Matt Rourke/AP Photo
Given Elon Musk’s clout within the government, it’s not unreasonable to suggest that spectrum auctions could favor his companies.
As the kleptocracy settles in, attention has turned to Elon Musk’s constellation of companies, which over the past couple of decades have benefited from $38 billion in federal contracts, and which stand to gain more now that he’s co-president. A $400 million State Department order for “armored Teslas” was scuttled after word got out, but the Federal Aviation Administration has agreed to test Starlink, the satellite internet system that’s part of Musk’s SpaceX, for upgrading its information technology system. That $2.4 billion contract is currently in the hands of Verizon; Musk has attacked Verizon’s performance, and FAA leadership has demanded that staff find the money to include Starlink in the deal.
Sen. Richard Blumenthal (D-CT), ranking Democrat on the Senate Permanent Subcommittee on Investigations, has said that the Musk/FAA deal “reeks of the most corrupt, self-serving abuses that federal procurement laws and principles are intended to prevent.” But that’s not the only way that Musk, and Starlink in particular, could benefit from government support.
For example, as Bloomberg has reported, Starlink could elbow its way into the $42.5 billion Biden-era program to build out broadband internet service in underserved areas. Starlink’s satellite service did not initially meet reliability standards for the program, nor did it commit to a low-cost option for low-income users. Starlink service starts at $120 a month, which is substantially more than the average broadband bill.
But the Trump administration could rewrite the rules to let Starlink participate more fully in the program, and compete with the more prominent wired fiber-optic service. Only three states—Louisiana, Delaware, and Nevada—have finalized their broadband funding. “Most of the other states can bid under different rules with this government and shift funding to Starlink,” said Alejandro Molina, a former National Economic Council official under President Biden.
The key agency running the broadband build-out is the National Telecommunications and Information Administration (NTIA), and Trump has nominated Arielle Roth, former policy director on telecommunications to Sen. Ted Cruz (R-TX), now chair of the Senate Commerce Committee, to head the agency. Cruz has been critical of the Biden broadband program for delays in build-out, though these were entirely predictable given the bill that Congress passed, which required maps to be drawn and states to apply for funding. He has boosted “innovative and simpler wireless and satellite options” like Starlink. The SpaceX subsidiary has a factory in Cruz’s home state of Texas.
Winning that contract under new rules could perhaps be the biggest potential haul for Starlink. And on Tuesday night, the Wall Street Journal reported that the Commerce Department will explore ways to allow states to give Starlink contracts for broadband worth billions of dollars. But there’s another way in which Musk’s firm and other wireless companies can grab a lucrative piece of infrastructure that the government owns.
Wireless industry lobbyists and allies like Cruz are working to funnel lucrative bands of spectrum to companies like Starlink. Such spectrum acquisitions are critical to these companies’ development and could enhance their bid to take over broadband deployment. The maneuver could also help Congress pass tax cuts for wealthy people like Musk. In that sense, it’s a double victory.
THE GOVERNMENT HAS FOR DECADES managed sales of spectrum—public airwaves that are used in all manner of telecommunications—typically through auctions administered by the Federal Communications Commission. But the FCC’s authorization to conduct these sales expired two years ago, and it needs Congress to re-up it.
Some congressional Republicans, like House Energy and Commerce Committee chair Brett Guthrie (R-KY), have argued for going beyond just reauthorizing the FCC’s normal spectrum sales, and directing a “pipeline” of specific auctions for specific frequencies of spectrum on accelerated timelines. Because the auctions deliver revenue to the government, those sales could be booked as near-term money that can offset the planned extension of the Trump tax cuts.
The Republican “menu” of options for pay-fors in their tax bill estimated $70 billion over ten years from accelerated spectrum auctions. Sen. Cruz, a major supporter of the idea, has put that number at $100 billion.
It’s important to note that this is mostly an accounting gimmick. “You auction off substantially more spectrum to get a short-term revenue realization,” said Reed Showalter, who worked on spectrum issues in the Biden White House. That just deprives the government of other auctions down the road, when it all evens out. Experts I’ve talked to scoffed at the high price tag. But it only matters if the Congressional Budget Office approves of that number; at that point, it can be used in Congress as one “fiscally responsible” way to offset huge tax cuts for the rich.
Wireless industry lobbyists and allies like Sen. Ted Cruz are working to funnel lucrative bands of spectrum to companies like Starlink.
Democrats have blasted this approach, especially because it wouldn’t be used to fund telecom priorities like broadband infrastructure grants and emergency communication systems, as has been the tradition, but instead to enable those tax cuts. “This is simply not the way these funds should be used,” said Rep. Frank Pallone (D-NJ), ranking Democrat on the House Energy and Commerce Committee, in a hearing last month.
There is no unanimity even among Republicans on spectrum auctions. House and Senate Armed Services Committee members in particular are concerned that selling off spectrum will impact the military’s ability to preserve its radar and communication frequencies. “The Department of Defense should not be forced to vacate or artificially compress within these bands at the detriment of national security,” said Rep. Mike Rogers (R-AL), chair of the Armed Services Committee, in a statement last month. Sens. Mike Rounds (R-SD) and Deb Fischer (R-NE) reportedly also oppose the spectrum auction play.
But the Trump administration appears to favor spectrum sales. Commerce Secretary Howard Lutnick condemned the hoarding of spectrum by the Pentagon in his Senate confirmation hearing, and said that “I’d like to try to help us drive some of that spectrum towards our businesses.” And it’s not just Lutnick: Cruz’s former aide Arielle Roth will be running NTIA, which is a leading voice in managing and allocating spectrum. NTIA in particular directs the National Spectrum Strategy, which is supposed to study what spectrum should be sold for commercial use. Cruz has reportedly brought up the spectrum issue directly with President Trump.
What type of spectrum Cruz and other Republicans want sold is critical. Spectrum has many uses, from radio to military communications to microwave communications for cellphones. The higher the frequency of spectrum, the more data it can carry. But the so-called “mid-band” spectrum is the most valuable. “It’s good because it can carry a lot of data and it’s less susceptible to interference from walls and other structures,” Molina explained.
That’s what Cruz wants released, particularly for wireless companies like Starlink to develop and expand next-generation 5G and 6G technologies. Two bands in particular—3 GHz and 7/8 GHz—are among the most coveted. “Through a clear pipeline of mid-band spectrum, American companies will have the certainty they need to invest billions in their networks and lead the world in revolutionary innovation,” Cruz said at a hearing earlier this month.
The wireless industry has repeatedly argued for the release of mid-band spectrum. A new and ubiquitous lobbying campaign called Spectrum for Broadband Competition was formed last month, launching a campaign called “End the Cableopoly,” which claims that cable companies are blocking 5G competition by preventing wireless companies from obtaining spectrum. Ads for End the Cableopoly have popped up in the spate of D.C. tipsheets at outlets like Politico and Punchbowl.
The campaign is being directed by the wireless industry’s chief trade group, CTIA, which has been touting the economic benefits of mid-band spectrum auctions, as well as 5G Americas, another wireless trade group. 5G Americas and CTIA’s membership includes T-Mobile, which recently initiated a partnership on direct-to-cellphone satellite services with none other than Starlink.
Viet Nguyen, president of 5G Americas, said that Starlink was not involved with their lobbying campaign. However, he added that T-Mobile and other members of the trade group have relationships with Starlink and other satellite (which he calls “non-terrestrial network”) providers. “There is growing interest between wireless cellular providers and non-terrestrial network providers in finding ways where our respective networks can work together to benefit consumers,” Nguyen said, citing a recent 5G Americas paper on the subject. So even if Starlink isn’t part of the campaign, it’s allied with companies that are increasingly dependent on satellite, and Starlink is the market leader in that category.
With added spectrum, Starlink would be able to improve service and better meet the reliability requirements for the $42 billion broadband build-out program. And given Musk’s clout within the government, it’s not unreasonable to suggest that the auctions could favor his companies, which could secure public infrastructure that would carry a major return on investment.
Of course, Molina explained, the government could simply waive the reliability requirements for Starlink as well. “They don’t need the spectrum, they could just go to NTIA and ask them to waive the requirements,” he said. However, he added that there are other, more established broadband subsidy programs, funded through the FCC’s Universal Service Fund, where better performance would also help Starlink participate. And whatever the rules for Starlink, Musk could have the FCC or NTIA put different constraints on what his competitors, like the Chinese company SpaceSail or Amazon’s Project Kuiper satellite service, can do with spectrum.
There is a precedent here for Starlink. Last year, Musk successfully pressured the Indian government to allocate spectrum on a fixed basis and not through an auction, which likely reduced the ultimate price. Other telecom operators in India argued against the change. If Musk does the same to agencies that handle spectrum in the U.S., the government could be “basically giving out a subsidized state gift to the favored companies,” Showalter said.
Democrats have strained to highlight where Musk’s business interests conflict with his service in the government. This is an obscure but fertile area for potential abuse.
