Digital Beat

Ten Things About ACP that Ted Cruz Cares About

#5 ACP vs Private Low-Income Plans

We're sharing ten questions about the Affordable Connectivity Program (ACP) 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.

5. Your written testimony cites a 2021 article from the American Economic Journal: Economic Policy. That study is not based on ACP but instead is based on information from a Comcast program from 2012-2018.

a. Given that private low-income plans like Internet Essentials and Spectrum Internet Assist were available in the majority of the country prior to ACP, doesn’t that suggest that a $30 nationwide subsidy isn’t universally necessary, and that ACP should be better tailored to account for local offerings and the presence of competition?

I applaud private efforts to address low-income adoption, particularly Comcast’s Internet Essentials, which is the oldest and most extensive program. To reiterate a point that I made in my answer to question 1b, Comcast started the program in 2011 and has continually studied and changed the program to improve its outcomes. That is the path the Federal Communications Commission (FCC) and Congress should follow with the ACP.

But the question ignores how the ACP, by focusing on improving the demand side of the equation, improved the supply side of low-income offerings. ACP caused the private sector to improve the quality of their offerings to lower income Americans—both in terms of the price actually paid by the consumer and the quality of the service—in response to greater aggregate demand from lower-income households.

Moreover, I don’t think that private efforts alone will solve the problem of universal broadband, in the same way that the admirable private efforts providing meals for the hungry would not eliminate the need for SNAP or the commendable charitable efforts related to healthcare would not eliminate the need for Medicaid.

As to the dollar amount that the government subsidy should provide, I would hope that the FCC economists, who are capable of great work, would take the data from the EBB and ACP programs and provide an analysis to Congress about the two variables of the eligibility criteria and price point.¹ I would further hope that the analysis would evaluate the trade-offs for different combinations.² I would also hope that the FCC could evaluate and determine if there are various ways to lower the cost structure for providers and benefit from that in terms of lowering the price point and structure its programs and advise Congress accordingly.³

As to tailoring the program for local offerings, I am not sure what the question is implying. But if it should be read to imply that we should have a different program for areas served by different ISPs, I would be opposed. I don’t see why we would subsidize Comcast subscribers differently than Charter, AT&T or Verizon subscribers. I think such a program would be administratively chaotic and lead to problematic and inefficient incentives.

As to focusing on competition, I support improved market-based competition. Indeed, we are seeing significant market-based efforts to upgrade copper networks to fiber that I believe will improve broadband prices and offerings for tens of millions of Americans.

But no one should be under the illusion that the increased fiber competition to cable will result in entry level prices sufficient to result in low-income Americans increasing their levels of adoption. Noted telecom economist Dr. Scott Wallsten of the Technology Policy Institute analyzed the data relating to fiber-cable competition and in a 2021 paper demonstrated that additional cable-fiber competition does not bring the unconnected online.

Again, as I said in my written and oral testimony, I am in complete agreement with the 20 House Republicans who wrote Speaker Johnson last month asking for action on ACP, saying “We believe that bipartisan solutions are within reach to ensure uninterrupted access to the ACP while concurrently pursuing long-term funding strategies.” That is, I would hope Congress would provide an ACP extension and then, as part of a larger and necessary Universal Service Fund reform effort, design a more efficient and sustainable program that moves us toward universal adoption.

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Notes

Some have suggested a different variable of eligibility being based on not previously being on broadband. I would hope those advocating that position would acknowledge that the current law does not make that requirement. I would also hope they would have the decency to articulate how they think it would be administered. I think such a requirement would be an administrative nightmare for the ISPs and the recipients.
On this point, the Committee might review Dr. Horrigan’s 2021 affordability study which supports the “one size does not fit all” finding on the price point, as different people in the same income bracket had very different views as to what they would be willing to pay to obtain a broadband service. https://static1.squarespace.com/static/5aa8af1fc3c16a54bcbb0415/t/61ad77...
In this regard, I might reference the current debate occurring at the FCC over “bulk billing” practices in which various parties are arguing that bulk billing enables lower prices while some are arguing the opposite. My point is not to weigh in on the merits of that debate but to suggest the debate appears to show evidence that there may be ways, through the aggregation of demand, to lower prices.

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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