Should broadband lifeline subsidies minimise cost or maximise service?

26 October 2015 by Steve Blum
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Cost matters.

Frontier Communications told the Federal Communications Commission that setting minimum broadband speed requirements for lifeline programs aimed at low income people would be a barrier to greater broadband adoption. In a presentation published (per standard procedure) on the FCC’s website, the company’s in-house lobbyists told commission staff

Minimum service standards may be a good idea in some respects but must not prevent or limit consumer choice.
– The Commission asks about setting a minimum speed for fixed Internet services, such as 10 Mbps [download speed]/1 Mbps [upload speed].
• Certain rural consumers, however, may not currently have access to 10 Mbps/1 Mbps fixed Internet speeds and would thus be prevented from choosing to use Lifeline for a fixed Internet service.
• Even if higher speeds are available, a minimum speed standard may prevent a customer from opting for a lower speed plan that may better meet their budget.

That last point is important. Frontier cited an FCC study, in which it participated, that concluded

Patterns within the data indicate that cost to consumers does have an effect on adoption and which plans they choose. In several of the projects, when given the choice among service plans, new adopters were willing to pay for broadband service, but tended to choose more modest and affordable speeds and data allowances.

One of the primary goals of consumer-side broadband subsidies is to convert people who don’t buy broadband service into subscribers. It’s wrong to assume that non-subscribers do not understand digital services and technology. Although that’s true of some, the FCC study also concluded that digital literacy programs do not appear to be “efficient or effective” in creating new users. It comes down to cost and the perceived value of Internet access.

Setting standards for infrastructure and service availability is a proper – necessary – thing for regulators to do when public subsidies are involved. If used at all, taxpayer dollars shouldn’t pay for outdated technology or prop up exploitive business models. But individual consumers need meaningful choices, particularly the ability to choose between low cost or high bandwidth service.