By Bronwyn Howell

Due to substantial technological developments, satellite broadband is rapidly becoming a viable and cost-effective alternative for providing fast, reliable internet service to some of the planet’s hardest-to-reach customers: namely, those living in remote locations where the costs of providing services using conventional technologies are high or prohibitively expensive. This should be manna from heaven (or at least a bonus from billionaire high-tech benefactors) for governments looking to close digital divides between their urban and rural citizens.

Starlink, operated by Elon Musk’s SpaceX, has gained first-mover advantage in this emerging new market. Starlink is already operating using a constellation of 1,740 low-orbit satellites launched according to a plan approved by the Federal Communications Commission’s (FCC) International Bureau. In a recent submission to the FCC, Starlink reports already having more than 90,000 customers in 12 countries worldwide. Some of those customers are in the most rural parts of Australia and New Zealand, illustrating the reach and responsibility the FCC has in determining how this nascent technology is regulated and, necessarily, how it develops.

Project Kuiper, backed by Jeff Bezos’ Amazon, plans to
enter the market with its own array of satellites. It too has received FCC
approval but has yet to launch either satellites or services. But the very
intention, backed with regulatory approval, signals that very soon there is
expected to be real infrastructure competition in the satellite broadband
market. This surely must be good news both in terms of prices (i.e., static
efficiency gains) and ongoing innovation in the technology itself, along with
the products and services offered using satellite broadband (i.e., dynamic
efficiency gains).

However, it must be remembered that these are still very
early days in the deployment of a very new technology. So far, it is fair to
say Starlink’s current deployment has been a trial to prove the technology does
in fact work as anticipated and that customers find the offerings acceptable in
terms of price and capabilities. Starlink’s FCC submission suggests a viable
product, with a reported half-million orders for the service on the books
globally.

Given the learnings from its initial “trial,” SpaceX would
like to launch an additional 30,000 satellites (called Gen2) which will enable
it to serve a larger number of customers with faster, lower latency connections
than the first generation of satellites. SpaceX has applied for FCC permission
to launch the satellites based on two different plans: “Configuration 1” and
“Configuration 2.” SpaceX claims this is necessary as it is not yet clear which
configuration will be best. It thus wants to preserve the option to choose
later when it has more information from its currently deployed system and
ongoing research. 

Herein lies the problem for the FCC and, by extension,
SpaceX’s likely future competitor, Project Kuiper. In deciding to approve or
decline the application, the FCC must take into account the interference
externalities the satellites create. With regard to SpaceX’s two
configurations, two plans means double the interference possibilities. As space
is limited at the low-orbit level in which the satellites will compete, SpaceX
is in effect asking the FCC to reserve two sets of locations for its future
developments — only one of which will actually be used. This necessarily
impinges upon Project Kuiper’s future development plans and indeed any other
possible future satellite broadband competitors. Project Kuiper’s developments
must now take place in the context of not knowing which of the two plans SpaceX
will deploy. This creates additional cost and risk for both their research and
development and proposed future operations.

Unsurprisingly, Project Kuiper has filed its own ex parte letter to the FCC outlining these concerns. Furthermore, it claims SpaceX’s application contradicts the FCC’s rules and precedents, which require licensees to submit an application for a single system rather than as SpaceX has done: proposing two systems and indicating it will notify the FCC which it ultimately chooses. Yet from SpaceX’s perspective, the uncertainties inherent in their current research and development activities could mean it is currently difficult to know which plan will be preferred. Signaling that they have narrowed it to two could be interpreted as providing information in an early application that could inform potential competitors.

The FCC has difficult decisions to make. Is SpaceX acting as
a monopolistic incumbent seeking to appropriate approval for locations to
increase rivals’ costs and lock them out of using particular resources to
compete? Or is SpaceX just responding to uncertainty — an inherent reality of
research and development? Is Project Kuiper — which is still yet to launch —
using regulatory processes to frustrate a rival too? And can the FCC even
legally make a decision about this in the first place?

Whatever unfolds, the stakes, both in the US and internationally,
are large.

The post Feathers fly in the FCC’s satellite broadband battle appeared first on American Enterprise Institute – AEI.