ISPs Push for Higher Prices on Affordable Broadband Services for Low-Income Users
ISPs seeking government handouts try to avoid offering low-cost broadband
Despite getting subsidies, ISPs oppose $30 plans for people with low incomes.
Internet service providers are eager to get money from a $42.45 billion government fund, but are trying to convince the Biden administration to drop demands that Internet service providers offer broadband service for as little as $30 a month to people with low incomes.
The Broadband Equity, Access, and Deployment (BEAD) program was created by a US law that requires Internet providers receiving federal funds to offer at least one "low-cost broadband service option for eligible subscribers." The Biden administration says it is merely enforcing that legal requirement, but a July 23 letter sent by over 30 broadband industry trade groups claims that the administration is illegally regulating broadband prices.
The fund is administered by the National Telecommunications and Information Administration (NTIA). The NTIA is distributing money to states, which will then distribute it to ISPs. Before obtaining money from the NTIA, each state must get approval for a plan that includes a low-cost option. Nearly half of US states have already gotten approvals.
Although the law requires ISPs receiving grants to offer a low-cost plan, it also says the US may not "regulate the rates charged for broadband service." In the letter sent to US Secretary of Commerce Gina Raimondo, ISPs claim that the NTIA's demands for specific prices violate the ban on rate regulation:
We have also heard from stakeholders of specific instances in which certain State broadband offices have faced the prospect of political pressure unless they acceded to a $30 rate for the low-cost service option. This contravenes the clear language of the Infrastructure Act, which states that "[n]othing in this title may be construed to authorize [NTIA] to regulate the rates charged for broadband service."
ISPs want to upend approved state plans
Funds like BEAD are intended to help ISPs build broadband networks in areas where it would otherwise not be economically feasible. In other words, the government giving money to ISPs directly lets the telcos make a decent profit on network-construction projects in areas where subscriber fees alone wouldn't be enough.
ISPs receiving funds don't have to offer the low-cost broadband plan to everyone. They only have to offer it to eligible subscribers who meet low-income requirements, as detailed in the NTIA's Notice of Funding Opportunity.
Despite that, ISPs claim that prices for the low-cost option should be calculated based on "the economic realities of deploying and operating networks in the highest cost, hardest-to-reach areas." The letter said:
While NTIA purports to give States the flexibility to choose a low-cost program that meets their particular needs, the reality is much different. According to NTIA's own program guidance, it has "strongly encouraged" States to set a fixed rate of $30 per month for the low-cost service option. For a broad cross-section of America's rural broadband providers, the $30 rate is completely unmoored from the economic realities of deploying and operating networks in the highest cost, hardest-to-reach areas that BEAD funding is precisely designed to reach.
Groups signing the letter include USTelecom, which represents AT&T, Verizon, CenturyLink/Lumen, and many other telcos. It was also signed by lobby groups for small cable firms and rural telcos, and numerous lobby groups for ISPs in specific states. The state-specific lobby groups signing the letter are from Alaska, Alabama, North Dakota, Montana, North Carolina, Kansas, Georgia, Illinois, Indiana, Iowa, Michigan, Minnesota, Nebraska, Nevada, New York, Ohio, Oregon, Oklahoma, Pennsylvania, South Carolina, South Dakota, Texas, Utah, Washington, and Wisconsin.
Many states have already received approval for their grant plans, including plans for requiring low-cost options. The NTIA today announced approval of New Mexico and Virginia's initial proposals, bringing the total count to 22 states plus the Northern Mariana Islands, the District of Columbia, Puerto Rico, and the US Virgin Islands. Another 30 states and territories are waiting for approval after having submitted initial proposals by December 2023.
The lobby groups want the NTIA to reverse approvals for existing states' plans. Their letter said the agency should "require each State to revise the low-cost service option rate proposed or approved in its Initial Proposal so that the rate is more reasonably tied to providers' realistic costs, such as by using the FCC's Urban Rate Survey benchmark."
$48 a month too low, ISPs claim
The lobby groups' letter acknowledged that the NTIA has given states leeway to make their low-cost option as high as $48. But even $48 is too low, they claimed:
And while some States' proposed low-cost service option requirements have been approved at rates above $30, such as Pennsylvania's at $48.60, those rates are also unrelated to the actual cost of deployment and approach operational impossibility. To make matters worse, our understanding is that those State broadband offices that have taken a measured approach and sought to base their proposed rate for the low-cost broadband service option in economic reality have been subsequently advised by NTIA to lower the proposed rate.
The groups argued that mandating "unrealistically low rates can undermine our shared goal of providing affordable broadband to those who need it most by making participation economically infeasible for rural broadband providers." Although the government funding will cover much of the building cost, "a provider match will be required in most cases and providers will be responsible for the expenses necessary for the ongoing operation and maintenance of these networks," they said.
"A low-cost option at the unrealistically low rates NTIA has been approving means most providers will not be able to sustain these networks over the long term and so will lack a business case to participate in the program," the letter said.
The ISP groups also object to the NTIA requiring providers to offer the low-cost rate for the "useful life" of the subsidized network, defined for 10 years after deployment. "Some States have allowed for modest inflation adjustments, but these do little to alleviate the problem as providers' construction and operating costs typically outpace inflation," they said.
Republican complaints
Republican members of Congress have also been complaining about the NTIA's approach to requiring low-cost plans, calling it rate regulation that is "counter to Congressional intent and in violation of the law." GOP leaders of the House Energy and Commerce Committee announced an investigation into the NTIA's handling of the program on July 9.
After the GOP investigation began, the NTIA told Ars that it "is working to implement BEAD in a manner that is faithful to the statute." NTIA Administrator Alan Davidson defended the program rules at a congressional hearing in May, saying that requiring a low-cost option for people with low incomes is not the same as regulating broadband rates.
"The statute requires that there be a low-cost service option," Davidson said at the hearing, according to Broadband Breakfast. "We do not believe the states are regulating rates here. We believe that this is a condition to get a federal grant. Nobody's requiring a service provider to follow these rates, people do not have to participate in the program."
To evaluate each state's proposal, "you have to be able to understand what is affordable," Davidson was quoted as saying. "Every state has to submit a low-cost option that we can understand is affordable. When states do that, we will approve their plans."
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