The Industry

Who is Using ACP?

The FCC announced on February 14 that 10 million households have enrolled in the new Affordable Connectivity Plan (ACP) that provides a $30 monthly discount off broadband bills. That’s a big number, but I’ve seen estimates that as many as 30 million homes might qualify for the discount. The Universal Service Administration Company (USAC) has released a few high-level details of the program that also bridges back to the predecessor Emergency Broadband Benefit (EBB) program.

The ACP plan is a new version of the EBB plan that was created by the Consolidated Appropriations Act, and that provided a discount of $50 per month for eligible homes as a response to the pandemic. The ACP replaced the EBB plan on December 31, 2021 and the nine million households were largely transitioned to the new plan – some no longer qualified for the new plan.

At the end of January, the ACP had 9,697,257 subscribers. Almost 6.4 million subscribers were getting the ACP discount for cellular plans, over 3.2 million subscribers of fixed broadband (cable, DSL, and fiber) were getting the discount, and only 54,000 subscribers of fixed wireless and satellite were enrolled.

One surprising aspect of the ACP plan is the relatively small number of households subscribing to the plans through traditional ISPs. For the fixed ISP, the 3.2 million ACP customers represent about 3.8% of the subscriber base of these companies collectively. WISP and satellite companies are only slightly behind in ACP subscribers at 3.7% of the customer base. I compare these percentages to 2020 Census data that shows that 11.4% of households live under the poverty level. Since the ACP plan is available to homes with incomes up to 200% of the 2021 Federal Poverty Guidelines, the eligible households are far higher than 11.4% of the population. I haven’t seen any good estimates of the total eligible households.

The most surprising statistic is that the ACP is mostly going to cellular carriers. That mostly means families with traditional cellular data plans, although it looks like the three big cellular companies are now up to almost one million homes using fixed cellular broadband plans with unlimited data.

I looked at how the cellular carriers are marketing ACP, and the AT&T plan is typical of the others. AT&T is offering a phone with unlimited telephone and text and 5 gigabytes of data for $30 per month. For an eligible ACP family that means a free plan – although each household is eligible for only one discount. An ACP customer can upgrade to 15 gigabytes and pay $10 out-of-pocket, or to AT&T’s ‘unlimited’ plan for $20 per month – a plan that is not unlimited and where data speeds are reported to be restricted after hitting 22 GB per month.

I can only speculate why the cellular companies are selling ACP at twice the rate of landline ISPs. It’s fairly obvious that cellular companies are far better at marketing than landline ISPs. My cable company mails me marketing literature every month, and I don’t think we’ve ever opened one. But I hear advertising about the latest cellular plans all of the time, which is perhaps easier to pull off for companies that work nationwide.

I also think there is a demographic issue at play. We know from looking at FCC 477 data that landline penetration rates in the poorest neighborhoods of major cities are far lower than elsewhere. It’s not unusual to find neighborhoods where less than half of homes have a landline broadband connection, and some neighborhoods are far lower than that. The cellular companies have become the de facto ISP in some poor neighborhoods because it’s an easy choice to pick a cellphone for a household budget that can afford both cellular and landline broadband. The ACP plan dollars are going to where the need is. Let’s face it, even after a $30 dollar discount most cable company plans are still unaffordable for low-income homes.

Interestingly, this is not how the plan is being portrayed by policymakers. ACP is being portrayed as helping to solve the digital divide, and I’m not sure that it is. Cellphone data is many things, but it is not a substitute for a landline broadband connection for students trying to do homework. A 5 or a 15-gigabyte cellphone data plan will allow somebody to participate in many of the most important parts of the digital world. But these plans are not a substitute for a landline connection when OpenVault reported recently that the average landline broadband subscriber now uses over half of a terabyte of data per month. Let’s not pretend that 5 gigabytes per month is a reasonable substitute for 500 gigabytes. Giving one family member a discount on a cellphone is also not solving the digital divide – with a 95% national cellular penetration rate, that home almost certainly had the cell phone before the discount plans.

Don’t read these observations as being negative against the ACP program. I think giving a discount to low-income homes for connectivity is a good idea. But just as happened with the Lifeline plan in the past, DC policymakers seem to be declaring ACP a success without looking at how the plan is being deployed. We aren’t going to solve the digital divide by giving $30 discounts to cell phone users.

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