Affordable Connectivity Program Ends, ISPs Voluntarily Fill the Void

On June 1, the Affordable Connectivity Program (ACP) officially came to an end, at least for now. Some hold out hope that Congress still might appropriate additional funding. In the meantime, Internet service providers (ISPs) have stepped in to make available to low-income households broadband service plans priced at or below $30 per month until at least the end of 2024.

Through April, the ACP provided to eligible households a $30 monthly subsidy ($75 on Tribal lands and, as I described in an August 2023 post to the FSF Blog, up to $75 in certain high-cost areas) that they could apply to their choice of broadband service plan offered by a participating provider. In May, the $14.2 billion appropriated by Congress in 2021's Infrastructure Investment and Jobs Act was close to running out, so participating households received only a partial benefit.

In a press release marking the program's final day, FCC Chairwoman Jessica Rosenworcel noted that over 23 million households participated in the ACP; urged Congress to provide additional funding; and highlighted the Lifeline program, which offers a $9.25 monthly benefit to a smaller set of eligible households. For one, Lifeline limits eligibility to those households whose income is less than 135 percent of the Federal Poverty Guidelines, a threshold that Free State Foundation President Randolph J. May urged Congress to adopt on numerous occasions, must recently in "The Conservative Case for Saving the Affordable Connectivity Program by Reforming It."

As the White House highlighted in its own press release, however, in the wake of the ACP's demise, fourteen ISPs have made voluntary commitments "to offer plans at $30 or less to low-income households through 2024, so that families across America can continue accessing low-cost Internet." That list includes AT&T, Comcast, Cox, Charter Communications, and Verizon, as well as a number of smaller ISPs that serve rural areas.

The Conservative Case for Saving the Affordable Connectivity Program by Reforming It

 

The Affordable Connectivity Program, a $14.2 billion subsidy program established by Congress in 2021 to support broadband access for lower-income American households, may soon be ending. April was the last month during which the over 23 million participants received the full $30 ($75 on tribal lands) monthly subsidy. In May, customers will receive a partial ($14) benefit if their Internet service providers (ISPs) agree to provide one.

After that, the appropriated funds will be gone. For over a year, I’ve advocated extension of the ACP program. But as I wrote in a recent piece in the Washington Examiner, “only if it is meaningfully reformed to render it more fiscally responsible.” I said there, and previously, that “[t]his can be accomplished by adopting a considerably more restrictive eligibility requirement and further measures to reduce waste and fraud in the program."

There’s little doubt that, for most of us, access to a high-speed broadband connection enhances the quality of our lives. Adequate broadband access is usually required to take advantage of various educational opportunities, apply for jobs, interact with government websites, participate in community activities, or use social media. So, like government benefit programs that provide subsidies to low-income persons for securing food, housing, or energy assistance, a properly conceived and efficiently operated Affordable Connectivity Program can be an important “safety net” worthy of support from conservatives.

 

Moreover, by providing qualifying low-income households with a voucher to choose their broadband provider, the ACP program empowers them. Unlike the current legacy Lifeline model that provides support for telecom services indirectly to low-income persons by subsidizing the service providers, under ACP the consumer participates directly in the competitive broadband marketplace. This is a more market-oriented pro-consumer-choice approach.

 

So, there is a conservative case for saving the ACP program on the condition it is reformed.

 

Specifically, I have argued that "there is no reason why the ACP eligibility criterion should exceed 135% of the federal poverty level," the benchmark used for the FCC's Lifeline program. In any event, Lifeline should be folded into a reformed ACP program.

 

I made similar arguments in two earlier Perspectives from FSF Scholars, "The Affordable Connectivity Program: Time Is of the Essence for Congress to Act" in March 2023 and "Congress Should Extend and Revise the Affordable Connectivity Program" in October 2022. And others have expressed related concerns. As I noted in the Washington Examiner piece, Senator Shelley Moore Capito asserted that "we need to have accountability to make sure that the people who are receiving this benefit are the ones that actually cannot pay, and would not pay otherwise had they not had the extra money to be able to afford this."

More recently, Senator Ted Cruz leveled a more forceful critique:

[T]he [ACP] is not working as Congress intended: to assist those for whom cost was the barrier to gaining internet access…. [I]t turns out the vast majority of [participants] already had high-speed internet. Here's an FCC survey showing just 22 percent of the households receiving the taxpayer subsidy were previously unsubscribed to broadband. This means that for every household that didn't subscribe to premium internet, the federal government is subsidizing four households that did. Beyond this inefficiently, reports have also found – unsurprisingly – that ACP has had inflationary effects on the price of internet."

As the end date approaches, proponents have floated various legislative solutions, some with their own flaws. On April 26, Senate Commerce Committee Chair Maria Cantwell released an amended version of her Spectrum and National Security Act discussion draft that would reinstate the FCC's long-lapsed spectrum auction authority and lend the FCC $7 billion (up from $5 billion in the original) to replenish the ACP with the promise of future auction revenues as collateral.

As Harold Furchtgott-Roth, an economist and former FCC Commissioner, and Kirk Arner wrote in RealClear Markets:

This is a bad idea that would set a dangerous precedent. Federal agencies do not ordinarily borrow large sums from Treasury. If this were allowed to occur, other agencies would quickly seek similar 'borrowing authority' to pay for projects that are unaffordable today, hoping that requisite funds might be scrounged up somewhere else tomorrow.

They also agreed that "[i]f Congress decides to extend ACP, it should narrow the program to only cover households that but for the program's subsidy would not already be subscribed to Internet service."

Senator John Fetterman, meanwhile, has introduced a bill that would replace the current source of ACP dollars – that is, direct congressional appropriations accompanied by the oversight inherent to the legislative process – with yet another drain on the Universal Service Fund, a regressive "tax" on the dwindling user base of Title II "telecommunications services" whose contribution factor already has reached unsustainable levels. The Promoting Affordable Connectivity Act would require broadband and edge service providers to contribute to the USF in order to fund the ACP, purportedly, and magically, without further raising costs to consumers.

Direct congressional appropriations provide our elected leaders an opportunity periodically to reexamine the operation of federal programs, including ones like the ACP, to assess their efficiency and effectiveness in meeting their programmatic goals in a fiscally responsible manner. This includes, with respect to ACP, the eligibility requirements, the size of the benefit, and the controls to prevent waste, fraud, and abuse.

Eligibility for a household to participate in the program should be reduced from 200% of the federal poverty guideline (currently $62,400 in income for a household with four persons) to 135% (currently $42,120 for a four-person household). In line with the widely reported agreement of the bipartisan congressional Universal Service Working Group, the current $100 device subsidy should be eliminated as unnecessary. And effective controls to prevent fraud and abuse should be implemented.

And considering overall fiscal constraints, the size of the current monthly benefit should be subject to reevaluation too. As Senator Cruz said at a May 2 Senate Commerce Committee hearing, “History has shown that when the federal government starts subsidizing demand ­- in higher education, in agriculture ­- the subsidy gets capitalized and prices go up.”

In my view, if reformed to ensure it is operated on a fiscally responsible basis, including restricting the eligibility requirement to no more than 135% of the federal poverty guideline, the Affordable Connectivity Program is a worthwhile “safety net” program that should be extended.

 

Moreover, as I said in my earlier Washington Examiner op-ed, “if Congress does meaningfully reform the ACP program, it will constitute an important precedent demonstrating that ‘safety net’ programs can indeed be reformed.” In the “tax and spend” environment that prevails in Washington, this would be no small achievement in and of itself.

FCC Chairwoman Rosenworcel to Congress: Absent Additional Funding, Affordable Connectivity Program Will End in April

In letters to congressional leaders dated January 8, 2024, FCC Chairwoman Jessica Rosenworcel warned that the Affordable Connectivity Program (ACP), a broadband-service subsidy relied upon by over 22 million lower-income households, is projected to run out of money at some point in April of this year.

Established by the Infrastructure Investment and Jobs Act (IIJA) in 2021, the ACP provides eligible households with between $30 and $75 per month to be applied toward (and which, in many instances, covers) a monthly broadband subscription from the participating Internet service provider (ISP) of their choice. Absent additional congressional action, the ACP will end when the hefty initial appropriation – $14.2 billion – is depleted.

In October 2023, the Biden Administration asked Congress to appropriate sufficient funding to extend the ACP through the end of 2024: $6 billion. Chairwoman Rosenworcel's letters echoed that request, as did a White House Fact Sheet released the same day.

As Free State Foundation President Randolph May noted approvingly in an October 2022 Perspectives from FSF Scholars, the ACP "enables millions of lower-income consumers to participate on a relatively equal footing in the competitive marketplace for high-speed Internet access." He therefore called for Congress to "extend and revise" the ACP, specifically by "target[ing] its limited resources to those most in need."

And as I have pointed out in a series of posts to the FSF Blog, the ACP enjoys bipartisan support.

According to Chairwoman Rosenworcel, "the Commission expects to begin taking steps this week to start orderly wind-down procedures to give participating providers, households and other stakeholders sufficient time to prepare for the projected end of the ACP."

Those actions will include: (1) providing ISPs with "guidance on the timing and requirements for notifying participating households," (2) setting a date after which no additional households may enroll, and, ultimately, (3) formally determining a date certain for the program's termination.

Biden Administration, Democratic Senators: Fund the Affordable Connectivity Program

As the clock ticks steadily toward the moment in early 2024 when the Affordable Connectivity Program (ACP) runs out of money, the Biden White House and a group of 32 Democratic Senators recently added their voices to the bipartisan chorus calling for additional funding.

Created by the Infrastructure Investment and Jobs Act (IIJA), the ACP provides a monthly subsidy – up to $75 on qualifying Tribal lands and in certain high-cost areas, $30 elsewhere – that eligible lower-income households can apply toward a high-speed Internet access subscription. It also makes available up to $100 for the purchase of a connected device.

At the end of August, more than 20 million households had signed up for the ACP. Consequently, it is expected that the $14.2 billion initially appropriated will have been spent by some point early next year.

In an August 2023 post to the FSF Blog, I highlighted calls, from both sides of the aisle, for Congress to appropriate additional money to the ACP. I also noted that Free State Foundation President Randolph May, on multiple occasions, has urged Congress to extend the ACP – but also to "revise the program's eligibility requirements to target its limited resources to those most in need."

More recently, panelists at a Broadband Breakfast online event on October 11, 2023, spoke of the ACP's importance – one, Debra Lathen, President, Lathen Consulting LLC, described it as "critical" to the success of the $42.45 billion Broadband Equity, Access, and Deployment (BEAD) program.

In addition, 32 Democratic Senators, led by Jacky Rosen (NV), wrote in a letter to congressional leaders dated October 19, 2023, that, "as you finalize a government appropriations package, we urge you to include full funding for the ACP as well as a long-term solution that provides a sustainable, responsible funding stream, so that millions of Americans don't lose access to critical connectivity services."

And in an October 20, 2023, letter to House Speaker Pro Tempore Patrick McHenry, Shalanda D. Young, Director of the Office of Management and Budget, highlighted the importance of additional funding to "avoid the risk that millions of Americans lose access to affordable high-speed internet."

According to Communications Daily (subscription required), the White House is "is expected to seek about $4 billion in additional money for the [ACP] as part of a second part of the supplemental federal funding request it will send to Congress this week."

Support Grows for Extending the Affordable Connectivity Program

The number of households participating in the Affordable Connectivity Program (ACP) has surpassed 20 million – up from over 17 million just three months ago. Fortunately, the chorus of voices urging Congress to replenish the ACP's dwindling coffers, which could run dry early next year, simultaneously grows louder.

The ACP provides eligible households with a one-time subsidy (up to $100) to purchase a connected device and as much as $30 per month ($75 on qualifying Tribal lands) to apply to a broadband service subscription. It was created by Congress in 2021, which appropriated $14.2 billion in a one-time lump sum.

In "FCC Votes to Increase Broadband Subsidy in High-Cost Areas," a recent post to the FSF Blog, I pointed out that the Commission's 4-0 vote at the August Open Commission Meeting to increase the monthly stipend in certain expensive-to-serve areas to as high as $75 will accelerate the date upon which the ACP doles out its last dollar. Likewise, the roughly 3 million additional households that have enrolled in the ACP since May place greater financial stress on the finite funds available.

Calls to extend the ACP's lifespan through additional appropriations have come from multiple directions:

• In a letter last week, 45 members of Congress – 29 Democrats and 16 Republicans – urged House and Senate leadership "to include full funding for the [ACP] in the upcoming government appropriations bill to ensure that households can access the broadband they desperately need" – and concluded that "[f]ailure to extend funding would not only leave millions of families without access to the internet but also hinder our long-term competitiveness as a nation."
• In an August 1, 2023, letter to House Speaker Kevin McCarthy, Office of Management and Budget Director Shalanda D. Young wrote that "the Administration … believes that the Congress must act quickly to ensure continued funding for programs that lower costs for families, such as expanded access to affordable, high-quality child care and high-speed internet."
• In a June 2023 blog post, I highlighted a letter from eight Republican Senators encouraging President Biden to "repurpose a portion of unobligated emergency COVID relief funds to ensure the continuity of funding for [the ACP], while we explore alternative sustainable funding mechanisms and updated parameters."
• At a June oversight hearing held by the House Energy and Commerce Committee's Communications and Technology Subcommittee, FCC Chairwoman Jessica Rosenworcel reportedly described the ACP as "the best program we have ever developed to [address affordability], and we've got to make sure it continues…. If Congress were to fail to appropriate new funds for the Affordable Connectivity Program, we would … cut families off." And in the August 14, 2023, press release marking the 20 million+ ACP enrollment milestone, she stated "[w]e've made too much progress in helping families get online to turn back now."

Free State Foundation President Randolph May also has vocalized his support for the ACP on several occasions (here, here, and here), arguing that Congress should extend it but also "revise the program's eligibility requirements to target its limited resources to those most in need."