Lawmakers Hear ACP Lapse May Cut BEAD Builds

UPDATE “It would be a significant waste of government funds to let this program lapse,” said Senator Ben Ray Luján (D-NM). He was speaking about the FCC’s Affordable Connectivity Program (ACP), which is due to run out of money this month unless Congress appropriates more funds.

Luján chairs the Subcommittee on Communications, Media and Broadband, and is a member of a bipartisan working group that’s reviewing options to refund the ACP, which distributes subsidies to providers for low-cost broadband. During a hearing yesterday on the future of broadband affordability, witnesses discussed the connection between the ACP and BEAD, the impact of a potential lapse or end of ACP and ways to address existing shortfalls in broadband affordability programs.

Ranking Member Ted Cruz (R-TX) said government subsidies raise prices for everyone, noting that before the ACP, some ISPs offered low-cost plans starting at $10 a month, however since the ACP floor was $30, ISPs raised their lowest prices to that. “History shows when the government starts subsidizing demand, prices go up, and prices rise for everybody else.”

Cruz continued, “The FCC oversubscribed ACP, blowing through the money.” FCC Chair Jessica Rosenworcel calls the program a success, he explained, but “most of the subscribers already had internet” service, instead of the program mostly serving those without internet access as originally intended.

John Thune (R-SD) agreed the agency expanded the ACP, turning it into a more expensive program. “ACP does a poor job of directing money to those who truly need it. Without performance goals, we have no evidence to support that ACP or Lifeline connects truly unserved to the internet.”

Thune believes “it’s imperative” the Commission conduct analysis to determine who the money is helping. “Simply saying ACP has 23 million enrollees is not undertaking the right analysis. We need a better survey to ensure the program actually reaches those in need,” he said.

Blair Levin, a policy advisor to New Street Research and former FCC staffer, testified representing himself personally. He said FCC research showed the bulk of ACP recipients start and then drop their internet service repeatedly based on financial need.

Jennifer Case Nevarez is the director and lead educator for the Community Learning Network in New Mexico and a member of the BEAD support team in that state. She cited the situation of a woman she works with “to highlight the need for Congress to act.” This woman lives and works on a farm in rural New Mexico. “She, and many others like her, will go without internet at home, and drive 50 miles to the public library to check her email.” Nearly half of the ACP recipients in New Mexico are veterans and many are over the age of 50. Many of the 320,000 ACP recipients in the state are on Tribal lands. Of those, one out of four are at risk of losing their connectivity, Nevarez said.

“Deploying fiber is extra costly in rural areas that have a low population density, “ Nevarez testified. “Local providers often run on tight margins. They are at a high risk of bankruptcy without a consistent pool of customers,” she explained.

Kathryn de Wit, project director for the Broadband Access Initiative of The Pew Charitable Trusts, agreed and added that BEAD success is dependent on ACP. “Providers have expressed that they won’t participate in BEAD if ACP goes away. ACP should be improved. We must extend ACP for Americans to have access to healthcare, job opportunities and more. There is no time to waste.”

Levin said: “The cost of digital exclusion is large and growing. The pandemic has largely ended but the shift to online has not. AI will magnify those costs.” If ACP ends, he said, “America is about to take greater steps to widen the digital divide.”

“Rural areas are suffering from the growing epidemic of hospital closures. That makes telehealth more important.” Levin cited a study that showed accessing a televisit first may save someone from having to go to a hospital emergency room, saving $3,000. He agrees ACP needs reforms. “Let’s adopt a clean extension and then put in reforms.”

“Subsidizing demand makes consumers less sensitive to price and quality,” said Economic Policy Innovation Center President/CEO Dr. Paul Winfree. “Without it [meaning subsidies] ISPs would be forced to compete for customers with plans. In the last week, we saw a major ISP offer a $9.90 plan that wasn’t offered before.”

Lujan asked Nevarez what happens when a small, rural provider goes bankrupt. “In rural New Mexico, finding alternative providers is difficult. When a small, rural community builds a network, there’s often no competition.” In the aftermath of a bankruptcy, “small businesses that use that network also fail,” she said.

Tribes are building their own networks and operating them, Nevarez told lawmakers. “They train their fiber optics workforce. If it goes away, those jobs go away and they have to move to cities.”

de Wit emphasized that the ACP and BEAD were designed to work together. “I do believe an ACP lapse would affect BEAD builds. We need every single dollar for building networks in urban, suburban and rural communities.” Having both programs up and running, she emphasized, “means we are providing a guaranteed customer base.”

Peter Welch (D-VT) called the ACP situation “urgent” and “immediate.” He introduced a measure to re-fund the program, Inside Towers reported. “The debate over whether everybody needs the internet is over! Extending electricity [to rural farms] in the ‘30s was a social decision. In COVID, the decision was made for us. All the work doesn’t do any good for folks if they can’t get to it,” meaning the internet.

Welch agrees ACP needs reforms, but emphasized, “We’re not there yet and we can’t let this expire. I hope all of us work together to at least get to a short-term fix until the working group comes up with a long-term solution. My enormous apprehension is that this Congress may let it fail.”

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