Will Congress Fund the ACP?

The clock is ticking on the Affordable Connectivity Program (ACP). Current estimates show the program may run out of funding as soon as the end of the first quarter in 2024, ten months from now. The ACP provides a $30 monthly discount to eligible households and up to a $75 monthly discount to households residing on Indian reservations. The program started with a little over 9 million households at the start of 2022, and in March 2023 was up to over 18 million enrollees. You can see the enrollment statistics on this website.

The only solution for keeping ACP operating is for Congress to refill the ACP funding bucket somehow. This topic was discussed at the recent House oversight hearings on broadband. Angela Siefer of NDIA (National Digital Inclusion Alliance) testified at that hearing and said that reauthorizing ACP was one of the biggest broadband issues on the plate for Congress. She talked about the many gains that have been made in getting broadband to low-income homes.

ACP was not created through a normal budget appropriations bill but was funded by $14.2 billion from the Infrastructure Investment and Jobs Act (IIJA). There was also rollover funding of $2.2 billion added from the previous Emergency Broadband Benefit program that had been funded by the CARES Act. That was a one-time funding event, and that means specific legislation is needed to keep the program running.

There has been talk of moving the responsibility of the ACP to the FCC’s Universal Service Fund. But that would mean the agency would have to find a new way to pay for it. The current fees levied on Internet telecommunications are not nearly large enough to absorb the ACP obligations. Congress has already been considering ways to eliminate the FCC’s Lifeline fund, so the FCC might not be a politically viable solution.

Big ISPs are in favor of the ACP. The largest recipient of the funding is Charter, and Comcast is the fourth largest. One of the things that makes it harder to continue the funding for ACP is that eleven of the top fifteen recipients of ACP are wireless carriers. There is some concern that there is fraud embedded in the claims of some of these companies, which gives ammunition to those who don’t want to see the subsidy continue.

For ISPs, one of the biggest issues that will arise from the end of the ACP is that the upcoming BEAD grants require ISPs to have a low-income plan. Most ISPS have been pointing to the ACP as their low-income solution. But if the ACP expires, ISPs will have to develop a self-funded discount plan in order to win grant funding.

Anybody who has been watching Congress this year understands the challenge of getting a divided Congress to agree to continue funding a subsidy program. Many DC pundits are convinced that there will be very little bipartisan legislation passed in 2023 and 2024. There has been a lot of recent effort aimed at getting more folks enrolled in ACP – but that effort will mean very little in the long run if the program runs out of money.

Broadband Redlining

The National Digital Inclusion Alliance (NDIA) recently asked the FCC to investigate the practice of digital redlining, where big ISPs only bring the best technology to more affluent neighborhoods while ignoring poor ones.

The NDIA has statistics to back up it’s claims. They used the FCC’s data in 2017 to look in detail at how AT&T had deployed DSL in Cleveland. Years ago, AT&T deployed the first generation of DSL almost everywhere in the market. However, the company became far more selective in where they upgraded to faster DSL.

NDIA mapped where AT&T had deployed VDSL and later DSL technologies in Cleveland and found that the company had deployed faster DSL mostly in affluent neighborhoods and in the suburbs while leaving older downtown neighborhoods with the older DSL. VDSL offers speeds of at least 18 Mbps, up to nearly 50 Mbps when deployed using two copper pairs. NDIA found that the 55% of the census blocks in downtown Cleveland still had DSL speeds of 6 Mbps or less while 22% had speeds below 3 Mbps, with some as slow as 768 Kbps. It’s likely that AT&T marketed all versions of DSL the same, advertising ‘up-to’ speeds that described the fastest product in the market.

The AT&T deployment in Cleveland is not an isolated incident and the same is true in communities across the country. It’s not just AT&T that’s done this and Verizon deployed its fiber FiOS product in a similar manner and largely ignored northeast downtowns in favor of serving suburbs. We also tend to think of cable company networks being deployed ubiquitously in cities, but there are pockets in every major city that don’t have cable broadband.

In the industry this practice is generally referred as cherry-picking. It means deploying a new network in the places where the costs are lower or the expected penetration rates are higher – and ignoring the parts of a market that don’t fit a desired financial profile.

Historically the big telcos weren’t allowed to cherry-pick or redline. AT&T was still largely a regulated company when the first DSL was deployed. But the trend over time to deregulate telephone providers has led to laxer regulation, and obviously in Ohio and many other states the telcos were not required to build later generations of DSL everywhere.

One of the reasons we see so much cherry-picking is that many states have adopted statewide cable franchising. Cable franchises were historically negotiated in each community, and cities insisted that a cable provider build to the whole community as a condition for getting a franchise. However, AT&T and other broadband companies lobbied hard for statewide franchising rules, using the storyline that they wanted to deploy fast DSL to bring cable service. The statewide franchises generally give a cable provide the ability to build anywhere in a state. The telcos argued that the cost of negotiating with every community was killing innovation and deployment of faster broadband. What these companies really wanted was the ability to cherry-pick with no obligation to serve whole communities.

The practice of cherry-picking is still common today and most commercial fiber overbuilders engage in it to some degree. Most overbuilders have limited financial resources and they deploy fiber or other broadband technologies in those places where they get the best return for their investment. Many communities have seen fiber built to businesses and to new subdivisions while ignoring the rest of the town.

It’s hard to fault s smaller fiber overbuilder for maximizing the return on their fiber investment. On the flip side, there are few communities that don’t want fiber everywhere. However, most communities are realistic and know that if they always insist on getting fiber everywhere they might not get it anywhere.

Communities that really care about good broadband everywhere are the ones that are building fiber themselves or trying to attract a partner that will build the whole community. However, there are numerous states that hinder or prohibit communities from building broadband networks, and many other cities find the costs to build new networks to be prohibitive. The majority of communities must rely on the good behavior of the incumbents, and unfortunately they don’t always do the right thing.