AT&T announced that it will withdraw its 5G home Internet product in New York rather than comply with the law that requires it to offer broadband rates as low as $15.
The law went into effect recently when the U.S. Supreme Court refused to hear the appeal for the New York law approved by the New York legislature in 2018. The Affordable Broadband Act requires ISPs to offer broadband rates to low-income households of no more than $15 for 15 Mbps (rumored to soon to be 100 Mbps) or $20 for 200 Mbps. Earlier this year, the 2nd U.S. Circuit Court of Appeals in Manhattan ruled that federal telecommunications law does not stop states from regulating broadband rates, and when the Supreme Court refused to review the case, the law went into effect.
It’s pretty extraordinary when a huge company like AT&T walks away from a state over reduced profits. The company has $122 billion in revenues for the year ending September 2024, and it’s impossible to believe that the company can’t afford to give a discount to a few of its customers.
What is most extraordinary about AT&T’s decision is that the company has been touting its FWA wireless technology as the replacement for customers who lose copper lines. The company announced recently that it intends to retire all copper nationwide by the end of 2029. This new announcement means AT&T is willing to tear down rural copper in New York and provide customers with no alternative. To some degree, they were going to do that anyway since many rural areas don’t have adequate cellular coverage to support the AT&T wireless product.
It’s hard to think that New York regulators won’t quickly react to AT&T walking away from existing FWA customers. This decision might ultimately cost the company more in fines than what it would lose from customer discounts.
It’s hard to see AT&T’s decision as anything other than a political decision and not a monetary one. The FWA products likely has high margins since there are no wires involved. AT&T could have reacted differently. For example, they could have required FWA customers to buy the wireless receiver, which would have eliminated the biggest cost of offering the service. This feels more like a warning to other states about implementing similar laws.
In a related story, Starlink wants an exemption from the new law. The company says it has less than 20,000 customers in the state – which would qualify for an exemption. Other ISPs, like Windstream, are asking for the same exemption. It’s a little hard to accept Starlink’s story of having less than 20,000 customers in the state since the company claims 1.4 million customers in the U.S., but if the company is under that threshold, it should be exempt.
What does that mean for Starlink’s future in the state? Will it permanently cap customers at 20,000 to stay out of the discount program? This seems like it would preclude Starlink from taking any New York BEAD funding to add more customers in rural areas.
One interesting feature of both FWA wireless and Starlink to consider is that these products don’t offer different speed tiers. The networks of both ISPs are not equipped to selectively choke customers to slower speeds, so a $15 customer would get the same bandwidth as everybody else. Both products deliver all-you-can-eat broadband, with no caps on speeds or the amount of broadband used during a month.
It will be interesting to see if other states consider putting the burden for customer discounts on ISPs. There is no guarantee that if this issue spreads to other states that the Supreme Court won’t decide to hear the issue.
Perhaps the biggest problem with the law is that it could bankrupt small ISPs that build expensive networks. 20,000 might seem like a lot of customers, but it’s not. The New York legislators seemingly picked the $15 rate of out the air with no consideration of what that might mean for ISPs. This feels like regulating with a sledge hammer rather than doing the research to develop a long-term solution that can work for both ISPs and customers.