1. As an American-based company, SpaceX would be subject to CALEA [0], meaning that they would have to enable law enforcement intercept of communications with a warrant. This would likely be done by replicating the packet streams at the gateway. However, it's quite possible that you could use the system in a repressive country, without them knowing about it or having a way to stop you.
2) The purpose of the system (and the spectrum) will likely be broadband data, not hand-portable voice. So, it should be disrupting Time Warner and Verizon's cable and fiber offerings, not cellphones. The real value is internationally to have reliable broadband available anywhere.
"The purpose of the system (and the spectrum) will likely be broadband data, not hand-portable voice."
You're unlikely to get one without the other.. if down the road you can get an affordable internet connection on your phone without having to deal with cellular networks, I'd bet that you would see a huge shift to VOIP.
Edit: Whoops, looks like phones probably won't be able to receive this signal practically.
"I believe Musk is, like Teledesic, planning to use the Ka-band. That means the smallest antenna would be the size of a large laptop" [0]
2. Can cellphone communication work this way on scale (like Iridium)? Bypassing providers like tmobile, sprint etc.