Have Affordable Broadband Plans Helped Connect Low-income Households? Evidence from California (2014-20)
February 16, 2023
In recent years, state and federal regulators have imposed obligations on Internet Service Providers (ISPs) to offer affordable broadband plans as a condition for approving proposed mergers and acquisitions. The details vary in each case, but the obligation typically involves making available a basic, standalone broadband plan at a price significantly below market rates for a period of several years, using a predetermined set of rules to determine eligibility. This study explores the impact of three affordable plans in California during 2014-20. It examines whether these plans have contributed to narrowing the income gap in residential (fixed) broadband, helping connect eligible households that would otherwise not have connected. To estimate impact, the study uses a difference-in-difference (DiD) strategy that compares the change in adoption rates among eligible households before and after the introduction of the affordable plan in the areas served by each ISP to the change in adoption rates among eligible households in areas not served by the ISP. Overall, the results indicate that these affordable plans have had little impact in connecting low-income households to residential broadband. Weak compliance monitoring and a misalignment between private incentives and public interest goals are the main factors that explain these findings. In broad terms, the findings raise questions about the value of affordable plan obligations as a regulatory remedy in merger cases involving large ISPs. The conclusion discusses alternative tools to promote residential connectivity among low-income households on a sustainable basis.