Broadband Grants and Affordable Rates

One of the things that I don’t hear discussed enough is that some of the ISPs chasing rural broadband grants have high broadband rates. I’m curious how much emphasis State Broadband offices will put on the retail rates of grant applicants when evaluating grant winners.

The two most easily identified ISPs with high broadband rates are Charter and Comcast. Charter rates for standalone basic broadband are now over $90 in many markets, and Comcast is nearing $100 per month. Both ISPs don’t give any indication that they are going to slow down with annual rate increases. In fact, now that broadband customer growth has slowed, rate increases are the best path for these companies to satisfy Wall Street expectations.

But these two companies aren’t the only expensive ISPs that are winning grants. Any other big cable companies that will be pursuing grant funding have rates similar to Charter and Comcast. Many of the RDOF winners have high rates. Nextlink has affordable slower speeds but charges $100 for 300 Mbps – the starting speed for cable companies. Resound Networks currently charges $99 for 100 Mbps. I’ve seen several smaller RDOF winners with base rates starting around $100.

We already know that the high broadband rates of the cable companies in cities are a major factor in the growth of broadband deserts where many households can’t afford broadband. Numerous studies have shown a direct correlation between household income and broadband adoption – high rates make it harder to afford broadband.

To be fair to the big cable companies, most have special low rates for low-income residents, but that also comes with slower speeds. But I have to wonder if cable companies will be as willing to connect low-income homes on a newly built fiber network where it can easily cost over $1,000 to add a new subscriber. It’s relatively inexpensive in cities to add a customer to a coaxial cable network, but will the cable companies be willing to make a significant investment for homes that will have low rates that will take many years to break even?

A lot of ISPs participate in the FCC’s ACP plan that gives low-income subscribers a $30 monthly discount. But the funding for that program will be gone around the end of the first quarter of 2024, and it’s anybody’s guess if a divided Congress will approve the continuation of a low-income program.

What is not being discussed enough is that most of the ISPs that participate in ACP or have their own low-income plan don’t aggressively push saving to low-income households. It’s easy for public relations purposes to have these programs but not let customers know the discounts exist. The ISP that brags the loudest about serving low-income households is Comcast. The company’s website says that it has brought its low-income product to 10 million people since 2011. That’s impressive and probably equates to something like 4 million homes. It’s less impressive when you realize that Comcast passes over 61 million homes. ACP is eligible to homes with household incomes up to 200% of the level of poverty. My quickie estimate is that perhaps 13 million homes in the Comcast footprint are eligible for the ACP discount (I’d appreciate other estimates).

But back to high rates. There is a significant level of poverty in many rural areas. In the states I’ve been working in recently, the level of poverty in rural counties is generally higher than the statewide average. How much good are we doing for rural counties when we fund broadband networks where the rates will be over $90? Even with the ACP discount the cost of broadband will be over $60.

I contrast this to many cooperatives and even the larger telco overbuilders. Most of them have broadband rates in the $60 – $70 range. If I’m a rural customer and some giant ISP is going to bring fiber using grant money, I’d prefer the rates from AT&T or Frontier over the big cable companies. But the surveys I’ve done show that folks prefer local ISPs over big ISPs – they are hoping that grants will go cooperatives, small telcos, and other local ISPs.

I expect the BEAD grants will have the most complicated scoring of any broadband grant program ever. There are so many requirements for qualifying for a BEAD grant that it’s hard to think broadband rates can play a significant role in determining who wins the grants. That’s unfortunate because, in the long run, rates might be the most important factor for an ISP that comes to a rural area.

3 thoughts on “Broadband Grants and Affordable Rates

  1. Broadband rates haven’t even kept up with inflation while speeds on cable or fiber plants have increased 50-100x.

    A $45 cable internet plan in 2003 at a whopping 5Mbps would be $75 20 years later but the base speeds for most cable operators are 300Mbps. In most markets, Spectrum is around $70 for 300 and Comcast is around 75 for 200.

    Meanwhile that 2003 cable service was subsidized by the bundled video services and there was essentially no streaming content. Today, video packages are in rapid decline and the ‘cable TV’ company is an ISP with a video offering.

    That’s not meant as a defense of ‘big cable’, just want to put some perspective on the price.

    All this BEAD money, along with many of the previous funding models, do not benefit local operators. The rules governing the use, the testing requirements, the penalties, and the ability to lobby state governments to put their finger on the scale, has put most of this funding into the hands of large corps to overbuild the small companies. This government money absolutely does not benefit local operators, it’s a proxy war against them with the government funding large ISPs to overbuild.

  2. Doug:
    If you convert initial capital costs for FTTH into a continuing stream of payments (eg, servicing a loan), then capital costs are 1/3 or less of the total cost of providing service. The rest is operating cost. MCFiber has chosen not
    to apply for USGov grants because, in our judgement and experience, the REAL cost of such grants is greater than the cost of commercial debt. In other words, we are providing our slowest (100meg) full duplex FTTH service for $90/month in spite of paying commercial rates for our capital funding. I must say that we are not experiencing much (if any) pushback from customers ref. our prices**. The main complaint is that we can’t hook them all up fast enough.
    Tim Nulty

    (**Part of this the fact that, on top of the internet service we provide unlimited VOIP for $15/mo and 260 channels of video for $50/mo. Thus, our full “triple play” package is only $155/mo–which is, if I may so, a great deal in today’s market.)

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