Democrats and Republicans Agree: The ACP is in Need of Reform

May 6, 2024

WASHINGTON, D.C. – In case you missed it, last week’s U.S. Senate Commerce Subcommittee on Communications, Media, and Broadband hearing on broadband affordability highlighted the need for Congress to reform the Affordable Connectivity Program (ACP) before spending billions of additional taxpayer dollars to subsidize the internet bills of many households who previously had access to high-speed internet.

During the hearing, both Democrats and Republicans acknowledged that the ACP has inflated the price of broadband for all Americans while paying the bills of many households who already had access to high-speed internet.

Key highlights from the hearing can be found below.

To watch the hearing, click HERE or on the image above.

Dr. Paul Winfree in response to a question from Sen. Ted Cruz (R-Texas) on the two ways that ACP has had an inflationary impact on broadband prices:

“There are two ways that ACP affects prices. The first way that it affects prices is by setting, essentially, a price floor for plans. What my research shows and is that predominantly hits, again, urban areas. What we saw before ACP is a bunch of plans that were say, $20 up, $20 down, $10 per month. Those went away during ACP. So the speed levels went up moderately, but the price level went from $10 to $30 [per month], because that’s where the ACP benchmark is. So all those cheap plans went away.

“And then the second way that ACP affects inflation is through government spending. Right now, we live in an economic environment where the Fed is having a really tough time getting inflation under control . . . so every dollar that is spent by the federal government is ultimately inflationary right now.”

Sen. Peter Welch (D-Vt.) on his openness to reform the ACP:

“We’ve heard very compelling arguments about some of the reforms that we should make. Now Sen. Capito has been a big advocate of that. And I agree that those of us who advocate for a program have an obligation to kick the tires, check it out, make reforms so that the intended purpose is what’s being served and that it’s not being gamed. So I, for one, who am a strong proponent of the Affordable Connectivity Program, pledge to work with my colleagues, Republican and Democrat, to make it better.”

“The economic arguments that we’re having back and forth, they’re real, and we have to deal with them.”

Sen. Shelley Moore Capito (R-W.Va.) on the need to narrow the eligibility criteria for the ACP to ensure subsidies are targeted:

“Just earlier this week, the president of a local internet service provider said he was informed that he’s eligible for the $30 a month because the school lunch program in [West Virginia] makes everybody eligible. It cannot possibly be true that 23 million people really need this. We’ve got to narrow it down to the need. I’m supportive of the program.”

“I understand the urgency and the expiration… we’ve known this was coming. We’ve been talking about reform for a year. I don’t know why we have to be pressed now to move forward to a way overexpansive program that is going towards some people that don’t need it. It’s not fair to the people who do need it, because it calls into question what’s going to happen with the entire program.”

Sen. John Tester (D-Mont.) on how government subsidies often raise the price of consumer goods:

“We do a lot of things here, military, for example. We give an increase for housing allowance. And what happens, many times, when we announce we are giving an increase for housing allowance is, people who are repping the ‘hood, they jack it up before we even give it. So it’s a net zero, and sometimes even worse. Is there any way, when we have a subsidy program, to hold, particularly the big companies . . . I don’t think the rural co-ops are doing this as much, but the big companies tend to get what you can get out of the marketplace, and if that subsidy goes up, they’ll jack up rates. Is there any way to stop that?”

Dr. Paul Winfree in response to Sen. John Thune’s (R-S.D.) question on the FCC’s misleading ACP “fact sheet” claiming millions of Americans will lose access to high-speed internet if the ACP expires:

“There are two issues here. The first issue is, what does the survey data show? And then the second issue is, is this survey something that we can rely upon?

“If you take the FCC’s data as gospel, then it shows that only 15.7% of folks will lose broadband coverage if ACP goes away. Now the problem is, is that the way the survey was conducted is they went out to 110,000 households, and only 5,300 and some households responded to the survey. Now, OMB says that when your survey response rate is under 70 percent, which is much higher in this case than the 5,300 and some households, you have to have a new methodology for addressing that non-response rate. FCC didn’t do that, and that’s one of the challenges I have as an economist and someone who looks at government survey data on a regular basis. I don’t even know how to read this survey. It might be representative; it might not be representative. We don’t know, and we shouldn’t be passing it along as if it is representative.”

Sen. John Hickenlooper (D-Colo.) on combining the ACP with other Universal Service Fund programs to be sustainable long term:

“The E-Rate program, the Lifeline program, the Rural Health Care Program to support hospitals and clinics, the High-Cost program to help expand access in rural America – during the pandemic, Congress authorized these programs to get to the same goals as the Universal Service Fund through direct appropriations and unique appropriation rules. How would you advise Congress to combine these pandemic-era programs with the Universal Service Fund to be sustainable long term?”