Elon Musk’s SpaceX is coming to Colorado. Sort of. The California aerospace firm was among the winners in the $9.2 billion federal broadband auction aimed at ending the digital divide in rural America.
SpaceX, short for Space Exploration Technologies Corp., received a $39.7 million piece of Colorado’s allotment to serve more than 19,000 households or businesses in the western part of the state, including Mesa, Rio Blanco and San Juan counties. It joined seven other companies, including Lumen (previously called CenturyLink) for the state’s $250 million share to offer broadband service for the first time to 76,216 households and businesses in the state.
If completed, this would get Colorado’s rural households with subpar internet close to 100% covered. But there’s concern among local broadband leaders that just because the money has been awarded, that doesn’t mean fast internet will actually arrive — at least not anytime soon.
“These numbers are difficult to take seriously because we still don’t know how (winners will perform) on their responsibilities,” said Teresa Ferguson, the Colorado Broadband Office’s director of Federal Broadband Engagement, adding that winners must file more details with the state and the FCC in upcoming months. “They won the money. But now these companies have to do the real hard work ahead to prove that they can provide the services.”
With the Rural Digital Opportunity Fund, the FCC tried something different in handing out federal dollars. The agency essentially put a price tag on how much it would pay a company to provide broadband to a census block. If more than one company accepted the challenge, the FCC lowered its payment and continued the process until there was just one provider left standing.
While details of how low it would go weren’t shared, the FCC said more than 300 service providers participated in the reverse auction. And instead of spending $26 billion to get 5.2 million homes and businesses up to speed, the FCC’s final price was $9.2 billion. (The FCC had allocated $16 billion for the auction fund, even though it had set an initial reserve price of $26 billion.)
The FCC accepted bids for speeds faster than its standard 25/3 mbps down/up. But it prioritized higher speeds so ultimately 85% of the locations are slated to get gigabit internet, with most of the others offering speeds of at least 100 megabits per second down and 20 mbps up, according to an FCC media release.
Because the FCC’s reverse auction saved the agency money as internet competitors said they could do the same job for less, that left more money for Phase II. The remaining $6.8 billion will roll into the Phase II auction, now valued at $11.2 billion, to target partially served areas.
This is how SpaceX’s Starlink service wound up being one of the largest awardees, receiving $886 million. SpaceX has launched nearly 1,000 satellites to provide global internet service from its Starlink constellation. It recently began pilot programs — cheekily titled “Better Than Nothing” — in the northern U.S. and southern Canada. It’s priced at $99 a month for speeds between 50 and 150 mpbs, according to Reuters.
SpaceX officials did not respond to a request for details on its Colorado rollout, but according to Starlink’s website, the service will rapidly expand “to near global coverage” in 2021.
As far as Jay Lindell knows, SpaceX doesn’t have a presence in Colorado. But Lindell, who is the Aerospace & Defense Industry Champion at the Colorado Office of Economic Development and International Trade, pointed out that the company is part of a national security space launch along with ULA, which is based in Centennial and the two would be working together.
Outsider SpaceX wasn’t the only one of the eight winners with no operations in Colorado — or lack of existing gigabit service.
Another company, Resound Networks, was awarded $29.5 million to roll out gigabit service to 11,797 homes and businesses mostly in eastern Colorado. According to FCC auction maps, Resound’s coverage includes the Las Animas, Pueblo, Weld and Sedgwick counties. Resound, based in the north Texas town of Pampa, has no operations in Colorado, according to a spokeswoman. And It doesn’t seem to offer gigabit service. On its site, it only offers residential wireless internet up to 100 mbps for $99. For business customers, the price is 40% higher, but the speeds are the same.
The second-largest winner financially was LTD Broadband, which is based in Minnesota. Its fastest residential service is “+Ultra” at 25 mbps, starting at $80 a month (business speeds are up to 500 mbps). The company also doesn’t cover Colorado yet. It received $69 million to serve about 11,500 homes and businesses.
Wyoming-based Visionary Broadband launched in Colorado in 2013, when it acquired VailNet’s operations in Avon, Vail and Summit County. The company has continued to expand and is in the process of acquiring another internet company in Gunnison County.
With the FCC auction, they decided to go big and made several bids. But Visionary ended up with just a few awards in Gunnison, Archuleta and Jackson counties, said Brian Worthen, Visionary’s CEO.
They lost to SpaceX.
“Elon is on the rise and everybody’s excited about his product,” Worthen said. “But by handing money to satellite, that money does not get spent on fiber in the ground in Colorado. … And what Colorado misses out on is property tax on fiber, paying contractors’ rooms in hotels, meals and labor. That all went out the door.”
The auction results left Justin Nelson, Visionary’s chief operating officer, confused. Visionary only bid on areas where it knew it could sustainably build fiber-gigabit service based on the FCC funding. That excluded the block across the street from his house in Lyons.
He said there are 10 houses there, which could provide adequate financial return for some companies. But it’s expensive to build fiber internet in places where there are very few customers or the challenging geography that makes construction difficult. For the FCC funding, it’s not just about providing internet to the 10 houses but the whole census block.
“But when you zoom out, what you realize is that the way that block was aligned, that area is actually connected to an area that’s 4.5 miles up the canyon towards Estes,” he said.
And it doesn’t end there. The same block includes an area southeast of Estes, plus another ridge closer to U.S. 34 as you enter into Loveland, he said.
“All of that is part of the same block. And somebody, sorry, won that block for gigabit” at possibly 70% the FCC’s initial price, he said. “We wouldn’t have built that area at 100%. We just couldn’t get our head wrapped around the math. But apparently, others were more aggressive. I hope they’re successful at it.”
The winner of that block was Connect Everyone LLC., a company registered in Delaware.
Connect Everyone is the same as Starry, Inc., a company with service in Denver, according to a spokeswoman. But she couldn’t elaborate on the auction because of FCC rules that prohibit communication for now. Connect Everyone was awarded $17.1 million for 5,190 sites.
Starry’s service typically targets the opposite of the rural household. In Denver, it works with the Denver Housing Authority to offer wireless internet service to the densely populated apartments for low-income residents.
Another company that is already in Colorado is also one of the state’s largest internet providers: Lumen. It was awarded $7.5 million to provide gigabit fiber to 1,500 homes and businesses in the central part of the state, with a concentration in Estes Park and Leadville.
“As a disciplined company, we only pursued Rural Digital Opportunity Fund obligations where we could deliver great broadband service economically,” spokeswoman Linda Johnson said in an email. “We look forward to using fiber to deliver gigabit service to many currently unserved households across America via RDOF.”
Johnson added that the company won’t receive the funds until 2022. According to the FCC, the funds will be distributed over the next 10 years. There are also requirements that providers reach all targeted locations by year six.
Ferguson, with the state’s broadband office, said she’s grateful that there’s a commitment by providers to provide faster internet to Colorado’s unserved community. But based on the past, she’s concerned about whether the dollars will turn into actual service.
“My concern is that broadband is local,” she said. “It’s a local issue and the results of the Connect America Fund — the last auction that the FCC engaged in — left a lot of areas of Colorado with 10 megabits down, 1 megabit up service. For millions of dollars.”
She doesn’t think Colorado got enough value from the experience.
“I worry that history could repeat itself here,” she said. “But the FCC has indicated that they are going to do their due diligence to ensure that the services that providers say they can provide, they will deliver. So, I’m cautiously optimistic.”
This story was updated at 7:40 a.m. to include details on Connect Everyone and SpaceX’s presence in Colorado. Updated on Dec. 11 with minimum speed of internet service accepted in FCC bids.