Study weighs the risk Charter faces from ACP's possible demise

A fresh report from New Street Research estimates that Charter Communications serves more than 4 million Affordable Connectivity Program (ACP) recipients and assesses that the operator, like many of its peers, could face a revenue and earnings hit if the US government fails to refund the program.

The ACP, which has about 22 million recipients overall and relies on a piggy bank that's poised to run dry this spring, provides a $30 monthly subsidy toward service. Nearly half of ACP households are using the subsidy for fixed broadband services.

A bipartisan and bicameral group of lawmakers introduced a bill to fund the ACP with $7 billion, enough to extend the program through the end of 2024. But with a shut down of the program still a distinct possibility, the FCC recently ordered the ACP to halt the acceptance of new program enrollments after February 7.

Up to 300,000 Charter customers 'at risk'

Under New Street Research's current model, the firm estimates that between 4.1 million to 4.8 million ACP recipients belong to Charter, representing $1.01 billion in total revenues and $697 million in EBIDTA in its conservative case (4.11 million ACP recipients), and $1.17 billion in revenues and $809 million in EBIDTA in its more aggressive case (4.78 million ACP recipients).

Related:New ACP extension bill would fund program with $7B

Based on some of the choices available to those ACP recipients (more on this later), New Street believes that between 200,000 and 300,000 of those customers are "at risk," with a potential loss in the range of $700 million to $900 million in revenue and $500 million to $600 million in EBIDTA annually.

Those anticipated numbers could change. New Street Research expects to republish its model with a "more robust set of assumptions" after completing and analyzing the results of a recently commissioned survey, analyst Jonathan Chaplin explained in the report.

Charter's ACP breakdown

Here are the changes New Street Research currently expects to see among Charter's ACP recipients if the program is shut down:

Related:Nearly half of ACP households are using it for fixed broadband – FCC

Chaplin points out that some groups of customers will continue to receive service (without the ACP credit) if the program runs out. They include customers who previously consented to receive service after the benefit ends, those who received service from the carrier before they joined the program and customers who contribute towards the cost of services above the ACP benefit.

"The rest will be disconnected," Chaplin said, stressing that operators will do what they can to have ACP recipients fall into one of the buckets above before the program terminates. He believes that Charter secured consent to continue to provide ACP recipients with services in the event that the ACP benefit runs out.

ACP refunding odds 'below 50%'

In a separate note, Blair Levin, policy advisor for New Street Research, said he believes that most ISPs secured permission to transfer customers to a new service and pricing tier if and when the program funds run out (the FCC requires an opt-in for those circumstances).  

While it's possible some customers may not understand the implications of that, Levin likewise said "the number who can absorb a significant increase in a monthly subscription cost without complaining or dropping, is also lower than what we have heard others believe."

Levin and New Street Research believe that the odds of Congress refunding the ACP are "still below 50%," with party politics taking the brunt of the blame. "House Republicans simply do not want to do anything that might help Biden's presidential prospects, even if he goes far more than half-way to address Republican policies," Levin explained.

But he does see a silver lining.

"The good news for ACP is that the real budget negotiations were moved back to a March deadline," Levin said. "By then, we should have a better idea of the public reaction to news of the subsidy ending. That increases the odds of Congress refunding the ACP."

Rural group asks FCC for help

Meanwhile, some organizations representing rural telcos have banded together to urge the FCC to come up with a plan.

The Western Telecommunications Alliance (WTA) has asked the Commission "to make it as simple and rapid as possible for RLECs [rural local exchange carriers] to re-qualify eligible customers and resume their ACP broadband service," PolicyBand reported.

The WTA, which represents roughly 400 RLECs, estimates that its members have between 10% to more than 50% of their rural customers enrolled in the ACP.