This grant was originally not going to even allow satellite providers - the idea was it was going to go to hundreds of small fiber and wireless ISPs who needed the money to build infrastructure to rural areas that is not profitable on the face of it.

A one-time grant like this isn't going to make or break Starlink - they're not building anything infrastructure with the money (the satellites burn up in a few years and need to be replaced - are they going to need ongoing grants?), so basically it's just giving free money to SpaceX. Whereas if the money went to a company building fiber or wireless repeaters that money would pay itself back over and over again and the fees would just pay for maintenance