A man holding a briefcase full of money.

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’s funded areas in and around the Miami airport.

Free Press

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 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.