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Ten Things About ACP that Ted Cruz Cares About

#4 ACP and GDP

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.

4. During the hearing, you claimed there was a study by John Horrigan which estimated that for “every dollar spent on ACP, we get a $3.89 increase in GDP.”

a. Is there a John Horrigan paper that finds this conclusion? If yes, please provide a citation for this study.

In my written testimony I cited Dr. Horrigan’s paper as saying, “Another study found that ‘every dollar of ACP subsidy returns nearly two dollars in impacts to those using the program’ due to ‘employment effects that boost household income; and convenience effects, e.g., time saved from shopping online as well as having access to a greater variety (or quality) of goods.’” The title of that study is The Affordable Connectivity Program Creates Benefits that Far Outweigh the Program's Costs.

In that written testimony I cited a different paper related to the finding on the increase in the GDP.

To the extent that my oral testimony implied something different than my written testimony, that is my error for which I apologize.

I would note, however, that there are other studies that come to similar findings about how universal broadband access and adoption can increase the GDP. For example, a 2021 paper published by the National Bureau of Economic Research found that “moving to high-quality, fully reliable home internet service for all Americans (“universal access”) would raise earnings-weighted labor productivity by an estimated 1.1% in the coming years. The implied output gains are $160 billion per year, or $4 trillion when capitalized at a 4% rate."

b. John Horrigan has published a “brief,” in which he provides an “exploration” of existing data to develop a benefit-cost analysis. In this brief, Mr. Horrigan states that the FCC’s survey finds that only 22% of the ACP recipients did not have internet prior to ACP. Do you also agree that this is the finding of the FCC survey?

I believe that the single data point misrepresents Dr. Horrigan’s analysis and the historical record.

A fair reading of Dr. Horrigan’s work would start by adopting his insight that ACP is part of a three-legged stool that during the pandemic helped increase broadband adoption and sustain it for low-income households. Philanthropic and private sector initiatives were important, but the EBB and then the ACP were crucial in making these efforts have an impact on a national scale.

It is then important to consider how Dr. Horrigan describes that ACP’s predecessor EBB is an important historical antecedent that, if, taken into account, would increase that number of households that were not connected prior to a government subsidy program. As he writes, “It is hard to escape the fact that pandemic era initiatives (such as stimulus checks, the EBB, private-sector marketing initiatives, and philanthropic efforts) were responsible for getting a large number of low-income households online. The ACP not only sustained this, but helped low-income households weather a 2022 that saw a growth in inflation, the end of the child tax credit, and other economic headwinds. It is worth noting that the data only takes us through 2022 and it is likely that 2023 ACP signups included significant numbers of wireline customers."

Further, Dr. Horrigan writes that based on his analysis of American Community Survey data from 2019-2022, 56% of the growth in home wireline broadband subscriptions in that time was among households whose annual incomes were $50K or less. And 38% of the growth was from “under $25K households” (that make up about 16% of all households.)¹ ACP and EBB were partly responsible for this.

Dr. Horrigan also urges policy makers to understand that a high percentage of ACP recipients are returning and intermittent users, writing for example “Many low-income households have at one time had their internet subscription lapse. Estimating just how many low-income households are likely to cycle on and off home connectivity in a given year is a crucial step in determining the overall benefit of the program."

He then suggests that policymakers ask, “How many more consistent broadband subscribers did ACP create?” He answers that question by writing:

Surveys conducted during the pandemic showed that 29 percent of internet users with annual incomes below $30,000 (or nearly 5 million households) lost service due to the economic challenges the pandemic imposed upon them.
That survey looked not just at those who lost service but also at the past subscription patterns of those currently lacking service. Some 31 percent of those without a home wireline subscription had had service in the past.
Another view of the comings-and-goings of connectivity comes via data from surveys that ask people without service if they had had a home subscription previously. The National Telecommunications and Information Administration’s (NTIA) 2021 Internet Use surveys found that 23.5 percent of households without internet subscriptions had household members who had previously been home internet users.
If 30 percent of wireline ACP enrollees restore service they once had, this comes to about 2.4 million “returning user” households—30 percent of the 8 million wireline ACP enrollees who are not new broadband households due to the benefit.

In short, the 22% number is a snapshot in time that ignores critical data from both before and after the snapshot was taken.

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Notes

A 2023 USC survey of California made similar findings. https://broadbandforall.cdt.ca.gov/wp-content/uploads/sites/19/2023/12/2...

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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