For consumers, the February 2024 freeze of funding for the Affordable Connectivity Program (ACP) meant that they had to look for affordable internet service from Internet Service Providers (ISPs) themselves, rather than rely on Federal assistance to make service affordable.
In the absence of what was the Federal government’s largest subsidy targeting service prices (a $30/month discount for households, and $75/month discount for those households on tribal lands) the responsibility to keep low-income Americans connected to the internet falls more heavily than ever on individual companies – a responsibility which a number have met. NDIA’s Honor Roll page lists those plans from ISPs that meet our low-cost plan inclusion standards for low-cost broadband service.
Of the strategies used to bring broadband into the realm of affordability for low-income households, two approaches from ISPs have emerged as the most common: fixed discount offers, and low-cost plans.
Other approaches do exist, and have had their impact. Agreements between ISPs and housing authorities can ensure that low-income multi-family housing blocks have service priced at lower rates, and Federal/state policies, such as New York’s Affordable Broadband Act mean that ISPs are obligated to guarantee service at particular speeds and prices to eligible households. The purpose of this blog post is to review the approaches that internet service providers (ISPs)themselves have created to make service more affordable for some customers.
Low-cost Plans
A common approach to affordability when it comes to high-quality internet service is the low-cost plan, mostly for qualifying low-income households – a broadband internet plan with an inexpensive sticker price, not requiring additional discounts to make it affordable. The prices of low-cost offers are fixed to the offers themselves, and are not promotional (i.e., there are no prices that expire after a certain time period). Low-cost offers are also far more common than fixed discount programs, with sixteen out of nineteen plans currently listed on NDIA’s Honor Roll page falling into this category.
Low-cost plans are structured more simply than fixed discount offers, which we review below. Everything to do with subscribing to a low-cost plan can be completed within a single transaction – no need to work out whether an internet plan is compatible with a separate discount offer, or what the final price will be during a promotional period and after promotions expire.
A disadvantage of traditional low-cost plans as an affordability solution is that individual ISPs themselves determine what is considered to be “low-cost” –that is, what qualifies as low-cost for Spectrum may not align with what qualifies as low-cost for AT&T. And neither may coincide with what a consumer considers low-cost.
Another potential drawback is the flexibility a consumer is offered. Most of the ISPs that NDIA has identified as offering low-cost internet plans typically offer no more than one or two plans that meet NDIA’s low-cost plan inclusion standards. This means that if those low-cost plans don’t fit a consumer’s bandwidth needs, there is little that can be done about reducing the cost of higher priced, higher speed plans.
Furthermore, the effectiveness of low-cost offers is highly dependent on the level of restriction when it comes to determining eligibility, and how an ISP requires eligibility to be demonstrated. Both of these factors are determined by the provider itself. For example, fewer recognized criteria for eligibility, such as enrollment in SNAP or Medicaid (for a full list of eligibility criteria, see our GIG eligibility criteria) coupled with methods of providing proof such as mailing in physical copies of documents, may greatly reduce the ability of consumers to make use of a low-cost plan.
Fixed Discount Offers
Fixed discount offers refer to a voucher-style, broadly applicable discount that is applied to an existing internet offer to lower the total monthly price paid by the consumer.
In comparison to traditional low-cost offers, fixed discount offers allow users a certain level of flexibility that traditional low-cost offers may not. Verizon’s Forward discount offer, for example, means a discounted price to consumers who meet certain eligibility criteria, bringing down the cost of a given internet plan by up to $30 (ACP was an example of a fixed discount offer)
One advantage of fixed discount offers is the potential to combine a discount with other promotional offers to reduce monthly bills further, even if temporarily. Fixed discount offers also place slightly more choice, typically with regards to bandwidth, in the hands of users when it comes to choosing the right low-cost internet plan for their needs, assuming there are sufficient options available. In other words, consumers can choose which plans to apply their discount towards, instead of being boxed into an existing low-cost offer being made available by an ISP.
There are potential drawbacks of fixed discount offers. If a plan’s starting price is relatively high, applying a discount may not bring the total cost into the realm of affordability for the average person searching for low-cost internet. There is also the additional burden on part of the consumer above and beyond selecting and applying for an internet plan, to understand a separate discount program, how to use it, and whether the plan they have selected is compatible with a fixed discount offer.
Finally, as with low-cost plans, the effectiveness of fixed discount offers is, again, highly dependent on the level of restriction when it comes to determining eligibility, and how consumers demonstrate their eligibility. And again, both of these factors are determined by the provider itself.
How ISPs Can Create Affordability Strategies
Have options for Low-cost Broadband Service
ACP closed service gaps for some 23 thousand enrolled households, enabling consistent connectivity for vulnerable communities, reducing stress, and facilitating consistent access to education, healthcare, job applications, and work. Relatively few service providers have taken steps to address the affordability gap created when the program was not renewed. To meet the needs of urban and rural communities, all ISPs should aim to offer low-cost broadband service options, or programs that bring current offers into reach for those who are not able to afford them.
Increase the number of low-cost plans and the range of pricing tiers offered.
Individual ISPs offer a limited amount of affordable plans, and they have the opportunity to diversify the variety of low-cost offerings in this market.
Users risk being railroaded into plans that do not meet their needs because there are not enough low-cost plans with insufficient variability in speeds in a given service area. An increase in the number of plans should be accompanied by an increase in the range of pricing options to support access across the low-cost pricing spectrum.
Reduce barriers to internet access by reducing or removing eligibility criteria for low-cost internet service and discount offers
Whether or not internet plans are made more affordable by design (low-cost plans) or by adding separate discounts, they are of little use if eligibility criteria are too restrictive. Reducing the number of conditions to be met and demonstrated by the consumer – or better yet, removing them altogether – is a goal that all ISPs offering low-cost plans should strive towards.
Spread awareness about discount offers and how they differ from traditional low-cost plans.
If the chosen method for an ISP to move plans into what it can consider low-cost is a fixed discount program, consumers should be able to easily understand what they are signing up for, especially in the face of things like separate contractual agreements and multiple renditions of eligibility confirmation. The responsibility falls on the ISP to be able to effectively communicate what it is they are selling and minimize the amount of effort a consumer should put in to complete a purchase.
In Conclusion
Both approaches—fixed discount offers and low-cost plans—have advantages and drawbacks, and both are useful and necessary to make service more affordable. NDIA supports both approaches and encourages ISPs to meet the criteria for either in its Low-cost Plan Model.