By David Shepardson

WASHINGTON (Reuters) - The U.S. Federal Communications Commission on Tuesday reaffirmed its 2022 decision to deny SpaceX satellite internet unit Starlink $885.5 million in rural broadband subsidies.

The FCC said the decision impacting Elon Musk's space company was based on Starlink's failure to meet basic program requirements and that Starlink could not demonstrate it could deliver promised service after SpaceX had challeged the 2022 decision.

"The FCC followed a careful legal, technical and policy review to determine that this applicant had failed to meet its burden," FCC Chair Jessica Rosenworcel said.

The FCC cited among its reasons SpaceX's failure to successfully launch its Starship rocket, saying "the uncertain nature of Starship's future launches could impact Starlink's ability to meet" its obligations.

The FCC had rescined the funding in August 2022 based on speed-tset data after Starlink had agreed to provide high-speed Internet service to 642,000 rural homes and businesses in 35 states.

SpaceX said it was "deeply disappointed and perplexed" by the FCC decision, adding Starlink "is demonstrably one of the best options - likely the best option" to accomplish the goals of the rural internet program.

The two Republican commissioners on the five-member FCC dissented from the decision saying the FCC was improperly holding SpaceX to 2025 targets three years early and suggesting the Biden administration's anger toward Musk was to blame.

FCC Commissioner Brendan Carr said the commission was joining "the growing list of administrative agencies that are taking action against Elon Musk’s businesses" and said the decision "certainly fits the Biden Administration’s pattern of regulatory harassment."

Musk said in a post on X the FCC decision "doesn’t make sense. Starlink is the only company actually solving rural broadband at scale! They should arguably dissolve the program and return funds to taxpayers, but definitely not send it (to) those who aren’t getting the job done."

Republican FCC Commissioner Nathan Simington, who noted Starlink had about two million subscribers in September 2023, added: "SpaceX continues to put more satellites into orbit every month, which should translate to even faster and more reliable service."

(Reporting by David Shepardson; Editing by Stephen Coates)