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ACP provides $30 discounts to qualifying households for their monthly internet service bills
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Some of the biggest ACP providers are wireless companies
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A December survey conducted by the FCC found that 29% of ACP recipients said they would drop their service if they lost their ACP benefit
If Congress doesn’t act soon, the Affordable Connectivity Program (ACP) is expected to run out of money by the end of April, leaving millions of Americans without discounted internet services. While the demise of the ACP will hurt broadband providers the most, wireless operators and mobile virtual network operators (MVNOs) will also lose because there are millions of ACP recipients using their benefits to purchase wireless service plans.
ACP data from the FCC that was released in April 2023 indicates that some of the biggest ACP providers are wireless companies. For example, MVNO Q Link Wireless received $288.2 million in ACP funding, Tracfone Wireless, which is now owned by Verizon, received $250.2 million, T-Mobile received $208 million, AT&T received $188.4 million, and Dish Wireless received $119.7 million in ACP funding.
ACP provides $30 discounts to qualifying households for their monthly internet service bills. For low-income households in tribal lands, the ACP provides $75 discounts to their monthly internet service bills. The program also provides a one-time $100 subsidy to purchase laptops, desktops or tablets.
Although there is bipartisan support for an extension to the ACP– the Affordable Connectivity Program Extension Act of 2024 – which would add $7 billion in additional funding to the program, the bill’s sponsor, Senator Peter Welch (D-VT), recently told the New York Times that it’s “tough to be optimistic” about it passing.
Without ACP funding, many recipients say they will have to forgo their services. A December survey conducted by the FCC found that 29% of ACP recipients said they would drop their service if they lost their ACP benefit.
Fallout for operators
Wireless operators are expecting some fallout if the ACP is not funded. During a recent Morgan Stanley Technology, Media & Telecom conference, Tony Skiadas, EVP and CFO at Verizon, said that Verizon has about 1.2 million prepaid subscribers that are using the ACP program. He added that Verizon’s prepaid team has a plan in place in case ACP goes away but didn’t provide any specifics.
However, Verizon Consumer Unit CEO Sowmyanarayan Sampath said during Deutsche Bank’s Media, Internet & Telecom conference this month that if the ACP is not extended, it will have some impact on the company’s service revenue but he added that there will be almost no impact on Verizon’s margins because of the economics of the ACP program.
According to analyst Roger Entner, founder of Recon Analytics, if the ACP program is not extended, wireless operators will see a drop in their prepaid and postpaid customers. However, he said that because the ACP program isn’t a profitable business for wireless carriers, they won’t see an impact to their bottom line.
“The optics don’t look good,” Entner said. “The overall revenue goes down and the subscriber count goes down. But the business will still make money.”
Analyst Bill Ho with 556 Ventures said that the prepaid business has always experienced difficulties when government assistance programs change or are no longer supported.
For example, in 2013 Sprint MVNO Virgin Mobile, AT&T and Verizon all had to dramatically reduce the number of Lifeline subscribers they had because the program was being abused and many Lifeline subscribers were not actually eligible to receive funding from the program.
The Lifeline program was created to help low-income Americans obtain telecom services and those who qualified for the program typically got around $10 per month for cell phone service. But for many years the FCC didn’t actually require wireless operators to check to see whether Lifeline subscribers were actually eligible for the assistance, creating abuse of the program.