How Much Will ACP Demise Affect Home Broadband?

It is not unusual to see estimates of U.S. households that will “lose their home broadband service” because a particular subsidy program is out of funding at about six million homes, or roughly 25 percent of households that had used the ACP subsidy, as estimated by researchers at Maravedis, for example. 

According to the Federal Communications Commission, some 21 million ACP accounts were in service in December 2023. 

The issue then is how many of those households will find some other way to obtain home broadband, as was the case before the Affordable Connectivity Program was funded. In other words, users of ACP subsidies often had already been buying home broadband service, or had chosen to use their smartphones, before the ACP was available. 

So the end of the ACP subsidy does not automatically mean all or most of those who used the program will simply stop buying home broadband services. By way of reference, it has been estimated that “low-income households” with less than $30,000 a year in income had home broadband buy rates in the 70-percent range before the ACP was funded. 

source: Pew Research

Also, according to Pew Research estimates, about 15 percent of U.S. adults say they rely on their smartphones to access the internet, though such practices are about 27 percent of adults with incomes less than $30,000 annually  and about 19 percent of adults with incomes less than $50,000 but at least $30,000 annually. 

 

source: Pew Research

By implication, perhaps 46 percent of U.S. adults with incomes less than $50,000 annually rely on their smartphones for internet access instead of buying home broadband. 

Keep in mind, though, that home broadband is purchased “by the household” while “smartphone internet access” is purchased by the person. 

So 86 percent of U.S. adults with incomes of $30,000 or less are estimated to use internet access services by some means, while 91 percent of U.S. adults with incomes of $30,000 to $50,000 have internet access. 

In total, between 93 percent and 95 percent of U.S. homes purchase home broadband services, according to Pew Research estimates.  

If one assumes that it was primarily the adults with annual incomes of less than $30,000 annually that were the bulk of the ACP subsidy recipients, and if ACP accounts numbered about 23 million households, with an average household density of about 2.5 persons, that suggests as many as 57.5 million U.S. adults might have been using the ACP (some of the household members were younger than 18). 

The Federal Communications Commission survey of ACP recipients in December 2023 said ACP recipients numbered 21 million. The FCC survey found that mobile-only service was used by 25 percent of survey respondents; 30 percent had both mobile and home broadband access and 23 percent already had home broadband service. About 22 percent reported they had no internet access prior to the ACP. 

The FCC survey also found that 11 percent of the “had no internet access service” respondents also said they had no need to access the internet. And more than 80 percent of those reporting no pre-ACP internet access said they used access services in some other way (library, school, business or friend’s account). 

Using the FCC’s 21 million ACP account figure, and subtracting the 11 percent of respondents who said they had no need to use the internet, perhaps 2.5 million of the ACP accounts were homes that wanted to use the internet and did not have a home broadband service prior to the ACP.

On the other hand, more than 50 percent of respondents who already had mobile internet access before the ACP was available said they used the subsidy to reduce the cost of mobile service they already had, and did not add a home broadband service. But a significant percentage (about 38 percent) said they did add home broadband using the ACP benefit. 

About 84 percent to 85 percent of respondents who already had some form of internet access used the ACP to reduce the cost of their existing plans. 

None of that is to minimize the remaining portion of the U.S. adult population that does not buy internet access or home broadband. But consumer choices also play a role. 

The whole point of public, school and business access is to allow people to use the internet without buying a personal subscription. Some consumers make rational choices not to purchase home broadband, instead using their mobile connections or free access of some sort.

Not every statistical artifact is the result of invidious action or circumstances.

AI Will Produce Winners and Losers

Though many executives and analysts are trying very hard to figure out which firms benefit most from generative artificial intelligence and AI in general, the prior experience of firms with the internet suggests there also will be losers.

And those losers could come from industries focused on digital and physical products such as “print” media, as our experience with the internet suggests. 

Study Title	Authors	Year	Focus	Key Findings
How the Internet Changed the Market for Print Media	NBER	2019	Impact on print media	Household adoption of broadband significantly reduced print readership and circulation, leading to revenue decline for newspapers.
The Impact of the Internet on Media Industries: An Economic Perspective	Oxford University Press	2008	Economic impact on media	The internet weakens intellectual property protection, making it easier to distribute content illegally and reducing potential revenue.

Similar losses can be noted in retailing as well, with a shift from place-based and physical retail to online retail. 

Study Title	Authors	Publication Year	Key Findings
The Impact of E-Commerce on Retail Employment	Autor, D., Dorn, D., Hanson, G.	2017	Found that increased e-commerce adoption led to job losses in retail sectors most susceptible to online substitution (e.g., electronics).
Omnichannel Retailing and Customer Engagement: A Review of the Literature	S. Verhoef, M. Kannan, P. Bharadwaj	2009	Highlights the importance of omnichannel strategies for retailers to enhance customer engagement and satisfaction in today's digital age.
The Impact of Online Shopping on Brick-and-Mortar Stores	T. Van den Poel, R. Verhoef	2003	One of the earlier studies exploring the potential negative impacts of e-commerce on traditional brick-and-mortar retailers.

Advertising has seen some of the greatest shifts from the internet, though.

Source: Gemini

Put simply, digital now claims up to 82 percent of all U.S. ad placements and revenue. Print has declined from 42 percent to less than three percent. Linear video dropped from 38 percent to 16 percent. Radio dipped from 10 percent to half a percent. 

Channel	1996 (Billions)	1996 (%)	2023 (Billions)	2023 (%)
Print (Newspapers, Magazines)	80.0	42.1%	10.0	2.7%
Linear Video (TV Broadcast, Cable)	72.0	37.9%	60.0	16.2%
Network Radio	10.0	5.3%	2.0	0.5%
Other (Radio Spots, Out-of-Home)	28.0	14.7%	18.0	4.9%
Digital Ads (Search, Social Media, Display)	-	-	300.0	81.7%

It might be reasonable to expect the content industries, advertising and retailing will again be among the industries to see early AI disruptions. 

Financial services might also be included on the list of industries that saw early internet disruption, and might see further challenges from AI. More recently, various forms of “sharing” (transportation and lodging, for example) also have emerged, and might see further changes from AI. 

But manufacturing and pharmaceuticals seem poised for AI disruption as well. On the other hand, construction might see relatively low amounts of disruption. 

Industry	Potential AI Impact	Drivers
Manufacturing	High	Robots can handle repetitive tasks, improve precision, and optimize production processes. AI can also be used for predictive maintenance and quality control.
Transportation	High	Self-driving vehicles, logistics optimization, and automated traffic management are all powered by AI.
Customer Service	High	Chatbots and virtual assistants can handle routine inquiries, freeing human agents for complex issues.
Finance	High	Algorithmic trading, fraud detection, and risk assessment can be significantly enhanced with AI.
Healthcare	High	AI can assist in medical diagnosis, drug development, and personalized medicine.
Retail	Medium	AI can personalize recommendations, optimize inventory management, and automate tasks like pricing and promotions. However, the human element in customer service and product selection might remain crucial.
Legal	Medium	AI can analyze legal documents, predict case outcomes, and streamline research tasks, but human judgment will likely remain essential for legal proceedings.
Education	Medium	AI-powered tutors can personalize learning experiences, but human teachers will likely remain central for guidance and social interaction.
Media & Entertainment	Medium	AI can personalize content recommendations and automate content creation tasks.
Construction	Low	Manual labor and on-site decision-making are still crucial aspects of construction, making widespread AI adoption less likely. However, AI can be used for design optimization and project management.
Hospitality	Low	The human touch remains essential in hospitality, but AI can automate tasks like booking and guest communication.
Arts and Culture	Low	Human creativity and emotional connection are central to the arts, making AI unlikely to replace artists entirely. However, AI can be used for artistic exploration and content creation tools.

Right now, attention is logically focused on industries and functions that are susceptible to AI automation. But equally big changes could come if AI allows competitors to enter markets in new ways. Think ridesharing and peer-to-peer lodging. 

And there always is the possibility that new industries are born. Think search and social media.

Netlfix: New Boss Just the Same as the Old Boss?

One sturdy storyline is “new boss just the same as the old boss.” So it is that some observers criticize video streamers such as Netflix for raising prices, just as legacy cable TV suppliers do. 

That seems unfair, as it is a charge that could be aimed at all sellers of products and services over time, especially when inflation rates are higher. And find any publicly-traded company whose basic imperative is anything other than “grow revenue and earnings” every year. 

Also, except for Netflix, virtually all other public streaming services are unprofitable, which is one reason why prices are being raised. 

Of course, one might prefer that higher prices over time are accompanied by higher value as well. 

So when others might argue that streamers such as Netflix are facing greater risks of becoming monopolists with weaker value propositions for consumers, that is a greater risk only if Netflix cannot grow its value proposition. 

That again is a general issue with all potentially market-leading firms. “New and improved” is almost a necessity, over time. 

We might agree with those who argue the “lower prices overall” advantage of streaming services only sometimes seems to be the case. Since many, perhaps most, consumers buy multiple streaming services, “saving money” is often, but not always an advantage, compared to buying a single linear subscription. 

It might be fairer to say that the key advantage is “choice” rather than “cost,” as a rule. 

Sudy	Year	Sample Size	Recurring Cost per Service (USD)	Avg. Number of Services per Household	Total Spending per Household (USD)	Key Findings
Parks Associates	2023	10,000 US households	$12.40	3.2	$40	Households with higher incomes subscribe to more services. Gen Z and Millennials lead in streaming adoption.
eMarketer	2022	1,000 US internet users	$15.00	2.7	$39.50	Increased cost-consciousness leads to subscription stacking and “churning” (switching between services).
GlobalWebIndex	2023	120,000 internet users across 25 countries	$10.80	2.4	$26	Global adoption of streaming is rising, with regional variations in preferred platforms.
Statista	2023	2,000 US adults	$14.20	3.0	$42.60	Original content and exclusive programming drive subscription decisions.
Nielsen	2022	5,000 US households with streaming subscriptions	$13.70	2.9	$39.30	Cord-cutting continues, with younger generations relying solely on streaming.

We might also argue that streaming is to linear video as many other forms of “internet” content are to legacy forms of content: more on-demand; more user-generated; more platform-oriented; pull (algorithm driven) from push (linear packaging); more consumption of “stories” or “items” rather than specific media. 

In and of itself, higher prices over time are not unusual, nor specific to Netflix or other streamers. What will draw attention is inflation rates that are higher than “background” rates of inflation. 

One might note that video streaming retail costs have risen faster than the background rate of inflation since perhaps 2024. On the other hand, it is also fair to note that almost no streaming services are profitable at such rates, either. 

Providers still are searching for the better formula for a sustainable business model.