Consider Affordable Broadband State-By-State - Episode 635 of the Community Broadband Bits Podcast

Jordan Pittman (00:01):
Hi everyone. Jordan Pittman here from the Institute for Local Self-Reliance. This week we're rerunning our previous special event called Consider Affordable Broadband State by State. In this live forum, Chris was joined by Sean Gonsalves and Shayna Englin to focus on what New York's affordable broadband law includes and what other states may want to consider when crafting similar legislation. Together they discuss the [00:00:30] ripple effects it has created and more. Thanks for listening and we'll see you next time.

Christopher Mitchell (00:57):
Welcome. This is a [00:01:00] first of perhaps a few things that will pop up when I think that they're relevant. I'm Chris Mitchell with the Institute for Local Self-Reliance and we've got Sean Gonsalves here. How are you doing, Sean?

Sean Gonsalves (01:11):
Good, good. Glad to be here.

Christopher Mitchell (01:13):
Excellent. This is an event we're calling Consider Affordable broadband state by state, and it's a little bit of a reaction to something that we think is pretty interesting. We're going to be discussing it. We're going to have Shayna Englin joining us on stage about halfway through here, [00:01:30] encouraging people to leave questions in the chat. We'll be monitoring those. If it's something that we can answer easily, we'll do it probably in the chat or else Sean or I will respond to it. But we have a pretty simple agenda. We want to do just about 30 minutes to go through some of the key things that are happening with state affordability policies and particularly this one coming out of New York that some other states are learning from. [00:02:00] And we'll be going through this agenda, Sean.

Sean Gonsalves (02:05):
Alright, yeah, good. Glad to virtually meet with all of you. So our agenda is pretty lean and nice and so we're going to give you a bit of background. We'll cover a little bit of background on affordable Internet access, which as you all know is a real challenge in this space. Then we're going to go over some of the initiatives that we're seeing in states, and before [00:02:30] we get into a bit about the policy and politics behind addressing these issues in states outside of New York well and maybe also including in New York. As Chris mentioned, we are really hoping that folks have come with some questions because this is meant to be informative and so we can roll right into the next slide I think here and talk a little bit. Go ahead

Christopher Mitchell (02:57):
And, sorry, Sean. I just wanted to say that this is the sort of thing that [00:03:00] I feel like it's moving very quickly. That's why we wanted to have this event and this is not something that Sean and I have practiced 10 times in front of four live audiences. So this is going to be a bit informal, but we have some information that we've tried to really, really make it concise and what's most relevant. But if we missed anything, we'd love to know about it in the chat.

Sean Gonsalves (03:21):
Exactly. No, thank you. Yes, we are definitely winging it in some ways. However, the background we should get into [00:03:30] without further ado, and we probably could just begin with the end of the affordable connectivity program, which I'm going to imagine everyone here is familiar with. That program ended last spring when the 14 billion that had been allocated for it in the infrastructure bill ran out of money and Congress was not moved to renew it. There was a lot of politics around that. There was a lot of advocacy to try to renew it, but it [00:04:00] has not been renewed. And from our perspective and the folks that we talked to both on the hill and around the country, there doesn't look like there is really any prospect for an ACP 2.0 on the horizon, nor do we think that there will be any significant universal service reform that many folks were hoping to see because a lot of us thought that if the Universal [00:04:30] Service Fund could be reformed, that that could be a permanent funding solution for a new ACP program. None of those things seem likely, and so here we are with dealing with this issue on a state by state basis. Chris, you want to talk a little bit about the price of Internet access?

Christopher Mitchell (04:49):
Yes, and we've got a great question in the chat already. I love it. We'll be adding that to the end, but one of the things, this is a judgment call on behalf of Sean, [00:05:00] myself and some of our colleagues in the community Broadband Networks program, but we would say that many of these programs, but A-C-P-U-S-F may happen in the future, but it seems very unlikely in the next two years or so. So price of Internet access is just not a big media issue, and that's one of the reasons we don't think there's going to be a lot of pressure to deal with this mean if you look about everyone's talking about the price of eggs, whether sarcastically or whether because they're going up so much that's in the news, right? [00:05:30] Internet access is almost never in the big news. So it is slowly becoming more of an election issue, but it does not seem to be a hot topic that this administration is concerned about, and I don't think the Democrats are going to make it a big issue as they're in the minority party status.

(05:46):
So as we look at what the options are then for what can be done to try to make sure families can afford this essential service is we look at other utilities, but other often have a monopoly system that's very different [00:06:00] from what we have in Internet access. Internet access became competitive in 1996. That matters because if you have a company that has a defined service area and it knows that it is going to be able to get a certain amount of revenue from there and not lose market share, it can be required to offer services at different prices. All the prices might be regulated, some of the prices might be regulated. There are more tools. We do not have a monopoly system and it doesn't seem likely that we [00:06:30] would head back in that direction. I think there are pros and cons in that we've discussed on other shows and we could discuss again, but the reality is there's just no real plan right now for how we're going to make sure that everyone has high quality access.

(06:46):
It's a priority for many of us, but there's no real plan. So we look to New York, and I'm going to kick this off just saying New York had 1.7 million households, almost 1.8 million enrolled in the ACP toward the end there. That works out to [00:07:00] 51 million a month at $30 a month. Now some of the people in New York were living on reservations and they were eligible to receive $75 a month or the number is somewhere right around there. And that works out to a total of 612 million per year, just assuming everyone was getting that $30 a month. So that amount, the reason I'm talking about this is because it is just too expensive for a state to pay for. I think California was looking at whether or not they could [00:07:30] cover that Illinois looked at it, the amount of money that is needed to just give out $30 a month, it's too great for state budgets to handle. Sean, what else should people know about the Affordable Broadband Act?

Sean Gonsalves (07:43):
Well, that has been that

Christopher Mitchell (07:45):
There is a thing called that,

Sean Gonsalves (07:47):
That there's a thing called that and it's actually been around for a few years. It was actually first passed in 2021, and then of course the big ISPs were staunchly opposed to this, and so they fought it out in court. [00:08:00] It went all the way up to the US appellate court and the US appellate court said, Nope, New York, this law is constitutional, you can run with it. Sorry big ISPs, but you're going to have to deal with it. And the major ISPs tried to petition the Supreme Court to get them to intervene. And towards the end of the 2024 in December, the Supreme Court actually refused to intervene, which meant the law was upheld, which meant that [00:08:30] the state of New York could put the law into effect, which did in fact happen actually just this past month in January of the new year here. We should note though that one of the cable television associations representing the bigger ISPs has recently asked the Supreme Court to reconsider their not reconsidering decision. So they want them to go back and it's like, are you sure you really want to not intervene? [00:09:00] And we're no legal experts or prognosticators. I mean, I don't want to say the historical precedent is necessarily any guide, but certainly if you look at history, there aren't a lot of examples of the Supreme Court declining to intervene in a case and then a few months later going, you know what? I guess we will, but we shall see.

Christopher Mitchell (09:23):
Sean, you want to carry on and let people know if they're not familiar with the specifics what this law does?

Sean Gonsalves (09:28):
Sure. So some of the specifics [00:09:30] in the law is frankly that the ISPs of a certain size, meaning any Internet service provider that has over 20,000 subscribers, must offer a low cost plan of $15 a month that provides a 25 megabit per second download connection. And you can as an option as an ISP under this law offer a 200 megabit per second download for $20 a month. [00:10:00] The qualifications broadly for households to be qualified are any home that is enrolled in the free and reduced lunch program, any home that is a household where they're Medicaid recipients or SNAP beneficiaries. So those are some of the guidelines in terms of determining eligibility.

Christopher Mitchell (10:21):
Right, and there's a question that just popped up. I don't think we know where the $15 a month came from. We'll talk briefly about economics [00:10:30] in a second. $15 a month comes close or I would say it's on the bubble of capturing the rough operating costs for many ISPs that are operating at scale. We'll talk about what that means briefly, but the $20 a month plan, I believe comes from Verizon, which wanted to be able to offer a plan they'd already been working on. And so I think the $20 a month option came from a reality on the ground with Verizon and Jim, we're going to deal with both of your questions in a bit. [00:11:00] Go ahead, John. Finish up quick.

Sean Gonsalves (11:02):
Yeah, just a couple of other minor, but I think important considerations that are in the Affordable Broadband Act in New York and are worth thinking about, of course in other states if they're thinking of similar legislation, which is that these plans must be advertised and not hidden. How well that's being complied with at the moment is, I do not know the answer to that question, but if there're anything like the broadband nutrition labels, [00:11:30] it's probably hard information to find. There are some annual reporting requirements and there are some provisions in the law to as time moves forward to update the speeds for these low cost plans and potentially what's considered to be an affordable price.

Christopher Mitchell (11:49):
And so we would expect, I think that 25 megabit downstream to be changed soon by the Public Service Commission or the Department of Public Service. I forget which has the [00:12:00] requirement to look at that periodically. So these things will be moved around a little bit. The increase is limited as to how much the price could be increased, so it would not be as significant increase in the prices that are charged. So as Sean was saying earlier, there are exemptions, ISPs with fewer than 20,000 subscribers can request an exemption. Some have requested that. And then we included a couple other bullets here. There's a link in the chat if you'd like to download this and be able to click through. [00:12:30] AT&T Wireless has pulled out of the state, AT&T is not a big player in New York state. It's mostly a Verizon state. And so some of us think that might be more about signaling than a lot of actual reason that they're losing money or something like that.

(12:48):
Charter Spectrum was already required to offer this program broadly because of a settlement after allegations that they did not mean merger conditions. [00:13:00] And ours, Technica had an article as Sean had said about one of the ISPs that was making it difficult for people to use this. So you can click through if you're looking for background on that, if you download the slides. I was going to dive in on the economics as well for people that are not as familiar with this. If you're trying to build an Internet service provider and you have fewer than 5,000 subscribers, you're generating revenue, but you're not really generating enough revenue to pay for all of the support staff [00:13:30] that you'd really want to have as well as the debt costs of building the network. And so if you have 5,000, 7,000 subscribers, you might be able to make it work, but it's hard work and it's very difficult.

(13:45):
Often you can often catch your breath a little bit, and if you are much larger than that, then you're actually starting to really generate a lot of excess revenue. Without getting too much into this, what's important, [00:14:00] what's important to understand is that if you build the network, you're probably going to lose money on every subscriber that you have for four years, more or less. If you're a bigger company, much less time. But if you're a smaller company starting out it's like four or five years of taking payments from a customer until you've paid off the debt and the operating cost of having connected them. And so once you've amortized the cost of the network, then you're doing much better, better. This is why we think there should be exemptions for small ISPs. That's why New York does have an exemption, and [00:14:30] we actually think that you could do an exemption that is much larger, so rather than 20,000 subscribers, you could do it for about a hundred thousand subscribers or something like that. And our modeling, which we're working on to release soon, suggests that almost everyone in almost every state is covered, which is to say more than 90% of the people are covered by the larger ISPs in most states. And so this requirement, it hits different ISPs in different ways. [00:15:00] Sean, is there anything you wanted to add here before I think we're about to bring Shayna on?

Sean Gonsalves (15:04):
No, I'm looking forward to seeing Shayna, but just underscore your point. I mean, the idea is that smaller, independent ISPs, there's a lot to be said for providing some exemption, especially if you're trying to encourage competition in the market and not the barriers for entry into market if you're a smaller is P can be challenging. And so we want to encourage that because we [00:15:30] think having a competitive marketplace works well for all subscribers and for prices. And so it's an important consideration.

Christopher Mitchell (15:40):
So shayna's going to come on in part to help us better understand this. I work with a lot of small ISPs, and it's important to understand that even those that are seeming to be doing well, they often take all the money they make at the end of the year and they plow it back into the next year's build. And so they're using that [00:16:00] money and they're deeply concerned about losing any revenue because they're trying to keep reinvesting it. So that's why for us, the exemption is an important thing to consider, but shayna's going to help us better understand how the biggest companies, how this does not have the same impact to their bottom line as it does the smaller ISPs and why I'm comfortable, I'm not losing any sleep suggesting that we should put this obligation on the bigger ISPs Shana's with the California [00:16:30] Community Foundation and has dug into these numbers for quite some time. Thank you for coming on, Shana.

Shayna Englin (16:35):
Thanks Chris and Sean for having me. So I will just say that to the extent that anybody is losing any sleep about whether the big ISPs are going to be profitable or able to accommodate any of this, you can stop right now and anytime you are worried about that, I encourage folks to log onto all of these companies investor relations pages and give a listen to their quarterly [00:17:00] investor relations calls. What you're seeing here is a screenshot from AT&T's most recent, so this is for their quarter 4, 20, 24 results. This is a screenshot from their one page of highlights I want to draw your attention to on their mobility. So this is wireless services, and what you see is that's in billions of dollars. This is a bda, which is a proxy for profit. So [00:17:30] in Q4 2024 at t's profit on their wireless services was almost nine, just shy of $9 billion.

(17:43):
And underneath that it shows they call out, the margin on that went up to 53 7%. So to Chris's point about how much does it cost to actually deliver these services for AT&T, at least on their mobility services, it costs them [00:18:00] less than 50% of every dollar that they charge to actually deliver the services. And you can see down the line, they're wildly, wildly profitable. And this goes back quite a while on charter spectrum. And actually we can go to the next slide just for ease and time. So this is charter spectrum. This is again from their Q4 results, expenses and adjusted profits. You can see even in a quarter when their expenses went up a tiny bit, [00:18:30] their profit went up way more. And that is also in a quarter when they acknowledge that their Internet customers decreased by 177,000 subscribers, primarily driven by people who can no longer afford their service because of the end of the ACP. And then last slide, so this is Comcast. Comcast makes it a little bit harder to see exactly what's going on, but this is a screenshot from, as you can see, their residential and connectivity platforms. [00:19:00] And I'll call out that their residential connectivity revenue was up 5% domestic wireless that their mobility was up 17% and their overall Internet connectivity revenue was up 10%. Domestic broadband was up overall was up 2%. So their again continued to be wildly, wildly profitable. These big companies have, it's a rounding error in terms of these requirements.

Christopher Mitchell (19:28):
Yeah, there's such a great [00:19:30] capacity for these companies to add new subscribers without really increasing their costs, in part because they've built out their networks, now they're reinvesting and I think a lot of us would like to see more reinvestment more quickly, but nonetheless, they are reinvesting, but they throw off so much money that the idea that being able to or being required to offer a low cost plan is going to somehow really hurt them. It's not really something that would have a significant [00:20:00] impact on them, whereas it changes the lives of a household to be able to have Internet access to make sure their kids have education opportunities, that they have more economic opportunity. Shane, is there anything you wanted to,

Shayna Englin (20:12):
Chris, just on that point about the reinvesting? Again, when you dig into some of these reports, and I think it's actually on the charter slide that we skipped, there is a number in there that shows their capital expense. This last quarter, this wasn't true, but it has been true in several quarters. So you can see [00:20:30] CapEx is that second number there. You can see it went down in quarter three and quarter four of 2024. But also if you look over the buyback summary, so this is the company buying back its own stock in many and in many years, these companies actually spend at least as much money buying back their own stock as they do in investing in buildout. And again, you still have that kind of level of profitability.

Christopher Mitchell (21:00):
[00:21:00] So we wanted to throw out people that are considering this, and there's multiple reasons to consider this. One is that it will lower the cost for families that desperately need it. And another one is that even I should say is that if we have many states, which could just be three or four big ones, but if we have a movement of states pushing this, suddenly the big cable and wireless companies will want to lobby in Washington DC for [00:21:30] a national program that works better for them, might not be as great for the taxpayer, but would be better for them. And that's how we get a potential program again in the federal level is by having multiple states pushing this forward in ways that the big carriers then want to reprioritize their lobbying dollars. Now, I did want to note that this, I want to be honest about this in that it is one thing to be a part of the affordable connectivity program where [00:22:00] you do some reporting and you get a check back. It is a different thing when you're going through collections. And so these companies, it is not nothing to require them to do a $15 a month plan, but once again, we think that the balance is worth it if this is our only way to try to make sure millions of families can better afford decent connectivity. So we're going to talk about, just very quickly as we go into the questions to wrap up, please add any [00:22:30] more questions to the chat, we'll get to those. But Sean, what's going on in your own Massachusetts?

Sean Gonsalves (22:35):
Right in my home state of Massachusetts here, actually the first state after New York, once the legal questions had been settled and New York was able to move forward, that kind of signaled for other states that, hey, now it might be a good time. There were 22 states actually that signed on to a legal brief before the Supreme Court, before this whole thing was adjudicated in support of New York's authority to do this, Massachusetts, [00:23:00] California and 20 other states also signed onto that brief. But Massachusetts actually just a few weeks into January filed a bill, a state Senator Payano called the Enact Preserving Broadband serves for low income. It essentially mirrors the New York law in that it targets a $15 a month low income plan, although in the Massachusetts bill, they're aiming for a higher [00:23:30] download speed one that's in line with the current FCC minimum definition of broadband, which is a hundred megabits per second. It's early in the legislative session. I believe at least one person that's been working on this bill may be in the audience here. So if I'm misspeaking on anything, please signal in the questions or raise your hand however you can. But there's not a whole lot to say here other than Massachusetts is just now getting the ball rolling. And one other state has now [00:24:00] also joined the Fray, the state of California.

Shayna Englin (24:06):
Great state of California. That's right.

Sean Gonsalves (24:08):
Shayna, you know more about this than I do.

Shayna Englin (24:11):
Sure. So it was a spot Bill. So I think I saw a question in the chat around, or a few of them actually around some of the details on this bill, and we'll just flag that it was introduced basically as a bill that states it is the intention of the legislature to pass [00:24:30] a bill that does some things. It's AB 353 and again, when folks download this slide, that's a link to the bill so you can track how it's moving. The introduction as a spot. Bill is strategic for a number of reasons. One, it's to allow us a vehicle and allow the author a vehicle to continue to engage some of these key questions and work out some of those details. And also has this was dropped more [00:25:00] or less at the same time as the ask of the Supreme Court to reconsider and so wanted to make sure that we weren't throwing any gas on that fire or any other way being sucked into that as we were trying to figure out what the policy was going to look like here.

(25:18):
So that's the bill. As of right now, all of the details are in the air and including some of the details [00:25:30] around eligibility, who's eligible for it, what does it mean to be eligible for it, what problem exactly are we trying to solve? And then also how does it, answering those questions around who's eligible, how does someone get to have access to an affordable plan, how does that translate into enforcement? And really monitoring how that works. So one thing we'll kind of throw out there is, and I think Chris, [00:26:00] you had mentioned the kind of politics and someone had asked around the politics of this, and look, the politics of this should be much more broadly around cost of living full stop, not just for low income people, but for everybody. We know in California that the average bill for everyone that they spend on broadband is a hundred dollars a month.

(26:20):
Even with the cost of eggs as high as they are, that's 10 dozen eggs a month at a very, very high cost. So we should be thinking about this and [00:26:30] the talking about this and making this a political issue in the same way as all of the other affordability issues are. And so how those politics play into how we think about eligibility and then also here in California of the things that we're trying to be intentional and considerate around on this is learning some of the lessons around how difficult and how much investment was needed in enrollment and actually getting people access to ACP. As I'm sure lots of folks on [00:27:00] this call were involved in those efforts and it was an incredibly heavy lift on households, on nonprofits, on everyone else and expensive. And so how do we learn lessons from that as we think about questions around eligibility and enrollment?

(27:15):
And then also here in California, like in the rest of the country, we're really tackling questions around legal status and how much do we want to connect [00:27:30] eligibility for affordable, an affordable utility, which all of us really experience broadband as a utility. How much do we want to connect that to having to enroll and put yourself at risk in this context, given how many of the folks who actually need this across the state of California are in jeopardy in some way or live in households with folks who are in jeopardy in some way in that way. So all of those questions up in the air.

Christopher Mitchell (27:59):
Thank you, Shayna. One [00:28:00] of the things to consider is that in New York there was an argument for those who opposed it that what New York was doing was rate regulation. And a response that I had was that having a means tested low income plan to me did not seem like rate regulation. If one was to as a state create a law that says that everyone should have access to a $30 a month plan, which is not an uncommon teaser rate from many of the big ISPs [00:28:30] that may or may not be considered differently. The Supreme Court may hear this case in the future. So for instance, if Oklahoma created this law and then it was appealed up, I would not be too surprised if they found it states weren't allowed to do this, and then the Supreme Court might take another shot at it. So this is not something that we can necessarily say will be an approach that is bulletproof.

(28:57):
We will see what happens there for [00:29:00] the barriers to setting up similar legislation. I think one is that the telecom companies have been very strong in the states. Historically. We do not have an organized broadband coalition that operates in every state. There's no Sierra Club of Broadband or Ducks Unlimited of broadband. And so that is something that I suspect will come in time. But as of right now, politically, this movement does not have a lot of firepower [00:29:30] to go back and respond. But the cable and telephone companies are not as strong now as they were four years ago. So that is changing. Sean.

Sean Gonsalves (29:37):
I was just going to say, and it is a good point, Jim raised that question and it's a great one, and I think it'll vary from state to state. California has, thanks to Shayna and all of her wonderful colleagues, they have a pretty robust group of coalitions working on these issues. Other states are not as robust. And so I think fundamentally it's a question of political will versus some of the entrenched [00:30:00] interest of the bigger ISPs. And so I think success of even filing a bill and it moving forward is going to depend a lot on coalition and political organizing.

Christopher Mitchell (30:12):
Yeah, I think as we're in final comment territory, this question about what can be done locally, this is something that states are looking at. It is not clear whether or not cities may have some authority to put in a requirement as part of a franchise negotiation [00:30:30] or something like that for some services. This is sort of new territory. There is some areas in which this is very well trod ground and other places in which cities may try to be creative. Our preferred solution at the Institute for Local Self-Reliance is not actually state regulation like this. It is for local investment into networks that meet local needs. And so that is something that Sean and I do day in and day out trying to help encourage [00:31:00] those sorts of things. I think it's a better long-term strategy, but millions of families need to be able to connect to the Internet to make sure they can get the full benefits and that we will all benefit from them being on the Internet too. And so this is something we just can't ignore while we try to go community by community. Last thoughts? No last thoughts. I

Shayna Englin (31:26):
Would just say that the politics of [00:31:30] local investment, and I think Chris, you know that the Digital Equity LA coalition, the California Alliance for Digital Equity is in solidarity with you on that. That having public dollars go to public assets that then could be used to provide public benefit, that is community centered and community responsive is the right way to go here. But to the extent that the politics of regulation are tied up in the absolute money and power of, [00:32:00] in particular here in California AT&T and the cable industry makes that difficult, makes this kind of regulation difficult. The creating competition and creating local networks and getting those up and running is 10 x harder. So in terms of building and sequencing to that kind of responsiveness, I think this is a reasonable place to start.

Sean Gonsalves (32:30):
[00:32:30] Yeah, I was just going to say my last thought is just simply that there's a lot going on. There's a lot of issues out there, but I think that there is a lot of action to be had at the state and local level and can be a very sort of constructive way to really actually make a difference at a local and state level, which I think also kind of reinforces and reminds us of the things that we can still get done.

Christopher Mitchell (32:56):
Yes. So thank you all for your work on this. If you're watching this, [00:33:00] we know that you're a part of the movement to try to make sure everyone is well connected. I think that there is a role for everyone from the largest corporations to smaller folks like us who are going to be able to connect our neighbors with a variety of approaches. This is a tool that we absolutely need in the tool bag. I think we need to be careful to make sure it is aimed in the correct directions, but we hope that this is helpful. This will be archived [00:33:30] for reviewing or whatever people would like to do with it, cutting it up and making a disco, I don't know. But if you like this kind of content, we do a lot of it. You can find more of [email protected]. And if you look around there for what we write about California, you'll learn more about the wonderful digital equity Los Angeles Coalition, as well as Cade, the California Alliance for Doing Empathy. I don't know what is the D for Digital Equity. Equity. [00:34:00] Another one of Chris's wonderful figuring out acronyms on the fly. So thank you all for tuning in. Thank you for your work, and we'll be in touch as we learn more things to share with you on this.

Ry Marcattilio (34:17):
We have transcripts for this and other podcasts available at muni networks.org/broadbandbits. Email [email protected] with your ideas for the show. Follow Chris on Twitter, his handles [00:34:30] at communitynets follow muni networks.org. Stories on Twitter, the handles at muni networks. Subscribe to this and other podcasts from ILSR, including Building Local Power, local Energy Rules, and the Composting for Community Podcast. You can access them anywhere you get your podcasts. You can catch the latest important research from all of our initiatives if you subscribe to our monthly [email protected]. While you're there, please take a moment to donate your support [00:35:00] in any amount. Keeps us going. Thank you to Arne Hughes for the song Warm Duck Shuffle, licensed through creative comments. This was the Community Broadband Bits podcast. Thanks for listening.