Texas Broadband Office Freezes $3 Billion in Funds After Starlink Rule Change Draws Fire

The Texas Broadband Development Office (BDO) placed a temporary hold on all disbursements of federal funds under the Broadband Equity, Access and Deployment (BEAD) program, effective Monday, after lawmakers accused the office of favoritism toward Elon Musk's Starlink.

The hold covers more than $3 billion in BEAD funds, according to the Texas Tribune, which obtained an email the BDO sent to subgrantees saying the pause is in effect "until further notice," with no reason given. "No further action is required from subgrantees at this time," the office said in the email. The office did not respond to the Tribune's request for comment before publication.

Lawmakers began questioning the Broadband Office in June over how it distributed more than $3 billion in BEAD funding. During a Senate committee hearing, Sen. Charles Schwertner, a Republican from Georgetown, said his office had heard concerns about taxpayer money, including how much was disbursed up front for the projects.

What actually changed

Under the original BEAD rules, providers were expected to receive 10% of their grant money up front, with the rest paid out later on a tiered system tied to subscriber numbers, according to the Texas Tribune and texreporter.com. That structure protects taxpayer money by requiring companies to show they're delivering service before being paid in full.

That changed for one category of provider: low-Earth orbit satellite companies, which includes Starlink and Amazon's newer satellite service, Amazon Leo. BDO Director Bryant Clayton told lawmakers the disbursement schedule was altered specifically for LEO providers, and that the change came from Gov. Greg Abbott's office just one or two days before the grants were awarded, according to texreporter.com and the Texas Tribune. When asked what reason his office was given for the change, Clayton said: "We were out of step with other states," per texreporter.com.

When Schwertner asked what the new disbursement amount actually was, Clayton did not give a clear answer, according to texreporter.com. Schwertner also said other applicants, upon seeing the LEO providers get better terms, asked for the same treatment for themselves, and pointed to a signed letter from a coalition of businesses requesting reconsideration. Clayton said he was familiar with the letter but disagreed it reflected what the businesses were asking for.

Schwertner also criticized the office for requiring applicants to file Public Information Requests to get information on the award process, calling it adversarial. "I have my eye on y'all regarding the way y'all are conducting your business," Schwertner told Clayton. "I don't care who's messing with your business, but we, as an oversight committee, are going to oversee it regarding fairness and transparency."

Officials respond

Comptroller Don Huffines announced a comprehensive internal review of his office, which includes the Broadband Development Office, according to the Texas Tribune. Lt. Gov. Dan Patrick and House Speaker Dustin Burrows separately called for a performance audit of the BDO, saying in a joint statement that the audit follows concerns raised about the BEAD award process. Patrick and Burrows said the legislature will take further action during the next session, beginning in January.

In his final days as acting comptroller, Kelly Hancock responded to the allegations by accusing Amazon of "aggressively" lobbying state legislators, including members of the Senate committee, saying the company wanted a reduction in liability requirements while portraying itself as a victim. Hancock said Amazon did receive an award but declined to sign the grant agreement. He added that he didn't believe Texans should act as a financial safety net for multibillion-dollar companies. Hancock's statement did not mention Musk or Starlink, the focus of the favoritism allegations.

Schwertner responded to Hancock on X: "It's good to see new incoming leadership in the comptroller's office after the failed election and tenure of the current interim comptroller. No tantrum on the way out of the office will change that."

Sen. Nathan Johnson, a Dallas Democrat, raised broader concerns during the hearing about Musk's influence over federal contracting, saying, "The federal government issues some new edict, and the award happens to go to 99% of his companies which are priced at three times what other companies are pricing... I understand there's probably deficiencies, and there may be a perfectly logical explanation. I hope there is."

The audit process is underway, though there is no clear date for when it will be completed.