It seems that almost every ISP going for broadband grants is promising to offer a low-income program by promising to take part in the Affordable Connectivity Program (ACP), which provides a $30 monthly discount on broadband rates for qualifying households. The discount is available for households earning less than 200% of the federal poverty level.
I love the idea of the ACP program. It certainly makes a bigger difference for households than the $9.25 Lifeline subsidy provided by the FCC. But I think it’s already time to start the discussion of what happens when the ACP program runs out of money.
Congress put $14.2 billion into the ACP fund effective January 1, 2022. That money was bolstered by about $2.2 billion left over from the Emergency Broadband Benefit program that came out of the CARES Act funding. I did a little math to see how long the funds will last. By my quick math, the ACP fund will have paid out about $1.3 billion by the end of this April 2022.
As of April 16, there are almost 11.6 million enrollees in the ACP program. That equates to a monthly draw of $348 million per month. And the draw is growing. This year the number of plan participants has been growing by over 700,000 per month. If fund participants keep growing at that rate, then the ACP fund will run dry in 25 months. If growth in fund participants slows to 500,000 per month, the ACP only last two additional months. If I had to make a bet, I would think that the number of new participants per month will accelerate even more than the current 700,000 per month. Even if nobody new enrolls in the ACP, the funding will be gone in a little less than four years.
If the ACP fund runs out of money, the subsidy will stop. If the fund participants grow at the current rate, then 28 million homes would see an immediate $30 rate increase – one that, by definition, most of them can’t afford. The only way for the ACP to continue is for Congress to continue to fund it. If there are 20 million ACP participants, that’s a new annual federal subsidy program of $7.2 billion per year. At 30 million participants, it’s $10.8 billion per year.
This sounds like the kind of subsidy that will draw a lot of political controversy. There have been major critics in Congress for years about the FCC’s Lifeline program, which costs only a fraction of the ACP numbers.
This also creates a dilemma for ISPs. Most ISPs will tell you that the cost to connect a new household to a fiber network can cost between $1,000 and $1,500 in cities depending upon whether drops are aerial or buried, and even more in rural areas with longer drops. Can an ISP justify making that kind of investment for a home getting the ACP discount if that discount will disappear in two years? Obviously, not everybody getting an ACP discount would drop service without the subsidy, but a lot will have no choice.
What’s also ironic is that the ACP program was designed as part of the Investment, Infrastructure, and Jobs Act and was meant to provide a subsidy to go along with the $42.5 billion in broadband grants in the BEAD grant program. My best guess of the timeline is that the ACP will be out of money by the time that BEAD grant households start coming online.
There are a whole lot of folks putting energy today into digital equity, and many of them tell me that the $30 discount really makes a difference to families. I’m sure many of them have done the same math as me and must be worried about what happens when the ACP runs out of money. Two years is almost no time in political terms, and anybody who wants the ACP fund to last more than two years needs to already be lobbying for the replacement funding.