Elon Musk’s SpaceX Riles Its Rivals for Broadband Subsidies

The federal government is now planning a final round of vetting before it bets big that Mr. Musk’s technology can help close persistent gaps in U.S. high-speed internet service. Most of the $9.2 billion in subsidies awarded by the Federal Communications Commission was earmarked for more established technologies, which included companies laying fiber-optic cable.

The FCC is requiring SpaceX and others in line for subsidies to demonstrate their financial and technical wherewithal to build out a network, and Friday was the deadline for submitting those plans.

Rivals of SpaceX for subsidy dollars are calling on the FCC and its new leadership under the Biden administration to give those plans a closer look, and they are drumming up support for their cause on Capitol Hill.

More than 150 members of Congress wrote the FCC on Jan. 19 urging it “to thoroughly vet the winning bidders to ensure that they are capable” and to “consider opportunities for public input on the applications.”

The letter, which didn’t mention SpaceX or other companies by name, was subsequently promoted online by two trade groups that have competed for the federal subsidies: the National Rural Electric Cooperative Association and the Rural Broadband Association.

“We are in effect funding an experiment here,” said

Jim Matheson,

chief executive of the National Rural Electric Cooperative Association, which represents electricity providers also in line for subsidies to build out fiber-optic broadband networks. “We don’t know if it works or doesn’t work,” he said in an interview, referring to the SpaceX system.

Representatives for SpaceX, whose official name is Space Exploration Technologies Corp., didn’t respond to requests for comment.

Supporters of the SpaceX plan say delivering broadband via satellite has the potential to reach isolated homes and businesses at a significantly lower cost.

Meanwhile, federal subsidies could help boost plans by Mr. Musk’s company to deliver high-speed internet by satellite across the globe, a venture considered key to its financial success.

An FCC representative declined to say when the agency expected to make a decision on the SpaceX plan, pointing to the agency’s published procedures. They don’t give a timeline for approving applications and state that the applications with detailed plans are generally not public until approved.

SpaceX isn’t the only company whose system uses satellites—nor is it the only winning bidder to generate controversy. Mr. Matheson pointed to large amounts of funding secured by internet providers that use so-called fixed-wireless technology, apparently beating out fiber-based providers even though fiber technology is generally considered speedier.

SpaceX plans to use the money to provide broadband to more than 640,000 locations across 35 states that don’t yet have high-speed access, according to the FCC. Many of these are homes and businesses in rural areas where the cost of building a high-speed network has so far exceeded the potential revenue broadband companies could expect to reap.

In a Jan. 22 filing with the FCC, SpaceX pointed to initial deployments in states such as Washington.

“SpaceX continues its rapid deployment of its next-generation satellite system and is already bringing high-throughput, low-latency broadband service to otherwise unserved Americans across the country,” the company said.

In a filing last year, it touted its technology as serving “the hardest-to-reach rural Americans, for whom access has for too long been unreliable, prohibitively expensive, or completely unavailable.”

FCC commissioner

Jessica Rosenworcel,

a Democrat who is serving as acting chairwoman while the new administration settles on its nominee, declined to comment. She was critical of the FCC moving ahead with the subsidies last year, saying the agency should wait until it has better data about where broadband is needed.

FCC commissioner

Brendan Carr,

a Republican who helped develop rules for the subsidy program, said the program allowed providers using various technologies to compete against one another, driving down the subsidies’ cost to the government. “There is going to be a range of different technologies that are going to be best suited” to close service gaps in different locations, he said.

SpaceX’s move to secure broadband funding is part of a broader Washington-focused strategy that also includes government contracts for ferrying astronauts, launching national-security satellites, weather forecasting and missile tracking.

Under the FCC-run broadband auction last year, the bidder offering the fastest internet service at the lowest price in a given geographic area won access to the federal subsidies, which comes from so-called universal service fees on consumer phone bills.

While SpaceX’s technology is slower than some competing ones, such as fiber-optic cable, the company’s bids were successful in areas where faster providers weren’t interested, including large tracts in the Northwest.

The Hawthorne, Calif.-based company is set to receive the fourth-most funds of any group vying in the auction, accounting for almost 10% of the $9.2 billion to be distributed.

SpaceX began offering test versions of its internet service last year, priced at $99 a month with an initial $499 equipment cost for customers, according to October reports that cited a promotional email from the company. It isn’t clear how the new federal subsidies might affect those prices.

Public entities in Washington state, including a school district and emergency-management agency, are already using the service, according to SpaceX’s Jan. 22 FCC filing. The filing said the company has launched 955 satellites with thousands more planned.

The rollout hasn’t been without bumps. SpaceX initially planned to bring the internet service online as early as 2018, but faced delays and high costs, The Wall Street Journal has reported. Some of the satellites have failed. SpaceX also has asked the FCC for modifications to its license as it tinkers with the system and tries to address concerns that the satellites might collide with other objects, creating space debris.

Skyler Ditchfield,

chief executive of GeoLinks, a fixed-wireless internet provider in California that also competed in the FCC auction, noted that SpaceX promised to build the network before securing subsidies.

“To pay them additional funds to do something they have already committed to [do] seems to me to not be in the public’s best interest,” he said in an interview.

Almost 13% of the money awarded to SpaceX, about $111 million, is earmarked for groups of census blocks that include urban areas, according to an analysis of public data by Free Press, an advocacy group that has been critical of the FCC’s auction process.

Many are close to areas served by existing providers, such as cable companies, the group said. That would appear to be inconsistent with the FCC’s stated goal of allocating funds for unserved rural areas, although Free Press said it didn’t find evidence of rule-breaking. The FCC had no comment.

Mr. Carr, the Republican FCC commissioner, said the government is getting something for its money.

“Now we have a legally binding commitment that they serve everybody in those areas,” he said. “We need to hold every single entity that won accountable, and we should take very strong enforcement action against any entity, any technology that falls short.”

Write to Ryan Tracy at ryan.tracy@wsj.com