Internet service providers including Charter, Verizon and Comcast are quietly scaling back efforts to revive the Affordable Connectivity Program, an expiring federal internet subsidy that helped low-income households pay their broadband bills.
The $14.2 billion program offered discounts of up to $30 a month to some qualifying households and up to $75 a month to those who lived on qualifying tribal lands, but officially ended in June after Congress decided not to renew the funding.
A December study by the Federal Communications Commission found that ACP serves about 23 million homes, two-thirds of which had spotty or no internet connection before signing up. In February, ACP stopped accepting new applications as funding for the program dwindled.
Following the ACP’s lapse, broadband companies reported losing some customers, but overall they weathered the crisis better than expected.
“Generally speaking, the impact on businesses so far has been less than feared,” said MoffettNathanson analyst Craig Moffett, “but this doesn’t take away from the fact that families may be losing access to broadband, which was important to them.”
Since the ACP expired, some Democratic and Republican lawmakers have been working to reinstate the program.
Broadband companies lobbied to have the ACP renewed before it expired, but with funding uncertain and the November elections pouring cold water on Congress, they have done little to revive the program since then.
“We know the difference between when an industry really wants something to happen and when they say, ‘Of course we support it,’ but they don’t spend money on advertising, they don’t spend money on lobbyists, they don’t spend money on research to back up their claims,” Blair Levin, an analyst at New Street Research, told CNBC.
Comcast owns NBCUniversal, the parent company of CNBC.
Capitol Hill Revival Initiative
Both Democrats and Republicans in the House and Senate have introduced bills to spend $6 billion to $7 billion to at least temporarily reopen ACPs.
“I’m hopeful we can get something done quickly, especially now as kids get ready to go back to school,” said Rep. Mike Carey, a Republican from Ohio, who co-sponsored the House bill with Rep. Nikki Budzinski, a Democrat from Illinois, in August.
The ACP was originally funded as the Emergency Broadband Benefit Program, a pandemic-era internet subsidy that quickly gained traction at a time when reliable access became essential in a world dominated by online classes and work.
Internet usage has surged in 2020 and 2021. Even now, usage levels remain well above pre-pandemic levels, according to broadband data provider Open Vault.
But as the coronavirus fades from people’s memories, convincing lawmakers to spend billions to extend those grants is an uphill battle.
One of the main reasons is the timing: it’s an election year.
For example, Republican Senator J.D. Vance of Ohio was one of the ACP’s leading supporters, but after being nominated as Republican presidential candidate Donald Trump’s running mate, Vance withdrew his support for the ACP.
In Congress, the Republican majority in the House and Democratic control of the Senate could flip in November, meaning Democratic leaders may choose to prioritize other priorities over the ACP while they control the Senate.
“This election is going to be very close, so they probably want to use floor time on judicial nominations,” Gigi Song, a consumer broadband advocate and lawyer who served as an FCC commissioner under Biden, told CNBC in an interview.
Still, Song believes that bipartisan support for the ACP means that reauthorizing it should be a surefire political win for Democrats.
“That’s one of the things that really baffles me, because to me, this is something you definitely want to do in an election year.”
As the Sept. 30 budget deadline approaches, the ACP has become even less of a priority as congressional leaders focus on passing a stopgap budget bill to avert a government shutdown. After September, Congress is expected to recess until after the election.
“This is dead.”
While some members of Congress are adamant that the window for ACP revival is narrowing, the private sector is keeping expectations in check.
“(ISPs) have made plans, they’ve told Wall Street that this space is over, and they’re just not putting their effort into it,” Song said.
Broadband providers have generally supported the ACP, but many in the industry believe the subsidies will benefit a broad range of American households, and there are examples of customers redeeming the money for other products such as mobile and pay TV.
For example, a fact sheet released by the White House in February found that a quarter of New York households used ACP.
After the election, a better option may be to start a new subsidy program from scratch while also boosting digital literacy among low-income consumers, people close to the companies said.
Song said industry players are likely to become disillusioned with the temporary model and lobby for a permanent solution, such as strengthening the universal service fund, but that comes with its own political obstacles, especially after a federal court ruled the universal service fund unconstitutional.
With or without private sector resources, lawmakers have vowed not to back down from their efforts to revive the ACP.
“What we’re looking at is the short-term issues,” Carey said, “and then we can come to an agreement to look at long-term plans.”
But dwindling support from industry partners has called into question the future of ACP, since it is ultimately the companies that can provide internet service and educate customers about the program.
“The industry has one voice on this issue because they are the organizations that provide this service,” Budzinski told CNBC. “It’s important that they’re at the table.”
Disillusionment with the industry
The expiration of the ACP has also cast a shadow over some businesses, including those that had invested heavily in enrolling new and existing customers in the program.
Charter Communications CEO Chris Winfree said in July that despite the company’s “tremendous efforts in the ACP program,” its lapse had affected both its losses and broadband connectivity for low-income customers.
Charter is one of the industry’s biggest advocates of ACP, receiving about $910 million from the program from 2022 through February 2023, according to FCC data. Comcast and Verizon each received more than $200 million from the program.
When Congress decided not to renew funding for the ACP, cable companies were forced to absorb a shock at a time when broadband customer growth was already stagnating due to increased competition and sluggish home sales.
Representatives for Charter and Comcast declined to comment. Verizon did not immediately respond to a request for comment.
In the second quarter, Charter reported a loss of 149,000 internet users and Comcast reported a loss of 120,000 broadband users, some of which can be attributed to ACP, but both companies expect the biggest impact in the third quarter.
Since the ACP ended, companies have tried to help customers move to lower-income or alternative internet plans, and in some cases, reverting them to their pre-subsidized plans.
Comcast said in July that it was helping customers transition to other broadband plans.
Charter has been trying to retain its lower-income customer base by rolling out new discount plans, such as offering ACP customers a year of free unlimited mobile lines.Other companies, such as Verizon, have decided to simply count the financial hit of losing customers, reporting a loss of 410,000 prepaid wireless subscribers in its second-quarter earnings.
The initial hit to the bottom line from the ACP expiration appears so far to be less than some company leaders and analysts initially expected, but the process isn’t over yet.
“So far, we’ve only seen chapter one, meaning we’ve only seen the impact on total subscriber numbers, but we haven’t yet seen the impact on bad loans or unpaid disconnections,” MoffettNathanson’s Moffett told CNBC. “That will become clear in the third quarter.”