How ACP negotiations might shake out

This month, the FCC released its latest version of the national broadband map, this time showing that the number of unserved homes and businesses has dropped from 8.3 million locations to roughly 7.2 million since the last update in May. The total number of broadband serviceable locations now stands at 115 million, an increase of 800,000.

"The digital divide is still significant, but it's narrowing," said FCC Chairwoman Jessica Rosenworcel in a blog post.

While that may be true from an access standpoint, the looming lapse of funding for the Affordable Connectivity Program (ACP) threatens to widen the affordability and adoption gap just as the access gap is closing. The ACP, which currently provides a broadband subsidy of $30 for roughly 22 million households, is projected to run out of funding by April 2024 without action from Congress. And, despite a recent push from President Biden to fund the program with $6 billion through 2024, industry stakeholders are increasingly pessimistic that will happen this year.

'Crucial program'

To be sure, the ACP has widespread, bipartisan support throughout the country. Data from the Digital Progress Institute (DPI) shows continuing the program is supported by a majority of Democrats and Republicans. And in mid-November, a bipartisan group of 26 governors sent a letter to Senate and House leadership, expressing support for the ACP and pushing for its continuation.

Related:The Divide: Why the Affordable Connectivity Program is key to closing the digital divide

"The ACP could run out of funding as early as April 2024. Without bipartisan collaboration between Congress and the White House to continue the ACP, nearly 20 million households enrolled nationally could lose connectivity as well as all the essential services that come with it," wrote the governors. "We stand ready to work with you and the White House to find a commonsense solution to funding the ACP. We urge you to ensure this crucial program continues."

Moreover, the ACP has broad support in the telecom industry, as well as with consumer advocates, making it an easy win for politicians who don't always get to score points with both groups on a single issue, not to mention with their own constituents.

"I've never been involved in an issue in which pretty much everybody in the ecosystem believes the same thing. Which means, Congress, you really have to fix this," said Blair Levin, policy advisor for New Street Research, in conversation with Light Reading. Levin previously served as chief of staff to former FCC Chairman Reed Hundt, and was director of the Obama administration's national broadband plan.

Related:Biden requests $6B for ACP, $3B for 'rip and replace'

And significantly, the ACP is a cornerstone of the federal government's $42.5 billion Broadband Equity Access and Deployment (BEAD) program, which requires grant recipients to participate in the ACP. As it currently stands, the ACP is set to lapse before BEAD dollars even start rolling out to providers.

Testifying before Congress back in May, NTIA Administrator Alan Davidson confirmed that a failure to fund the ACP will negatively impact BEAD. "As we build out our broadband networks, we want providers to know that there's some certainty that they'll have customers, particularly in these rural areas, particularly in areas where there's lower-income Americans, they need to know that those Americans are going to be able to afford to get online. The ACP plays a major role there," he said.

Funding paths

The White House, along with some bipartisan members of Congress, have urged congressional leaders to fund the ACP in supplemental funding packages before the end of this year. Those requests have been further bolstered by calls throughout the country and industry to keep the program afloat. In a statement this morning about the ACP reaching a milestone of 22 million households, Benton Senior Fellow Gigi Sohn called the ACP a "red, white, and blue" issue, adding, "I urge Congress to meet the moment and invest at least $6 billion to keep this program funded through 2024, giving policymakers time to find ACP funding a permanent home."

Related:Fixing ACP's funding gap 'biggest issue' on 2023 horizon – ACA Connects CEO

However, other industry sources say the program is unlikely to be included in spending bills passed by the Republican-controlled House. 

"The House is the number-one issue mainly because it's operating on what's called a 'CUTGO' type of framework, meaning that you're gonna have to find places to cut if you want to move forward on the other spending packages and spending programs," said Joel Thayer, president of the Digital Progress Institute. ("CUTGO" is cool congressional lingo for "cut-as-you-go.") 

To avoid a government shutdown, the House and Senate already passed a stopgap spending bill, which was signed by Biden, funding the government through early 2024. The House is now working toward passing an aid package with support for Ukraine, Israel and border security. House Speaker Mike Johnson said on Monday he's "confident" that aid for Israel and Ukraine will pass the House and indicated a vote in the "coming days."

The White House request for $6 billion in ACP funds aside, Thayer said it's unlikely for the Republican-controlled House to include the ACP in the emergency package, nor for the Democratic-controlled Senate to hold that package up to negotiate the ACP. Senate Majority Leader Chuck Schumer (D-NY) told his colleagues last week that he expects to bring the emergency aid package to the floor "as soon as the week of December 4th."

"My gut instinct is that Senator Schumer is going to push really hard on things that he can absolutely get," said Thayer. "It's gonna be an uphill battle if Senator Schumer was to include ACP in the Senate version of that bill." (Light Reading reached out to Sen. Schumer's staff but did not receive a response as of this writing.)

Furthermore, Thayer said that while a request for ACP funding from the White House was positive and necessary, couching it in a broader request for billions of dollars in aid for international wars and domestic border security allowed the ACP funding request to serve "more as a sacrificial lamb in order to create a negotiation on these other priorities."

'Cut as you go'

Notably, with the Republican House operating on a "CUTGO" approach, some industry stakeholders argue that continuing the ACP will save the government money. 

For example, providing access to telehealth ultimately reduces the costs of Medicaid, according to Levin. "If you have 20 million Americans covered by Medicaid, who don't have access to broadband, it's going to cost more money," he said. "I could make a similar argument about education, public safety, all kinds of different things."

Relatedly, former FCC Commissioner Michael O'Rielly, a Republican, wrote in a February op-ed for The Hill – entitled "A conservative case for the Affordable Connectivity Program" – that "broadband adoption reduces governmental costs to function and opens doors for businesses."

And in a study by the American Consumer Institute (PDF), released in August, the research group argued that the ACP will save the government money because "Americans who enroll in the ACP are less likely to need as much federal assistance in the long run because the program itself encourages self-sufficiency by providing more opportunities for career advancement such as through online GED programs and college courses."

From 'CUTGO' to cut off

How far those arguments go in Congress remains to be seen. But while there are additional avenues beyond the emergency aid package in which to fund the ACP before the year's end, DPI's Thayer thinks it's more likely to happen through negotiations in January, as constituents start hearing from their service providers that they're on the verge of losing this federal benefit – and potentially having their service cut off.

"It's most likely negotiations are going to start in January, because you're gonna get a lot of a lot more pressure from constituents," said Thayer. "So, my guess is that we're ultimately going to feel the heat turn up a bit in the beginning of the new year ... The fact that you still have governors willing to sign on to this, the fact that you have the take rate going up, and the fact that people are becoming more aware of the program are all going to be significant factors as we creep into the new year."

Levin offered a similar argument, that while "there are all kinds of vehicles" through which Congress can pass ACP funding before the end of the year, the issue may not gain enough traction until ISPs start issuing notices to ACP participants to alert them of the lapsing benefit.

"Maybe people call their members of Congress, maybe they don't. Maybe there's a big backlash, and maybe there isn't. We'll see," said Levin. "But until that starts, in a way, it's not real to anybody."

The FCC is expected to set the date by which service providers must alert ACP participants of the benefit ending but has not yet done so. The FCC did not respond to a request for information from Light Reading as of this writing. The House will hold an FCC oversight hearing on Thursday, during which the ACP is expected to be a topic of discussion.

Meanwhile, for ISPs caught in the mix, the message from legal advisors is: pay attention.

"Don't leave the details to the last minute," said Tamar Finn, a partner at Morgan Lewis, in conversation with Light Reading about how her firm is advising telecom clients around ACP uncertainty. "Monitor how the funding is going down. When we're coming up close to the end of funding and you need to get those notices out, make sure you have things prepared."

New year, new problems

Pushing ACP negotiations to January may bring about its own challenges. For starters, it's an election year, making all legislative matters more complicated.

"I guess that's the $8 billion question," said Thayer, with a sigh. "It depends. It really does ... Even in election years there are cracks."

Thayer expects those cracks, and thus ACP funding, to come in the form of an FCC reform package around the Universal Service Fund (USF), or a light infrastructure package that addresses some Republican concerns with the BEAD program, to be negotiated early in the year. Most likely, Republicans would seek to tighten certain aspects of the ACP, such as eligibility requirements. Whether it's possible to pass such a package before ACP runs dry, without an interim extension of the funds, is unclear.

However, as Levin notes, creating a permanent solution for the ACP is crucial, or we'll end up back in this position at the end of next year – again, just as BEAD funds are on the verge of rolling out to providers.

"If this thing ends in December of '24, there's not going to be a permanent solution until at the earliest the summer of '25. What is a permanent solution? It's one where Congress is revising not just ACP but Universal Service," said Levin. "I would feel much more comfortable if I thought that this thing was going to last until approximately mid-2026 ... You want to give the next Congress some time to solve it."