ACP and Broadband Adoption Research

At a recent Senate Commerce Committee hearing, one of the witnesses produced a study (the EPIC study) that concluded that ACP led to inflation in broadband services. In addressing your question of which studies Congress should rely on, I think the EPIC study demonstrates the very problem you raise.   While I am not an economist, my over two decades of working with institutional investors in communications causes me to immediately see several material problems with the study. First, it is empirically wrong.  As a filing to the Committee from a conservative think tank, R Street, noted “According to recent studies, the most popular broadband speed tier plan prices dropped by 18.1 percent during ACP implementation." The letter further noted that “recently-published research found that not only do Internet Service Providers (ISPs) pass cost savings on to their customers, but they also are ‘not inflating prices to appropriate government subsidies, and the ACP is successfully reducing the cost of internet plans for eligible households.’" Further, even the FCC Urban Rate Survey on which the EPIC study relies demonstrates exactly the opposite of what the EPIC model would predict.  That survey concludes that prices for lower speed offers rose 5.4% between 2020 and 2023, well below the general rate of inflation in those years. So, the price differences EPIC uses to make its claims took place in speed and price tiers not likely to be relevant for ACP-eligible households. The key error made by the EPIC study is that it relies on pricing data that doesn't reflect the experiences of ACP subscribers. Further, any analysis of price and ACP uptake needs to happen at "apples-to-apples" levels of geographic granularity. The EPIC study does not do this. Second, the EPIC study is theoretically wrong.  Anyone who understands communications networks would incorporate into their analysis that communications networks are a shared resource for which the greater the number of customers using the network, the lower the per user cost structure for the provider. Third, it is logically wrong.  Think of it this way.  There are two kinds of broadband customers; those relying on ACP and those who don’t. As to the first group, whether they previously purchased broadband or not, ACP meant that as a practical matter, they were paying less for broadband.  So as to that group, ACP is clearly deflationary. As to the second group, they would be unaffected by ACP.  That is, they are not eligible to receive it.  But as noted above, as the ACP lowers the cost structure for the ISPs, if anything, it should reduce prices. 

Ten Things About ACP that Ted Cruz Cares About #9 Broadband Adoption Research