On May 29, ACA Connects held a webinar highlighting a newly released study by Cartesian titled "State Broadband Rate Regulation: Impact on Investment and Competition." The study analyzes the negative effects of state-level price controls for fixed broadband Internet service investment and access.
My February 2025 Perspectives from FSF Scholars, "States Should Keep Broadband Internet Services Free From Price Controls," addressed New York's requirement that fixed providers in the state offer $15 and $20 monthly price plans to qualifying consumers. In response to the state's law requiring service offerings at rates far below market, AT&T discontinued its AT&T Internet Air fixed wireless access (FWA) service. Also, Starlink petitioned for an exemption and thus apparently intends to limit its subscribership to less than 20,000 in New York. Those early responses to the implementation of New York's law are real-life examples of how imposing price controls in competitive markets creates more problems than it solves. New York's rate regulation has discouraged market entry by new providers using innovative technologies.
Back to the Cartesian study. Based on its economic model, Cartesian found that price caps on fixed broadband Internet service would result in most states losing 15% to 35% of modeled capital expenditures by marketplace providers, depending on the state and based on whether it imposes a $30 monthly or $15 monthly low-income plan mandate.
Cartesian similarly concluded that American consumers lose choices as a result of state-level rate regulation, as it found that most states would get 15% to 35% fewer locations served by new competitive entrants. Among its key findings: a 19% drop in investment (per $30 low-income monthly plan) would result in one less provider for 3.3 million locations, and a 41% drop in investment (per a $15 low-income monthly plan) would result in 7.5 million locations with one less additional competitor.
ACA Connects and Cartesian should be commended for preparing and publishing the insightful study about the harmful downsides of state-level rate regulation of broadband services.
The bottom line is that state-level rate regulation is a poor policy for promoting Internet access. Instead of imposing price controls that will inevitably reduce investment and new market competitors, state legislators who are concerned about affordability and lack of access for low-income households should consider options such as (1) promoting awareness of the federal Lifeline subsidy program, which offers $9.25 per month toward broadband service for qualifying households; (2) using state universal service fund subsidies or establish other state-level subsidy programs to supplement Lifeline support for their residents; (3) promoting awareness of private affordability programs such as Xfinity's Internet Essentials.
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