Today, Luke Hogg and I submitted written testimony to the U.S. Senate Committee on Appropriations, Subcommittee on Commerce, Justice, Science and Related Agencies. Click here to download a pdf of the testimony.
Chair Shaheen, Ranking Member Moran, and members of the Subcommittee:
We are writing on behalf of the Foundation for American Innovation (formerly Lincoln Network), a think tank working to promote market-oriented ideas that strengthen American innovation. We write to encourage the Subcommittee to provide appropriations sufficient for a short-term continuation of the Federal Communication Commission’s (FCC) Affordable Connectivity Program (ACP). We also write to encourage the Subcommittee to include a recommendation in the report accompanying its appropriations bill requesting the Department of Commerce conduct a comprehensive comparative analysis of the various programs aimed at closing the digital divide.
Established by the Infrastructure Jobs and Investment Act (IIJA), the ACP provides a subsidy of up to $30 per month toward internet service for eligible households and up to $75 per month for households on certain Tribal lands. The program also provides one-time discounts for households to purchase certain electronic devices.
The program has enjoyed significant success helping connect low-income Americans to internet services, currently assisting nearly 17 million Americans across the country. Internet Service Providers (ISPs) covering more than 80 percent of the U.S. population have committed to offering high-speed plans to eligible households at $30 per month, making internet service virtually free for the vast majority of low-income Americans.
Unless Congress acts, the ACP is estimated to run out of money early next year. If the program lapses, millions of Americans would immediately lose this benefit, hampering bipartisan efforts to close the adoption gap of the digital divide, particularly in rural communities.
Furthermore, the ACP is just one of numerous federal government-run programs seeking to close the digital divide. To ensure that the federal government is maximizing the return on investment (ROI) of taxpayer dollars, we also ask that the Subcommittee include a recommendation in the report accompanying its appropriations bill requesting that the Department of Commerce conduct a comprehensive comparative analysis of the various programs aimed at closing the digital divide.
The cost of internet service is one of the most important factors that cause millions of households not to adopt broadband. As our research shows, a variety of other factors contribute to the adoption gap, including low awareness of low- or no-cost internet offerings, lack of clarity about eligibility, confusion about the application process, lack of trust in free or low-cost services, and structural limitations such as unstable housing and language barriers.
These factors help demonstrate why the ACP has been more successful than many past efforts at addressing the adoption gap. The FCC has awarded grants under the ACP to, and partnered with, a wide range of organizations, including ISPs, to serve as trusted community messengers to historically underserved populations, including rural communities and on Tribal lands.
When debating government-funded vouchers, policymakers should consider whether the benefits are worth the burden to taxpayers. Research by University of Maryland economist George Zuo shows that connecting a low-income household to broadband reduces the likelihood of unemployment by over four percent and increases annual income by nearly $1,400. A separate study from the U.S. Chamber Technology Engagement Center estimates that stronger broadband adoption and digital literacy in rural areas could increase economic activity by as much as $84 billion in sales and 360,000 new jobs.
The ACP is the most recent program that aims to close the adoption gap of the digital divide, but it is not the only one. Established by Congress in 1985, the Lifeline program is designed to help low-income households access telecommunications services. It was updated in 2016 to assist consumers in adopting broadband services. Applying to consumers with an income at or below 135 percent of the federal poverty level (FPL), “Lifeline provides up to a $9.25 monthly discount on service for eligible low-income subscribers and up to $34.25 per month for those on Tribal lands.”
Plagued by fraud in its early years, Lifeline has significantly improved since implementing a national verifier through the Universal Service Administrative Company (USAC) but remains far inferior to the ACP in getting low-income Americans connected. The requirements for participation in Lifeline are so onerous that the vast majority of major ISPs do not participate, as illustrated by the USAC’s online dashboard. In contrast, the vast majority of ISPs do participate in the ACP, no doubt in large part because of its simplicity.
Another related benefit of the ACP is that it is both technology and vendor neutral while Lifeline can only be used toward offerings that include voice service and are provided by an eligible telecommunications carrier (ETC), subject to numerous requirements. The diversity of options available under the ACP allows consumers more flexibility to find a service that meets their needs.
While the ACP is superior to Lifeline, instances of fraud prove that the ACP is not perfect. As it examines whether or not to appropriate new funds to the program, Congress should also take the opportunity to look critically at how to improve the ACP.
An obvious area for Congress to reform the ACP is its eligibility requirements, which are set at 200 percent FPL—a mark that is too high. With this threshold, households that do not need ACP vouchers to subscribe to broadband services have done so. Lowering the threshold to at or near the federal poverty level—for example, mirroring the Lifeline threshold of 135 percent FPL—would put the program on more sound footing and ensure that taxpayer funds are more narrowly targeted to households who truly need assistance.
Congress should also seek to improve ACP transparency. There are many questions about the program that cannot be answered without the right data. Requiring the USAC to publish more detailed information on the program would further help policymakers tweak the ACP to maximize its efficacy.
Aside from federal discount programs, many advocates and policymakers argue that another solution to the adoption gap is dramatically increasing government regulation of broadband, including price regulation. This argument is made despite the wide availability of free broadband service for low-income households, and ample research demonstrating that cost is but one factor preventing people from adopting broadband services.
In an environment where activists and some policymakers are pushing rate regulation, the ACP offers a market-based solution while remaining technology-neutral and avoiding preferences regarding the corporate structure of ISPs.
In conclusion, we encourage the Subcommittee to:
- Provide such sums as may be required to continue the Affordable Connectivity Program through FY2024.
- Consider revisions to the program that would reduce the cost to taxpayers, including reducing the eligibility requirements and requiring more transparency.
- Include a recommendation in the report accompanying the Subcommittee’s appropriations bill that requests the Department of Commerce undertake a comprehensive comparative analysis of federal programs intended to help close the digital divide. This report should have a particular focus on comparing the efficacy and ROI of Lifeline and the Affordable Connectivity Program.