January 2, 2025

By Matt Wiederrecht, Head of Capstone’s Special Situations Team

Capstone believes a Republican-led Federal Communications Commission (FCC) will take an “America first” stance in the satellite race against China by boosting new, large US-based satellite constellations such as SpaceX’s Starlink and Amazon’s (AMZN) Project Kuiper. The FCC is set to implement a waiver by Q1 2025 and simplify the licensing procedure, change spectrum-sharing rules, and expand broadband capital subsidy programs.

Outlook at a Glance:

• FCC to Simplify Satellite Licensing by Granting Waivers, Accelerating Approval Process, and Allowing License Modifications; Boosting Large LEO Constellations
• Recent FCC Decisions to Allow Spectrum Sharing on NGSO FSS Bands Indicate Opportunities for SpaceX in MSS, May Harm Spectrum Valuations for EchoStar
• BEAD Program to Boost LEO Satellites as Republicans Resist Fiber Preference of Biden Administration, 5G Fund Delay Likely

FCC to Simplify Satellite Licensing by Granting Waivers, Accelerating Approval Process, and Allowing License Modifications; Boosting Large LEO Constellations

Winners	SpaceX, T-Mobile (TMUS), Amazon (AMZN)
Losers	Verizon (VZ), AT&T (T), Iridium (IRDM), Globalstar (GSAT), AST SpaceMobile (ASTS), Omnispace, Vodafone (VOD), EchoStar (SATS), Eutelsat Communications SA (ETL on the Paris exchange)

Waiver for Large Satellite Operators with Interference Concerns

We expect an “America First” FCC will grant SpaceX a waiver from interference limits by Q1 2025, enabling its satellite-to-device offering to provide full text, voice, and data service. Currently, SpaceX must comply with the interference limits set by the International Telecommunication Union (ITU), limiting it to text-only service.

Incoming FCC Chair Brendan Carr is likely to exempt SpaceX from power restrictions by granting interference waivers, enabling the first commercially available satellite-to-device service following the FCC’s establishment of the Supplemental Coverage from Space (SCS) framework in a March 2024 Report & Order. This would allow satellite operators using terrestrial spectrum to use higher power levels and still have a smooth regulatory path to commercial service by bypassing internationally agreed upon interference limits.

On November 26^th, the FCC granted SpaceX a license to begin commercial satellite-to-device services on T-Mobile’s US spectrum at limited power levels. SpaceX has 297 Gen2 satellites in orbit as of November 2024, enough to provide SOS text messaging services in the US. However, to provide a fully scaled voice and data service for partner T-Mobile, SpaceX needs a waiver of the out-of-band emission power flux density (OoBE PFD) limits set by the International Telecommunications Union (ITU)—otherwise, its satellites produce too much interference for neighboring operators. Despite objections from competitors and neighboring spectrum users, we believe the FCC under Carr will grant SpaceX a waiver of the OoBE PFD limit in Q1 2025. SpaceX has lobbied very aggressively for a waiver, as evidenced by the following:

1. Commenting on FCC docket 23-135 (regarding SpaceX’s OoBE PFD limit waiver) more than any other docket in the past two years.
2. Promising free emergency services to all smartphones regardless of provider if the waiver is approved.
3. Agreeing to competitor AT&T’s request to temporarily reduce power levels to allow for text-only commercial service while the FCC continues to deliberate on the waiver request.
4. Partner T-Mobile confirming that SpaceX cannot satisfy the FCC’s OoBE PFD limits and provide “robust satellite coverage” simultaneously.

Carr has commended SpaceX’s satellite-to-device service as being transformative for first responders and has urged the FCC to fast-track service to ensure a first-mover advantage for the US. Competitors like AST SpaceMobile, Lynk Global, and EchoStar remain years away from offering fully scaled text, voice, and data services, positioning SpaceX as the main beneficiary of waiver approvals.

Shorter FCC Decision Times Will Enable Constellations to Scale Faster and Compete Globally

We believe Trump’s FCC will drive to position the US to win the “satellite race” against China by speeding up the licensing process, enabling large LEO constellations to have more reliable timelines to providing service. This will allow SpaceX and Amazon to scale service faster and compete with Chinese government-funded constellations.

To scale constellations faster than international competitors, Carr previously testified in front of Congress advocating for accelerated approvals and “shot clocks” for the FCC to issue satellite licenses. If implemented, we believe these shot clocks will enable large constellations to scale faster in the pursuit of American success in LEO—a tailwind for SpaceX and Amazon.

Carr has spoken extensively about the satellite race, stating, “What the American government should be doing right now is doing everything we can to give Starlink, to give Kuiper, to give every other US-based internet provider wind at their back to continue to extend their lead over the CCP as the CCP stands up their competitors.” Current FCC Chair Jessica Rosenworcel has argued that the US economy doesn’t benefit from SpaceX’s monopoly, but it’s clear that Carr is more focused on the global space race.

• SpaceX has advocated for a standardized 45-day shot clock for the FCC to act on a license application.
• Amazon has suggested a 30-day shot clock that avoids automatic dismissal if the application requires more time to review.
• EchoStar wants extensions to the timeline if issues are found, but opposes the “shot clock” system.

If the FCC implements shot clocks without extensions, large constellations will be able to precisely estimate how long it takes to get satellites in the air, while simultaneously creating a barrier to entry by giving the FCC less time to evaluate newer, complicated applications. If shot clock extensions are permitted, we expect licensing reform to help all US-based satellite operators, regardless of size.

Likely License Modification Approvals to Grow Throughput and Reduce Latency for SpaceX

SpaceX wants to lower the altitude of 7,500 planned Gen2 satellites by 50 kilometers within LEO, but requires a license modification from the FCC to do so. Approval of this modification is likely, as earlier this year, SpaceX’s attempt to move satellites into very low Earth orbit (VLEO) was approved to avoid interference.

SpaceX founder Elon Musk has stated that this adjustment will allow the company to achieve one gigabyte parallel speeds through “a 10X increase in bandwidth and, with the reduced altitude, faster latency.” One gigabyte per second speeds have been a goal of SpaceX since the inception of the Starlink constellation, as it would then reach comparable speeds to fiber.

We believe a Carr-led FCC will maintain this trend and approve the modification – a huge tailwind for SpaceX to meet BEAD and 5G Fund performance requirements. Further, the FCC has previously approved SpaceX’s license modifications to lower its satellites within LEO.

Recent FCC Decisions to Allow Spectrum Sharing on NGSO FSS Bands Indicate Opportunities for SpaceX in MSS, May Harm Spectrum Valuations for EchoStar

Winners	SpaceX, Amazon (AMZN), new NGSO FSS operators
Losers	SES/O3b, Telesat (TSAT), Eutelsat, EchoStar (SATS), Globalstar (GSAT), Omnispace, incumbent NGSO FSS & MSS operators

FCC Simplifies FSS Spectrum Sharing, Removing Incumbent Protections After Ten Years

We believe Carr will continue to increase the amount of spectrum available to large LEO constellations that provide satellite internet services. On November 15^th, the FCC issued a Report & Orderto streamline its spectrum-sharing rules for bands used by NGSO FSS operators, establishing a process for new satellite constellations to gain access to bands that are typically used for NGSO FSS, such as the Ku-, Ka-, and V-bands.This is a win for newer satellite constellations hungry for spectrum, such as SpaceX and Amazon, who can now cause higher, specified levels of service degradation and unavailability to incumbent operators.

The FCC’s specification of permitted interference levels will allow newer constellations on shared bands to operate with higher power, deliver faster service, and face fewer regulatory hurdles.

Short-term impacts of the rule:

• For ten years after a new satellite constellation is authorized to share on NGSO FSS spectrum:
  • New operators can degrade the services of incumbent operators by up to 3%, the first time a measurable limit of interference has been established on these bands.
  • New operators can reduce the availability of incumbent operators’ service by up to 0.4%.
  • If these limits are exceeded, the later-round operator must reduce interference through diminishing power levels or changing the orbital tilt of its satellites.

Long-term impacts of the rule:

• Ten years after the newer operator is authorized to use the shared band, a sunset period will kick in, making all NGSO FSS operators, regardless of incumbent status, share the spectrum on equal terms.
  • If the degradation or unavailability limits are exceeded, operators must coordinate on an even playing field.
  • If coordination is unsuccessful, the FCC will split the spectrum equally among operators regardless of how long they have used the band.

With the new rules, spectrum-sharing authorizations on NGSO FSS bands will have clearer, objective standards, which is a boost for SpaceX and Amazon, but harms incumbent operators SES/O3b, Telesat, and Eutelsat. Previously, incumbent operators with priority protections on shared bands (like Eutelsat’s OneWeb constellation) could subjectively claim “harmful interference,” forcing newer operators to prove compatibility to the FCC before being authorized. hence, creating a major barrier to entry.

A Republican FCC Could Allow Easier Access to MSS Bands, Lowering Spectrum Valuations

The FCC is considering a rulemaking that could allow SpaceX to access non-geostationary orbit mobile satellite service (NGSO MSS) for satellite-to-device services via spectrum sharing – a decision that would diminish the valuation of spectrum holdings for EchoStar (SATS), Globalstar (GSAT), and Omnispace. We believe this framework would resemble the FCC’s new standardized spectrum-sharing rules for non-geostationary orbit fixed satellite service (NGSO FSS) operators, which allow SpaceX to cause low levels of interference to existing users when providing satellite internet to homes and businesses.

With satellite-to-device offerings from SpaceX, AST SpaceMobile, Globalstar, EchoStar, Iridium, Viasat (VSAT), Omnispace, and Lynk Global expected to come online over the next few years, NGSO MSS spectrum is in high demand. So far, SpaceX has been unsuccessful in entering the 1.6/2.4 GHz and 2 GHz bands, being denied access by the FCC due to the lack of established processes for introducing new operators on these bands through licensing or spectrum sharing.

However, the door is not completely closed for newer NGSO MSS operators – the FCC has since issued two public notices seeking comment on SpaceX’s proposed revisions to licensing and spectrum sharing on the 1.6/2.4 GHz and 2 GHz bands. A future rulemaking could create a path for LEO operators, like SpaceX, to offer satellite-to-device services in these bands. A Carr-led FCC could address the proposal once there is a Republican majority. Still, it will likely take around two years for the FCC to complete the rulemaking – much slower than the 180-day application timeline SpaceX was seeking, but has already been denied.

If SpaceX is granted access to NGSO MSS bands:

• Globalstar’s satellite-to-device service, currently operating in the 1.6/2.4 GHz band, would face interference issues and increased competition.
• Spectrum holdings by EchoStar and Omnispace would decrease in valuation from more MSS providers entering the 2 GHz band.

We believe that a Republican FCC motivated to win the satellite race against China will be more receptive to opening new bands to spectrum sharing, even at the detriment of existing operators. SpaceX is currently having trouble satisfying the OoBE PFD limit to operate on T-Mobile’s 1900 MHz spectrum, so gaining access to bands with similar propagation characteristics could be a viable backup option for full text, voice, and data MSS.

BEAD Program to Boost LEO Satellites as Republicans Resist Fiber Preference of Biden Administration, 5G Fund Delay Likely

Winners	SpaceX, Amazon, AST SpaceMobile
Losers	Rural telecommunications providers in more marginal high-cost unserved areas where LEO providers will have a competitive advantage in bidding for BEAD funding under a more accommodative Trump administration.

A More Tech-Neutral BEAD Under Republicans Advantages SpaceX, Harms Fiber Through Waivers

As much as 10% of the $42.45 billion Broadband Equity, Access and Deployment (BEAD) program could be made available to LEO broadband providers like SpaceX or Amazon’s Project Kuiper if a Republican-led National Telecommunications and Information Administration (NTIA) issues technology waivers allowing high-cost locations to be served by technologies that are more cost-effective than fiber deployments.

The BEAD program allocates $42.45 billion to states to provide internet speeds of 100 Mbps download and 20 Mbps upload (100/20) with a latency under 100 milliseconds to every unserved location across the US, which was established under the Biden Administration as part of the Infrastructure, Investment, and Jobs Act (IIJA). Carr has repeatedly criticized the program for having a “thumb on the scale” in favor of fiber and for failing to allow companies with more cost-effective technologies like fixed wireless or LEO satellite broadband service to compete for funds on a level playing field.

We do not believe that Republicans will be able to derail BEAD, as Louisiana’s final proposal is expected to be approved by the NTIA before Trump is sworn into office, releasing $1.355 billion to the state. It will also be politically unpopular for Republicans to block BEAD funding for the remaining states, the District of Columbia, and the US territories if Louisiana has already begun spending. However, Carr can encourage LEO utilization by urging the NTIA to grant technology waivers. By allowing higher utilization of “alternative technologies” (LEO satellites and unlicensed fixed wireless), states such as California and Texas that cannot afford to deploy ubiquitously, fiber will be able to stretch scarce BEAD dollars to expand coverage across more unserved locations by allowing SpaceX’s participation in the BEAD program.

SpaceX is the main beneficiary of a “tech-neutral” Carr at the helm. Assuming it can reach BEAD’s performance requirements (100/20), it could stand to receive over 10% of the program as the least expensive option to reach extremely rural locations. For more of our thoughts on BEAD, read our Telecom 2025 Preview.

Further Delays of 5G Fund Impairs EchoStar’s Buildout, Gives Satellites Time to Scale

A Carr-led FCC will further suspend the 5G Fund for Rural America program, which is on the verge of awarding $9 billion in subsidies to expand mobile 5G text, voice, and data services in dead zones across the country. After four years of delays stemming from broadband map issues, the FCC announced in an August Report & Order that it is nearly ready to begin hosting auctions for eligible tracts.

In his dissenting statement on the 5G Fund rollout, Carr contends that the FCC should prioritize resolving issues with the BEAD program before proceeding with the 5G Fund. He suggests that leveraging fiber backhaul and licensed fixed wireless from BEAD will enable wireless carriers to stretch 5G Fund subsidies further. Supporting Carr’s position, a group of congressional Republicans advocated for delaying the 5G Fund until BEAD outcomes are clear. This alignment increases the likelihood that 5G Fund tract auctions will be postponed until at least 2026.

MNOs like AT&T, Verizon, T-Mobile, and EchoStar may delay network expansion in expensive rural areas until the program is ready. This especially harms EchoStar, which is projected to receive the lion’s share of $900 million in Open Radio Access Network (ORAN) incentives earmarked in the 5G Fund. EchoStar also has a buildout milestone of December 14, 2026, to provide 5G coverage for 80% of the population across its AWS-4, AWS H Block, and Lower 700 MHz E Block spectrum holdings. A delay in 5G Fund subsidies may hinder EchoStar’s ability to meet these coverage requirements – increasing the likelihood of spectrum license forfeiture, penalties, or remedial measures enforced by the FCC.

To be eligible to bid on 5G Fund subsidies, providers must consistently deliver 35/3 Mbps speeds and latency under 100 milliseconds. While this is easily achieved by terrestrial MNOs, satellite operators partnering with terrestrial networks could also meet these requirements – positioning companies such as SpaceX and AST SpaceMobile to supplement dead zone coverage under the SCS framework.

For these satellite operators, a delayed 5G Fund may be a tailwind. Both companies are still scaling their services, with SpaceX reaching 17 Mbps and AST SpaceMobile reaching 21 Mbps in testing. Many tracts eligible for subsidies are rural roads without any households or businesses that MNOs are less interested in, but satellite operators can service easily without capacity concerns. Currently, no satellite operator meets the 5G Fund’s performance requirements, but Carr delaying auctions until after BEAD progresses with its program give constellations more time to launch satellites, increasing data throughput. Unlike BEAD, the 5G Fund is tech-neutral and subsidies are allocated to the cheapest option, opening a potentially massive opportunity for satellite-to-device operators.

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