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As part of its partial authorization to launch roughly 30,000 second generation Starlink satellites to orbit, SpaceX submitted a surety bond to the Federal Communications Commisison (FCC) at the close of last year to guarantee that it will meet the approval. The FCC's rules require companies authorised to launch satellites or use spectrum submit such bonds to ensure that they do not simply hoard spectrum, which is a crucial resource. SpaceX's filings with the regulatory body reveal that the bond has a maximum penalty of $1.6 million, which can be increased to as much as $6 million in the worst case scenario.

SpaceX Gears Up To Start Testing Its Second Generation Satellites After FCC Approval

The Commission's approval, granted after a long drawn battle related to SpaceX's plans to use Starship to launch the satellites, became offical in Deember last year. It requires SpaceX to launch half of its planned satellites within six years of the grant and then launch the remaining satellites within the next three years.

However, instead of the 29,988 satellites that SpaceX had asked for, the FCC instead allowed it to launch up to 7,500 spacecraft due to concerns of "orbital debris andspace safety," as it alsonoted that since SpaceX plans to also use these spacecraft for the V-band frequency spectrum instead of launching new spacecraft, the sum effect of the changes will actually lead to fewer spacecraft in orbit.

As part of the authorization, SpaceX had to submit a surety bond to the Commissionw, which will be forfeited should the firm fail to meet its obligations. At the same time, this failure will also reduce SpaceX's authorization to the number of satellites in orbit should they be less than the amount required to be launched in six years.

SpaceX's surety bond submitted to the FCC as part of its Gen2 satellite authorization. Image: FCC File No: SATLOA2020052600055

The surety bond reveals that SpaceX's maximum penalty is $1.67 million if it fails to meet the FCC's obligations. However, this penalty can increase dramatically, with a condition to the agreement indicating that the sum can go as high as $6 million should the insurance company providing the bond agree.

This condition stipulates that:

The maximum penal sum of the bond may be increased on an annual basis with the Surety's consent, via a rider to this bond sent to the FCC and the Obligee. Such riders will increase the maximum penal sum to the required amount in accordance with with the following formula, with all sums expressed in U.S. Dollars: A= $1,000,000 + $4,000,000*D/2,192, where A is the penal sum to be paid, and D is the lesser of 2,192 or the number of days that have elapsed from the date of the Authorization grant until the date when the Authorization was surrendered.

Of course, legally, its SpaceX's Starlink subsidiary will owe the money instead of the firm that owns the rockets that launch the satellites. This is a key benefit of a subsidiary, as a parent is often shielded from financial obligations in case of trouble.

True to form, SpaceX is already moving fast with its second-generation satellite plans. It has applied for and received temporary authority from the FCC to operate very high frequency (VHF) beacons and E-band links on the satellites. VHF antennas are quite small and are used in two way radios, while the E-band is the holy grail of satellite communications. It includes frequneices in the 71 to 76GHz and 81 to 86GHz range, and SpaceX plans to test the E-band component of its Gen2 satellites before a potential full approval by the FCC. On the other hand, the VHF antennaswill help SpaceX ensure that its satellites are functional before they reach orbit and help mitigate orbital debris in case of solar flares.