Can the Satellite Industry Woo Federal Regulators to Win Broadband Funding?

Satellite internet is supposed to connect people who otherwise face limited choices — or have no other options — for internet service. While satellite generally isn’t faster than fiber optic, it’s easier and cheaper to install, particularly in rural areas and other hard-to-reach places. As a result, the industry has billed this technology as a potential solution to the digital divide: the enormous gap in the quality of internet connection between the most and least privileged.

But there’s a hiccup. In the United States, one of the ways the government addresses the digital divide is through grants, including funding administered by the Federal Communications Commission (FCC) and the National Telecommunications and Information Administration (NTIA). While some satellite providers have received federal support to offer their broadband service, satellite providers say they’re at a disadvantage when it comes to certain government programs.

“Federal treatment of satellite service providers including both LEO and GEO has been to basically subsidize the competition, reducing the customer base,” Tom Brady, a retired telecoms professional who worked on tactical satellite systems — and later, private satellite systems — told Via Satellite. “We seem to be the only country that doesn’t think satellite has a place in broadband, meanwhile Elon is busy signing up rural consumers with broadband, years before federal grant winners will get money and install facilities.”

Some argue that the government shouldn’t be handing out funding for satellite internet — at least not yet. There are concerns that Low-Earth Orbit (LEO) internet constellations, which operate far closer to Earth than traditional, Geostationary Orbit (GEO) satellites, face capacity issues. SpaceX’s Starlink service, for example, recently raised prices on people living in “limited capacity” areas. Also, a good chunk of the country is still waiting for access to service, though SpaceX has said its upcoming generation of satellites should provide more capacity.

There are other hurdles facing the satellite internet industry. Extreme weather can disrupt satellite service, critics point out. And the fiber industry has continued to argue that its technology is the gold standard for broadband and that LEO satellite internet is still too new.

Tom Wheeler, a former FCC chairman and a visiting fellow at the Brookings Institution, has accused the wireless and satellite internet services of pushing the government “to define digital down so that they may be able to sup at the federal funding trough.”

At stake is the race to address the digital divide, which represents a key and seemingly intractable tech policy challenge throughout the United States. With no or limited broadband, people face hurdles accessing everything from healthcare and education to emergency services. While there have been improvements, 23 percent of Americans didn’t use broadband at home in 2021, according to statistics collected by the Pew Research Center, and rural communities’ internet access still lags behind suburban and rural areas. The digital divide remains a challenge within cities throughout the country, too, in large part because of digital redlining.

Now, as the government deploys funding across a number of agencies and programs to address the problem, the satellite industry is trying to make the case that it should play a greater role in the process — and win lucrative subsidies, too. Part of the challenge is that in order to win funding, they have to prove that they’re viable, but some of these services may not be financially viable without government support, explains Howard Feld, the senior vice president at Public Knowledge, a consumer advocacy organization that focuses on internet issues.

“Federal agencies need to be very careful about the money they spend,” Feld told Via Satellite. “This new satellite technology, it is going to have to prove itself.”

A major example of surging tensions came when the FCC reversed course on a major funding package for Starlink. Back in 2020, SpaceX had won preliminary approval for a $886 million funding subsidy package, which came as part of the first phase of the Rural Digital Opportunity Fund Auction. Starlink was supposed to provide internet service to more than 600,000 locations in rural areas.

But after SpaceX completed a second “long-form” application, the agency rejected the funding. While the technology showed promise, the FCC couldn’t determine that the “still developing technology” could provide the service it promised, FCC Chairwoman Jessica Rosenworcel said in a statement last August. The FCC determined funding the service was too risky, in part because the system also involves expensive equipment. SpaceX appealed the decision last fall.

The FCC, for its part, says it’s technology neutral. The agency evaluates applications based on speed and latency, a spokesperson told Via Satellite. While Geostationary satellites may not be able to reach those requirements right now, it’s possible that Low-Earth Satellite constellations could in the future. In response to a request for comment from Via Satellite, the commission also pointed to a spate of contracts it’s awarded to Viasat and Hughes Network Systems.

“The satellite industry continues to rapidly evolve and innovate,” an FCC spokesperson told Via Satellite. “Both Geostationary and LEO broadband systems hold promise to fill the gaps in broadband connectivity in the future.”

The agency recently established a new Space Bureau, aimed at modernizing the agency’s approach to satellite policy.

But the FCC isn’t the only agency that awards funding for broadband service. Right now, the National Telecommunications and Information Administration is ramping up its plans for a new initiative, called the Broadband Equity, Access, and Deployment program, which was established by the Infrastructure Investment and Jobs Act that President Joe Biden signed two years ago.

The NTIA, which is run out of the Department of Commerce, was recently awarded tens of billions of dollars in funding, which it will deliver to states — as well as other entities, like Puerto Rico and the U.S. Virgin Islands — to administer their own broadband equity plans. The program is supposed to address the digital divide and is focused on developing infrastructure and creating new networks, among other goals.

The rules established by the agency prioritize fiber, and count areas that only have access to satellite internet as “unserved.” The satellite industry, as well as fixed wireless providers, has argued that the rules are unfair, and go against principles of technology neutrality.

“One challenge is that the program seems to favor fiber systems, and the criteria seem to favor fiber-based systems,” Tom Stroup, the president of the Satellite Industry Association, told Via Satellite. “Even though the legislation that was passed to provide the funding said it should be technology neutral.”

Stroup points to other factors that, he says, unfairly disadvantage the industry. Right now, states are in charge of handling NTIA funding. Because satellite internet providers don’t need to function on the regional level — coverage is ubiquitous — Stroup says those providers don’t have the same relationships with local offices that other internet providers do.

The NTIA did not respond to a request for comment. The chief of the agency recently told Fierce Wireless that in areas where installing fiber is exorbitant, the NTIA does expect states to spend money on other technologies.

Still, fiber remains a major area of focus for the NTIA. For example, fiber and fixed wireless represent the majority of applications, about 146, to the Tribal Broadband Connectivity program — a $3 billion funding initiative meant to assist tribal governments with internet access — according to a study published by the Government Accountability Office in January. Only about 22 applications were filed in the “other” category, which includes Geostationary and LEO services, as well as other approaches, like DSL.

Some satellite policy experts and members of the industry are skeptical about progress.

“When it comes to this administration and the FCC there is a strong bias that everything, everyone should have fiber,” says Jennifer Manner, the senior vice president of regulatory affairs at EchoStar/Hughes Network Systems. “I don't know how you change that until they have a disaster.”

Some are pursuing a hybrid approach to bridge the digital divide, like the Tidal Network, a broadband network established by the Central Council of Tlingit and Haida Indian Tribes of Alaska. It received a spectrum license from the FCC, and has been awarded just under $50 million by the NTIA’s Tribal Broadband Connectivity Program.

While Low-Earth Satellites are relatively new, Chris Copley — the network’s director — says that Geostationary satellite service has been “a literal lifesaver for Alaskans for decades.” Generally, satellite internet is cheaper and also easier to install since the process primarily involves purchasing and setting up ground equipment. Tidal officials also argue that it’s more resilient than like a backhaul or middle mile fiber, since the failure of a single satellite wouldn’t necessarily take out the entire network.

“Some islands in SEAK [Southeastern Alaska] don’t have subsea fiber but microwave point-to-point internet access. This access has such small bandwidth it’s hard to utilize the Internet the way it can be in places such as Juneau, or farther north like Anchorage,” explains Michelle Bruce, the Tidal Network’s coordinator. “Building the towers on the islands for point-to-point access can cost millions of dollars. Whereas satellites, there is no need to barge steel, use helicopters, or cut trees to make a road and clear for a tower.”

The officials acknowledge satellite service has flaws, too. Along with weather, environmental factors, such as canyons and tall trees, could potentially make accessing a satellite internet service more difficult. Higher-density buildings may also struggle to get connected — though that’s not a major problem for Tidal’s users in southeastern Alaska.

Still, Cropley argues that LEO satellites could be critical in places where there’s no way to build a tower or fiber. He says that Tidal’s application to the NTIA included LEO satellite services, and that the network is also using funding for satellite service through the American Rescue Act Recovery Fund. He says satellite would also allow the network to provide backhaul for towers, and that the NTIA rules aren’t keeping up with the “pace of technological advancement in satellite and wireless options.”

Luke Johnson, the systems architect at the Tidal Network, feels satellite is inevitable, wondering if it’s possible to provide internet to every citizen/residence in the next decades without it.

“While fiber to every U.S. residence is a noble goal, the reality is that there are residences or locations that are so remote and low population that the costs to bring purely terrestrial or fiber systems will not make sense anytime soon,” Johnson says.

Now, what remains to be seen is whether the satellite internet companies can make the case for the benefits of their service. Right now, the main argument is that fiber, and the current approach, aren’t enough to fix the problem of the digital divide — and won’t be anytime soon.

That said, some critics, and some officials, argue that it’s still early days for the industry, and far too soon for the federal funding that the industry seeks. They also point to other options, including local or municipal solutions, such as local broadband networks.

“Whatever happens, Congress is going to be breathing down your neck on oversight,” Feld, from Public Knowledge, told Via Satellite. “NTIA is making very sure that nobody's going to be able to come to them five years later and say, ‘Well, you know, you funded this proposal with this technology, and now my constituents don't get broadband.’” VS