FCC Ends Internet Subsidy Program for 23 Million Americans

The seal of the Federal Communications Commission (FCC) in Washington on Dec. 14, 2017. (Jacquelyn Martin/AP Photo)

The U.S. Federal Communications Commission (FCC) is ending a program that gave subsidies to millions of households that subscribe to high-speed internet, citing an exhaustion in funding.

The Affordable Connectivity Program (ACP) was established in December 2020 and provided eligible households with a discount of up to $30 per month for their internet subscriptions. For qualifying tribal lands, the discount was up to $75 per month. Since its inception, ACP has enrolled over 23 million subscribers across the United States.

Congress had provided $14.2 billion in funding for the program in 2021, which ran out in May. On May 31, FCC Chairwoman Jessica Rosenworcel announced that the agency would officially end ACP on June 1 because of a lack of additional funding.

“The Affordable Connectivity Program filled an important gap that provider low-income programs, state and local affordability programs, and the Lifeline program cannot fully address,” Ms. Rosenworcel said. “The Commission is available to provide any assistance Congress may need to support funding the ACP in the future and stands ready to resume the program if additional funding is provided.”

The FCC is encouraging service providers who took part in the initiative to develop their own low-cost subscription programs for low-income groups. The agency reminded ACP beneficiaries that they could resort to the Lifeline program, which provides a $9.25 per month broadband discount for low-income consumers.

However, the FCC noted that while Lifeline may reduce some financial pressure for certain ACP beneficiaries, it cannot replace the Affordable Connectivity Program. Moreover, “not all ACP households will qualify for Lifeline, and by statute, many ACP providers are not eligible to participate in the Lifeline program,” it said.

While the FCC suggests the ACP was beneficial, some critics warn about potential negative consequences from the program.

The ACP initiative was a topic of discussion during a May 2 Senate hearing on “The Future of Broadband Affordability.”

In his testimony, Paul Winfree, president of the Economic Policy Innovation Center, pointed out that even though the FCC claims the purpose of ACP was to reduce the digital divide for low-income users, most ACP subsidies were “going to households who already have broadband.”

He said that subsidizing demand can end up raising the prices of high-speed internet. Mr. Winfree suggested that the proportion of households receiving an ACP subsidy was positively associated with the prices of lower speed broadband plans—the more households received subsidies, the costlier the plans were.

“One possible explanation is that broadband service providers are marketing their lower-speed plans to those eligible to receive the ACP subsidy while raising the cost of these basic plans to capture larger proportions of the subsidy,” he said while estimating that the average cost of broadband is roughly $5.48 to $9.39 higher due to ACP.

Jennifer Case Nevarez, director and lead educator of the Community Learning Network, backed the necessity of ACP during the hearing.

The end of ACP would negatively affect students, seniors, veterans, those with low income, and rural communities, she said. People would lose access to many health care and essential services, with local economies and the national economy being impacted as well, Ms. Nevarez warned.

“When connectivity is critical for progress and a matter of national security and economic vitality, are we really going to let ACP end?” she asked. “Affordable, reliable internet is more than just a bi-partisan issue. It is a people issue with real-world impacts on health and wealth for Americans.”

Funding ACP

During the hearing, Sen. Ted Cruz (R-Tex.) criticized ACP, saying it was “not working as Congress intended: to assist those for whom cost was the barrier to gaining internet access.”

Though the FCC claims ACP to be a broad success because of the 23 million households enrolled in it, the vast majority of the people “already had high-speed internet,” he noted while citing an FCC survey showing that only 22 percent of households receiving ACP subsidies were previously without broadband.

“This means that for every household that didn’t subscribe to premium internet, the federal government is subsidizing four households that did.”

Mr. Cruz highlighted the inflationary effects of ACP on the price of internet service, citing testimony from Mr. Winfree.

“History has shown that when the federal government starts subsidizing demand—in higher education, in agriculture—the subsidy gets capitalized and prices go up. After all, why would corporations ever leave free money on the table? While those who receive the subsidy may realize an immediate cost reduction, the market price rises for everyone else,” he said.

The Biden administration has taken steps to boost high-speed internet connectivity. In June last year, the White House announced a $42.5 billion program to ensure that all Americans have access to reliable, affordable high-speed internet by the end of this decade.

On May 31, President Joe Biden called on Congress to extend ACP funding so that “tens of millions of Americans can continue to access this essential benefit,” said a White House Fact Sheet.

In January, Sen. Peter Welch (D-Vt.) introduced the Affordable Connectivity Program Extension Act of 2024, which would provide $7 billion in additional funding for ACP this fiscal year.

A survey by Benenson Strategy Group in collaboration with Comcast found there was “widespread concern” that losing ACP subsidies could result in job losses and losing access to health care for beneficiaries.

It says that “65 percent of ACP Participants fear losing their job or their household’s primary source of income ... 75 percent of ACP Participants fear losing access to important healthcare services, like online appointments or prescription medicine refills ... 81 percent of ACP parents worry about their children falling behind in school.”