Starlink and other ISPs took advantage of broken FCC system, researcher says.
The Federal Communications Commission last week awarded $9.2 billion to 180 broadband providers, saying the money will bring Internet access to 5.2 million "unserved" homes and businesses in rural areas across the United States. But consumer advocates say they’ve found major problems in the FCC’s funding choices, such as sending money to wealthy urban areas that are adjacent to high-speed networks. SpaceX is among the biggest beneficiaries of the funding decisions that have drawn criticism.
FCC Chairman Ajit Pai is "subsidiz[ing] broadband for the rich," according to the title of an analysis last week by Derek Turner, research director at advocacy group Free Press. Turner has a strong track record analyzing FCC broadband data and last year found major errors in Pai’s broadband-deployment claims.
Pai’s priority seems to be "closing the golf-course and parking-lot digital divide," Turner wrote. The FCC’s Rural Digital Opportunity Fund — despite its name — is devoting a significant portion of its money to urban and suburban areas, he wrote. While there are broadband shortages in urban areas, Turner argues that some of the FCC money is going to urban areas that existing cable or fiber ISPs could serve with just minor extensions of their existing networks.
The $9.2 billion for all ISPs is being distributed over 10 years, making the annual payout $920 million.
SpaceX Wins Money in Surprising Places
Turner published a follow-up blog post today focusing on SpaceX, which is receiving $885.51 million over 10 years to provide Starlink broadband to 642,925 homes and businesses in 35 states. Free Press estimates "that nearly 13 percent of the money awarded to Starlink—$111 million—is to provide service in urban areas." Across all 180 funded ISPs, "more than $700 million of the $9.2 billion in subsidies were awarded to ISPs for deployment in non-rural areas," Turner wrote.
SpaceX CEO Elon Musk has said Starlink is targeted at rural areas and "will serve the hardest-to-serve customers that telcos otherwise have trouble" reaching. While SpaceX did get FCC funding for plenty of rural areas, it also won "the right to serve a large number of very urban areas that the FCC’s broken system deemed eligible for awards," Turner wrote. For example, Turner wrote that SpaceX won broadband subsidies in locations at or adjacent to major airports in Atlanta, Chicago, Denver, New York City, Seattle, Las Vegas, Newark, Miami, Boston, Minneapolis-Saint Paul, Fort Lauderdale-Hollywood, Detroit, and Philadelphia.
Turner’s post is filled with examples such as this one, which shows that SpaceX received funding to serve the Miami International Airport and adjacent areas:
SpaceX’s funded areas in and around the Miami airport.
SpaceX won funding in other surprising places such as "the Jersey City Target store"; census blocks "with luxury hotels" in Chicago; "empty parking lots, grassy fields and highway medians" near Washington, DC; a "parking garage in downtown Miami Beach, two blocks from the beach, surrounded on all sides by multiple companies offering gigabit service"; and a street in San Francisco "that borders the southern edge of Golden Gate Park." SpaceX is also getting funding to serve "a parking lot outside the Pentagon," according to Turner.
FCC rules “created a broken system”
The RDOF and other universal service programs run by the FCC are paid for by Americans through fees imposed on phone bills. According to rules set by the FCC, the entire $9.2 billion must fund deployment only in census blocks where no ISPs report offering service with at least 25Mbps download and 3Mbps upload speeds.
But census blocks are small, and blocks that are counted as unserved "may be surrounded on all sides by fiber," Turner told Ars via email. "That’s because of an important design flaw in the FCC’s mapping system: ISPs are [required] to report the blocks where they currently offer service or could without extraordinary use of resources within a 10-day period. Thus a block can show up as ‘unserved’ even though it isn’t any more expensive than any typical block to serve; it just means an ISP didn’t claim the block."
SpaceX "appears to have played by the rules. But the FCC’s rules created a broken system," Turner wrote in his post on the Free Press site. "By bidding for subsidies assigned to dense urban areas, Musk’s firm and others were able to get potentially hundreds of millions in subsidies meant for people and businesses in rural areas that would never see broadband deployment without the government’s help."
We contacted SpaceX about Free Press’s post today and will update this article if we get a response. SpaceX has not said whether it will use the FCC money to lower Starlink prices in funded areas or if the money will simply help pay for the network’s deployment costs.
“Another Hyperloop-style boondoggle”
"If Musk needed that much of our subsidy money to make his rural-only operation viable, he should have bid on rural blocks in the areas he intends to serve," Turner wrote. "That he didn’t suggests three possibilities: He either couldn’t win the reverse auction for those areas outright (meaning another company will get FCC subsidy money to serve them while Starlink covers them too); that this is just another Hyperloop-style boondoggle; or that the auction was so rushed that companies like Starlink didn’t even know what they were bidding on. None of these explanations are acceptable."
Universal service funding is a "zero-sum world" in which every wasted dollar is "one less dollar that could go to connecting the [nearly 80 million people](https://ecfsapi.fcc.gov/file/10919131284198/Free Press_2020 Section 706 Inquiry Comments.pdf) who can’t afford home Internet," Turner wrote. The point of the RDOF "is to offer the subsidy needed to ensure broadband is built in places where the deployment costs are so high that deployment is not feasible," he told Ars. But the FCC’s census-block standard does not ensure that funding is limited to such areas, he said.
Charter and Cox also benefit
In his previous blog post last week, Turner pointed out a number of other areas that are getting questionable FCC funding, such as "the luxury Los Angeles County resort Terranea, a popular spot for visitors who want to at least take pictures of oceanside cliffs (and stay in one of the posh rooms if they can afford the $500-per-night fee). This resort is a popular place for SoCal tech companies to hold events, and it would be odd for them to gather in a place without Internet access." But a fixed-wireless provider called GeoLinks is getting FCC funding to serve five customer locations (i.e., five homes and/or businesses) in the area, Turner wrote. GeoLinks also got funding to bring broadband to 16 customer locations in LA’s Griffith Park "area that’s adjacent to an exclusive golf course and fancy homes," he wrote.
Charter was one of the biggest winners in the reverse auction, securing $1.22 billion over 10 years to bring service to 1.06 million homes and businesses in 24 states. As part of that, Charter is getting FCC funding to serve "a small plot of land in Calabasas [in Los Angeles County], where the average home costs nearly $1.5 million, containing 26 customer locations (and a few swimming pools)," Turner wrote. (Disclosure: The Advance/Newhouse Partnership, which owns 13 percent of Charter, is part of Advance Publications. Advance Publications owns Condé Nast, which owns Ars Technica.)
Cox is similarly getting money to serve "a very small area in Corona Del Mar… just a few minutes away from billionaire Palmer Luckey’s giant house," Turner wrote. The FCC’s broadband data, which is based on submissions by ISPs, says there is currently no 25Mbps service "available to the five luxury homes" on one side of the street but that Cox "already offers gigabit service" on the other side of the same street.
Cox should not need federal funding to serve this area, Turner wrote. "I’m not an FCC chair, but I’m pretty sure that—even without this newly won federal-subsidy money—there’s a good business case for Cox to extend its service a few dozen feet to these five homes valued at $3 million and higher," he wrote.
FCC plans data upgrades
We contacted Chairman Pai’s office today and will update this article if we get a response. Pai is planning to leave the FCC next month when Joe Biden is inaugurated as US president.
The FCC is planning a second RDOF auction that would send up to $11.2 billion to partially served areas and unserved areas that didn’t get funding in the first round. This should occur after the FCC collects more accurate data, as the commission has ordered ISPs to provide geospatial maps of their coverage areas.
The FCC’s current broadband data fails to count many unserved homes because the FCC counts an entire census block as served even if only one home in the block can get service. BroadbandNow, a company that provides an online tool for checking broadband availability, found in February that FCC data failed to count 21 million people who live in areas without 25Mbps Internet access. Last week, the company released a new report that said the FCC is exaggerating deployment of gigabit coverage.
Wireless funding disappoints fiber advocates
The FCC’s rural fund is also shortchanging Americans by giving fixed-wireless providers much of the money set aside for "gigabit" deployments, telecommunications consultant Doug Dawson wrote on his blog last week. The FCC set restrictions on what types of providers could bid for funding at certain speed tiers. Satellite providers, even those such as SpaceX that use low Earth orbit satellites, were prohibited from bidding in the 1Gbps category, for example.
But fixed-wireless providers were allowed to seek gigabit funding, which essentially "means the FCC believes that fixed wireless technology is the functional equivalent of fiber," Dawson wrote. He continued:
By allowing WISPS [wireless Internet service providers] to claim gigabit capabilities, the FCC cheated huge numbers of people out of getting fiber. There were numerous electric cooperatives, small telcos, CLECs, fiber overbuilders, and public/private partnerships in the auction hoping to bring fiber to entire rural counties. In looking at the footprints won due to this fiction, I’m guessing the FCC’s decision to allow fixed wireless to falsely bid as gigabit technology killed fiber construction to at least a few hundred rural counties.
Similar concerns were raised by Christopher Mitchell, director of the Community Broadband Networks Initiative at the Institute for Local Self-Reliance. He is worried that fixed-wireless providers won’t actually provide the required gigabit speeds. "Here is what to watch out for—will the FCC change the rules here retroactively to accommodate auction winners that cannot do what they promised?" he wrote.
NTCA—a lobby group that represents rural broadband providers, including a few dozen that got RDOF funding—is also worried that the FCC won’t prevent ISPs from delivering less than the promised speeds. NTCA CEO Shirley Bloomfield wrote that the group "STRONGLY urged the FCC to engage in more thorough vetting of would-be bidders PRIOR to their participation in the auction." She continued:
As a matter of transparency and accountability for critical values for precious government resources, it is essential now for the FCC to vet thoroughly those who may have made promises behind the scenes in their applications claiming the ability to deliver Gigabit and 100Mbps services using technologies that have never done so on a widespread basis—or at all—in rural America. There is far too much money at stake and far too many consumers on hold to gamble on confidential promises and untested technologies, and the real success of this effort will be defined not by the auction results themselves but by the actual delivery of robust and reliable broadband to rural consumers.
In the future, Bloomfield wrote, the FCC must "prioritize making this right by vetting RDOF winners in a more transparent and accountable way before money flows or billions of dollars and rural Americans will be the real losers here."