FCC prepares to shut down the Affordable Connectivity Program as funding runs out

The Federal Communications Commission (FCC) revealed it will begin taking steps this week to wind down the Affordable Connectivity Program (ACP), as funding for the program dries up and Congress drags its feet allocating more. New Street Research analyst Blair Levin told Fierce Telecom the loss of the program could undermine the $42.5 billion Broadband Equity, Access and Deployment (BEAD) Program and cause chaos for participating internet service providers as they work through revenue losses, customer mistrust and the rollout of new low-income offerings.

The ACP provides most eligible households with a $30 per month subsidy toward fixed or mobile broadband service. But with only about $4 billion left in the bank, the projected end date for the program is now less than four months away.

In a letter to key members of Congress on Monday, FCC Chairwoman Jessica Rosenworcel said the agency has no choice but to begin "orderly wind-down procedures."

Among other things, she said the FCC will provide guidance to providers on how they should be notifying households about the program's shut down. The Commission will soon set a date to halt new enrollments in the ACP to manage remaining funds and stabilize the program. It also will officially determine the program's end date, providing notice and information to facilitate its conclusion.

There's just under $4.1 billion left in the ACP fund for allocation. As of January 8, there were 22.5 million households enrolled. California had the highest number of enrollees with about 2.8 million, followed by Florida (1.7 million), New York (1.7 million), Texas (1.65 million) and Ohio (1.1 million).

Rosenworcel in the letter urged Congress to allocate an additional $6 billion to the program, which she said would extend ACP benefits through the end of 2024. She warned if Congress does not provide additional funding for the ACP in the near future, roughly 1,700 internet service providers will be affected, and they “may cut off service to households no longer supported by the program.”

Concerns over the ACP’s fate mounted through 2023, so this was not the FCC’s first plea with Congress to dish out more funding. In November, Rosenworcel made similar comments when she addressed the Congressional Subcommittee on Communications and Technology.

In October, the White House requested the $6 billion figure from Congress to ensure the continuation of the ACP. However, that funding proposal was part of a $56 billion supplemental domestic budget request that has since been tied up in a quagmire of partisan disputes.

If the program ceased to exist, more than 20 million Americans would “immediately feel the impact on their pocketbooks,” according to Kathryn de Wit, who directs the Broadband Access Initiative at Pew Charitable Trusts.

De Wit pointed to research that showed 62% of households making $50,000 or less annually would need “significant cost relief” from market prices to keep their internet plans. She also noted that the ACP benefits the broadband market by creating “stability and decreasing customer turnover for internet service providers, a costly process that can threaten private investment in unserved communities.”

What about BEAD?

The FCC has repeatedly claimed that the termination of the ACP would undermine the efficacy of the federal $42.5 billion Broadband Equity, Access and Deployment (BEAD) program, which puts a large focus on connecting rural areas. When Congress established the broadband program, participation in ACP was a condition for internet service providers that applied for BEAD.

The ACP’s end could undermine BEAD “as an economic matter,” New Street Research's Levin told Fierce Telecom. The BEAD dollars without the ACP will finance fewer rural deployments, considering that as of September the states with the highest number of consumers receiving ACP subsidies were highly rural states like Louisiana, Ohio, Kentucky and North Carolina.   

Essentially, the loss of the ACP “will hurt both the deployment and the affordability in rural America,” he said.

Levin described the math in a Brookings note about a year ago, when he pointed to a study reviewing the ACP’s impact on BEAD. That study, conducted by Boston Consulting Group, concluded that the ACP reduces the subsidy needed to incentivize providers to build in rural areas by 25% per household.

The National Urban League noted the same study demonstrates that if Congress fails to reauthorize ACP, the federal government “likely will end up overpaying for broadband deployments. As a result, the federal dollars will end up funding deployments to significantly fewer unserved and underserved homes and businesses.” 

If the ACP ends, ISPs will likely need to go back to voluntarily offering low-income programs. And Levin said if that happens, there will be “a lot of confusion, mistrust, extra customer service costs, etc. on top of the lost revenue.”