The ACP High-Cost Benefit Isn’t Going to Break the ACP Bank
Tuesday, November 7, 2023
The ACP High-Cost Benefit Isn’t Going to Break the ACP Bank
In the bi-partisan 2021 Infrastructure Investment and Jobs Act, Congress decided to provide a larger Affordable Connectivity Program (ACP) benefit in high-cost areas—up to $75/month, compared to the standard $30/month benefit. Last week, the Federal Communications Commission (FCC) quietly announced that service providers could start filing applications on January 17, 2024, to become eligible to receive this larger benefit. This new benefit is unlikely, however, to significantly increase ACP outlays in the coming year because it only is available in limited areas, where there are few consumers, and few service providers may choose to participate.
Background: Congress specified that this larger ACP benefit will only be available in situations where the service provider demonstrates it will suffer from “particularized economic hardship” from operating in the high-cost areas where it seeks to offer the enhanced benefit. The infrastructure law defined the eligible “high-cost areas” as areas in which at least 80 percent of the locations are unserved, and in which the cost of building out broadband service is higher than average, and it directed the National Telecommunications and Information Administration (NTIA) to identify those areas.
NTIA subsequently defined “high cost” using a cost model that incorporates an area’s remoteness, population density, topography, and poverty, and it defined areas using census block groups. In August, NTIA released a map and list of the eligible census block groups that it deems “high-cost.” (Incidentally, BEAD-funded deployment projects in these same high-cost areas will be exempt from the minimum 25 percent matching funds requirement.)
What ACP Providers Need to Demonstrate: The FCC adopted rules to implement the higher ACP benefit in August 2023. Under the FCC’s rules, service providers must demonstrate particularized economic hardship by submitting an affidavit under penalty of perjury, supported by an income statement demonstrating the provider is currently operating at a loss in each of the relevant high-cost area(s) and related federal income tax returns. The affidavit must describe in detail the methodology used for determining that the annualized expenses of maintaining the operation of the provider’s broadband network in a particular high-cost area exceed the provider’s expected total revenues, including subscriber revenues, the standard $30 ACP payment, and universal service payments for that high-cost area. Only facilities-based providers (no resellers) are eligible for the benefit.
Good Intentions, But Little Impact
Unfortunately, the enhanced ACP $75 benefit isn’t going to bring reliable, high-speed broadband to many low-income households. Here’s why:
- Limited Eligible Areas: The higher benefit is only available in specific geographic areas defined by NTIA. As shown in the map reproduced above, many states don’t have any high-cost areas at all, or only a few areas where the benefit will be available.
- Limited Eligible Consumers: There aren’t many prospective ACP customers in the eligible areas. These areas are high cost and largely unserved in large part due to low density.
- Limited Provider Participation: It’s not clear how many ACP providers will choose to apply for the higher benefit. It would not be surprising if many ACP service providers are reluctant to open up their books to make the required financial showing to the FCC that they suffer particularized economic harm by offering broadband in the specific areas identified as high cost. The required allocation of expenses to the designated high-cost areas could require some creative accounting in uncharted waters.
- Limited Duration: Absent a new congressional appropriation, the new $75/month benefit will roll out shortly before the FCC has to take steps to wind down the program. Current ACP funding is projected to be exhausted by spring 2024. If there remains uncertainty in January about the program’s continuation, many service providers likely will take a pass on going through the necessary hoops to offer the enhanced benefit.
In contrast, the standard $30 ACP benefit will more broadly improve the business case for deploying broadband in unserved areas in every state because it’s not limited to the geographic areas that meet NTIA’s definition of “high-cost.”
The current ACP program is bringing affordable internet to more than 21 million households, benefiting low-income families in both rural and urban America. Congress needs to appropriate additional funding for ACP now.
This article originally appeared on Medium; it is reprinted here with permission of the author.
Carol Mattey is a former senior official from the Federal Communications Commission, where she led teams working on initiatives to modernize the FCC’s $9 billion Universal Service Fund to support broadband. She currently is the principal of Mattey Consulting LLC, which provides strategic and public policy advisory services to broadband providers and other entities seeking funding for broadband. She is partnering with Irby Utilities to help achieve the vision of bringing sustainable, reliable internet to everyone in rural America.
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