The Looming Battle Over How to Set ‘Low Cost’ Broadband Prices

The Biden administration wants to make sure that lower-income people can afford to use the expanded broadband service that will be built out with $42.45 billion from the recently signed bipartisan infrastructure package.

To do that, the Infrastructure Investment and Jobs Act mandates that states must require companies that get a piece of the funding—which is meant to build broadband in places with no or poor service—to offer the new customers a “low-cost option.”

But in a debate that will be played out in statehouses across the country, the broadband industry and consumer advocates are clashing over how states should define “low-cost.”

“Oh yeah, it’s going to be interesting,” said Angela Siefer, executive director of the National Digital Inclusion Alliance, an advocacy group. As states go about defining what offering a “low-cost” option means, she said she expects heavy lobbying by internet companies in state capitals. 

“They’re already there,” said Siefer, who argues that broadband service created under the infrastructure act should be essentially free for low-income people.

The broadband industry, though, would consider that government intrusion into deciding what companies can charge.

Resolving the debate could end up pitting governors against the Biden administration.

‘Just As Important As Access’

Under the IIJA, whatever definition states come up with for whether companies’ prices are “low cost” could be rejected by the Commerce Department’s National Telecommunications and Information Administration as not low enough. NTIA is the agency overseeing the roughly $42 billion available for broadband projects through the law’s Broadband Equity, Access, and Deployment program. 

Governors, particularly Republicans, are already worried about Biden pursuing a liberal agenda through the implementation of the infrastructure package, and would likely balk at being overruled by the federal government on the broadband dollars.

NTIA didn’t return inquiries from Route Fifty asking what it considers to be “low cost” pricing and whether it will spell that out in upcoming guidance to states for spending the funds.

But U.S. Secretary of Commerce Gina Raimondo signaled at a hearing before a Senate Appropriations subcommittee last week that setting low rates under the infrastructure act is a high priority for the administration.

“Affordability is just as important as access. What good is it to have broadband in your neighborhood if you can’t afford it?” she said, “We’re going to define ‘low-cost’ to be really low cost.”

Speaking at a gathering of the U.S. Conference of Mayors in January, Alan Davidson, the Commerce Department’s assistant secretary for communications and information, also noted that IIJA requires a low-cost option. 

“Anyone who gets this money is going to have to ensure affordability is built in,” he said.

But at the same time, Raimondo, a former governor of Rhode Island, also stressed at the Senate hearing that “we’re focused on getting this done right and giving states the flexibility they need.” 

“We do not have a one size fits all approach because I don’t believe that would be successful,” she said.

Industry Pushback

The dispute has already emerged in comments industry and consumer groups submitted to NTIA this month on how the agency should implement the broadband portion of IIJA.

Industry groups like NCTA — The Internet & Television Association, which lobbies for cable companies like Comcast NBCUniversal that provide broadband service, made it clear they expect minimal interference from states and the federal government on what they are allowed to charge.

“NTIA should specify that an eligible entity may not dictate the price or terms of a low-cost broadband offering,” the group said.

Rather than setting a maximum price to get online, NCTA said NTIA should judge companies to be offering a “low-cost” option if they are giving low-income households a $30 monthly discount through an existing Federal Communications Commission initiative known as the Affordable Connectivity Program.

USTelecom, another trade group representing broadband providers, also urged NTIA to say that all companies need to do to meet the “low-cost” requirement is to offer the discount.

Using the rebate program “will greatly simplify the process for [companies] to adhere to this requirement, and providers will benefit from the reduced burdens of compliance with multiple state requirements,” the group said.

‘Needs of the People’

But consumer groups want more. They see the “low-cost” requirement as an opportunity to do exactly what the companies oppose—get the government to force companies to offer inexpensive broadband for low-income customers.

“Just focus on the demographics and needs of the people in the state,” said Greg Guice, director of government affairs for Public Knowledge, when asked what he’d tell state officials as they go about defining what’s low-cost. 

“Here’s a moment to do something for the citizens,” said Guice, whose left-leaning tech advocacy group was co-founded by Gigi Sohn, Biden’s nominee to the FCC.

The group in its comments to NTIA cited USTelecom figures that the most popular internet plans in the U.S. cost an average of $47.15. The fastest plans cost $68.96.

Public Knowledge also pointed to a study by the Benton Institute that suggests low-income households can only afford to pay $10-a-month for broadband.

Even with a $30 discount, low-income people would be left with “a co-pay far higher than $10,” the group told NTIA.

As a result, groups like Public Knowledge and the National Digital Inclusion Alliance, are urging the NTIA to require broadband companies receiving infrastructure funds to charge low-income customers no more than $30-a-month. They would also be required to offer the $30 discount—essentially making access to the internet free for those in need.

The two sides also disagree over who should get the cheap rates, a question infrastructure law is silent on.

NCTA, the industry group, in its comments said that only those who would qualify for the federal $30 discount plan should be eligible for low-cost pricing. That would include households with incomes less than 200% of the federal poverty level—or  $27,180 for a single person and $46,060 for a family of three. Those eligible for other kinds of federal aid, including food stamps and Medicaid, are also eligible for the discounts.

But advocates like Guice say others, including seniors, should be eligible for the cheaper plans. Even if they may make too much to qualify for the discounts, he said, the fact they are living on fixed incomes could deter them from getting online.

“Broad eligibility will prevent our nation from spending billions to replace a deployment gap only to leave an adoption gap,” Public Knowledge said in its comments. 

States Weigh Their Options

Erika Henry, deputy director of Washington state’s broadband office, noted low-income and other households who belong to the military or who are seniors receive discounts for electricity and other utilities.

But figuring out whether to do the same with broadband internet service promises to be more complicated for states. 

“Due to the extremely rural locations of some premises, as well as geographic isolation and deep poverty, significant subsidies will be required to support the access and affordability,” Henry said. 

She added that urban areas have different challenges, which could require discussions with other types of groups, such as utilities and affordable housing organizations. 

“The best approach will be flexible based on population densities and other considerations specific to each community. In short, this is a wonderful opportunity … and we have more work to do,” she said.

Experts like Tyler Cooper, editor-in-chief of BroadbandNow, a site that publishes data and research on broadband plans, predicted that states controlled by different parties will come up with a hodge-podge of definitions for “low cost” pricing.

“Since the vast majority of the new grant program will be state-led, I expect that states will have varied (and fairly political) disparities,” he said in an email. 

Cooper suggested that states come up with an average price for what families pay for broadband in different areas, and then set a low-cost threshold “aggressively” below that figure.

Siefer, with National Digital Inclusion Alliance, disagrees and said this approach would cause confusion. “People living near state lines will see prices being advertised that they won’t be eligible for because they’re in another state,” she said. 

She urged NTIA not to wait until after states define what “low cost” means and to instead set a standard now.

However, broadband companies would likely consider a move like that to be government overreach, and illegal.

Echoes of a Prior Dispute

The debate over the infrastructure funds is similar to a fight over a requirement New York state imposed under the then-Cuomo administration in April 2021. 

Broadband companies were required to offer low-income families a $15 a month plan with download speeds of at least 25 megabits per second if they wanted to do business in the state. 

Lobbying groups for the broadband providers, including the USTelecom, sued. They said the requirement violated federal laws that take a deregulatory approach toward the industry and that do not allow for the government to set the prices companies charge. That’s in contrast to the regulation of the telephone industry.

A federal judge agreed and blocked New York’s regulation from going into effect.

Siefer said a critical difference with the new low-cost pricing debate is that NTIA would only be setting the terms for companies to be able to get federal dollars rather than setting a price for all broadband companies in a state.

But USTelecom argues in its comments to NTIA that it would be illegal for the agency to say how much a low-cost offering can cost. 

“Doing so would violate NTIA’s statutory prohibition to regulate rates,” the industry group warned. 

Meanwhile, a move by NTIA to tell states what to do could further agitate h Republican governors already wary of federal interference on infrastructure spending. Last month, 16 GOP governors in a letter to Biden pushed back against the White House trying to attach liberal strings to the public works dollars.

Alaska Gov. Mike Dunleavy, was among those who signed on. Dunleavy spokesman Jeff Turner said the administration is still examining how it wants to use the funds to expand internet service. But Turner said the letter to Biden, “accurately states the Dunleavy Administration’s position on allowing states to have maximum flexibility for using IIJA funds.”

Laine Arnold, a spokeswoman for Tennessee Gov. Bill Lee, another of the letter’s signers, said expanding broadband service is a high priority for the administration. 

But she said, “We reiterate our concerns regarding unnecessary restrictions that would dilute the impact these funds could otherwise have. We’d encourage NTIA and the White House to re-consider any provisions that would restrict the number of broadband providers participating in this program.”