Low-Income Americans Benefit From Cheap Internet. So Do Comcast and Charter

Two years ago, US lawmakers created a $14.2 billion fund to help low-income families across America pay for internet service they would otherwise struggle to afford.

(Bloomberg) — Two years ago, US lawmakers created a $14.2 billion fund to help low-income families across America pay for internet service they would otherwise struggle to afford.

Since then, nearly 19 million households have come to rely on the subsidy — which provides $30 or more in monthly bill aid, helping to narrow the long-standing digital divide that has placed low-income families at a disadvantage for everything from educational services to employment opportunities. Broadband providers, including Comcast Corp. and Charter Communications Inc., have come to count on the program as a fresh source of income at a time when their customer growth rates are slowing.

But the program is on track to be exhausted by early next year. While both Republicans and Democrats agree that connecting more people to broadband is a worthy cause, intense partisan fights over debt and spending suggest the program could fail to win renewal from Congress. 

“There’s a real chance it won’t get re-upped,” said Greg Guice, director of government affairs for the policy group Public Knowledge, which works to expand internet access, in an interview. “That’s why we’re pushing, and pushing hard.”

The top six internet service providers participating in the Affordable Connectivity Program have raked in more than $2 billion since its inception, according to data from the Federal Communications Commission. Charter is the biggest beneficiary, receiving $910 million from early last year through the end of February, implying it’s cleared more than $1 billion by now.

Verizon Communications Inc.’s wireless unit TracFone took in $250 million from the program, and Comcast and mobile company T-Mobile US Inc. each collected more than $200 million, according to the FCC.

In addition to the government subsidies, the internet service providers also get revenue from the households that sign up for additional services, suggesting that the total benefit from the ACP is much higher.

As a result, Charter and the other providers have formed an unlikely partnership with consumer advocacy and civil rights groups to fight for the program’s future.

“We’ve been a big proponent,” of the ACP, Charter Chief Financial Officer Jessica Fischer told investors May 24. “We’ve done a lot of work to try to sign up a lot of our subscribers for that program. It’s really valuable to consumers.”

Enrollees include those who at times have had to drop broadband for lack of ability to pay, Fischer said. 

“Customers are able to be consistently subscribed to our product,” Fischer said. “It’s good for us in terms of a consistent subscription revenue. It’s also good for the customers” who maintain connections.

If the subsidy isn’t renewed, it could also jeopardize other federal initiatives that are aimed at helping close the digital divide, because many of them require internet service providers to participate in the ACP, according to the Pew Charitable Trusts. It would also leave providers the difficult choice of keeping or cutting customers who suddenly can’t pay their bills.

“Failure to extend the ACP with new funding could result in the biggest loss of internet connectivity ever,” the Leadership Conference on Civil and Human Rights said in a May 10 letter to lawmakers that also was signed by 165 groups and cities including Chicago and Philadelphia. “Without adequate and sustained funding, millions of vulnerable Americans currently relying on the program would see their internet bill jump or be disconnected entirely.”

The subsidy is provided to households with incomes less than 200% of the federal poverty level, or participants in programs such as food stamps and subsidized school lunches. About 25% of households taking part in the program are new to broadband, according to research by the Benton Institute for Broadband & Society. 

The program could run out of money in May 2024, FCC Chairwoman Jessica Rosenworcel said last month. “It’s a terrific program. I want to see it continue. I want to work with Congress to make sure that happens,” said Rosenworcel, a Democrat.

Some members of Congress have bristled at renewing funding, saying aid may have been abused or mismanaged.

“I have serious questions,” said Senator Ted Cruz of Texas, the top Republican on the Senate Commerce Committee that oversees communications issues, in an email. “I expect that my colleagues and I will take a hard look at the program’s future. Any extension of this program — if it should occur at all — must only happen after there’s a thorough review.”

In a May 8 letter to Sharon Diskin, the acting inspector general of the FCC, which helps run the program, Cruz cited data that he said “suggests that the vast majority of tax dollars have gone to those who already subscribed to broadband plans,” and the funding is “poorly targeted to the stated goal of reducing the digital divide.” 

The FCC has said about a dozen companies that receive payment from the government have claimed reimbursement for fraudulently enrolled individuals. One provider collected nearly $230,000 for providing service to 997 households enrolled based on the eligibility of the same 18-year old Medicaid recipient.

Despite the advantages, only about 36% of eligible households have enrolled in the ACP, according the Benton Institute. Some states like Michigan are pushing for increased visibility for the program to get more people to sign up and not lose support. 

The program has been backed by conservative voices as well as progressive groups.

“Given the enormous benefits that broadband brings to American families, I believe there is a very fair chance that ACP can and will get additional short term federal funding, even in these fiscally-conscious times,” Michael O’Rielly, a former Republican FCC commissioner, said in an email.

–With assistance from Jesse Levine.

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