If Musk Leaves, Will His Influence on Telecom Policy Follow?

What’s New: Today, the market will be focused on and reacting to yesterday’s news about President Trump’s new tariff framework.[1] But there was also news yesterday that months from now we might view as significant for how telecom policy plays out; the news that Musk will be leaving his DOGE efforts and returning to the private sector. Prior to last fall’s election we wrote that if Trump won, Musk would be the most influential player in telecom policy (LINK). But if Musk leaves, will that influence diminish? In this note we analyze how his departure will affect specific areas of telecom policy.

Background: Yesterday, Politico reported that Trump has told his inner circle that Musk will be stepping back in the coming weeks from his current role with the Administration.[2] We believe the story is accurate.[3] Before discussing the impact of the departure,[4] we first provide some background on our prior takes and the Republican calculus in dealing with Musk.

Our prior takes. In early October, we wrote that if Trump won, Musk would be the most influential player in telecom policy (LINK).

We pointed to how Musk, with his satellite companies, had incentives at odds with the incentives of the traditional major forces in telecom policy.[5]
We suggested his influence could change the way policy develop with BEAD, Universal Service Fund reform, and spectrum policy.
We missed one area where Musk could also be influential; government contacts for communications networks.
While most dismissed our analysis as fanciful, that changed after Trump went on the Rogan show and offered talking points that—whatever one thinks of them factually and philosophically—were indistinguishable from the Musk/Starlink talking points (LINK).
Since the inauguration, we have seen further evidence of that influence in how the Commerce Department talks about BEAD and how the FCC has addressed the first spectrum issue to come up (LINK).

The Republican Dilemma: Two out of three ain’t bad[6] but is it doable?

Republicans want to retain Musk’s money and platform for their political campaigns.
They would prefer that he would not personally show up and make himself the center of attention in any campaign.[7]
The challenge is whether the Republicans can obtain the first two without allowing the third.

There must be 50 ways to leave but here are three most likely.

The most likely scenario is that Musk leaves but continues to support Trump and Republicans with his money and platform.
Another possibility is that Musk leaves but simply steps away from politics and focuses on improving the performance of his many companies.
A third possibility is that the separation turns ugly, and while Musk is unlikely to seek refuge among Democrats, he uses his checkbook and platform to attack Republican policies he does not like.
It is highly likely that the separation starts with the first but could morph into the second or third.
The analysis that follows assumes the separation follows the first scenario.

Issue Analysis

BEAD: Musk leaving makes it slightly easier for the Commerce Department to let the states that have completed, or are near completing, their bidding process, to simply continue without putting what Republicans regard as problematic conditions into the contracts with the ISPs, something both the states and ISPs would welcome (LINK).

That would result in Starlink not gaining a material amount of federal funding as it has not been a bidder in any of the 42 states that are done or far down the road with their bidding process.
It would also result in the wireline companies most active in bidding for BEAD funding (which includes CHTR, T, and VZ/FBYR) obtaining the grants they have previously won or will win the states that have not yet completed their bidding.
On the other hand, we continue to hear that Secretary Lutnick and his team, while they are discovering both political and legal obstacles to requiring states to rebid, is still looking at how to force the states to rebid and increase the percentage of funds going to satellite.

USF Reform: We don’t think Musk leaving will affect the Republican approach to USF reform as Musk and the Republicans are largely aligned, regardless of his support, or lack of support.

We think there is a material risk that after the BEAD funding is allocated, the Republican support for USF goes down, as Republicans may view the remaining goals (modest operating expense subsidies for a small number of rural telcos, E-Rate, rural healthcare, and low-income support) as more appropriate for states to address, something that serves the interests of Starlink.
If the Republicans decide to maintain USF, they will likely attempt to make the subsidy to low-income Americans living in rural areas substantially larger than the subsidy for other low-income Americans, something that serves the interests of Starlink but also are strong Republican areas.
The political context will depend on how the Supreme Court rules on the challenge to the legality of the current system (LINK) but we don’t think Musk’s departure is likely to change how Congress and the FCC respond to the court ruling.

Spectrum Issues: There are many spectrum issues that the FCC and Congress will address over the next several years.

Some involve SpaceX/Starlink pitted against the wireless industry while others pit SpaceX/Starlink against individual companies, like DISH or Globalstar.
While the issues should be evaluated on a case-by-case basis, we think SpaceX/Starlink are likely to continue to have significant influence at the FCC, and Musk ending his DOGE efforts is unlikely to change that.
However, if the separation gets ugly, the influence is likely to diminish, which would be particularly beneficial to the wireless carriers (T, VZ and TMUS).[8]

Government Contracts: We think Musk will likely still obtain some federal contracts.

His leaving, however, will reduce his ability to shift contracts to his companies as it limits both his knowledge and power in dealing with such contracts.

Bottom Line: Musk leaving on good terms with Trump is likely. But if bad news or political problems arise in which Trump allies decide that blaming Musk is the right strategy, we are not sure how the break-up will evolve. We think that by the time things go bad, if they do, the BEAD issue will already be resolved, but it could significantly affect some spectrum issues down the road.

[1] As of the time of this writing, the grade is not good: According to Barron’s, the Dow Jones Industrial Average futures fell 1,020 points, or 2.4%; S&P 500 futures were down 3.5%; and Nasdaq 100 futures fell 4.4%.

[2] The story indicates that the departure was always planned, and that Trump told his inner circle back in March that Musk would be leaving. That could be true. But the story coming out the day after the Wisconsin defeat of Musk’s efforts there and the sharp drop in Tesla sales strikes us as something other than a coincidence. Also, it strikes as a great plot point in the remake of Citizen Kane, based on Musk rather than William Randolph Hearst.

[3] The second paragraph of the story begins “The president remains pleased with Musk and his Department of Government Efficiency initiative but both men have decided in recent days that it will soon be time for Musk to return to his businesses and take on a supporting role.” To DC insiders, that reads like an authorized leak, suggesting the Trump Administration wants the story out, something they would not want if it were not true.

[4] One impact of his departure is that, despite Tesla sales dropping a record amount, Tesla stock was up, falling early in the day but then rising when the Politico was published. We will let others analyze the value of the stock; we will just note the poetic point that Tesla stock rose when Trump won and Musk entered the government and rose when news emerged that he was leaving the government.

[5] Obviously, Musk’s influence extends far beyond telecom policy and includes antitrust reviews, regulatory investigations, and the ending of long standing programs designed to provide America soft power in the world.

[6] The Meatloaf lyrics—“I want you/I need you/But ain’t no way I’m ever gonna love you/Now don’t be sad/’cause two out of three ain’t bad”—is an excellent short summary of the Republican relationship with Musk. The challenge, as anyone who has expressed that sentiment to someone else would know, is that most people in a relationship want three out of three. Further, in most such relationships, failure to offer the third leads to rather bitter endings. But that might not be the case here.

[7] Republicans are understandably hesitant to have campaign appearances from someone who will grab the attention and is prone to tell Joe Rogan that social security is “the biggest Ponzi scheme of all time” and who only 13% of Americans want to have a lot of influence on the government.

[8] TMUS is complicated due to its partnership with SpaceX/Starlink with the direct to device offering, but on bigger issues, such as the future reallocation of the upper C-Band, TMUS would be aligned with T and VZ rather than SpaceX/Starlink.