This is Dominic Pino filling in for Audrey Fahlberg filling in for Jim Geraghty, who is enjoying Alaska on the NRI cruise. Next week, you’ll have me Monday through Wednesday, and then the Jolt will go back to Audrey.
On the menu today: A follow-up on my February 15 Morning Jolt about web welfare, the $30-per-month internet-subsidy program that Congress ended by doing what it does best: nothing. Funding officially ran out on May 31, and we can now see how the industry has responded to the subsidies going away.
The Metamorphosis of a Welfare Program
The impossible has happened: A welfare program ended. Congress created a web-welfare program on an “emergency” basis during the Covid pandemic, and, in classic Washington form, politicians tried to make it permanent. They rebranded it the Affordable Connectivity Program (ACP) and gave it billions in extra funding. The program provided subsidies of up to $30 per month to qualifying households for broadband-internet service.
It began providing benefits in May 2021 and accumulated over 20 million enrollees. Congress did not give it more funding, though, and the Federal Communications Commission (FCC), which was responsible for administering it, stopped accepting new enrollees in February of this year. The ACP paid its last benefits on May 31, and all funding for it has been exhausted.
Are millions of people losing internet access? No. We knew that wouldn’t happen, even though ACP supporters were fearmongering that it would.
The FCC tried to spin its own survey data to make the expiration of the ACP look worse than it would really be. The actual survey found that about 80 percent of ACP recipients had internet access before ACP. Many recipients were using the ACP to add a second service to one they already had. Only 22 percent of respondents said that they’d had no internet service before the ACP. And these results were from a survey with a response rate of 4.8 percent, well below the response rate of 70 or 80 percent that the Office of Management and Budget expects for government surveys.
Like other pandemic-era programs, the ACP was also prone to fraud. One way to qualify for subsidies was by having a household member enrolled in the free- or reduced-lunch program. A school in Florida with 200 students had 1,884 households enrolled in the ACP, the FCC’s inspector general found, one of dozens of schools nationwide similarly over-enrolled. An internet-service provider has already had to repay $50 million in improper benefits. The Democratic majority on the FCC refused to require recipients to do something so basic as provide the last four digits of their Social Security numbers, a fraud-prevention measure the inspector general had suggested.
Yet this program, which did not give anyone anything as recently as April 2021, was supposed to be vital. It began as an “emergency” program, for an emergency that never existed, namely that millions of people would lose internet access during the pandemic. The FCC, under then-chairman Ajit Pai, had already solved that potential problem using tools it already had, and essentially nobody lost service at the height of the pandemic recession when unemployment hit record highs. In March and April 2020, the FCC got 498 complaints of service being cut off. Out of 330 million Americans, that’s pretty darn good.
It wasn’t until a year later, when most people were back at work, that the “emergency” program even began providing benefits. It was then reclassified (along with, well, everything) as “infrastructure” and renamed the Affordable Connectivity Program. New funding was included in the bipartisan infrastructure law in 2021, a few billion in that $1.1 trillion behemoth. It was well on its way to becoming a permanent welfare program.
To seal the deal, politicians have recently begun saying the ACP is a necessity. A bipartisan group of legislators are calling for its renewal. Senate Democrats, in a letter from October, said, “Without an extension, nearly 21 million families already enrolled in the ACP will lose access to affordable broadband services that are critical to their everyday lives.” Senator J. D. Vance (R., Ohio) said of internet connectivity, “I think it’s one of those things like food, like medicine, where we’ve got to make sure everybody has access to it.” The White House said funding had to be extended “so tens of millions of Americans can continue to access this essential benefit.”
Why Telecoms Loved Web Welfare
Also supporting extension were internet-service providers. The ACP has been a great deal for them, putting them on the receiving end of billions of federal dollars. Charter Communications has received $3 billion through the program. T-Mobile has received $1 billion. One company was founded in 2021 to provide service through the ACP. It is called “Excess Telecom,” a great name for sucking up federal largesse, and it has received $910 million through the program, about the same as the much larger and more established Verizon.
Verizon paid at least ten different outside lobbyists a combined total of $470,000 to work on securing more ACP funding in the first quarter of 2024, lobbying-disclosure reports show. Charter paid at least eight different outside lobbyists a total of $420,000. Other major telecoms spent similarly, and when you also include their own internal lobbying spending, there has been a multi-million dollar effort to keep the ACP gravy train running.
Because the internet is forever, it’s easy to see how internet-service providers were capitalizing on the ACP. We can look on the Wayback Machine to see how they were advertising to low-income customers before, during, and after the program.
For example, in February 2021, before the original ACP program began, AT&T advertised low-cost plans for $10 or less per month:
After the ACP was established, the exact same webpage was updated to call service “free” with enrollment in the ACP, with the sticker price now advertised as being up to $30 per month further down the page. From May 2022:
This was a perfectly rational response to incentives by AT&T. If one of its customers subscribed to the $10 per month plan previously and switched to the $30 per month plan with full ACP benefits, AT&T’s revenue for that account would go up by $20, courtesy of taxpayers. Great deal for AT&T, not so great for taxpayers.
You’ll notice the speed of the service went up under the ACP, which is good for the people who are getting the service. But the ACP is supposed to be about connecting people who were not previously online, not speeding up service for people who already have it. If we want people to have faster internet, why stop at $30 per month? If the subsidy was $100 per month, people could have even faster internet, which would be even better.
Going the other direction, it’s easy to see why the ACP wasn’t necessary. Xfinity also advertised its low-cost offering as “free” with ACP enrollment. From March 2023:
Then, after the ACP ended, Xfinity started offering internet for $9.95 per month. Here’s what the exact same webpage looks like today:
The $30 subsidy way overshot what plans for low-income customers actually cost. Xfinity advertises the $9.95 price as good for speeds up to 50 Mbps, double the speed AT&T was offering for $10 per month in February 2021, pre-ACP. Competition leading to better service at lower prices — you love to see it.
Cox currently offers a plan specifically for low-income households with children, also for $9.95 per month, and it’s even faster, with speeds up to 100 Mbps. It’s called “Connect2Compete,” an apt name both for helping customers to compete by providing internet access and for being an illustration of how competition between companies, rather than government subsidies, leads to lower prices.
It’s not as though broadband prices had been steadily rising before the ACP. On the contrary, they had been falling for years. Economic historian Gale Pooley calculated that between 2015 and 2023, the average price for one month of broadband service in the U.S. had declined by 37 percent. Over the same time period, average internet speed increased by 213 percent.
To put these numbers in context for people, Pooley calculated that someone working at the average hourly wage for unskilled work in 2015 had to work 5.8 hours to afford one month of internet. In 2023, adjusted for the increase in speed, someone working at the average hourly wage for unskilled work only had to work 0.8 hours to afford the same service. Put differently, Pooley writes, “For the time required to earn the money to buy one month of broadband services in 2015, you could get over seven months (608 percent more) in 2023.”
This is not an industry the government needs to be subsidizing. Prices were coming down on their own, and there were many options available for low-income families that cost much less than $30 per month before the ACP. Those options have now come back to the fore in the program’s absence.
Internet-service providers were singing a very different tune to investors than they were to politicians. While they were lobbying in Washington to keep ACP, they were telling investors that the expiration of ACP wouldn’t cost them customers.
Communications Daily reported in March that “Numerous ISPs believe the affordable connectivity program’s demise would give them a chance to snag subscribers from competitors,” and, “In earnings calls with analysts this quarter, many cable companies and telcos also told Wall Street they don’t expect to take major hits to their subscriber base if the program ends.” If the absence of the program isn’t going to result in subscriber losses, then the program couldn’t have been the thing that was keeping people connected.
Internet-service providers have followed through on their promises to compete for customers without the ACP. For example, on May 29, Xfinity began offering a new streaming bundle of Peacock Premium, Netflix with ads, and Apple TV+ for $15 per month to its broadband subscribers. Paying for each of those separately would cost $23 per month. Pairing that discount with a broadband subscription is clearly an enticement to get customers to switch to Xfinity, and it was launched as the ACP was expiring.
Charter is trying to snag subscribers by offering people who switch to its Spectrum internet service who were previously enrolled in the ACP a free unlimited mobile-internet plan for a year to “help offset the loss of the $30 per month ACP credit.” The company’s unlimited plans retail at $29.99 per month — in other words, a one-for-one replacement for the taxpayer money.
Many of the largest national providers, including Xfinity, Charter, Cox, AT&T, and Verizon, all signed on to a White House statement on May 31 about “voluntarily offering their current ACP subscribers and other eligible households a high-speed internet plan for $30 per month or less, with no fees and data caps, until the end of 2024.” The corporatism is off-putting, but at least it provides further proof that taxpayers don’t need to be on the hook for the companies to offer low-cost service for low-income households.
Congress Must Keep the ACP Unfunded
All Congress has to do to keep this program unfunded is nothing. Proponents are still trying to argue it should be renewed, some using a bogus economic-impact study written by a geometry professor and a high-school student that claims the program creates $4 in economic growth for every $1 it spends. And with all that lobbying, the issue will not go away easily.
But the ACP debate is getting in the way of Congress’s other telecommunications policies. The FCC’s authority to auction off spectrum bands lapsed in 2023 and has not been renewed. That means the FCC can’t sell radio frequencies for commercial use, a requirement for any company looking to make advances in wireless communications. Attaching ACP funding to the spectrum legislation, as Senate Democrats have done, is only making it more difficult to solve that ongoing problem.
The Economic Policy Innovation Center, which has produced research on how the ACP allows internet-service providers to raise their prices and capture the subsidy, notes that the White House has called the ACP “a key component of Bidenomics.” Perhaps that’s part of the reason why the Republican Study Committee budget supported ending the program. If Republicans can agree on anything, it should be opposition to extending a component of Bidenomics.
There’s plenty more from the pandemic era that the federal government needs to roll back, and the ACP’s impact on the overall budget isn’t huge right now. But costs would only go one direction in the future, as the Biden administration wants to expand eligibility and turn web welfare into just another government benefit on top of all the others. Instead of distorting yet another industry with federal subsidies, Congress should keep the ACP unfunded and move on to other more pressing policy priorities.