Local Governments and ISPs

Today’s blog is a tale of two counties that were successful in attracting broadband grant investments and now want to pivot to making sure that residents are able to take advantage of the newly constructed fiber networks. Both counties are encountering an unexpected roadblock.

Both counties that did things the right way. Both counties put a lot of effort into attracting better broadband. They funded major feasibility studies. These studies included activities like sponsoring well-attended public meetings, doing surveys to understand the interest in broadband, and exploring all of the local issues that ISPs want to know about when they are considering building new networks. Most importantly, both counties used some of their own federal ARPA funding to make broadband grants to ISPs, which served as seed funding for ISPs looking for state and federal grant money to build fiber networks.

And the efforts by the counties paid off. Both counties attracted ISPs that were successful in finding the grant funding needed to build fiber in rural areas. The fiber construction is mostly completed, and the networks are operational. One county partnered with two large ISPs, a cable company and a telco, and the second county ended up with fiber being built by five, mostly local, ISPs.

Interestingly, both counties realize that infrastructure is only the first step and the work in their counties is not going to be complete until residents who want broadband are connected. I think they need to be applauded for this realization, because I know many counties have assumed that once the networks are built, they can move their focus to other issues.

The reason behind this blog is that both counties say they have reached the same roadblock, in that the ISPs that were funded to build fiber won’t tell them how many customers are subscribing to the new fiber networks. This caught both counties by surprise for several reasons. First, they thought they had forged a relationship with the ISPs during the process of awarding local grants and through the general process of working together to attract more grants. More surprising to them is that each county is willing to put effort and funding into getting more residents online by supporting a variety of digital inclusion efforts like getting more computers into homes and teaching people how to use online resources.

The folks at the counties assumed that digital inclusion efforts are a win:win:win for the residents, the ISPs, and the counties. The counties understand that getting people online means better opportunities for education and higher pay. They assumed the ISPs would be interested in getting more customers. But they are getting nowhere with the ISPs. ISPs ranging from small local providers to large national cable companies gave them the same response.

I know ISPs well, and I’m not surprised by the response. In a competitive world, ISPs don’t want to give subscriber information to a local government which they assume will become public – and they are probably right about that.

I’ve spent a few days scratching my head about this and wondering how we break this particular log jam, which I assume is being repeated all across the country. There are local governments and digital inclusion advocates of all types who are willing to put in the effort to get people connected to broadband. ISPs clearly benefit by getting more customers. But many ISPs are leery of looking outside the company for help, and the idea of trusting outsiders to bring new customers is a foreign idea.

I know there are ISPs that have embraced digital inclusion efforts. However, there are surprisingly few stories about this in circulation. Maybe that silence is on purpose, and these efforts are being tackled locally with little fanfare. I’d love to hear from anybody who has figured out how to break the logjam being experienced by these counties.

Technology-neutral Policy

Arielle Roth, the Administrator of NTIA, made a speech to the American Enterprise Institute that was titled There Is No Such Thing as “Future-Proof” Technology. Her speech was in reference to the upcoming 6G technology.

She made a really interesting observation about 6G that I hadn’t seen before: That lesson is especially timely as we stand at the frontier of AI-native 6G . . . Perhaps the defining feature of AI-native 6G is not simply that it will make communications networks more intelligent. It is that it will make the future of communications even less predictable. Previous generations of wireless networks were designed primarily to move information faster. The next generation promises networks that increasingly optimize, adapt, and derive insight from the information they carry. As intelligence becomes embedded within the network itself, we should become more humble about our ability to know which technologies, architectures, or applications will ultimately prevail.

Obviously, NTIA is on the 6G bandwagon, much like the first Trump administration was on the 5G bandwagon. To some degree, it’s the government’s role to promote new technologies, and this is done for many other technologies outside of telecom.

I have my doubts that carriers are going to build networks that are less predictable, because that sounds rife with risk. I have serious doubts that the big carriers are going to hand off the responsibility to operate 6G networks completely to AI. The industry learned a lesson last year with the big Verizon outage that lasted far longer than it should have when technicians couldn’t figure out how to fix problems in AI-generated software. Everything I’ve been reading is that the big nationwide networks are bringing more human intervention back into the operation and troubleshooting of networks.

The speech then went on to talk about technology-neutrality. Roth said that the government should never favor any technology, since doing so changes the direction of industry by crowding out innovation.

To some degree, it’s hard to argue with that statement since there are many examples in the past where governments stuck with older technologies and ignored innovations. But it’s hard to say that the current Administration is technology-neutral when it favors traditional power technologies over wind and solar.

Roth said that technology-neutrality matters the most in rural areas, where low-Earth orbit satellite constellations have reduced the cost of reaching people. She said satellite has made obsolete the idea that we need to build wireline networks to reach homes.

I don’t think she is going to find very many local governments and people in rural areas who share her vision that satellite technology is superior to fiber networks. I’ve worked with several hundred counties who understand that a fiber network build today puts their county in a good competitive position for the rest of this century. I don’t know one rural county who regrets the construction of fiber networks.

I find it interesting that she brought up rural broadband in the context of touting 6G, because 6G is not coming to most of rural America, just like 5G didn’t. If anything, the transition from using lower frequencies for 4G to higher ones for 5G and 6G means that rural cellular coverage will continue to shrink over time.

Just as an aside, as she has done in the past, Roth referred to the reduction of BEAD infrastructure grants as a savings to the taxpayer – again hinting that NTIA is going to be reluctant to release much, if any, of the BEAD nondeployment funds.

After the AI Crash

Everything I read about the AI industry leads me to think there will be an AI crash. Consider the following:

  • Unsustainable Capital Expenses. It’s hard to imagine there can ever be enough revenue to pay for the huge capital investments in data centers and electronics. Several analysts have estimated that it will take $2 trillion a year in revenue to pay for the infrastructure that has already been built, and there are no believable forecasts for generating even half that much revenue. The capital needs of the industry are relentless since expensive AI data center electronics have to be replaced within five years, or less.
  • Circular Revenues. A small handful of tech firms, chip manufacturers, and AI companies are propping each other up by investing and buying from each other. If one stumbles, they might all fall.
  • Huge Debt. Much of the industry is being funded through debt, which has to eventually be repaid, instead of through equity.
  • Public Pushback. Local governments and people are increasingly pushing back hard against the creation of new data centers. Most new technologies have been welcomed by the public with open arms.
  • Increasing Corporate Skepticism. The news is full of stories of corporations that are throttling the employee use of AI since the costs to use the software are a lot higher than expected. There are many companies having second thoughts about replacing people with AI. The AI industry needs complete corporate buy-in to have any chance of succeeding, and large companies are generally still on the sidelines.
  • Diseconomies of Scale. Every new technology I can think of thrived, in part, due to economies of scale, where the larger the industry grew, the more efficient it got. AI is going in the opposite direction, where every new AI model consumes more resources than its predecessors. This may turn out to be the fatal flaw – the bigger the industry gets, the more its operating costs increase.
  • Institutional Warnings. Moody’s recently warned that high AI infrastructure spending threatens the credit of AI companies and their large tech partners. I read recently that the number one question being fielded by investment advisors is people asking how to divest from AI.

I don’t have a crystal ball to foresee the nature of the crash. It could be a total crash like the 2000 tech crash, where four out of five tech startups disappeared practically overnight. I lived in the DC area at the time, and I will never forget the rows of abandoned CLEC headquarters buildings in Northern Virginia. A crash could be milder, where a few firms disappear, with the outlooks for the survivors greatly diminished, and industry expectations are reset to something more realistic.

The reason I wrote the blog is to speculate about what happens after an AI crash. I foresee some of the following consequences of an AI crash.

  • An article in the Economist said a total crash would wipe out $20 trillion in U.S. wealth. That means wiping out the wealth of the investors in the new technology, along with a huge hit on the stock market.
  • Data center construction would stop dead, and unfinished projects would collapse. Communities that contributed to the costs of bringing data centers will end up eating those investments.
  • There will be stranded investments by electric utilities and water companies that built new infrastructure to support data centers. They won’t eat these losses, though, which will all be passed on to ratepayers in the form of higher electric and water rates.
  • A lot of vendors will be in big trouble. Companies that pivoted to supporting data center electronics, like Micron, might fold. But a lot of other vendors also would take a big hit. For example, Corning announced investments in three new fiber factories just to support data centers.
  • There have been some huge investments by carriers in middle-mile fiber to support data centers. The companies that made these investments won’t see the expected revenues.

The most interesting thing about a major crash is that it can do as much long-term good as it does short-term harm. I want to again use the analogy from the tech crash. I know of at least a half dozen CLECs that had business plans to capture 30% of the voice and data market in Atlanta. The crash cleaned them all out of the market, but without the crash they would have all failed more slowly. The tech crash brought a sense of reality to the telecom market, which still experienced phenomenal long-term growth after the original tech companies had died.

I don’t think there is any chance of AI failing as a technology. But that doesn’t mean the early developers are the ones who will see the ultimate success. Most, and maybe all of today’s players might be gone. A crash will bring financial constraints, which would mean that AI companies will have to figure out efficiency and economies of scale. If AI is ever going to be a viable technology, it has to control costs and be able to pay for itself. It’s hard to foresee today’s companies somehow reaching that point without some kind of market reset.

A New Strategy for the FCC

The FCC issued a Strategic Plan for 2026 to 2030 that describes a significant change in the focus of the agency. The FCC has periodically issued strategic plans since it was directed to do so by the Government Performance and Results Act in 1997. The strategic plan doesn’t change any FCC rules. It’s more of an outline of how the agency views its function and defines its priorities going forward. The plan has one formal use, which is to define the yardstick by which the GAO will measure whether the FCC is doing what it said it would do.

https://www.fcc.gov/document/strategic-plan-2026-2030

The new plan clearly represents Chairman Carr’s priorities, which he has been espousing since he took the Chairman position. Chairman Carr characterizes his policy initiatives as a Build America Agenda that includes:

  • Focusing on spectrum as a way to create jobs, increase competition, and drive down prices.
  • Focusing on the space economy to make sure that America is the world leader in this new industry.
  • Reducing red tape and making it easier for carriers to deploy infrastructure investments.
  • Focusing on national security to make sure that our networks are resilient and secure.
  • Protecting free speech.
  • Being a good steward of taxpayer money.

This is a huge departure from the Strategic Plan issued by former FCC Chairperson Jessica Rosenworcel. That past plan focused on bringing high-speed Internet to everybody, with a focus on affordability, digital equity and adoption, and consumer protection. The new plan almost entirely ignores the goals of the last FCC. One of the few areas of agreement between the two plans is the effort to eliminate robocalls and spam.

We’ve already seen all of the priorities of this plan in action.

  • The FCC is laser-focused on expanding mid-band spectrum to support 5G/6G. This was partly driven by direction from Congress in the One Big Beautiful Bill that directed the FCC to find 800 MHz of new spectrum for auction, but it was already a priority of Chairman Carr on day one. The FCC recently completed an auction for AWS-3 spectrum and is working towards an auction for Upper C-Band spectrum.
  • It’s clear that the FCC is focused on space. The FCC recently freed up new spectrum for satellite broadband and is considering even more spectrum. The FCC recently relaxed regulations related to approving new satellite constellations and ventures.
  • Much of the FCC’s actions this year have been aimed at making it easier for carriers to deploy infrastructure. The FCC’s tactics have mostly been aimed at overriding local and state authority and regulation of issues like wireless site placement, pole attachments, and permitting. The FCC also eliminated regulations and cleared barriers to removing copper networks. One of the first actions of this FCC was the Delete, Delete, Delete effort to eliminate outdated regulations.
  • In the area of national security, the FCC has tightened up rules about carriers using modems and other foreign-made devices and is discussing lowering the dependence on foreign technology in a wide range of the industry.
  • The free speech issue has puzzled me from day one, since Chairman Carr seems to be focused on punishing TV networks and others who don’t agree with the Administration. This seems like the opposite of free speech, but so far it’s mostly been rhetoric with little actual FCC action.
  • In the areas of being a good steward of taxpayer money, the FCC has focused on perceived fraud in Universal Service programs and is in the middle of a major investigation of all parts of the USF.

The plan is worth reading because it describes how Chairman Carr thinks about every aspect of what the FCC is doing. The plan puts the actions of the agency into perspective and defines the overall regulatory philosophy. This is an FCC that clearly values the big companies it regulates over the public and consumers. It’s not the first FCC to do so, and the document spells it out for anybody who reads it.

SpaceX Wants to Handle the World’s Broadband

In a recent request filed with the FCC, Starlink asked to increase the size of its broadband satellite fleet to 100,000. This coincided with the FCC’s announcement that it wants to ease the process for approving new satellites, so I have to think the idea will sail through. There was one extraordinary statement in this filing that is the topic of today’s blog. SpaceX said it has the goal of handling the majority of the world’s Internet traffic. Elon Musk has always been one for huge hyperbole, so statements like this are not surprising. I want to examine a few reasons why that goal is ridiculous.

No carrier handles a large percentage of the world’s internet traffic today. According to statistics shown on Cloudflare Radar, the company with the biggest percentage of worldwide traffic today is Amazon, with 3.5% of all traffic. The companies that carry more than 2% of worldwide traffic include Cloudflare (2.2%), Comcast (2.5%), Amazon (2.4%), Microsoft (2.2%), Reliance/Jio (2.1%), and AT&T (2.1%). SpaceX is on the worldwide list at number 18 today, already carrying 0.7% of the world’s Internet traffic. SpaceX would have to grow by five times to catch Amazon. But that would still be a long way from carrying a majority of the world’s traffic, and it’s hard to imagine any carrier growing to carry even 10% of the world’s traffic.

Starlink has built an impressive ISP business by gaining 12 million broadband customers. Worldwide, there are over 6 billion Internet users, about 74% of the world’s population. If you assume an average of 2.5 people per household, Starlink today represents 0.5% of all residential Internet users. But residential broadband, as large as it is, is still only a fraction of the world’s Internet traffic. Again, according to Cloudflare, bots are currently making 56.8% of all web connections.

Starlink largely has a near-monopoly for satellite broadband today, but that’s going to change over the next five years. There are major plans by others to compete with Starlink, including Amazon, China’s Guowang, Shanghai’s Quinfan, Blue Origin’s TeraWave, and Eutelsat’s OneWeb. Competition will dilute Starlink’s share of the satellite market.

Love him or hate him, Elon Musk has aligned himself with politics, which is unusual for somebody operating a giant retail business. There are already many countries that ban Starlink, and this list could grow. Even in countries where Starlink is available, there are a lot of people who would never buy service from an Elon Musk-backed company.

I think the biggest reason is that there is a lot more risk associated with trusting your broadband to satellites. A massive 1,000-year solar flare could knock a lot of satellites out of commission. There is a real threat of a spreading cloud of space debris killing a lot of satellites, as predicted by the Kessler syndrome. There is a chance that satellites could be knocked out deliberately during a war or by a rogue nation.

Fiber networks face no similar worldwide threats. Large users of broadband are never going to trust their traffic to satellite. Don’t expect to see data centers, universities, governments, or large corporations favor satellite connections over fiber.

I have to admit that I like Elon Musk’s brashness, but his claims are always overboard. I think he has a better chance of establishing his colony on Mars than of capturing the majority of the world’s Internet traffic.

Cable Companies Continue to Upgrade

Jeff Baumgarner of Light Reading wrote an article detailing increased spending by cable companies as they continue to upgrade networks. The article notes a 40% increase in spending for the deployment of distributed access architecture (DAA).

Distributed Access Architecture is a network architecture that decentralizes cable networks by moving some of the brains and related functions to neighborhood nodes. Historically, cable company networks packed all of the network electronics at a centralized headend. There are significant benefits of moving broadband equipment into neighborhoods. The DAA upgrade is often accompanied by reducing the dnumber of customers on each neighborhood node, which alone increases the bandwidth distributed to the remaining customers. The upgrade to DAA generally means more overall bandwidth when cable companies upgrade to 10-gigabit bandwidth to feed each DAA node. In many cases, the transport reaching nodes still uses analog technology, and upgrading to a digital DAA improves bandwidth efficiency. Customers benefit from improved latency due to being closer to the core.

Part of the reason for the 2026 spending is that cable companies put network expansion plans on hold in 2025, waiting for the release of new Broadcom chips that enable the network to be expanded to 1.8 GHz of bandwidth. This higher bandwidth is enabling cable companies to significantly increase customer upload speeds by upgrading to symmetrical bandwidth with DOCSIS 4.0 or by using upgrades referred to as mid-splits to increase upload speeds on DOCSIS 3.1.

A lot of upgrades to DAA are restructuring cable networks for the future by using remote physical layer architecture (R-PHY) to move the modulation and demodulation functions to the neighborhood node. Remote MAC-PHY relocates both the PHY layer and the processing MAC layer to the node. This new configuration means the only thing left at headends are servers, switches, and routers, and opens the possibility of doing away with much of the headend and migrating the switching function to a regional data center.

Baumgartner notes other upgrades being made by cable companies. He notes that cable companies are integrating PON fiber technology into the network to serve new growth and rural markets. He quotes Jeff Heynen or Dell’Oro saying that sales of PON nodes to cable companies are up 71% year-over-year.

Baumgartner also provides some updates on DOCSIS 4.0 deployments. He says that Comcast is still leading the charge on DOCSIS 4.0 upgrades and has already upgraded millions of premises. He says Charter has plans to upgrade 35% of its footprint to DOCSIS 4.0 over the next few years and that it plans to accelerate the upgrades when it completes the merger with Cox. He also notes that Mediacom Communications is deploying D4.0 in some markets.

The one downside for vendors is that cable company spending on customer CPE is down 5% this year, probably reflecting the continuing loss of customers by every big cable company.

The reason for these upgrades is clear – customers still have more trust in fiber than in cable company HFC technology. PC Magazine recently conducted a nationwide survey that ranked customer satisfaction with ISPs. NextLight, a municipal network in Longmont, Colorado, got the highest rating of 9.7, followed close behind by GFiber at 9.4. The other big fiber ISPs ranged between 7.8 for Frontier to 8.3 for AT&T. The big cable companies ranged from 6.4 for Comcast to 6.8 for Optimum.

Nondeployment Funds Still in Limbo

Arielle Roth, the NTIA Administrator, recently testified before the House Committee on Energy and Commerce. Before the hearing, Roth provided a written statement covering a range of the activities currently being pursued at NTIA. This includes:

  • The effort the NTIA is undertaking to help the FCC find 800 MHz of spectrum for public auction. This directive was mandated by the One Big Beautiful Bill. For those who might not be aware of the details of spectrum management, the FCC regulates spectrum used by the public, and NTIA oversees spectrum used by the government.
  • How NTIA is working with the standards bodies that are developing the specifications for 6G. This includes a forum hosted in March that focused on the supply chain issues for U.S. companies building advanced robotics, which I assume must somehow involve 6G.
  • Bragging about progress with universal broadband availability, stressing the role that satellite broadband plays in making broadband available everywhere. She is still touting how the BEAD Benefit of the Bargain rules lower costs to taxpayers. She said the average cost per BEAD location is $4,765. Illinois and California BEAD applications are still pending at NTIA, with the agency having the Illinois proposal for eight months.
  • How NTIA is enhancing public safety through approval of FirstNet and how NTIA got AT&T to agree to take $2 billion less in funding.
  • Finally, Roth talked about an initiative to reduce screen times for school students. It’s a topic I’m still trying to get my head around since I can’t see how NTIA, which is essentially the government’s IT department, has any role in this kind of issue.

There was one big item that was conspicuously missing from her written comments. NTIA is still deciding what to do with the $21 billion of BEAD nondeployment funds that are left after making grants for BEAD broadband infrastructure. This is by far the biggest dollar item sitting at the NTIA, and it’s curious that there was no mention of it in the written comments, since many members of Congress are highly interested in how and when this money will be used.

During her testimony, Roth said that BEAD nondeployment funds are still up in the air. To provide a little history on BEAD nondeployment funds:

  • The original BEAD legislation, passed back in 2020, said that permissible uses of nondeployment funds included digital skills training, telehealth and remote learning access, cybersecurity education, digital navigator programs, or direct subsidies to low-income homes.
  • Originally, twelve states were sure they would have money left over after infrastructure deployment, twelve were sure they would not, and the rest kept the door open to possibly having some nondeployment funding.
  • NTIA completely rewrote the BEAD grant rules in its June 2025 BEAD Restructuring Notice. Those rules greatly reduced the amount of money that would be spent on infrastructure (greatly increasing the nondeployment funds). That Notice made it clear that NTIA intended to redefine the ways that nondeployment funds could be used. After that Notice, Commerce Secretary Howard Lutnick began referring to BEAD nondeployment funds as a “saving” for the taxpayer, implying that the funds would be eliminated or greatly curtailed.
  • During the rest of 2025, as the country awaited the new rules related to nondeployment, a number of Senators, Representatives, and Governors from both parties pleaded with NTIA to release the funds.
  • In December 2025, Executive Order 14365 directed Commerce to withhold nondeployment funds from any states with “onerous” AI regulations and also gave NTIA until March to announce its plans for releasing the nondeployment funds.
  • In February 2026, Commerce Secretary Lutnick announced that Commerce had no plans to withhold nondeployment funds, and NTIA held two “listening sessions” to hear ideas on how to use the nondeployment funds.
  • In March, NTIA slipped the date for making a decision on nondeployment until June 2026. Throughout 2026, both Secretary Lutnick and Administrator Roth have occasionally referred to nondeployment as a savings for taxpayers.
  • During testimony in the House hearing, Roth said that she now expects the plans for BEAD nondeployment to be announced sometime this summer (which could be any time before September 21). Roth said that NTIA wants to get the guidance right and not rush through the process.

It’s anybody’s guess if nondeployment funds will ever be released. It’s now been 13 months since the NTIA changed the rules for nondeployment funds, and they are obviously in no hurry to see these funds ever get spent.

Broadband Shorts July 2026

These are all interesting topics that didn’t fit an entire blog.

GAO Dings NTIA. The General Accounting Office wrote a memo to Arielle Roth, the Administrator of NTIA, that dinged the agency for not reacting to priority recommendations made by the agency. The memo said that NTIA had implemented 77% of the recommendations made by GAO five years ago, but that there are still twenty-two open recommendations that have not been implemented, including ten priority recommendations. The letter says that implementing the remaining priority recommendations would significantly improve NTIA operations.

The priority recommendations say that NTIA should be collaborating better with the FCC for designing studies to evaluate domestic and international spectrum management. The memo says that NTIA needs to step up cybersecurity measures for wireless infrastructure. GAO says NTIA should be communicating and coordinating better with other federal agencies related to broadband funding.

Right to Not Repair. In a 606-page filing at the FCC, AT&T is asking for emergency authorization to stop repairing copper networks that suffer storm damage or damage caused by vandalism. The report lists hundreds of locations that suffered damage across multiple states, covering just the period between April 30 and June 20 of this year, where the company says it will not restore voice services after outages. The company says it wants to instead deploy its resources to build the next-generation networks that will replace copper.

This certainly creates a shortcut way to retire copper – knock copper routes out of service and then seek FCC permission to not fix them. AT&T’s rationale for not restoring service is that it has alternative technology available to customers. But the concept of having a substitute for copper works in cities and towns, but much of rural America doesn’t have AT&T cell towers capable of reaching disconnected copper customers with cellular or FWA service. Anybody who has spent any time with the FCC cellular maps can see the huge holes in rural coverage, and that assumes the cellular coverage maps are accurate, which is often not the case.

Fiber Shortage. Connexon Connect recently told the FCC that it is falling behind on some of its RDOF buildout obligations due to a severely constrained domestic fiber supply. The company said that it has had fiber delivery commitments canceled by vendors that are instead directing fiber to hyperscale data centers. The company said its problems are made worse by the requirements of having to use American-made fiber due to the Build America, Buy America rules required by the BEAD program. The company specifically identified CommScope for canceling commitments for BEAD contracts. CommScope blames Corning on canceling orders to provide glass to CommScope, which it thinks is related to Corning accepting large orders from data centers.

Legislative Mandate for American-made Fiber. A group of bipartisan House members introduced a bill being called the FIREWALL Act that would mandate that fiber used to satisfy all federal grants must be manufactured in the U.S. In the announcement of the bill, Representative Gus Bilirakis of Florida said that the U.S. government shouldn’t be subsidizing technology sourced from countries that pose a threat to our national security. That’s an odd statement since it’s hard to imagine a threat that comes from fiberglass. An odder statement was that he wants to avoid a future rip-and-replace effort related to fiber. Unlike Chinese electronics and software, there is no functional difference in fiberglass strands, regardless of where they are made. I had to laugh when I pictured crews ripping up thousands of miles of fiber.

EchoStar Bankruptcy. EchoStar filed a prepackaged bankruptcy plan for the satellite business and the cellular business.  The company was facing a $2 billion dollar loan payment in July, and didn’t have the cash due to delays in getting paid for spectrum sales to AT&T. The company is counting on over $20 billion in net closing proceeds from the sale of spectrum to AT&T. The company also sold spectrum to SpaceX, which should bring $8.5 billion in cash, $11 billion in SpaceX stock, and $2.2 billion to assist with debt. The company is heavily leveraged and has over $6 billion in current debt and $18 billion in long-term debt.

While the company recently exited the facility-based cellular business, it still owns Boost Mobile, the HughesNet satellite business, the Dish satellite TV business, and online provider Sling TV. None of these businesses are thriving. The company is also facing a slew of lawsuits from vendors and fiber providers who were left stranded when the company suddenly ceased business. It will be interesting to see what the company does with any excess cash after the spectrum sales close.

The Amazon Leo Mystery

Amazon Leo recently launched 29 new satellites, bringing the size of its constellation to 396. To the surprise of everybody who follows the industry, the company announced that it has enough satellites to begin initial service later this year.

This has everybody wondering what initial service means. The company hasn’t announced its pricing yet, which has been a closely held secret. The big mystery is how the company could launch service with such a small number of satellites.

When Starlink began beta service, it had over 600 satellites in orbit. Starlink beta customers reported slow speeds and spotty coverage, and said they routinely lost broadband service when there was no satellite in range of their home. Starlink didn’t start getting good reviews on its coverage until it had over 2,000 satellites in orbit.

A recent article in PC Magazine speculated that Amazon might launch by serving a narrow geographic band that would extend from Phoenix, across the U.S., and that enters into Canada in Michigan. The company might be able to use its small number of satellites to offer service in this narrow band as a way to work out any bugs. Amazon is not using the term beta test, but that’s what a limited launch of this nature would realistically be.

It’s hard to see Amazon Leo being a serious competitor to Starlink for the foreseeable future. By the end of this year, Starlink will have nearly all of it’s original constellation of 12,000 satellites in orbit, and Starlink currently has FCC approval to launch 15,000 total satellites. SpaceX recently asked the FCC for permission to grow the constellation to 100,000 satellites. By contrast, earlier this year, Amazon Leo asked the FCC for a two-year delay for meeting the requirement to have over 1,600 satellites in orbit this summer. When its first constellation is complete, Amazon Leo will have just over 3,200 Gen1 satellites in orbit, with an additional 4,500 that was approved by the FCC earlier this year.

Amazon Leo is starting with one edge, in that its first satellites have a lot more capacity than the current Starlink satellites already in orbit. But Starlink says it will begin launching the more powerful V3 satellites sometime in the second half of this year. The V3 satellites are said to have ten times the capacity of current V2 satellites. The V3 launch has been delayed, with the original plan to start the improved satellites in the first quarter of this year. The delay has mostly been due to the need to use the larger Starship rocket rather than the current Falcon 9 rocket to launch the heavier V3 satellites. It’s going to take a number of years for Starlink to replace the older V2 satellites, with an announced capacity of 60 V3 satellites per launch using the Starship rocket.

Perhaps the early announcement from Amazon Leo of pending service is meant to mollify the FCC and NTIA, which are both anxious to see satellite competition. Amazon Leo won preliminary awards to serve over 300,000 locations awarded in the BEAD grant program, and states and the federal government have to be worried about the company being able to fulfill that obligation.

The whole industry is waiting to see Amazon’s pricing and bundling strategy. There has been a lot of speculation that Amazon would bundle Prime memberships, AWS cloud services, or other bundles of non-traditional market goods and services. Such bundles would be unique, and something that Starlink and other ISPs could not match. Picture buying satellite broadband and getting free shipping and access to a huge video library as part of the bundle.

The biggest question is if Amazon Leo will offer prices below Amazon’s standard $130 per month (recently increased from $120). Doing so would put a lot of pressure on Starlink to lower its prices. Unfortunately, there is also the possibility that the two companies will have similar pricing and will form a duopoly of expensive satellite broadband.

Digital Equity Grants Inch Forward

You may read headlines that lead you to believe that the courts have restored the Digital Equity Act as a result of a lawsuit by the National Digital Inclusion Alliance (NDIA). The ruling from Judge John D. Bates of the U.S. District Court for the District of Columbia is a lot more complicated than that.

If you’re brave enough to venture into the court order, you’re going to quickly figure out that, unless you are a constitutional lawyer, you aren’t going to understand a lot of the background and discussion inside the order. If you want a plain English summary of the order, I direct you to the excellent summary from the Benton Institute – and even that is challenging to read in places for those not used to reading court orders. Rather than rehash everything in the order, which was done well by Benton, I’m going to cut to the conclusions of the case and talk about what this might mean for those still hoping to get digital inclusion grants.

What did the Court order? The Administration killed the $2.75 billion grant programs that were part of the Digital Equity Act. This suit specifically challenged the termination of the Digital Equity Competitive Grant program, where NTIA made direct grant awards for digital inclusion activities. This suit did not address the Digital Equity Capacity Grant program, where State Broadband Offices were slated to make digital inclusion grant awards.

The Court did not yet order the NTIA to continue with the Competitive Grant program. The order basically eliminated the government’s stated reason for canceling the grant program. The government argued that making grants based on race was unconstitutional. The court agreed with that argument, which is a big win for the Administration, since this is the first Court to so plainly agree with that assertion. But the Court further ruled that if grant requirements based on race are removed, the rest of the lawsuit can continue. The government said in a footnote of their pleading that they would be willing to immediately reinstate the Competitive Grant program if the race issue were removed. The two sides are now required to file a joint status report by August 1 that proposes a schedule for continuing the case.

So what’s next? One possibility is that the government will want to continue to dispute some of the other claims by NDIA, and if that happens, the court case would continue.

The possibility that digital inclusion advocates hope for is that the government will be good on its word and will agree to end the suit now that the race criteria are gone. If that happens, it’s likely that the Court would order NTIA to restart the Competitive Grant program.

Nobody knows what that would mean. NTIA could decide to get moving again with the grant program. However, NTIA might still be reluctant to award these grants if that’s the message they get from the Administration, and they could slow-roll the process, just like they are doing with the BEAD nondeployment funds. NTIA could decide to take a fresh look at the grant rules now that race has been removed and start the process over. Even if NTIA moves forward, I find it unlikely that NTIA would automatically honor the grants that were already awarded and would make everybody apply again. I wouldn’t make any bets that NDIA is going to get a grant award from this program.

The other half of this program is the Capacity Grant program, which was going to give money to states to make digital inclusion grant awards. There doesn’t seem to be any direct ties between this case and that grant program, so it likely stays in limbo, even if the Competitive Grant program restarts.

There is also a big concern that the Administration has recommended no funding for this program in next year’s budget, so the entire program could quietly die through lack of funding, even if NDIA prevails in this lawsuit.

There is a ray of hope here, and digital inclusion folks should continue to hope and should continue lobbying Congress to keep the funding alive and to press NTIA to make the awards. But I can’t foresee anything happening quickly, even if the Court clears this off its docket in August.