International Finance

ACP discontinuation could cost American telecom USD 4 billion: Research

The survey estimated that around 1.6 million households will cut their telecom spending by USD 15 per month if the ACP ends

According to a new report from the financial analysts at New Street Research, the United States telecom industry stands to lose roughly USD 4 billion in market value, along with USD 1.1 billion in revenues, if the Affordable Connectivity Programme (ACP) ends in the coming days.

The London-based research group also stated that it based its latest calculation on its survey of over 1,000 ACP recipients as well as data from Recon Analytics, the FCC and the Benton Institute, along with the commentary from companies in the ACP programme and data obtained during the COVID pandemic.

The Affordable Connectivity Programme, which has kept millions of low-income American families with a low-cost high-speed internet connection since the beginning of the COVID pandemic, is now facing the prospect of being shut down, as the funds required to run the programme are about to end in April 2024.

New Street Research’s survey found that 27% of ACP beneficiaries would drop internet services if their bill increases by USD 30 (the amount of the ACP subsidy). However, the research body’s analysts estimated that around 1.2 million households may end up performing the move, given the fact that survey responses often do not directly correlate with actual consumer behaviours.

The firm also estimated that around 1.6 million households will cut their telecom spending by USD 15 per month if the ACP ends. The ACP gets support under the United States government’s Emergency Broadband Benefit (EBB) programme, instituted during the COVID pandemic, and distributes subsidies of up to USD 30 per month to low-income households for telecom services. As of March 2024, the programme has some 23 million American households as beneficiaries.

Companies in the programme were required to warn customers by March 19 about the uncertain future the scheme faces.

The Federal Communication Commission (FCC) also noted that May would be the last month where partial ACP funds would be made available. As per the government agency, ACP benefits will be between USD 7 and USD 16 per household in May, instead of USD 30.

Top lawmakers and the White House have reached a preliminary deal to avoid a US government shutdown and continue to fund key government agencies. According to an Axios report, that agreement would represent a milestone for House Speaker Mike Johnson, given the fact that his predecessor wasn’t able to pass a budget.

However, analysts are sceptical whether the legislators can reach a similar agreement over extending the ACP programme.

“The odds of passage have not improved,” summarised Blair Levin, a policy adviser to New Street Research and a former high-level FCC official, in a note to investors. The expert also noted that 197 House members are now listed as sponsors of a bill designed to keep the ACP programme intact.

However, most of those co-sponsors are Democrats and “the bottleneck for passage is the speaker, who we don’t think will allow a vote.”

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