Home Business Telecom fights price caps as U.S. spends billions on internet access

Telecom fights price caps as U.S. spends billions on internet access

Telecom fights price caps as U.S. spends billions on internet access


AT&T, Charter, Comcast and Verizon are quietly trying to weaken a $42.5 billion federal program to improve internet access across the nation, aiming to block strict new rules that would require them to lower their poorest customers’ monthly bills in exchange for a share of the aid.

In state after state, the telecom firms have blasted the proposed price cuts as illegal — forcing regulators in California, New York, South Carolina, Tennessee, Virginia and elsewhere to rethink, scale back or abandon their plans to condition the federal funds on financial relief for consumers.

The lobbying campaign threatens to undermine the largest burst of money to upgrade the country’s internet service in U.S. history. Enacted by President Biden as part of a sprawling 2021 infrastructure law, the funds are intended to deliver speedy and affordable broadband to the final unserved pockets of America by 2030 — a goal that the White House likens to the federal campaign nearly a century ago to electrify the nation’s heartland.

For some state and federal officials, though, the fear is that the massive influx of aid could fall short of its potential, particularly if Americans cannot afford the new broadband service in their long-neglected communities.

“We will not get a chance to spend tens of billions of dollars to connect Americans again,” said Alan Davidson, the director of the National Telecommunications and Information Administration (NTIA), an arm of the Commerce Department overseeing the program.

Telecom companies have focused their lobbying on the states, which are tasked with doling out the money. In Virginia, for example, AT&T hinted at the possibility of litigation if the state capped prices for low-income households as a condition of participating in the program. Officials in South Carolina and Tennessee, meanwhile, neutered key proposals to limit poorer residents’ monthly bills amid opposition from cable and internet providers.

Other states including Michigan, Missouri and New York faced pressure to relax some pricing requirements at the insistence of groups including USTelecom, which represents AT&T and Verizon. In California, the group said regulators’ approach “amounts to unfair market interference,” an argument later echoed by Republicans in Congress, some of whom have benefited from industry donations.

Often, the largest telecom companies have questioned the legality of the government’s attempts to limit broadband prices under the infrastructure law. Some companies have signaled that undesirable regulation could cause them to walk away from the program entirely, jeopardizing Biden’s ambitions to bring internet to the communities that still do not have it.

“Rate regulation is exactly a formula that will not allow the kind of flexibility that will ensure the overall [broadband] program will be a success,” said Jonathan Spalter, the president of USTelecom.

But consumer advocates counter that the industry is merely trying to reap the benefits of a new federal windfall without addressing one of consumers’ oldest complaints about broadband: the price.

“This is a requirement in exchange for a humongous government benefit,” said Gigi Sohn, executive director of the American Association for Public Broadband, which advocates for low-cost options. “The kind of notion that government can require something in exchange for giving out billions of dollars, that’s standard.”

The political wrangling carries great consequence for the roughly 8.5 million U.S. households and small businesses that still do not have access to modern-day connectivity, a persistent gap known as the digital divide. For decades, the government has spent billions of dollars to try to narrow this chasm, only to stumble amid fierce industry lobbying and complicated market forces.

The latest injection of aid arrived in 2021, when Congress established the Broadband Equity, Access and Deployment Program, known as BEAD, as part of the infrastructure law. The program allowed local officials to decide how to spend their portion of the roughly $42.45 billion pot, but it set some basic national parameters, primarily to ensure that newly built networks are affordable. In detailed guidelines issued in 2022, the Biden administration suggested that internet plans should cost consumers no more than $30 per month — though it allowed local officials to propose alternatives.

“There’s a recognition, right there upfront, that if you build it, it doesn’t mean they’re going to come,” said Raza Panjwani, a senior policy counsel at New America’s Open Technology Institute, which has advocated for low-cost broadband options. “You have to build it, [and] you have to make it affordable.”

By June 2023, the Commerce Department divvied up the money among the states, which started to design intricate plans for how to award grants to companies that would build out new networks. Spalter, the head of USTelecom, described the process at the time as a “vital step forward toward making the goal of internet for all a reality in our nation.”

Behind the scenes, though, lobbyists for AT&T, Charter, Comcast and Verizon began trying to block any restrictions on what they might charge customers served by taxpayer dollars.

As Michigan readied its plans for roughly $1.5 billion in new federal funds, a top lobbying group for Charter and Comcast warned the state’s broadband office in December against strict limits on prices. In a letter, the Michigan Cable Telecommunications Association said price limits for low-income residents would be “heavy-handed” and “impermissible.” The group did not immediately respond to a request for comment. Comcast and Charter declined to comment.

New York officials opted to grant the industry more leeway, settling on a $65 maximum monthly charge for low-income customers on new federally financed networks. But Paul Vasington, a director of public policy at Verizon, tried to dissuade the state in December, noting that pricing caps “could discourage participation” by telecom giants. In a statement, Katharine Saunders, the deputy general counsel at the wireless company, added that states needed to work with “experienced providers” to build new networks and “make universal broadband a reality.”

At times, the industry even objected to states that had planned to award money to companies that combined the fastest speeds with steep price cuts.

In Washington state, officials last year said they would heavily favor companies that reduce the cost of gigabit fiber internet — the gold standard in broadband — to $75 per month in areas served by the new funds. B. Lynn Follansbee, a vice president at USTelecom, later said in comments filed with the state that its approach “promotes a ‘race to the bottom’” and “encourages applicants to propose lower prices only in the hope of winning the grant.”

To sway regulators, telecom companies and lobbyists have stressed that most internet providers already offer special low-cost plans for needy families, though exact web speeds, prices and eligibility criteria can vary dramatically. They also point to a provision in the infrastructure law that bars the government from trying to “regulate the rates charged for broadband service.” Internet providers, who lobbied for that prohibition in 2021, maintain that most efforts to tie federal funds to specific pricing changes are illegal.

“The statute was to offer a low-income program, not specifically a $30 program,” said Rick Cimerman, the vice president for external and state affairs at NCTA – the Internet & Television Association, whose members include Charter and Comcast.

Cimerman added that some internet providers could face financial hardship if they are forced to cut costs too deeply, arguing that it is already expensive to build networks in hard-to-reach, sparsely populated areas.

“The net or end result may be some providers saying, ‘I’m sorry, I’m just not going to participate in this plan,’” he said.

The opposition underscores the vast power and reach of the telecom industry, one of the most formidable political forces in capitals across the country. Nationwide, companies including AT&T, Comcast, Charter and Verizon spent over $25 million last year to influence state policymakers on a range of issues — including implementation of the infrastructure law, according to local records reviewed by OpenSecrets. They spent an additional $117 million on federal lobbying in 2023, according to the money-in-politics watchdog.

At times, the political pressure has proved persuasive.

In Virginia, AT&T warned the state in a legal filing last September that strict pricing requirements “would be contrary to good public policy, lead to litigation and more importantly will discourage provider participation.” The company requested that “any rate regulation language be removed” from Virginia’s blueprint.

With $1.4 billion on the line, Virginia officials last year appeared to side with the telecom industry — touching off an unresolved battle between the state and the federal government, which signaled it would not send Virginia its money without a fix. Tamarah Holmes, the director of the Virginia Office of Broadband, declined to comment. Megan Ketterer, a spokeswoman for AT&T, said the company is “encouraging the states to follow the affordability provisions” in the law.

A similar lobbying push greeted Tennessee, which is set to receive about $813 million under the BEAD program. Last year, state officials proposed to cap broadband prices at no more than $50 per month for low-income residents served by new federally funded networks.

By spring, however, the state had quietly deleted that price point from its plan, under pressure from telecom lobbyists, including the Tennessee Cable and Broadband Association, according to two people familiar with the matter who spoke on the condition of anonymity to describe the conversations. The state declined comment and, by Saturday, had removed a copy of the plan from its website.

Ann Marie Walp, the executive director of the Tennessee Cable and Broadband Association, declined to comment. Executives from Comcast and Charter serve on the board of the organization.

Most states’ plans have not been finalized. Some states have said they intend to allow internet providers to raise prices on low-income Americans in limited circumstances, such as to address market changes or to keep pace with inflation. While the Biden administration has been adamant about the need for affordable broadband, it has also tried to adapt its new infrastructure program to fit local economic needs, according to senior officials who spoke on the condition of anonymity to describe the private discussions.

The policy disputes have taken on added urgency in recent weeks, as the U.S. government braces for the imminent lapse of another federal broadband initiative: the Affordable Connectivity Program, which faces the prospect of sharp cuts to the monthly subsidies that help lower bills for roughly 23 million Americans in May. The program is set to run out of funds and cease operating in June.

Since 2021, these payments have served as a financial lifeline for poor families and generated a windfall for the telecom industry, allowing companies, including Charter, to attract and retain customers who might not otherwise be able to afford high-speed internet. But Congress has repeatedly not replenished the program’s funds, worrying state officials who counted on the money when they designed their new broadband networks.

“We all drew up affordability plans assuming [the subsidy program] was around,” said BJ Tanksley, Missouri’s director of broadband development.

The state initially aimed to cap low-income plans in newly served territories at $30 per month, but Tanksley said Missouri changed its approach after receiving “pretty heavy feedback” from internet providers. “There are more questions than answers,” he said of the uncertain federal benefit program.

Some congressional Republicans have blasted the monthly subsidies as wasteful, while arguing broadly against federal intervention in the broadband market. House GOP lawmakers in December summoned Davidson, the head of NTIA, for a congressional grilling, where Rep. Bob Latta (R-Ohio) raised alarm that the office “may allow states to push the boundaries of what conditions they can impose on broadband providers.”

Often, the same GOP lawmakers have sided with internet providers over the provision of federal infrastructure funds. The dynamic has been especially evident in California, a frequent target of conservatives’ ire.

In November, the Golden State proposed an ambitious idea: Companies that receive federal grants could charge low-income consumers no more than $30 a month, which would be reduced to $15 if Congress does not restore funding for the Affordable Connectivity Program. California said it would also prioritize applicants that offer ultrafast gigabit-speed broadband at $50 to everyone, citing research showing that 3 percent of its residents lack internet because it is “not worth the cost.”

One month later, 16 Republicans on the House Energy and Commerce Committee pilloried NTIA for allowing states to pursue “rate regulation.” The chief authors of that letter — including Latta and Rep. Cathy McMorris Rodgers (Wash.), the chairwoman of the committee — said the Biden administration’s actions seemed designed “to ignore” Congress.

Each of those lawmakers has received donations from the communications and electronics sector, which includes the telecom industry, according to OpenSecrets, including McMorris Rodgers, who received more than $545,000 in 2022. She has announced plans to retire from Congress this year. A spokesman declined comment.

The GOP missive echoed arguments raised by industry lobbyists in Sacramento. The group CalBroadband, which represents companies including Comcast and Charter, had blasted California’s proposed prices as “arbitrary.” Janus Norman, the president of the group, added in an interview that prices should be “consistent across the board so that BEAD- funded areas should enjoy, or have consistency in pricing, with any other area that’s not government-subsidized.”

In their own sharply worded legal filings, AT&T joined other telecom companies in rebuking the state, and USTelecom argued that California “runs afoul of federal law,” citing Supreme Court precedent.

“These proposed requirements,” the group charged, “equate to impermissible rate regulation.”


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