ISPs must accept gov’t subsidy on all plans—no more upselling, FCC chair says

A stack of three $10 bills

Less than a year after Verizon and other ISPs forced users to switch plans in order to get government-funded discounts, a new federal program will prevent such upselling by requiring ISPs to let customers obtain subsidies on any Internet plan.

With last year’s $50-per-month Emergency Broadband Benefit that was created by Congress, the Federal Communications Commission let ISPs participate in the program as long as they offered the discount on at least one service plan. The FCC said it did so to encourage participation by providers, but some major ISPs drastically limited the subsidy-eligible plans—forcing users to switch to plans that could be more expensive in order to get a temporary discount.

Congress subsequently created a replacement program that will offer $30 monthly subsidies to people with low incomes. The program also specified that ISPs “shall allow an eligible household to apply the affordable connectivity benefit to any Internet service offering of the participating provider at the same terms available to households that are not eligible households.” The FCC still has to make rules for implementing the new Affordable Connectivity Program (ACP), but that requirement prevented the FCC from using the same one-plan rule that helped ISPs use the program as an upselling opportunity.

ISPs urged FCC to exclude “legacy” plans

Despite that, there was still a question of whether the FCC would define “any Internet service offering” to include legacy and grandfathered plans that are no longer offered to new customers. ISPs urged the FCC to let them exclude legacy or grandfathered plans from the subsidy-eligible offerings—such as requests from AT&T, Verizon, Frontier, Dish, the cable lobby group NCTA, and telco lobby group USTelecom.

The FCC is now on track to reject those requests under draft rules released by Chairwoman Jessica Rosenworcel on Friday. Although many ISPs “expressed concern at the extensive technical challenges necessary to include legacy and grandfathered plans,” the FCC draft rules “conclude that any Internet service offering means, for a particular customer, any broadband Internet plan in which the customer is currently enrolled (regardless of whether it is a legacy grandfathered plan), as well as any broadband Internet plan that a provider currently offers to new customers.”

The draft also says:

[W]e find that the purpose of this provision is to ensure that the eligible households are permitted to apply the affordable connectivity benefit to currently offered plans that are available to non-eligible households, such that eligible households are not limited to choosing from a subset of plans or restricted in some way for such plans. We also do not think that Congress intended to exclude consumers on existing legacy or grandfathered plans from participating in the Affordable Connectivity Program. We further clarify that the requirement that legacy or grandfathered plans be eligible for reimbursement does not require that providers offer such legacy or grandfathered plans to other customers, including ACP-eligible customers, that are not already on such plans.

Rosenworcel’s plan gives ISPs 60 days after publication of the order in the Federal Register to “ensure that the affordable connectivity benefit can be applied to all generally available and currently sold plans” and to “accommodate requests by existing subscribers to apply the affordable connectivity benefit to legacy or grandfathered plans on a case-by-case basis.”

Commission vote required

Rosenworcel’s plan requires a commission vote, so it isn’t a done deal. The FCC is still deadlocked with two Democrats and two Republicans, with the Senate having not yet acted on President Joe Biden’s nomination of Democrat Gigi Sohn. The FCC has a January 14 deadline for promulgating rules for the new subsidy program.

Over 9 million households enrolled in the Emergency Broadband Benefit program, which was open both to people who have low incomes and those who lost income during the pandemic. The ACP removes eligibility for people who merely lost income but expands eligibility for low-income households by raising the threshold from 135 percent of federal poverty guidelines to 200 percent. The original $50 subsidies will continue to be paid until March 1, 2022, and shift to the new level of $30 after that.

The ACP is funded with $14.2 billion. In addition to the $30 monthly subsidy for most eligible households, there will be $75 monthly subsidies for homes on tribal lands and “a one-time discount of up to $100 on a computer or tablet for eligible households, as directed under the law,” the FCC said.

Verizon complained of “substantial task”

ISPs had claimed that applying discounts to legacy and grandfathered plans isn’t as simple as just reducing a customer’s bill by $30 per month. “Because established providers may have many thousands of legacy service offerings, it would be a substantial task for providers to identify all legacy service offerings, determine all of the possible rate and discount combinations, and make the billing system changes necessary to correctly apply the ACP discount to all legacy services,” Verizon told the FCC.

An ISP could choose not to participate in the program, but then it wouldn’t get subsidy revenue from people who otherwise would not buy the ISP’s service.

Common Sense Media and Public Knowledge told the FCC that applying the discounts to legacy plans should be relatively simple. “We are not asking ISPs to make all legacy plans available to the public but simply to allow existing subscribers to use their benefit on their existing plans,” the groups said. They also argued that excluding legacy or grandfathered plans would let ISPs use the program for upselling:

If the benefit cannot be applied to grandfathered plans, then subscribers will have to choose between paying full price for their existing grandfathered plan or switching to a new ACP-eligible plan. This would create a system where new plans or participation in ACP have an inherent advantage over old plans, which could be exploited to raise prices for these customers, or to upsell or downsell them…

Congress designed the ACP to promote connectivity among low-income households. Grandfathered plans are used by many low-income households. Denying the ACP for grandfathered plans would hurt connectivity among these households and conflict with the central purpose of the ACP.

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