Funding the ACP should be 'primary goal for policymakers' – report

Citing estimates showing that the Affordable Connectivity Program (ACP) needs roughly $6 billion per year to operate, a new report from the Information Technology and Innovation Foundation (ITIF) is calling on Congress to find those funds by discontinuing other programs that support rural broadband.

That report, written by Joe Kane, director of broadband and spectrum policy at ITIF and former technology policy fellow at the R Street Institute, emphasizes the need for the ACP. But it also suggests that other subsidy programs – like the FCC's Lifeline and high-cost programs, and USDA's ReConnect – which currently support the rural broadband industry, should be abolished in light of the Broadband Equity Access and Deployment (BEAD) program.

"After BEAD is completed, the Affordable Connectivity Program (ACP) should be the only ongoing subsidy program. Congress should use funding from obsolete programs, around $6.43 billion, to make the ACP sustainable," writes Kane.

The recommendation comes at a pivotal point in the world of federal broadband subsidies. The ACP, which provides a $30 monthly benefit for over 19.5 million low-income households (plus a one-time device subsidy), is projected to run out of funding next year. Simultaneously, the Biden administration recently announced state and territory allocations for the $42.5 billion Broadband Equity Access and Deployment (BEAD) program, which will fund broadband deployments in high-cost rural areas and other unserved communities. And the Universal Service Fund (USF), which funds the FCC's Lifeline and high-cost programs, is facing calls for reform to its contribution base, and is also wrapped up in a court case that could force changes to its operations.

Meanwhile, Congress is considering a bill, reintroduced last week, that would streamline federal broadband programs, following a report from the Government Accountability Office last year that found the US approach to broadband "fragmented and overlapping" and called for a national strategy.

According to ITIF's Kane: "In short, the ACP has made Lifeline redundant. BEAD will make High-Cost programs futile. Therefore, policymakers should preserve and strengthen the ACP and pay for it by abolishing the Federal Communications Commission's (FCC's) High Cost and Lifeline programs and other federal programs such as ReConnect. BEAD is the large, one-time injection that can break this cycle of ineffective spending, so its success should come with the fading away of some of the USF's largest programs."

Rural broadband providers who rely on those programs to fund network sustainability in high-cost areas disagree, however. In response to a request for comment, Mike Romano, executive vice president of NTCA–The Rural Broadband Association, told Light Reading that ITIF's report misunderstands the purpose and utility of the USF.

"The high-cost program does not fund the actual deployment of networks as do BEAD and other capital grant programs. Rather, the high-cost fund serves very different purposes in providing support that helps to make the business case for investment using other capital and enabling the recovery of such investments and the higher costs of operations without the need to charge entire rural communities rates that are unreasonably high and would deter broadband adoption and use," said Romano.

"Any claim that BEAD or other grant programs somehow render the high-cost fund redundant or unnecessary therefore misses the mark on the importance of sustainability and affordability as core components of the lasting mission of universal service."

Indeed, while the ITIF report highlights the USDA ReConnect program as one to abolish, NTCA today along with 24 other organizations sent a joint letter to Congress pushing to make that program permanent, with symmetrical speed standards, in the 2023 Farm Bill.

'Find $5 billion to $6 billion'

The ITIF report comes as policymakers are pondering the fate of the ACP. The program was initially funded with $14.2 billion in the Infrastructure Investment and Jobs Act (IIJA) in 2021. But with over 19.5 million households enrolled, and a concerted effort to reach millions more eligible homes, the program is set to run out of funding early next year. That will create a connectivity crisis for millions of families relying on the subsidy for their broadband connection. It will also cause a significant problem for service providers tasked with unenrolling subscribers, and make it harder for ISPs to participate in federal grant programs.

"It is possible and necessary for Congress to find $5 billion to $6 billion by restructuring current subsidy programs administered through the USF and directly by executive branch agencies. This quest should be a primary goal for policymakers interested in closing the digital divide," writes Kane.

Other ideas for finding interim funding have been floated, however. That includes tapping into the FCC's Rural Digital Opportunity Fund (RDOF), as suggested by some in the industry. A group of Senate Republicans also recently urged the White House to use unspent COVID-19 relief funds to keep the ACP running while deliberations are ongoing.

Meanwhile, the cash-strapped program is only bound to get pricier. According to a notice circulated this week, the FCC in August intends to follow its congressional mandate in the IIJA to start a rule-making process to bump the ACP benefit from $30 to $75 in high-cost areas for providers that can demonstrate economic hardship. Currently, the $75 benefit only applies on tribal land, according to rules previously set by the FCC.

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— Nicole Ferraro, editor, Light Reading, and host of "The Divide" on the Light Reading Podcast.