A $2.14 billion federal loan to an Ottawa-based satellite operator is sparking debate among Canadian politicians about whether American billionaire Elon Musk poses a national security risk.
The battle concerns internet connectivity in remote regions as Canada tries to deliver on its promise to connect every Canadian household to high-speed internet by 2030.
Dan Goldberg, CEO of Telesat, said there “seems to be some misunderstanding” about the nature of his company's deal with the government.
A week ago, the Liberal government announced it would grant a loan to Telesat, a company that is launching a constellation of low-earth orbit satellites that can connect even the most remote areas of the country to broadband internet.
Conservative MP Michael Barrett objected to the price, asking Musk in a social media post how much it would cost to provide his Starlink network to every Canadian household that does not have high-speed access.
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“Less than half that amount,” Musk replied, to which Barrett concluded, “That sounds like a reasonable solution for Canada to me.”
In an interview, Goldberg rejected the settlement, saying his company received a loan and not a grant.
Telesat will pay the government nine percent interest. The Quebec government will also provide a loan of $400 million. In return, Telesat will transfer a stake of around 12 percent in the company to the two governments.
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“Nobody asked Elon, 'Do you want a $2 billion loan from the Canadian government at 9 percent interest and give up 10 percent of Starlink?'” he said. “I think the reaction would have been very different.”
He pointed out that part of the loan will ultimately go to Musk's SpaceX because Telesat uses the company to launch satellites.
A spokesperson for Innovation Canada said the new loan replaces an earlier $1.44 billion loan announced in 2021 that was not drawn down. The government is sticking to its commitment to spend $600 million to purchase internet capacity once the system is operational.
The Liberal government has launched a multi-year initiative to ensure that all Canadian households have access to high-speed internet, with the goal of reaching 98 percent of that number by 2026 and 100 percent by 2030.
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The latter pose the greatest challenge as they rely on satellite services. Traditional satellite internet, which uses a geostationary satellite in a higher orbit, has its limitations.
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Newer generation low Earth orbit satellite systems, such as the one launched by Telesat and those used by Musk's Starlink, use many satellites that orbit closer to Earth and can provide high-speed internet without the same problems.
Telesat's launch plans have already been delayed for years. Goldberg said those delays, some of which were related to challenges related to COVID-19, have been “overcome” and the company plans to be fully operational with global coverage by the end of 2027.
According to Starlink's coverage map, the service is available in Canada. However, the parent company did not respond to questions about service availability in the most remote areas of the country.
After Barrett's exchange with Musk, Innovation Minister François-Philippe Champagne accused the Conservatives of wanting to “betray our national security.”
“When you're further north, you need a reliable network and you need sovereignty and resilience in the network. So to say otherwise is a bit crazy to me.”
He said Telesat would design and manufacture the system in Canada.
“That is the kind of sovereignty and resilience we want to see, especially when it comes to critical military infrastructure that we also need to defend the North.”
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In a statement, the Conservatives stuck to their argument that Musk was the better choice. Industry critic Rick Perkins said: “There is an established, available platform that can deliver high-speed internet today, and it would not require billions of taxpayer dollars to flow into the pockets of insiders with ties to the Liberals.”
The Conservatives also tried to link the deal to former Bank of Canada Governor Mark Carney, who was appointed economic adviser to the Liberals on September 9, four days before the Telesat loan was announced.
Conservative Deputy Leader Melissa Lantsman told the House this week that Carney's “close friend, the CEO of Telesat, received more than two billion Canadian taxpayers' dollars to build a broadband network that other companies could have built for half that price.”
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Goldberg confirmed that Carney was a friend but said he had “absolutely nothing” to do with the loans.
Announcing the loan, the Prime Minister's Office said Telesat would provide capacity to the defense industry and support the modernization of NATO and Norad.
Goldberg said the agreement did not include details about the system's use for defense purposes. He said Telesat's constellation could be a “key factor” in modernizing Norad.
In 2022, the Liberal government outlined a $38.6 billion plan to modernize the joint Canada-US aerospace warning system
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Musk has become an increasingly controversial and political figure in recent years, especially since he bought the social media platform Twitter and renamed it X. He has used his wide reach to spread false information.
In the last week alone, Musk spread the false news that explosives had been found near a Donald Trump rally. He warned: “If Trump is not elected, America will fall into tyranny.” And he asked why no one was trying to assassinate President Joe Biden or Vice President Kamala Harris after the failed assassination attempt on Trump.
Goldberg said there were good reasons to maintain such a contract with a Canadian company.
“Space is a highly strategic sector, it's very capital intensive. If you look around the world, you see governments regularly entering into partnerships with their domestic operators,” Goldberg said.
Erik Bohlin, chair of telecommunications economics, policy and regulation at the Ivey School of Business, noted that there have always been some restrictions on foreign ownership in the telecommunications sector, including in Canada, but the satellite sector is “a new field with so much going on.”
Adam Lajeunesse, an associate professor at St. Francis Xavier University who focuses on Arctic and maritime security, said the administration has some valid arguments when it comes to Arctic defense and national security.
He said there is no reason to doubt that Starlink can meet the needs of the Canadian Forces today, but it is important to see what could happen to the company in a decade or two.
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“Strategic communications are simply vital to all security and defense activities in the North, not to mention civilian activities,” he said. “Having a single supplier, particularly when that supplier is outside of government control, is a dangerous situation.”
James Fergusson, a senior research fellow at the Centre for Defence and Security Studies at the University of Manitoba, said Musk was “a Trump guy” who had “said things that are contrary to current American foreign policy”.
However, he pointed out that the U.S. Department of Defense uses SpaceX, Starlink's parent company.
“For the Americans, he is not a security problem.”