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National Review
National Review
5 Mar 2024
Dominic Pino


NextImg:The Corner: End Web Welfare to Increase Competition for Internet Service

The Affordable Connectivity Program (ACP) began as an “emergency” Covid program and has since expanded to cover over 20 million households. It provides a subsidy of $30 per month to cover internet bills. The Biden administration and a bipartisan group of legislators wants it extended. As things stand, it is set to run out of money next month, and the Federal Communications Commission, which administers the program, has stopped taking new applicants.

Congress should let the program expire. It’s a classic case of a temporary program growing out of control. It is prone to fraud. And it contributes to rising prices as internet service providers (ISPs) capture a chunk of the subsidy.

By doing nothing and allowing the program to end, Congress can restore price signals to the internet market. That’s essentially the conclusion that many service providers are telling investors, according to Communications Daily.

“Numerous ISPs believe the affordable connectivity program’s demise would give them a chance to snag subscribers from competitors,” Communications Daily reports. “In earnings calls with analysts this quarter, many cable companies and telcos also told Wall Street they don’t expect to take major hits to their subscriber base if the program ends.”

That second part is key. One of the arguments in favor of the ACP is that it was crucial to expanding internet access. But if the absence of the program isn’t expected to decrease the number of internet customers, then it seems unlikely that the program played too large a role in increasing the number of customers.

That makes sense when one understands how the program works. It provides a subsidy of up to $30 per month for broadband internet service. Many ISPs have aggressively encouraged subscribers to enroll in the program, going so far as branding the service as “free” when you buy a $30 per month plan. The play for the ISPs is simple: Get people who are currently paying less than $30 to enroll in ACP and buy a $30 plan, then capture the difference. ISPs commonly offered plans for as low as $10 per month for low-income households before the ACP began.

A paper from Paul Winfree of the Economic Policy Innovation Center shows that is the effect the program is likely having. The proportion of the subsidy captured by ISPs is greater for low-income plans than for more expensive plans, he found.

Reducing price sensitivity for consumers means reducing competition in the market. When the ACP expires, Winfree said today on X, “internet service providers will compete on cost and quality to attract consumers” — as companies are supposed to do in a market economy.