Starlink RDOF opportunity

Today is the beginning of Rural Digital Opportunity Fund auction. Almost 16 billion USD shall be distributed to bidding winners over a period of 10 years. 1.6 billion per year. 

RDOF Blocks - the unit of geography containing the funding-eligible locations, credit to www.vetrofibermap.com 

Announced "Better Than Nothing" public beta pricing provides indeed aggressive pricing scheme - $99/month for up to 150Mbit bandwidth and 20-40ms latency. This clearly positions SpaceX to easily bid for low latency tier. For example, Viasat and EchoStar would have to provide 1GBit bandwidth to match that. 

Viasat was the big winner in previous CAF-II action two years ago under the similar rules as RDOF, getting to 4th place with 8% of the total funding. Even more interesting information is that the winning areas are spread among 20 different federal states. The first three telcos won over 40% of the funds in the 20 states. Which means that Viasat probably won in the areas where no-one else bid.

But now Starlink enters the action game. It can easily bid on the same blocks as Viasat, winning on the latency front.

Viasat will probably need to provide much more aggressive pricing to counter that disadvantage. Upcoming Viasat-3 launch will double their current capacity over the United States, and will enable significant price reduction in order to protect the current user base. But due to latency issue, it is highly likely that majority of existing subscribers will migrate from Viasat/EchoStar to Starlink. So Viasat can only compete with bandwidth and aggressive pricing.

Due to low latency tier, I would expect that Starlink to outcompete Viasat on almost all areas. It should also take significant chunk from other bidders. So taking 8% of Viasat (satellite broadband) take from CAF-II and 50% uplift, I would estimate SpaceX to win 12% of the funds. That would amount to almost 200 million funding per year. 

This funding would not be critical for Starlink success, as it would be spread over a decade. But it does provide long term assurance for network buildup and maintenance. It would provide revenue for 3000 satellites over a decade, more than enough to sustain the constellation. And it would cover almost 20% of the projected project cost providing investors and subscribers long term assurance.

It is yet unclear how much debt SpaceX took soo far, but with aggressive equity sale rounds, it is likely not highly indebted. Being a private company and due to the nature of its business revenue streams so far, it does not have assets that could cover multi-billion credit lines. Before Tesla skyrocketing valuation rise in the last 12 months, Musk's stake in Tesla was also reportedly highly leveraged. But recent SpaceX valuation of 100 billion indicates that Starlink is/was not mainly funded by debt. Further expansion could, since such revenue would be a first sign of trust into viability of LEO based broadband access.