As of the date that I wrote this blog, there are almost 15.6 million households using the broadband subsidy from the Affordable Connectivity Program (ACP). This program provides a $30 monthly discount for broadband to eligible households and up to a $75 monthly discount to households residing on an Indian reservation. The program started with a little over 9 million households at the start of 2022 and added over 500,000 new enrollees per month during the year. You can see the enrollment statistics on this website.
ACP was originally funded with $14.2 billion from the IIJA legislation. There was rollover funding of $2.2 billion added from the previous Emergency Broadband Benefit program that had been funded from the CARES Act. At the current level of enrollment, the ACP is paying out $477 million in a month, a number that gets bigger each month as more homes are added. Several folks who track the size of the fund say that it is going to run out of money sometime in the summer of 2024.
The obvious solution to keep ACP operating is for Congress to refill the ACP funding bucket. ACP was not created through a normal budget appropriations bill but was funded by the Infrastructure Investment and Jobs Act (IIJA). That was a one-time funding event, and that means specific legislation will be needed to keep the program running. Anybody who understands the implications of having a Congress divided between the two parties knows that this will be a major challenge in 2023 or 2024. Most DC pundits are predicting that there will be very little bipartisan legislation passed in the next two years. The chances of getting bipartisan approval of what many will consider a social program seem even lower.
That means that it’s time to think about what happens when the ACP fund runs dry. Nobody has an answer for how many households will drop broadband when the subsidy stops. Hopefully, a lot of ACP recipients will find a way to pay for more costly broadband. Almost 8.3 million, or 55% of the ACP recipients, get the subsidy for a cell phone. It’s likely that many of these folks will keep their cell phones. The remaining 6.8 million recipients use the ACP subsidy to offset home broadband prices. The entire premise of the ACP was to make it viable for low-income homes to afford home broadband, and it’s likely that many of these households won’t be able to afford broadband without the discount.
For the ISP industry, the end of ACP means seeing broadband customers drop over a few months by at least a few million subscribers. That will cause a footnote for the giant ISPs that regularly report customer counts as a success metric. Unfortunately, the biggest impact of ACP ending will be on any ISPs that most aggressively pushed the discount for customers. Some ISPs might try to counter the end of ACP by offering a lower-price product to low-income households, but few will find it feasible to discount broadband by $30.
This timing also has an interesting implication for the BEAD grant program. The grant legislation requires that grant winners participate in ACP, which will obviously be impossible if the plan ends. It’s obvious that whoever wrote that requirement into the grant rules thought that ACP would be funded into the future. It is looking unlikely that any households that get better broadband from a BEAD grant will have the opportunity to use the ACP discount.
I was uncomfortable from the day that ACP was announced that it would have staying power. From a funding perspective, the ACP program sits out on an island and is an easy target for politicians who are against spending money on social programs. Sustainable social programs like social security bring along a funding source – but ACP must periodically be funded from general funds to keep going.
What I find most distressing is the idea of bringing affordable broadband to homes, knowing that the discounts will likely disappear 18 months from now. It’s heartbreaking to think about the households who get a subsidized computer and an affordable broadband rate to support students, but who will see the rate climb higher sometime in 2024. It’s not impossible that some way will be found to continue the program, but the reality of politics in Washington DC doesn’t make that sound likely.