In a letter to state broadband offices, Elon Musk’s SpaceX suggested that it may be “untenable” for low Earth orbit (LEO) satellite internet providers, such as Starlink, to participate in the Broadband Equity Access and Deployment (BEAD) Program unless they receive exemptions from certain contract requirements. Those exemptions, which are specified in a “contract rider” attached to the letter, would limit Starlink’s performance obligations, payment schedules, non-compliance penalties, reporting expectations, and labor and insurance standards. 

SpaceX’s request highlights issues with the National Telecommunications and Information Administration’s (NTIA) reliance on LEO providers. BEAD was designed primarily to deploy terrestrial networks, which are physically located in communities, built with traditional construction methods, and are relatively easy to monitor and inspect. But, on June 6, 2025, NTIA restructured BEAD in ways that greatly increased participation by LEO providers, exacerbating the challenge of applying BEAD’s terrestrial-focused rules to LEO’s extraterrestrial networks.

SpaceX’s solution appears to be to simply exempt LEO providers from many of BEAD’s requirements. Specifically, SpaceX proposes that:

1. LEO providers should be evaluated exclusively by network performance. However, performance tests can only be considered if the LEO provider determines that the subscriber’s equipment is properly installed, and, notably, the LEO provider is not obligated to ensure proper installation. LEO providers should not be required to document that their network has “reserved capacity” exclusively for BEAD users.
2. LEO providers should not be reimbursed based on subscriber acquisition but rather should receive 50 percent payment upon certification of service availability and the remaining 50 percent quarterly over 10 years. 
3. In the event of default or non-compliance, LEO providers should only be subject to the clawback of grant funds and debarment, nothing more.
4. LEO providers should not be required to provide financial reporting or documentation of grant expenses.
5. LEO providers should not be subject to BEAD’s labor or insurance requirements.
6. Starlink’s Low-Cost Service Option will cost $80 or less and be available to Lifeline-eligible households.

While this proposal is authored by SpaceX, it is written to apply to LEO providers generally. This would include Amazon’s upcoming Leo service (formerly Kuiper), which does not currently offer consumer service. Thus, by adopting these standards, states may not only exempt Starlink from oversight mechanisms, they may also exempt Amazon Leo, which has yet to demonstrate its ability to offer service, much less meet BEAD’s requirements. 

Below, I put SpaceX’s proposals into context within BEAD’s overall framework.

1. Performance Obligations and “Reserved Capacity”

SpaceX declines to “reserve network capacity” exclusively for BEAD customers. Instead, the company suggests that it will use network planning activities (e.g. dynamic bandwidth allocation, rocket launches, sales efforts) to ensure that BEAD customers can receive the required 100/20 Mbps of service. SpaceX argues that, due to the complicated nature of network planning,  documented evidence of planning activities does not exist, and instead, the company should be evaluated exclusively through network performance testing. 

SpaceX adds that it should be able to exclude subscribers from network tests if the company determines the subscriber has malfunctioning or “improperly installed equipment” (e.g. the Starlink dish is installed in a location where its view of the sky is blocked by trees or other obstructions). SpaceX also seeks to clarify that it is not required to pay for professional installation of equipment and only required to provide three sets of “customer premise equipment” (CPE) (i.e. user terminal and router) per location during the 10 year period of performance.

Starlink recently surpassed two million U.S. subscribers. Its BEAD awards, which total roughly 470,000 locations, would represent a nearly 25 percent increase in its U.S. subscriber base. In the past, subscriber growth has caused Starlink’s service to slow due to increased network congestion. Will the network be able to accommodate BEAD’s influx of subscribers, especially considering BEAD’s speed and latency requirements?

2. Payments and Reimbursement Schedule

SpaceX asks states to forgo their option to reimburse LEO providers on the basis of subscriber milestones (e.g. the LEO provider gets 10 percent of the award when it subscribes 10 percent of households in the granted area)¹. Instead, SpaceX proposes that LEO providers receive 50 percent of their payment upon certification that service is available in the granted area and the remaining 50 percent quarterly over the 10-year period of performance. Since SpaceX currently claims that Starlink service is available to many if not all BEAD locations, it could effectively request 50 percent (i.e. ~$365 million) of its funding immediately. 

3. Penalties

SpaceX seeks to minimize states’ ability to penalize LEO grantees for defaulting or failing to comply with contract requirements. Specifically, SpaceX proposes that BEAD contracts only allow states to recover (i.e. claw back) the granted amount of funds and no more. This would limit states’ ability to implement “make whole” clauses and other protections, which are designed to promote compliance and ensure locations receive service. States may use such clauses because LEO providers are generally the lowest bidder (sometimes by a large amount) and so, in the event of a LEO default, states may need to recover funds in excess of the granted amount to ensure the state has sufficient funds to entice an alternative provider to connect the defaulted locations.

SpaceX also argues that a requirement for defaulters to provide wholesale network access is invalidated by the Restructuring Policy Notice. To ensure continuity of service, BEAD’s original rules (Notice of Funding Opportunity page 69) required that defaulters allow other providers to offer service over their networks at wholesale rates. NTIA’s Restructuring Notice eliminated this requirement, and SpaceX seeks to prohibit its inclusion in contracts.

4. Reporting, Records and Audits

SpaceX argues that LEO providers should not be required to report on the use of BEAD funds or other financial information related to the grant. According to SpaceX, costs associated with LEO networks are not structured around serving specific locations and so performance should be “exclusively measured via actual results (connectivity) and not through financial monitoring as if the project were reimbursement for construction-related activities.” 

5. Labor and Insurance

SpaceX requests exemptions from BEAD’s labor and insurance requirements, arguing that, due to the global nature of its network, individual contractors, employees, or pieces of infrastructure cannot be associated with specific locations, states, or insurable risks. As such, SpaceX argues that labor and insurance requirements should be removed from grant agreements. 

6. Low-Cost Service Option

To meet BEAD’s low-cost service option requirement, SpaceX will offer a plan that costs $80 or less to households that are eligible for the Federal Communications Commission’s (FCC) Lifeline program, such as those that participate in SNAP, Medicaid, or those that fall below 135 percent of the federal poverty line.

Notes:

1.  This reimbursement model is specific to LEO providers and allowed by NTIA’s BEAD Restructuring Policy Notice Appendix B.

Drew Garner is the Director of Policy Engagement at the Benton Institute for Broadband & Society.

The Benton Institute for Broadband & Society is a non-profit organization dedicated to ensuring that all people in the U.S. have access to competitive, High-Performance Broadband regardless of where they live or who they are. We believe communication policy - rooted in the values of access, equity, and diversity - has the power to deliver new opportunities and strengthen communities.

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