SpaceX just won $885 million in federal subsidies to expand Starlink, Elon Musk's satellite-internet project

  • SpaceX is quickly deploying Starlink, a network of thousands of low-flying internet satellites, in hopes of earning big money for the company.
  • To help fund the project, the Elon Musk-founded aerospace company competed in a $16 billion reverse-auction called Rural Digital Opportunity Fund Phase I.
  • RDOF's goal is to subsidize broadband internet in areas of the US where access is limited or unavailable.
  • The FCC on Monday announced a list of 180 winning bidders, who won rights to more than $9.3 billion in support over the next 10 years.
  • SpaceX won $885 million in bids for Starlink across 35 states. The company now has to complete a long-form application to secure rights to the subsidies — and deliver on its promises.
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On Monday, SpaceX received some very good news from the Federal Communications Commission: The company has won more than $885 million in federal subsidies for its Starlink satellite-internet project.

The money comes from the Rural Digital Opportunity Fund, a $20.4 billion effort to spread high-speed internet across America. The FCC program is designed to lure internet service providers into bringing broadband to parts of the US where decent web access is lacking or nonexistent.

The FCC split the project into two reverse auctions, called Phase I (worth up to $16 billion) and Phase II (worth up to $4.4 billion). Bidding for coverage areas in Phase I ran from October 29 through November 25, and the format made bids for higher-speed, lower-latency service much more valuable than bids for lower-speed, higher-latency service.

On Monday, the FCC posted its list of 180 winners, which included SpaceX.

In total, those companies and consortiums gained access to $9.23 billion in support for 5.2 million homes and businesses spread across 49 states and one US territory — an average of $1,768 of subsidies per new internet connection. (Alaska, Puerto Rico, and the US Virgin Islands declined to participate in RDOF.) Business Insider created a spreadsheet of the summary data here.

In a public notice, the FCC said 99.7% of winning locations will bring a minimum of 100 Megabits per second download speeds — more than enough for streaming high-quality movies and uninterrupted video conferencing. About 85% of the locations are slated to receive service at least 10 times as fast.

A needed boost for Starlink

Over the next seven years, SpaceX plans to fly between 12,000 and 42,000 Starlink satellites into orbit. The goal, per Musk, is to provide high-speed internet to nearly any location on Earth and generate $30 billion to $50 billion in annual revenue.

Musk views Starlink not as a personal wealth generator, but rather an economic flywheel to fund SpaceX missions to the moon and Mars, a planet where he wants to start flying people in 2026 and, later, establish a permanent human settlement.

Deploying Starlink is not cheap, though. Gwynne Shotwell, SpaceX's president and COO, estimated in 2018 that it may cost $10 billion to build and launch between 4,400 and 12,000 satellites the company is currently approved by the FCC to fly.

Operating the network is also expensive, with SpaceX covering potentially up to $2,000 in cost per user terminal — a high-tech dish that communicates with Starlink satellites flying overhead. From this and other predicted costs, industry specialists estimate that SpaceX may need several years and around 3 million subscribers to break even on the project. 

The $885 million worth of RDOF subsidies, while not as much of a windfall as SpaceX's roughly $2 billion-a-year fundraising, nonetheless represent free money for the company to expand its services, which are still in beta but should go public in 2021.

SpaceX bid for locations spread across 35 states. The company's largest wins by total amount were in Washington state, where it won $80.38 million to cover more than 52,000 locations, Montana ($72.72 million for nearly 29,500 locations), Pennsylvania ($63.07 million for 59,200 locations), Virginia ($62.39 million for more than 53,600 locations), and Oregon ($57.9 million for more than 35,600 locations).

By value per location, SpaceX's most lucrative winning bids were for Hawaii ($13,350 per location); Montana, Maine, and Utah (all about $2,400 per location); and Wyoming (about $2,210 per location).

SpaceX won't have immediate access to all the money it won. Each winning bidder has to clear more steps with the FCC, including submission of a long-form application due by June 7, and must meet performance and timing deadlines or risk losing the subsidies and paying fines.

Funding will be doled out over the next 10 years, which is SpaceX's case is an average of $88.5 million per year. That's far more than some bearish analysts predicted, one of whom previously told Business Insider he didn't expect satellite companies to win "anything" from RDOF Phase I.

The remaining Phase I funding will be pooled into Phase II, which is designed to fill in as many remaining gaps as possible. However, the FCC has yet decided how or when it plans to dole out that $11.2 billion; some commissioners have lamented the quality of maps the agency was using to determine which areas and locations would get awarded, and which wouldn't.

SpaceX did not immediately acknowledge Business Insider's request for comment.

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