Study: State Broadband Rate Controls Have Bad Consequences for Investment and Competition

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. 

USTelecom Report: Broadband Value Proposition Steadily Improves

Released on Monday, the 2024 edition of USTelecom's annual report on the competitive broadband marketplace tells a familiar tale of falling prices and rising speeds.

Authored by Business Planning, Inc.'s Arthur Menko, "2024 Broadband Pricing Index: Broadband Prices Continue to Decline As Consumers Choose Faster Speeds" (2024 BPI) reveals that, accounting for inflation, the price of the most popular broadband speed tiers ("BPI-Speed") decreased by 9.4 percent between 2023 and 2024 while the price of faster tiers – that is, those at or near gigabit download speeds ("PBI-Gigabit") – fell by 3.9 percent.

Compared to 2015, BPI-Speed inflation-adjusted prices are 59.9 percent lower. BPI-Gigabit inflation-adjusted prices, meanwhile, have decreased 43 percent since 2017. Of course, context is key – and a look at broader economic trends only underscores the increasing affordability of broadband:

• In real dollars, the per-Mbps price of BPI-Speed offerings has fallen by 81.2 percent since 2015 – and as the overall cost of consumer goods and services grew by 32.2 percent, the nominal price of BPI-Speed offerings fell by 41 percent.
• In real dollars, the per-Mbps price of BPI-Gigabit offerings has fallen by 43 percent since 2017 – and as the overall cost of consumer goods and services grew by 27.5 percent, the nominal price of BPI-Gigabit offerings fell by 21.4 percent.

While prices are shrinking, speeds are accelerating. In terms of downloads, BPI-Speed offerings are more than twice as fast as in 2015: 301 Mbps versus 141 Mbps. Upload speeds similarly have increased, from 51 Mbps to 96 Mbps.

Free State Foundation scholars have summarized every BPI report released by USTelecom. Posts to the FSF Blog addressing previous versions are available here: 2023 | 2022 | 2021 | 2020.

House Commerce Hearing Critiques NTIA's Handling of BEAD Program

As I previewed in a Monday post to the Free State Foundation blog, the House Energy and Commerce Committee's Subcommittee on Communications and Technology the following day held a hearing on the status of the $42.45 billion Broadband Equity, Access, and Deployment (BEAD) Program. Participants had much to say about NTIA's management of the program, particularly with respect to timing, clarity, and the approval process.

Committee Chair Cathy McMorris Rodgers (R-WA) in her opening remarks focused on "NTIA's decision to pressure states to regulate the rates charged for broadband service," "unnecessary workforce and climate-related requirements," "an expensive fiber-first agenda," and "unnecessary delays in NTIA's approval process."

Subcommittee Chair Bob Latta (R-OH) touched on similar topics in his opening remarks – and expressed concern that "NTIA continues to add requirements that are contrary to Congressional intent and make this program less attractive and more expensive to the broadband providers needed to deploy to unserved and underserved communities."

In a Written Statement, Misty Ann Giles, Director of the Department of Administration and Chief Operating Officer for the State of Montana, characterized navigating the BEAD Program process as "akin to building a plane while flying it without having the necessary instructions to be successful" and complained that "Montana has often received conflicting or even new and changed guidance after submitting our plans or beginning a previously approved NTIA operational process."

One specific example provided relates to NTIA's recent guidance regarding "alternative technologies" such as satellites and unlicensed wireless. Many, including Committee Chair Rodgers and Subcommittee Chair Latta, support the use of these and other non-fiber distribution platforms in areas where the deployment of fiber would be prohibitively expensive. But Giles, echoing an argument I made a month ago in "BEAD Program Technological Neutrality 'Fix' Falls Short," a Perspectives from FSF Scholars, pointed out that "[w]hile much of the guidance is helpful and needed, it has come at the 11th hour for Montana."

Shirley Bloomfield, NTCA – The Rural Broadband Association CEO, testified that "several concerns, if not adequately addressed, could deter small, community-based providers from participating in BEAD." They include: the accuracy of the FCC's National Broadband Map, prohibitively large project areas, preferences based upon fund-matching ability, higher-than-expected costs and longer-than-expected permitting processes, and the uncertain fate of the Universal Service Fund.

Video of the hearing is available here.

House Commerce Subcommittee to Hold Hearing on BEAD Program

Tomorrow the House Energy and Commerce Committee's Subcommittee on Communications and Technology will hold a hearing titled "From Introduction to Implementation: A BEAD Program Progress Report."

In the hearing announcement, Committee Chair Cathy McMorris Rodgers (R-WA) and Subcommittee Chair Bob Latta (R-OH) state that the "hearing will serve as an opportunity to hear about how the implementation of the program is going, better understand the impact of NTIA's rules, and what to expect going forward as states begin to award funds."

Regarding rate regulation and the statutorily mandated "low-cost broadband service option," a concern Free State Foundation President Randolph May addressed in a Perspectives from FSF Scholars published earlier today, the accompanying Majority Staff Memo asserts that "NTIA is responsible for reviewing and approving these low-cost options and has used this requirement as a way to regulate rates. The Committee considers these rate regulated approvals to be a violation of the IIJA's rate regulation prohibition."

Other topics teed up by the Majority Staff Memo include the disconnect between the clear congressional goal of technology neutrality and NTIA's "fiber-first" bias; the need for permitting reform; and the implementation impact of labor, letter of credit, and Buy America requirements.

The following witnesses are scheduled to testify:

• Misty Ann Giles, Director and Chief Operating Officer, Montana Department of Administration
• Basil Alwan, Chief Executive Officer, Tarana Wireless
• Shirley Bloomfield, Chief Executive Office, NTCA – The Rural Broadband Association
• Blair Levin, Policy Analyst, New Street Research and Non-Resident Fellow, Metropolitan Policy Project, Brookings Institution

The hearing will begin at 10:30 am.

House Commerce, Commissioner Carr Target BEAD Program

In a June 2024 Perspectives from FSF Scholars, I focused a spotlight on insidious efforts by both the National Telecommunications and Information Administration (NTIA) and certain state-level bureaucracies to inject extraneous policy objectives like rate regulation and a fiber-at-any-cost bias – what I termed "devilish details" – into Broadband Equity, Access, and Deployment (BEAD) Program funding decisions. Recent news from the Hill and the FCC demonstrate that others share my concerns.

In a letter dated July 9, 2024, to NTIA Administrator Alan Davidson, House Energy and Commerce Committee Republican leaders wrote that "it appears that the NTIA may be evaluating initial proposals counter to Congressional intent and in violation of the law." And in written testimony prepared for a congressional hearing held that same day, FCC Commissioner Brendan Carr expressed his broad view that the BEAD Program "is going off the rails."

Noting the BEAD Program's unprecedented exemption from Freedom of Information Act (FOIA) requirements, House Energy and Commerce Committee Chair Cathy McMorris Rodgers (WA), Subcommittee on Communications and Technology Chair Bob Latta (OH), and Subcommittee on Oversight and Investigations Chair Morgan Griffith (VA) in their letter demanded greater visibility into why only 16 of the 56 initial proposals submitted by states and territories prior to year-end 2023 had been approved as of July 9, 2024. (The following day that total grew to 17 with the approval of Maryland's submission.)

In particular, the authors pointed to "anecdotal evidence" – the best available under the circumstances – indicating that NTIA "is directing [states] to set rates and conditioning approval of initial proposals on doing so." By way of example, they highlighted an objection by the Virginia Office of Broadband to NTIA's insistence upon "an exact price or formula" for its low-cost service option before its initial proposal would be approved, an impasse which I addressed here.

Chair McMorris Rodgers and Subcommittee Chairs Latta and Griffith therefore requested copies of "all communications between [NTIA] and state broadband offices as it relates to pending [BEAD Program] Initial Proposals" no later than July 23, 2024. They also sought information regarding "[t]he factors or conditions that are preventing state entities from having their initial proposals accepted," including "all instances where a state's initial proposal was not accepted … due in part to the BEAD's low-cost option requirement pricing as a factor in the decision."

The concerns of Commissioner Carr, meanwhile, include but are in no way constrained to rate regulation alone. Labeling the $42.45 billion BEAD program "the slowest moving federal broadband deployment program in recent history" – after nearly 1,000 days, "not one person has been connected to the Internet with those dollars" – he pointed the finger at the convoluted, multistep design of the program and reminded the Subcommittee that this "failure to launch is not only predictable, it was predicted" by various members of Congress.

(For the record, it also was predicted by numerous Free State Foundation scholars: member of the Free State Foundation's Board of Academic Advisors Michelle P. Connolly, Ph.D., FSF President Randolph J. May, FSF Director of Policy Studies and Senior Fellow Seth L. Cooper, and me.)

Laying the blame at the feet of the Biden Administration for "layering on red tape and advancing a wish list of progressive goals," Commissioner Carr faulted specific elements of the BEAD Program as implemented – but not found in the text of the Infrastructure Investment and Jobs Act that lead to its creation – that "pursue a climate change agenda, [diversity, equity, and inclusion] requirements, technology biases, price controls, preferences for government-run networks, and rules that will undoubtedly lead to wasteful overbuilding."

Consequently, Commissioner Carr predicted that, at the end of the day and after all the money is gone, households, particularly rural households, will remain unserved "absent major reforms" that reign in wasteful spending on unrelated Biden Administration priorities and remove unnecessary bureaucratic hurdles.

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.

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."

FCC Votes to Increase Broadband Subsidy in High-Cost Areas

At this morning's Open Commission Meeting, the FCC approved by a 4-0 vote a Sixth Report and Order increasing the Affordable Connectivity Program (ACP) monthly benefit from $30 to as much as $75 in high-cost areas where the broadband service provider is able to demonstrate a "particularized economic hardship."

As a direct consequence, the date upon which the $14.2 billion appropriated by Congress will run dry, which is expected to arrive at some point next year, likely will come even sooner. As Free State Foundation President Randolph May wrote in an April op-ed, Congress therefore should "extend it, while mending it."

The ACP was created in 2021 by the Infrastructure Investment and Jobs Act (IIJA). It provides up to $100 dollars toward the purchase of a connected device and a monthly subsidy of $30 ($75 on qualifying Tribal lands) to eligible lower-income households. As of May 2023, over 17 million households were participating in the ACP.

Mr. May first wrote about the ACP in an October 2022 Perspectives from FSF Scholars. He concluded that "a fiscally responsible, targeted American Connectivity Program represents the preferred, marketplace-based approach to subsidizing broadband service." He therefore urged Congress to "extend the lifespan of the ACP through legislation that appropriates additional dollars" – and at the same time "revise the program's eligibility requirements to target its limited resources to those most in need."

In "The Affordable Connectivity Program: Time Is of the Essence for Congress to Act," a Perspectives published in March of this year, Mr. May took note of the accelerated predictions regarding when the ACP will run out of money – according to one observer, that could happen as soon as "early next year" – and in response repeated his "call for Congress to act without further delay to extend and revise the ACP."

The action taken by the FCC today, which will increase the monthly subsidy by up to $45 in certain high-cost areas, will place even greater strain on the dwindling, finite pool of money available.

Specifically, and as required by the IIJA, the Sixth Report and Order defines "particularized economic hardship" – that is, where "a provider is unable to cover the costs of maintaining the operation of all or part of its broadband network at the standard discount level in a high-cost area where the provider seeks to offer the high-cost area benefit" – and establishes implementing rules and processes pursuant to which increased subsidies will be made available.

In a June 2023 post to the FSF Blog, I highlighted a letter from a group of eight Republican Senators to President Biden proposing the redirection of unused COVID-19 relief dollars to the ACP "while we explore alternative sustainable funding mechanisms and updated parameters." While that might serve as a short-term fix, ultimately Congress must take direct action to ensure that the ACP continues on an ongoing, fiscally responsible basis.

GOP Senators to Biden: Use COVID-19 Dollars to Extend ACP

According to Light Reading and other news outlets, on Tuesday a group of 8 Republican Senators identified for President Biden a stopgap funding source for the Affordable Connectivity Program (ACP): untapped COVID-19 relief money.

The ACP, which provides eligible households with a $30 monthly subsidy ($75 on Tribal lands) to apply toward their choice of broadband service and up to $100 for a connected device, was created by the Infrastructure Investment and Jobs Act of 2021 (IIJA). Congress filled the ACP's coffers with $14.2 billion on a one-time basis.

Without question, $14.2 billion is a hefty sum. However, given that (1) to date nearly 19 million households have signed up for the ACP, and (2) the FCC continues to encourage consumer participation through outreach grants, that money soon will run out – perhaps as early as the first quarter of 2024.

Accordingly, many have called upon Congress to appropriate additional funds to extend the ACP's lifespan. That group includes Free State Foundation President Randolph May, who urged Congress to "extend it, while mending it" in a Real Clear Markets op-ed published in April of this year.

And in a March 2023 Perspectives from FSF Scholars, Mr. May wrote that:

Congress should extend the worthwhile ACP program promptly by appropriating additional funding. At the same time, it can consider revising the program to better target the ACP benefit to those lower-income households most truly in need and adopting measures to minimize, to the extent possible, any waste, fraud, and abuse in the program.

Notably, the ACP has bipartisan support. In written testimony submitted prior to her participation in an oversight hearing held yesterday by the House Energy and Commerce Committee's Communications and Technology Subcommittee, FCC Chairwoman Jessica Rosenworcel wrote that "I strongly support funding the Affordable Connectivity Program into the future to help more families get and stay connected to the high- speed internet they need to participate in modern life."

Speaking during that hearing, Chairwoman Rosenworcel reportedly stated that:

As a result of the bipartisan infrastructure law, we've got lots of funds to help with the deployment in largely rural areas, but we're also going to need funds and efforts to address affordability. ACP is the best program we have ever developed to do that, and we've got to make sure it continues.

Earlier this week, Senator Roger Wicker (MS) and 7 of his Republican colleagues reportedly wrote to President Biden to share a novel short-term solution: "repurpose a portion of unobligated emergency COVID relief funds to ensure the continuity of funding for this program, while we explore alternative sustainable funding mechanisms and updated parameters."

Senator Wicker's coauthors include Mike Crapo (ID), Kevin Cramer (ND), Thom Tillis (NC), Shelley Moore Capito (WV), J.D. Vance (OH), James Risch (ID), and Todd Young (IN).

As did Chairwoman Rosenworcel in her House testimony, the letter's signatories emphasized the interdependent relationship between (1) the hundreds of billions in federal subsidy dollars, including the $42.45 Broadband Equity, Access, and Deployment (BEAD) Program, targeting broadband infrastructure expansion, and (2) the ability of lower-income Americans to pay for the service that that massive public investment makes possible.

Specifically, they pointed out that, as those subsidized networks "become operational, the significance of the Affordable Connectivity Program will become even more important as it ensures our constituents can benefit from these historic investments in connectivity."

In response, a White House spokesman stated that "[w]e look forward to working with members of both parties to extend funding for the program so that it can keep lowering high-speed internet costs for tens of millions of American families."

Fiber Broadband Affordability Improved in 2022

A February 21 article in FierceTelecom by Masha Abarinova highlights survey findings by research firm Cowen that fiber broadband is more affordable and accessible to U.S. residential users. According to article, "Cowen found the average income of a FTTH [fiber-to-the-home] subscriber was around $83,000, compared to approximately $85,000 for those not subscribed to fiber." In other words, for the first time, "income for FTTH subscribers is lower than income for non-FTTH subscribers." Thus, it seems that fiber broadband is becoming more broadly affordable for Americans. And as the article observed, the Cowen survey found that fiber speeds continue to rise: "The survey showed FTTH subscribers received an average speed of 579 Mbps, whereas non-fiber customers are getting an average 419 Mbps. Notably, the 579 Mbps average fiber broadband download speed figure for the fourth quarter 2022 is up from 429 Mbps for fiber in the fourth quarter of 2022.

The Cowen survey constitutes another positive data point regarding broadband affordability in the U.S. In a series of blog posts from 2022, Free State Foundation scholars called attention to broadband affordability figures provided by different outlets:

• Seth L. Cooper, "New Study Touts the Affordability of Mobile Broadband In America," FSF Blog (November 30, 2022).
• Seth L. Cooper, "In the Face of Inflation, Prices Fall for Internet and Wireless Services," FSF Blog (October 14, 2022). 
• Andrew Long, "2022 USTelecom Broadband Pricing Report: Further Proof that Competition is Benefitting Consumers," FSF Blog (June 30, 2022)
• Andrew Magloughlin, "Dropping Consumer Broadband Prices Indicate Lack of Market Power," FSF Blog (May 13, 2022). 
• Seth L. Cooper, "Study Indicates Broadband Internet Service Prices Have Fallen the Last Five Years," FSF Blog (February 11, 2022). 

Acknowledging the significant difficulties posed to new investment and consumer buying power by reckless federal government-induced inflation, ongoing fiber deployments are likely to markedly improve the fiber access and affordability in 2023. A February 24 article FierceTelecom article by Diana Goovaerts provides a round-up of expected fiber deployments by broadband providers for this year, including FierceTelecom's admittedly underinclusive minimumprojection of 6.5 million to 7 million new fiber passings in the U.S. for 2023. 

New Study Touts the Affordability of Mobile Broadband in America

On November 30, CTIA announced the publication of "Unpacking the Cost of Mobile Broadband Across Countries," a study by Oxford Economics. The study examines consumer prices for mobile broadband services in different countries and analyzes the affordability of those services in the U.S. and other countries. According to Oxford Economics:

We find that, across all plans, the United States consistently ranks in the most affordable half of the distribution when accounting for the incomes earned by the average household. This is especially true for entry-level plans, with the US ranking as the 3rd most affordable for this mobile service category among the 20 benchmark countries, with an annual cost equivalent to 0.3% of the average household personal disposable income… 

 

Furthermore, our analysis shows US affordability has improved substantially between 2018 and 2021, with entry-level plans falling by 44% as a proportion of household disposable income. 

The study is worth reading in full, and it can be found online at CTIA's website. 

 

Free State Foundation scholars previously have highlighted the pro-consumer pricing performance of broadband Internet services over the last few years – and particularly in the face of harsh inflation. The affordability of mobile broadband services in the U.S. is a fortunate result of the strong private network investment, innovation, and competition in the U.S. wireless market. Preserving the existing federal light-touch policy framework for regulating communications services – including mobile broadband services – is essential to ensuring that mobile services remain affordable for Americans. 

In the Face of Inflation, Prices Fall for Internet and Wireless Services

On October 13, the U.S. Bureau of Labor Statistics released Consumer Price Index (CPI) data for September 2022. The overall CPI for September 2022 showed a sharp year over year increase of 8.2%, as Americans continue to be battered by inflation. However, CPI data for September 2022 shows significantly smaller increases or even slight decreases for communications and multi-channel video programming distributor (MVPD) services. Residential landline services have risen 3.6% year over year, and satellite and cable TV subscription services have gone up just 2.2%. Meanwhile, prices for internet services actually decreased 0.01% year over year, and prices for wireless services decreased 1.1% over that same timespan. 

One cannot reasonably or honestly deny that Americans are facing serious hardships due to high inflation. But the fact that communications and MVPD services are outperforming the bad inflationary trends – and even holding the line in the face of those trends for Internet and wireless services – is a testament to the strong private network investment and the competition in those markets. As USTelecom has reported, broadband providers' capital expenditures reached $86 billion in 2021. And CTIA reported that wireless providers' capital expenditures totaled $35 billion last year. Those investments have increased fixed and wireless broadband network capacities and geographic reach, giving overwhelmingly most consumers competing choices across platforms.
 

To help ensure pro-consumer pricing trends continue in fixed and mobile broadband Internet access services, the FCC should continue adhering to the light-touch regulatory framework that it applies to those services under Title I of the Communications Act. The Commission should maintain its reforms that bar unreasonable local permitting process delays for constructing wirelines and wireline infrastructure facilities as well as for making minor modifications and upgrades. And the Commission should act as quickly as it reasonably can to repurpose more spectrum for licensed commercial wireless use, including in the lower 3 GHz band. Promoting market investment and competition offer the best practical means for the Commission to ensure broadband availability and affordability. 

 

P.S. For an examination of broadband pricing trends against a longer timeframe, see Free State Foundation Senior Fellow Andrew Long's June 30 blog post, "2022 USTelecom Broadband Pricing Report: Further Proof that Competition is Benefiting Consumers. 

2022 USTelecom Broadband Pricing Report: Further Proof that Competition Is Benefiting Consumers

On Wednesday, USTelecom | The Broadband Association released its third annual Broadband Pricing Index (BPI) Report. Once again, the facts demonstrate that competition between broadband service providers is benefiting consumers through ever-higher speeds and – critically, given rising costs overall – steadily decreasing prices.

"2022 Broadband Pricing Index: A Comparative Analysis Showing Decreasing Prices and Increasing Value for U.S. Broadband Service Over Time" (2022 BPI Report) focuses on two types of broadband service tiers – the most popular and the highest speed – and compares their average prices and speeds in 2020 to those from (1)  the year prior, and (2) 2015.

According to the 2022 BPI Report, over the last twelve months, prices for goods and services generally grew 8 percent. By contrast, the average cost of the most-popular tier, adjusted for inflation, fell 14.7 percent, from $42.59 to $36.33. The average price of the highest-speed tier, adjusted for inflation, decreased by 11.6 percent, from $65.78 to $58.12.

Since 2015, inflation-adjusted prices have plummeted 44.6 percent, from $65.62 to $36.33, for the most popular tier and 52.7 percent, from $122.94 to $58.12, for the highest-speed tier.

Meanwhile, average speeds for both tiers increased dramatically between 2015 and 2022:

• Download speeds for the most-popular tier grew 127.7 percent, from 43 megabits per second (Mbps) to 98 Mbps;
• Upload speeds for the most-popular tier expanded at nearly twice that rate: 249.3 percent, from 13 Mbps to 44 Mbps;
• Download speeds for the highest-speed tier increased 84.6 percent, from 141 Mbps to 259 Mbps; and
• Upload speeds for the highest-speed tier increased 107 percent, from 51 Mbps to 103.7 Mbps.

The full 2022 BPI Report is available here, an overview here. For summaries of, and links to, the first two reports, please check out these posts to the FSF Blog: 2021 BPI Report and 2020 BPI Report.

Dropping Consumer Broadband Prices Indicate Lack of Market Power

The Consumer Price Index (CPI) for April 2022 shows fixed and mobile broadband prices dropping, after accounting for our nation's staggering inflation rate. Despite the aggregate CPI having a 40-year-high 8.3% annualized inflation rate, mobile broadband prices have decreased by .7% and fixed broadband prices have only increased by 1.7% over the same period. So both are decreasing on "real" (inflation adjusted) terms.

In fact, importantly, wireless broadband prices are dropping even without taking to account inflation. These price changes amount to a 6.6% and 9.0% annualized price cut for fixed and mobile broadband, respectively, providing convincing evidence rebutting assertions that broadband providers have significant market power. As the chart below displays, fixed and wireless broadband annualized prices changes are among the smallest on the CPI.

Note: The CPI refers to fixed broadband as "Internet Service" and mobile broadband as "Wireless Telephone Service"

Price cuts indicate that broadband providers cannot charge higher prices without risking significant competitive backlash. The plunge in real broadband prices is consistent with the view Free State Foundation Director of Policy Studies Seth Cooper and I advanced in our January 2022 Perspectives from FSF Scholars that "overall competitive conditions in the broadband . . . market and across service sectors within the market remained equally strong or even improved." The evidence for robust broadband competition has only strengthened since publication of our Perspectives, with further substantial subscriber growth for innovative, low-price fixed wireless subscriptions and cable MVNO offerings. 

Real broadband price decreases are also consistent with the benefits of infrastructure reforms implemented by the FCC over the past 5 years that removed substantial deployment barriers, such as the 2018 “Small Cell Order” and 2017 “IP Transition Order.” Removal of those barriers, combined with increasing competition, may have created an environment where provider cost reductions from infrastructure reforms are being returned to the consumer, at least in part, through real price cuts.

Study Indicates Broadband Internet Service Prices Have Fallen the Last Five Years

A study released on February 7 by BroadbandNow found across-the-board decreases in prices for broadband Internet service offerings over a five year period ending in the fourth quarter of 2021. The publication is called "Broadband Pricing Changes: 2016 to 2022." Among the BroadbandNow's findings, the average monthly price for broadband offerings with speeds in the range of 25Mbps to 99 Mbps fell by $8.80 or 14% over that span of time. And the average monthly price for 500+ Mbps offerings decreased by $59.22 or 42%. BroadbandNow's study provides evidence that effectively rebuts claims by proponents of rate regulation that prices for broadband have been increasing and made broadband supposedly unaffordable. 

For more on the topic of broadband pricing and affordability, see Free State Foundation Fellow Andrew Long's August 2021 Perspectives from FSF Scholars, "Evidence of Falling Broadband Prices Grows Despite Overall Spike in Inflation." Mr. Long's Perspectives analyzes sources that indicate that prices for broadband Internet service offerings decreased between 2020 and 2021, while putting those figures in the context of the strong capital investment in broadband networks that is benefiting U.S. consumers. Also check out his August 2021 blog post, "New BroadbandNow Report Further Demonstrates Affordability of Broadband."

Commenters Address Transition from Emergency Broadband Benefit to Affordable Connectivity Program

The recently passed Infrastructure Investment and Jobs Act (IIJA) appropriated $65 billion to broadband-related initiatives. While the $42.5 billion targeting the construction of network infrastructure has received much of the attention, another significant component of the IIJA is the $14.2 billion to be used by the FCC to modify and extend the Emergency Broadband Benefit Program (EBBP), a consumer subsidy created in December 2020 by the $900 billion COVID-19 relief and government funding bill. (For more information on the nearly $7 billion in broadband funding contained therein, please see this post to the Free State Foundation's blog.)

Interested parties recently submitted comments on how the Commission can assure a smooth transition, for both consumers and service providers, from the EBBP to the IIJA's Affordable Connectivity Program. That valuable and informed input can only benefit consumers and warrants careful consideration and action by the FCC.

As I described in "The Emergency Broadband Benefit: A Possible Model for Future Lifeline Funding," a February 2021 Perspectives from FSF Scholars, at the end of last year Congress allocated $3.2 billion to a short-term, pandemic-specific subsidy program to be administered by the FCC. Low-income Americans, as well as those experiencing financial hardship due to the ongoing public health crisis, were able to receive (1) a recurring $50 monthly discount on high-speed Internet access service, and (2) a one-time connected-device subsidy up to $100.

The EBBP, by design, was limited in duration: Congress made clear that it would conclude at the earlier of the end of the pandemic (plus six months) or when the money ran out.

The $1.2 trillion IIJA appropriated an additional $14.2 billion to extend those broadband service and device discounts. While the program established by the IIJA in many ways builds upon the EBBP, as initially defined by Congress and subsequently implemented by the FCC, it also made some changes, in particular to eligibility requirements and the amount of the standard monthly service discount. And it gave the program a new name to reflect its longer-term nature: the Affordable Connectivity Program (ACP).

On November 18, 2021, the Wireline Competition Bureau issued a Public Notice soliciting input from interested parties on how best to implement the ACP. A wide range of entities – including broadband providers (such as AT&T Services, Inc., T-MOBILE USA, INC., and Verizon Communications Inc.) and industry trade associations (among others, USTelecom – The Broadband Association, NCTA – The Internet & Television Association, and CTIA – The Wireless Association®) – submitted comments by the December 8, 2021, deadline.

Interested parties raised a host of issues, some "big picture," others highly detailed and specific. Below I discuss a few of the topics that seem to have garnered the most attention.

First and foremost, commenters emphasized the importance of policies and procedures that provide for a smooth and orderly transition, for both consumers and providers, from the EBBP to the ACP. Pursuant to the operative text of the IIJA, the EBBP will end, and the ACP will begin, on December 31, 2021. However, a final order will not issue from the FCC until the middle of January 2022.

Broadband providers urged the FCC to afford them reasonably sufficient flexibility as they strive to comply with rules not yet written – and adequate time to make necessary changes once those rules are finalized. For example, multiple broadband providers argued that, in the interim, they should be permitted to continue to determine eligibility according to the existing EBBP rules.

In addition, and as mentioned above, Congress modified the amount of the standard monthly discount. Whereas the EBBP made available $50, the ACP reduced that to $30. From the consumer perspective, commenters highlighted the need to provide meaningful notice of this change so that recipients are not caught off guard financially.

Providers, meanwhile, identified numerous time-consuming to-dos necessitated by this change, including billing-system modifications, website and other marketing material revisions, and customer service representative training. Again, commenters asserted that these steps demand adequate time to complete.

Another change wrought by the IIJA: participating broadband providers "shall allow an eligible household to apply the affordable connectivity benefit to any internet service offering of the participating provider, at the same terms available to households that are not eligible households" (emphasis added).

Commenting broadband service providers raised operational concerns and uncertainties triggered by this vague and overly broad language. As one example, they urged the FCC to clarify that "any internet service offering" does not include grandfathered packages – that is, those no longer actively marketed to existing or potential new customers.

In the interest of effective and efficient administration, these and other concerns identified by commenting parties deserve close consideration and a robust response from the FCC.

The deadline for reply comments is December 28, 2021.

New BroadbandNow Report Further Demonstrates Affordability of Broadband

A report released on August 18, 2021, by BroadbandNow provides additional proof that the number of U.S. consumers with access to affordable broadband service is both vast and growing rapidly.

In "Evidence of Falling Broadband Prices Grows Despite Overall Spike in Inflation," a recent Perspectives from FSF Scholars, I compared USTelecom broadband pricing information to Consumer Price Index (CPI) data released by the U.S. Bureau of Labor Statistics.

The former revealed that, between 2020 and 2021, the cost of connectivity fell across the board: entry level tier prices dropped by 9.1 percent, the most popular tier prices by 7.5 percent, and the highest speed tier prices by 2.3 percent.

By contrast, and over the same time period, the latter demonstrated that the cost of other in-demand consumer goods – various food items, electricity, fuel oil, and gasoline – increased by an average of over 7 percent.

Free State Foundation President Randolph May and I highlighted similar data in May 2021's "Biden Broadband Plan: Claims That Broadband Is 'Too Expensive' Are Unfounded," a direct response to unsupported assertions contained in the American Jobs Plan Fact Sheet released by the White House at the end of March.

BroadbandNow's "The State of Broadband in America, Q2 2021," provides still more evidence that competitive marketplace forces are driving down prices at an impressive pace.

Specifically, the report finds that, as of the second quarter of this year, 87 percent of Americans were able to subscribe to "low-priced" high-speed Internet access service – that is, offerings priced at $60 per month or less – providing speeds that meet the FCC's definition of "broadband": 25 megabits per second (Mbps) downstream and 3 Mbps upstream.

Impressive in isolation, that figure reflects incredible and rapid progress: an increase of 10 percentage points from just three months prior (Q1 2021) and, amazingly, over 35 percentage points since Q1 2020.

The report also notes that the percentage of Americans with access to "low-priced" offerings at even faster speeds – 100 Mbps downstream and 25 Mbps upstream – grew by 11 percent over that same brief period of time.