Al Root

Elon Musk's SpaceX might be on the cusp of stealing some Federal Aviation Administration business from Verizon Communications.

SpaceX's rapid win of a contract from a government agency will raise obvious fears about conflicts of interest. However, it would also show that space-based technology is ready to compete with terrestrial systems.

On Wednesday evening, The Washington Post reported that the FAA was considering ending its FENS critical-infrastructure contract with Verizon, and awarding it to SpaceX's Starlink service.

Starlink is a space-based Wi-Fi network with some 7,000 working communications satellites in low Earth orbit.

FENS, short for Federal Aviation Administration Enterprise Network Services, is a roughly $2 billion contract awarded in 2023 to "design, build, secure, integrate and operate a new telecommunications network infrastructure and supporting services" for the FAA.

Verizon, the FAA, and SpaceX didn't immediately respond to requests for comment.

One goal was to upgrade the system that manages air traffic, which impacts tens of thousands of flights and millions of passengers each day.

Musk tweeted on Monday that "the Verizon system is not working and so [it] is putting air travelers at serious risk."

Joe Russo, Verizon's executive vice president and president of Global Networks and Technology, was asked about FENS on Tuesday at a Barclays investment conference.

"We're in the midst of rolling out that network. It is not operational yet today, but will be shortly, as we continue to build in additional reliability and performance for the FAA," said Russo. "All I know is if they are testing, it sounds like they're testing in three locations using Starlink for some connectivity, I don't know for what applications, I heard weather applications, I think that can be complementary to what we're trying to build to really run the FAA infrastructure."

Complementary or not, the awarding of any government business to SpaceX raises conflict-of-interest questions. Musk and President Donald Trump have become incredibly close over the past few months, after the Tesla CEO endorsed Trump's candidacy. Musk even attended Trump's first cabinet meeting of his second term on Wednesday.

If anything in the FENS contracting changes, investors will have to watch to see what price the government pays. Musk has strenuously defended SpaceX, pointing out it is the lowest-cost provider of space solutions by far.

Typically, that refers to launch services. SpaceX pioneered reusable rockets, driving down the cost of reaching orbit. SpaceX has already launched more than 20 missions in 2025. In 2024 it was responsible for more than half of the world's orbital launches.

Competition between space-based communications systems and earth-based systems is less frequent. It is heating up, though.

When the FENS contract was awarded, the Starlink satellite constellation was roughly half the size it is now. More satellites enable better communications. Starlink now has a satellite-to-cell phone connectivity product that T-Mobile US is trialing. And Starlink's consumer Wi-Fi business has grown to some 5 million subscribers.

The potential for space-based communications becoming cheaper or more reliable than traditional systems is something investors can't ignore.

Conflict or not, typically lowest-cost solutions win in the marketplace.

SpaceX is privately held. Verizon stock was down 0.4% in premarket trading at $43.02, while S&P 500 and Dow Jones Industrial Average futures were up 0.6% and 0.3%, respectively.

Coming into Thursday trading, Verizon stock was up about 1% for the week.

Write to Al Root at allen.root@dowjones.com

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February 27, 2025 08:18 ET (13:18 GMT)

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