Why FCC RDOF subsidy withdrawal is not a big deal

Recent FCC decision to withdraw RDOF subsidy award from SpaceX in the amount close to a billion USD seems to be a big blow to its efforts. But viewed from the proper perspective, it is a minor bump on the road. Perhaps even a blessing in disguise.

As of time of writing, Starlink probably has over 600,000 subscribers, which amounts to 0.72 billion per year. But this number is rising fast. It was reported at 250,000 in February 2022. Four months later, it had additional 250,000 subscribers, which average acquisition rage of over 60,000 new subscribers per month. Plus they have made inroads into additional markets with much higher revenue per subscriber. 

On the other hand, RDOF award will be spread over ten years, with yearly payout of less than a hundred million. So even for the first year, RDOF revenue would be 10% or less than the revenue from regular subscribers. For the next year it would surely be less than 5%. If we assume linear growth to 30 billion dollar revenue in ten year timeframe, RDOF would represent less than 1% of the earned income. Government contracts (especially from DoD) alone will probably bring significantly more revenue than RDOF.

What are negative sides of RDOF award? It has negative political consequences. Tesla was awarded 465 million credit after 2008 financial crisis. Despite early payback, it was often quoted as unfair policy by Tesla adversaries and critics. So much, that Elon Musk tweeted not to take government subsidy again. And due to successful capital investment rounds, SpaceX does not seem to be strapped of cash. But it is strapped of another finite resource - frequency bands that can be used for Starlink communication. And that is much more important than RDOF funds. More frequency bands mean higher subscriber density. Although FCC controls rather small area of the Earth, its decisions will carry weight in allocation of frequency bands on the international stage. Ukraine experience has shown value of Starlink rapid deployment for maintaining connectivity during emergency situations for all except US adversaries. Therefore Starlink is well positioned to have quite broad international support for acquiring frequency bands that will be awarded by FCC. 

In addition, Starlink is free to "mix and match" capacity per subscriber in order of maximizing revenue per cell, without any contractual obligations to FCC. It might become especially important as it proliferates into other satellite communication markets (such as mobile coverage, backhaul, aviation, military/government, mobility etc.).