.
Universal service programs, such as RDOF, have never been vehicles for the FCC to speculate on technological development. As directed by Congress in the Communications Act, public funds administered by the FCC are intended for services offered over public telecommunications networks already deployed and subscribed to by a substantial majority of residential customers.
I shouldn’t have to point out that Congress intended these funds to be used for U.S. customers. While some of the funds sought by SpaceX and Starlink could be spent on CPE in the U.S., SpaceX effectively intends 98% of the funding to be spent on non-U.S. operations. That is likely impermissible under federal law, but I don’t think we have yet reached the stage of seeking a court injunction.
I am biased. I think broadband is an essential service. I think rural Americans should have access to broadband services comparable to those available in urban and suburban areas. I think the way to achieve that is to invest in long-term fiber infrastructure. I think it best to invest locally in networks that are constructed, operated and maintained locally, which produces both near-term and long-term jobs. I expect RDOF to lead to tens of thousands of jobs created by the coops we work with in South Carolina, Mississippi, Arkansas, Missouri, Oklahoma, Texas, Oregon, Kentucky, Virginia, Tennessee, Michigan and nearly every other state. Rather than a handful of jobs in California.
Like electric infrastructure, an investment in a fiber network will last for decades. By contrast, an investment in a SpaceX satellite will last perhaps five to seven years, after which Elon Musk will need more of our money.
Only SpaceX is asking for special treatment. Only SpaceX is asking the FCC to trust them with billions of dollars of public money before they deploy a network and provide any service to any U.S. residential customer.
SpaceX is aptly named. They will launch X satellites, to offer X service at X price with X capacity to X customers. Let them do so with $X of private investment, and $0 of public funds.