We're sharing ten questions about the Affordable Connectivity Program that  Senate Commerce Committee  Ranking Member Ted Cruz (R-TX) asked New Street Research Policy Advisor and Brookings Nonresident Senior Fellow Blair Levin testified after a hearing entitled The Future of Broadband Affordability.

3. You testified that investing in ACP “may actually result in a … net cost savings to the government.”

b. What evidence do you have to support this claim?

Please see the answer to question 2a for some of the evidence.  As noted, the savings from reductions in the cost of Medicaid alone could result in a net gain to the government.  And that does not incorporate savings from Medicare, the Veterans Administration, and other government-funded healthcare programs. 

Further, there are other savings related to other government programs.  For example, as noted in my written testimony, for lower-income individuals, adopting in-home broadband increases their likelihood of employment by 14%, with 62% of those newly connected households citing the connection as having helped them or a family member successfully find employment. This trend, applied across all ACP recipients, would reduce the cost of unemployment insurance. 

Another set of savings would be found in the administration of government services.  The U.K. government, for example, estimated that it could save up to several billions by shifting 80% of public services online, with savings likely to come from four key areas: the reduced staff time involved in processing digital transactions compared to offline alternatives; estates and accommodation; postage, packaging, and materials; and the costs of supporting IT systems.  Among the more dramatic findings were that the cost of digital transactions was 20 times lower than by phone and 50 times lower than  face-to-face. As a study from the consulting group BCG pointed out, online government services can also spur job creation and economic growth. For example, when new businesses have a simple path for filing documents and obtaining licenses, barriers to entry are lowered and growth increases.¹

b. Would the net cost saving be immediate? Or would it be down the road?

It would, if administered properly, be immediate.  In particular, I would expect savings in healthcare, job training and placement, and government services to be immediate upon effective adoption. 

Savings related to education are more long term.² For example, an analysis from Common Sense Media extrapolated from the previously mentioned study from Michigan State University showing the effect of connectivity and devices on student performance to show a GDP loss of $22 billion-$33 billion attributable to bad student connectivity.

But the key point policy makers should understand that whatever the savings there are today, those savings are likely to grow down the road.

Let me add that in answering your questions two and three, I recognize that we should all be humble in understanding that many factors, some unknowable today, can affect future outcomes.  But while we cannot know for future what the future holds, we nonetheless must move forward by making reasonable predictions.  For the last quarter century, most of my work has been with institutional investors who every day make investments based on their predictions of the future.  Some turn out to be true; others don’t.  But those in that business don’t have the luxury of throwing up their hands and simply saying “who knows?”

Neither does the Congress.  I think Congress was right to invest $42.5 billion in rural broadband deployment, but one could argue that it should have waited until we were sure wireless would not offer the same functionality.  Waiting, however, carries its own costs, particularly when the evidence is strong that fiber is far more future proof.  As for the adoption side, as discussed above, I am for more through study.  But as of now, the data is very clear that directionally there are significant savings to be had today from getting all Americans online and there will be more savings in the future.  Ecclesiastes suggested that the race is not always to the swift nor the battle to the strong.³ Still, as Damon Runyon noted, “but that’s the way to bet.”  So here, we as a country should be betting on savings from online services growing over time.

More in this Series

• Ten Things About ACP that Ted Cruz Cares About—And Ten Answers that Could Help Reshape How We Think About the Program
• #2 The Economic Benefit of ACP to the Health Care System
• #3 Net Cost Savings to Government
• #4 ACP and GDP
• #5 ACP vs Private Low-Income Plans 
• #6 ACP and Telemedicine
• #7 ACP and BEAD
• #8 ACP and Education
• #9 Broadband Adoption Research
• #10 What Companies Care About the Affordable Connectivity Program?

Notes

1. Awad, N., Brice, J., Ferrer, S., Kim, H. & Stuart, T. (2022). Delivering government services like a digital native. Boston Consulting Group. https://www.bcg.com/publications/2022/delivering-customer-centric-digita....
2. In my oral testimony I mentioned how in the early 2000’s, my sister, a public-school teacher pointed out my work at the FCC resulted in difficulties for her in that many of her students were using internet access to do their homework while others did not have access.  That problem continues.  As Common Sense Media has pointed out “Over 40% of Title I teachers do not assign work that requires internet access because they fear that doing so would exacerbate inequalities, and nearly 60% report that a lack of home internet and computers limits student learning.” Fazlullah, A. & Ong, S. (2019). The homework gap: Teacher perspectives on closing the digital divide. Common Sense Media. https://www.commonsensemedia.org/sites/default/files/featured-content/files/homework-gap-report-2019.pdf.  My point for raising it here is to note that while I would hope we could all agree that those fears and the failure to assign certain kinds of homework will be negative for our economy down the road, it is difficult to be precise about the timing and scope of those costs.

Blair Levin is the Policy Advisor to New Street Research and a nonresident senior fellow at Brookings Metro​. Prior to joining New Street, Blair served as Chief of Staff to FCC Chairman Reed Hundt (1993-1997), directed the writing of the United States National Broadband Plan (2009-2010), and was a policy analyst for the equity research teams at Legg Mason and Stif Nicolaus. Levin is a graduate of Yale College and Yale Law School.

The Benton Institute for Broadband & Society is a non-profit organization dedicated to ensuring that all people in the U.S. have access to competitive, High-Performance Broadband regardless of where they live or who they are. We believe communication policy - rooted in the values of access, equity, and diversity - has the power to deliver new opportunities and strengthen communities.

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