With Congress facing a Sept. 30 deadline to pass both its appropriations and farm bills, and the threat of a government shutdown looming, the options to find a moving vehicle to which Congress could attach an extension of the $14 Affordable Connectivity Program (ACP) are running short.
The ACP is expected to run out of federal funding within the next year. In anticipation of legislation to continue funding, some have called for an expansion of the program, while others have urged that the ACP be scaled back.
Despite its flaws, the ACP is superior to direct rate regulation and municipal broadband. According to a recent International Center for Law & Economics policy brief, the program should be continued with some straightforward adjustments.
Approximately 95 percent of households with access to the internet have a connection at home. Most households connect through a paid subscription with an internet provider. Some—survey responses would suggest—can connect without paying for a subscription.
With such a high adoption rate for internet service, it may be difficult for any policy to connect the last 5 percent of unconnected households. Indeed, some portion of the population likely would not sign up for an at-home connection even if the service were free. Thus, we should be skeptical of any claims that a program such as the ACP will make any meaningful difference in increasing at-home internet adoption.
At the same time, many supporters of the ACP and its predecessors argue that the main purpose of these programs is to ease the cost burden for households that are already connected. They make the reasonable claim that, over the past two decades, internet service has transitioned from a luxury to a near necessity. The COVID-19 pandemic sped up that transition, with the shift to remote work and schooling and the increased demand for telemedicine. Thus, ACP subsidies should be seen as important as Supplemental Nutrition Assistance Program (SNAP) benefits, Affordable Care Act subsidies, or Section 8 housing benefits. Viewed in this light, the ACP can be seen as enormously successful.
Even so, the ACP has its flaws. On the one hand, consumers complain that provisions to prevent and detect waste and fraud in the program make it difficult and time-consuming to enroll. On the other hand, despite such anti-fraud provisions, the program has experienced several high-profile instances of fraud and abuse, such as providers enrolling thousands of ineligible customers or overcharging the program for subsidized equipment.
Despite its shortcomings, the ACP is a much better policy than other alternatives, such as direct rate regulation or municipal broadband. Rate regulation discourages investment and innovation in the broadband market. Municipal broadband results in unfair competition and often wastes local taxpayer money. In contrast, the ACP likely fosters investment by encouraging household Internet adoption. In addition, unlike municipal broadband, the ACP does not favor one provider over another and does not require any state or local funding.
The ACP is easy to qualify for, but difficult to enroll in. Surveys show at least two-thirds of ACP-eligible households do not participate in the program. The ACP’s eligibility should be tightened to focus on low-income households without at-home internet service. Hand-in-hand with tightened eligibility, the program should also streamline the process and reduce the burden of enrolling in ACP.
More than half of ACP-eligible households claim they have either never heard of the program or had heard of it but didn’t know anything about it. Any reforms to the ACP should increase its outreach to eligible households through existing programs to support low-income households, such as SNAP, Medicaid, and Section 8. The FCC should also provide funding to local organizations, such as libraries, schools, community centers, and nonprofits, to inform eligible households and assist them with applying for the ACP.
The most substantial reform to ACP would be to issue subsidies directly to consumers—in the form of vouchers or debit cards—rather than to service providers. This would empower consumers to purchase the devices and subscribe to the services that best fit their demands. It would also make it easier for consumers to switch plans or providers, thereby fostering competition. Moreover, direct subsidies to consumers would reduce the likelihood of erroneously or fraudulently enrolling ineligible households or multiple members of the same household.
As Congress considers additional funding for the ACP, we urge legislators to take up these straightforward reforms to improve the efficiency and efficacy of the program. They would likely reduce the program's costs, thereby allowing more of the appropriated funds to be spent on the households the program is intended to help.
Eric Fruits is a senior scholar with the International Center for Law & Economics.
