FCC rejected a $886 million subsidy for SpaceX's Starlink satellite internet service.
The agency said it "failed to demonstrate that the providers could deliver the promised service."
Starlink already has a userbase of over 400,000 subscribers internationally.
The Federal Communications Commission denied SpaceX's bid for $886 million in US subsidies on Wednesday.
Elon Musk's startup was seeking funds to provide its satellite internet service to rural communities in nearly 650,000 locations across 35 states. The FCC funding is part of a $9.2 billion Rural Digital Opportunity Fund — an effort to bring WiFi to remote areas of the country where it would be more expensive to serve customers.
Starlink and LTD Broadband were both denied FCC subsidies. The agency said in a press release that both companies "failed to demonstrate that the providers could deliver the promised service."
A spokesperson from SpaceX did not respond to a request for comment from Insider.
"We must put scarce universal service dollars to their best possible use as we move into a digital future that demands ever more powerful and faster networks," FCC Chairwoman Jessica Rosenworcel said in the press release. "We cannot afford to subsidize ventures that are not delivering the promised speeds or are not likely to meet program requirements."
The chairwoman added that "Starlink's technology has real promise," but said it didn't make sense to fund the "still-developing technology."
In 2020, SpaceX initially won preliminary approval for the subsidy, but several of the locations the company sought to service included urban areas like New York City and Miami.
Starlink already has a userbase of over 400,000 subscribers across the globe. The company has a network of over 2,500 satellite in Earth's lower orbit. The service is designed to deliver high-speed internet of up to 100 Mbps to 200 Mbps to customers in rural areas.
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