In a rush to claim orbital real-estate, competitors ask regulators to clamp down on SpaceX’s Starlink project
5 min
Elon Musk’s internet satellite venture has spawned an unlikely alliance of competitors, regulators and experts who say the billionaire is building a near-monopoly that is threatening space safety and the environment.
The Starlink project, owned by Mr. Musk’s Space Exploration Technologies Corp. or SpaceX, is authorized to send some 12,000 satellites into orbit to beam superfast internet to every corner of the Earth. It has sought permission for another 30,000.
Now, rival companies such as Viasat Inc., OneWeb Global Ltd., Hughes Network Systems and Boeing Co. are challenging Starlink’s space race in front of regulators in the U.S. and Europe. Some complain that Mr. Musk’s satellites are blocking their own devices’ signals and have physically endangered their fleets.
Mr. Musk’s endeavor is still in beta testing but it has already disrupted the industry, and even spurred the European Union to develop a rival space-based internet project to be unveiled by the end of the year.
The critics’ main argument is that Mr. Musk’s launch-first, upgrade-later principle, which made his Tesla Inc. electric car company a pioneer, gives priority to speed over quality, filling Earth’s already crowded orbit with satellites that may need fixing after they launch.
“SpaceX has a gung-ho approach to space,” said Chris McLaughlin, government affairs chief for rival OneWeb. “Every one of our satellites is like a Ford Focus—it does the same thing, it gets tested, it works—while Starlink satellites are like Teslas: They launch them and then they have to upgrade and fix them, or even replace them altogether,” Mr. McLaughlin said.
SpaceX didn’t respond to requests for comment.
Around 5% of the first batch of Starlink satellites failed, SpaceX said in 2019. They were left to gradually fall back to earth and vaporize in the process. In November 2020, astrophysicist Jonathan McDowell of the Harvard-Smithsonian Center for Astrophysics calculated that the Starlink failure rate was nearly 3%. Mr. McDowell said Starlink has vastly improved the design of their satellites since then, and that the failure rate is currently below 1%, and on track to improve further.
Even with the constant improvement, Mr. McDowell said, Starlink will operate so many satellites that even a low failure rate would mean a relatively high threat to orbital safety because of the potential for collisions. “They clearly have been making continuous improvements…but it’s a challenging thing they are doing and it’s not clear that they will be able to manage the final constellation,” he said.
Starlink operates more than 1,300 spacecraft in Earth’s lower orbit and is adding some 120 more every month. Its fleet is now on track to top the total number of satellites that have been launched since the 1950s—around 9,000.
Orbital space is finite, and the current lack of universal regulation means companies can place satellites on a first-come, first-served basis. And Mr. Musk is on track to stake a claim for most of the free orbital real estate, largely because, unlike competitors, he owns his own rockets.
In the coming days, the Federal Communications Commission in the U.S. is set to approve a request by SpaceX to modify its license and allow a greater number of satellites to orbit at a lower altitude of around 550 kilometres (a kilometre is 0.625 mile). If approved, competitor satellites would have to navigate around SpaceX’s fleet to place their own spacecraft.
Other companies operating in space have asked the FCC to impose conditions on SpaceX, including lowering its fleet’s failure rate to 1 in 1,000, and improving collision-avoidance capabilities while ensuring they don’t block the transmissions of other craft orbiting above them.
“You should have fewer satellites and make them more capable,” Mark Dankberg, Viasat founder and executive chairman, said.
On Twitter, Mr. Musk commented on Mr. Dankberg’s earlier warnings that his company posed a hazard to orbital traffic by tweeting: “Starlink ‘poses a hazard’ to Viasat’s profits, more like it.”
A spokesman for Boeing, which is also challenging Starlink at the FCC, said it is “critically important to the future of a safe and sustainable orbital environment that standards be globally consistent and enable a competitive playing field.”
In the region of space where Starlink operates, satellites orbit the earth at 18,000 miles an hour. Any collision could spread high-velocity debris that could make the orbit unusable for years.
Competitors say Starlink satellites have low maneuverability, meaning that other firms’ craft have to act when collisions threaten.
Starlink satellites have come alarmingly close to other spacecraft twice in the last two years, including on April 2, when a Starlink satellite prompted another operated by OneWeb, controlled by Indian conglomerate Bharti Global and the U.K. government, to make evasive maneuvers, according to OneWeb and the U.S. Space Command.
Mr. Musk’s satellites are equipped with an AI-powered, automated collision avoidance system. Yet that system had to be switched off when a Starlink satellite came within 190 feet of the rival’s satellite this month, according to OneWeb’s Mr. McLaughlin.
When contacted by OneWeb, Starlink’s engineers said they couldn’t do anything to avoid a collision and switched off the collision avoidance system so OneWeb could maneuver around the Starlink satellite without interference, according to Mr. McLaughlin.
Starlink hasn’t revealed details about their AI collision avoidance system. Mr. McDowell, the astrophysicist, said it was hard to take any such system seriously when it remains unclear what data it uses to operate.
A similar incident took place in late 2019, when a Starlink satellite was on a near-collision course with an EU weather satellite, according to the European Space Agency, which runs EU satellites. The agency said it was only able to contact Starlink via email and the company told it they would take no action, so EU engineers had to initiate a collision avoidance maneuver.
SpaceX didn’t reply to requests for comment about the two incidents
Lower earth orbit is getting crowded with broadband satellite constellations: Amazon.com Inc.’s Project Kuiper aims to put out 3,200 satellites, Britain’s OneWeb about 700 and Telesat of Canada around 300. Russia and China are working on their own, potentially massive, constellations.
An EU official said that owning a constellation that can beam broadband internet to Earth is a strategic priority for the bloc. It is expected to publish a road map for a public-private partnership to create a broadband satellite fleet worth around €6 billion, equivalent to $7.19 billion, by the end of the year.
Space-safety experts say the number of projects means more regulation is needed to avoid potential catastrophes.
“It’s a race to the bottom in terms of getting as much stuff up there as possible to claim orbital real estate,” said Moriba Jah, associate professor at the Department of Aerospace Engineering and Engineering Mechanics at the University of Texas at Austin. “Musk is just doing what’s legal…but legal is not necessarily safe or sustainable.”
Nevertheless, most governments welcome the onset of satellite-beamed broadband as a cheaper and faster alternative to building broadband networks. In Germany, Europe’s biggest economy, the leading telecom provider Deutsche Telekom recently signalled a willingness to join with Starlink.
“I’m a great admirer of Elon Musk and his ideas,” Deutsche Telekom Chief Executive Timotheus Höttges said in January.
Reprinted by permission of The Wall Street Journal, Copyright 2021 Dow Jones & Company. Inc. All Rights Reserved Worldwide. Original date of publication: April 19, 2021
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Strong family financial planning can help reduce taxes and support younger generations. From intrafamily loans and asset gifts to inheritance disclaimers, strategic cooperation can create meaningful financial benefits—when families have the trust and structure to make it work.
4 min
Happy is the family whose members—parents, grandparents and grown children—trust each other enough to cooperate on shared goals, especially financial ones. When that is truly the case, Uncle Sam’s tax rules can help as well.
This matters especially now that mortgage rates are above 7%, and many families are looking for ways to help younger members. If the elders have resources and are confident younger ones can cooperate, a family loan could make homeownership possible while providing the elders with a useful income stream.
Other strategies can actually lower taxes, such as when funding 529 plans or Roth IRAs, or when someone inherits a traditional IRA with required withdrawals larger than they will need.
Here are three strategies useful for functional families.
It is perfectly legal for families to lend money to a relative for a down payment or even a private mortgage.
But it is important not to cut corners, says Ryan McKeown, a CPA with Modern Wealth Enhancement in Minnesota. If the loan is for a down payment, be honest with the mortgage provider and have a formal agreement. The lender owes tax on the interest payments received.
If the loan is for a private mortgage, both sides should have legal representation with a formal written agreement, including payment terms. The lender owes tax on the interest, and the borrower often can deduct it if he or she itemizes.
To avoid IRS trouble, the interest rate shouldn’t be lower than the agency’s Applicable Federal Rate at the time of the loan. Currently that is about 5% for loans longer than nine years; about 4.5% for loans three to nine years; and about 4% for loans three years or less. Currently, traditional mortgage rates are generally above 7%.
In addition, the lender could use the $19,000 annual gift-tax exemption (described below) to forgive some or all of the interest or principal annually. If both lenders and borrowers are married, that is up to $76,000 a year. There is no tax for the borrower on such forgiveness, because it is from a gift.
If you’re going this route, McKeown advises against having a fixed plan to forgive the debt. Instead, do it in one-off letters specifying the amount—and keep careful records. Otherwise the IRS might try to treat the loan as a taxable gift.
Powerful tax-saving moves for families often use gift-tax provisions. Under current law, anyone can give anyone else up to $19,000 of assets annually, free of gift tax. That means a married couple with three grandchildren could give them a total of $114,000 in 2026.
The gifts can be cash or other assets, like stock. For noncash gifts, the cost basis—which is the starting point for measuring taxable gain after a sale—“carries over” to the recipient. So if someone buys $1,000 of stock and gives it away when it is worth $5,000, the recipient’s cost basis is $1,000. If the recipient later sells the shares for $8,000, the taxable gain is $7,000.
Here’s an example showing how gifts could save a family taxes. Grandma is a widow of modest means, while her child and spouse have prospered. The couple has two children, and they want to contribute $5,000 to a 529 college-savings plan for each—but they need to sell stock to do it. Their tax rate on the sale would be 18.8%, and they would need to sell about $11,000 of stock.
However, Grandma’s federal tax rate on the stock sale is 0%. If the couple gives $10,000 of shares to Grandma, she could sell them, pay no tax, and fund the grandchildren’s 529 plans. This saves about $1,000 of tax.
These moves are legal, and they could be used in other ways, such as to help a young person fund a Roth IRA.
But trust among family members is essential: Under the law, givers can’t put conditions on a gift. Grandma could use her stock proceeds to take a cruise, but she makes 529 contributions instead.
Mark Sellner, a retired tax attorney and CPA living in Sarasota, Fla., uses this strategy. His children sell stock he gives them and fund 529 plans for his grandchildren.
The family’s tax savings aren’t huge, but he likes other benefits. The sales by his children don’t boost his adjusted gross income, which in turn could raise his Medicare Irmaa premiums or his 3.8% surtax on net investment income.
Sellner doesn’t worry about his children using the funds for another purpose.
“There can’t be any strings attached to gifts. Of course, it is up to us to decide whether to make them in the future,” he says.
Two caveats: The “kiddie tax” applies to most children under age 24, and it is levied at the parents’ rate on investment income above $2,700 in 2026. Consider this before making gifts to a young person.
Investors who give away stock also forgo the step-up, an important provision that exempts assets held at death from capital-gains tax.
Sellner knows he’s losing a step-up, but says, “The children could use a little more now. Why should they wait 20 years to get it?”
A disclaimer is a highly useful strategy in which one heir renounces an inheritance in favor of another heir. Assuming family members cooperate, this can save taxes.
Here’s one example. Dad died and had a large traditional IRA that he left to Mom. She has enough assets and income to cover her expenses, and she lives in a state with a stiff estate tax. The inherited IRA would put her estate over the threshold.
Also surviving are three young-adult children. If Mom disclaims all or part of Dad’s IRA within nine months of his death, that amount could go directly to the children. They will have 10 years to empty the account, and the family as a whole will likely save estate and income taxes.
Disclaimers have many key details, especially regarding beneficiary documents. Although heirs have great freedom in choosing what assets to disclaim, the rules about who gets disclaimed property are rigid. It is best if the original owner names tiers of heirs so that if one disclaims, the next recipient is clear.
