History

Cost as a barrier to Internet access for low income Americans has been an issue for policy makers, Internet providers and digital inclusion advocates since the World Wide Web's popular emergence in the mid-1990s.

The rapid transition of the retail Internet service sector – from a diverse, highly competitive collection of dial-up providers in the 1990s to a tiny handful of very large cable and telecom broadband providers, enjoying monopolies or duopolies in most markets, by the mid-2000s – had a major effect on the price of basic home access. As mainstream bandwidth requirements grew, DSL and cable Internet bills grew with them.

In 2000, when home DSL and cable modem connections were just appearing in many communities, the cost of the standard 56 kbps dial-up connection was less than $20 a month. Consumers with limited budgets could often find a local ISP or an ad-supported service like NetZero for $10 or less.

But by 2010, dial-up was no longer a serious option. The plethora of home providers at the end of the '90s had shrunk to just one or two, and their monthly charge for a modest “standard” home broadband connection, i.e. 3 to 6 Mbps ADSL or cable modem service, was generally between $35 and $50 after the usual year of promotional pricing. Time Warner Cable's Road Runner “Standard” service that year, for example, was 7 Mbps downstream for $49.99 a month.

As the impact of rising costs on Internet access for low income households became more apparent, there were a couple of early attempts to deal with it through philanthropic partnerships as well as regulatory deals. In 2006 AT&T and One Economy launched “Access All,” which included 50,000 free Internet connections for low-income families served by Habitat for Humanity and similar organizations³. The next year AT&T began to offer a low-end DSL product for $10 a month to new customers⁴, as one sweetener for the FCC's approval of its merger with Bell South. (Whether AT&T delivered on this agreement is a matter for debate.)

But serious efforts to create low-cost broadband options for low-income Americans didn't really begin until the Obama Administration, and the 2009 appointments of Julius Genachowski and Mignon Clyburn to the Federal Communications Commission.

The ISP discount programs outlined in this guidebook arose from two initiatives led by FCC Chairman Genachowski and his successor, Thomas Wheeler. Clyburn, who served with both, also played a major role. Those initiatives were:

The merger deals – a succession of low income discount rate programs that were included as conditions of FCC approval of major cable and telecom mergers between 2011 and 2016; and
Connect2Compete – a program that Genachowski organized with the cable industry following the first big merger-deal program, Comcast Internet Essentials, which extended some elements of that program to other cable providers on a voluntary basis.

ARRA, BTOP and the National Broadband Plan

As background to the FCC's leadership in this area, it's important to remember that much of President Obama's first term was devoted to the massive economic stimulus program called the American Recovery and Reinvestment Act (ARRA). One piece of the ARRA was the Commerce Department's Broadband Technology Opportunities Program (BTOP)⁵, which included a $400 million investment in community computer access centers⁶ and home Internet adoption support⁷ programs for disadvantaged, disconnected Americans – by far the biggest funding commitment in support of digital inclusion ever seen.

The ARRA also gave the FCC a task: The creation of a National Broadband Plan⁸ with "a detailed strategy for achieving affordability and maximizing use of broadband to advance consumer welfare, civic participation, public safety and homeland security, community development, health care delivery, energy independence and efficiency, education, employee training, private sector investment, entrepreneurial activity, job creation and economic growth, and other national purposes." The FCC completed and published its Plan in March 2010. It included several pages on barriers to household Internet adoption and ways to overcome them.

So Obama's new FCC appointees weren't acting in a political vacuum when they considered how to make broadband more affordable for low-income consumers.

First merger agreements: Comcast and CenturyLink

In December 2009, Comcast, the biggest U.S. cable provider, announced a deal to buy a controlling interest in NBC Universal for $6.5 billion; and in April 2010, CenturyTel unveiled a $12 billion deal to merge with Qwest, creating the nation's third biggest telecom corporation. Both deals required FCC approval.

Each of the two mergers took a year to review, and in the end, both were approved with extensive conditions⁹ ¹⁰. Among those conditions were Chairman Genachowski's signature low income discount program agreements: Comcast Internet Essentials ($10 cable Internet for “new adopter” families with children in the Federal school lunch program) and CenturyLink Internet Basics ($10-$15 ADSL for new adopter Lifeline households).

Both the agreements were temporary (Comcast's was for three years, CenturyLink's for five) and limited to new users. Both offered minimal speeds (1 or 1.5 Mbps).

In a very brief statement¹¹ accompanying the Comcast merger approval order, Chairman Genachowski gave just twelve words to the adoption discount program: “Our approval is also structured to spur broadband adoption among underserved communities.” Commissioner Clyburn had more to say¹²:

The adoption commitment in the Order is groundbreaking and will hopefully serve to chip away at the barriers that keep low-income and minority citizens from accessing the Internet. Having spoken to many students and parents during my time as a Commissioner, I have come to the conclusion that basic word processing skills, computer literacy, and general Internet know-how are all best realized and attained via early broadband adoption. Children with access to competent hardware and up-to-date software are far less likely to fall into the steep and perilous crevasse we know as the digital divide, a lonely place in which too many lower-income and minority children are currently stuck.

With that in mind, I urged Comcast and NBCU to break new ground, to really and truly reach out and touch America’s children through an adoption program that is bold, proactive, and realistic with regard to affordability. I sought and obtained assurances that the companies would not embark on a child-directed program just for the sake of doing so, and not to simply check the adoption box in launching a weakly-targeted and poorly-constructed outreach effort that is doomed to produce poor results even before it begins.

The adoption initiative that is detailed in the Order is well-crafted, ambitious, and has enormous potential. By offering the possibility of affordable, high-speed broadband to families included in the Department of Education’s School Lunch Program, not only will school-age children be able to explore the infinite worlds of the web, but the others in their homes will be able to join them. Many of these individuals think of a home computer with Internet access as an unattainable luxury, and the broadband adoption program will bring these students and their families as close to household Internet access as they have ever been.

With this statement, Clyburn staked out her role as the Commission's leading voice for low-income digital inclusion -- a role she would continue to play throughout her tenure, both in future merger proceedings and in the 2015-16 push to add broadband Internet access to the Lifeline program.

Connect2Compete

But the next step was taken by Chairman Genachowski. At events in October and November 2011, the FCC Chairman announced¹³ a new collaboration with the National Cable Television Association and a wide range of other companies and organizations. Called Connect to Compete (C2C), it would be built around a voluntary commitment by other cable providers to create programs similar to Comcast's Internet Essentials: Offering families eligible for the National School Lunch Program a $9.95/ month broadband Internet service, $150 laptop or desktop refurbished computers, and free digital literacy training. The effort was initially anchored by One Economy, which soon created a new nonprofit to run it (first called Connect2Compete, then EveryoneOn). Participating cable companies included Time Warner, Cox, Cablevision, Bright House, SuddenLink, and others.

The creation of Connect2Compete locked in the Internet Essentials model as a voluntary cable industry standard. Unlike Comcast, Time Warner, Cox and the other C2C participants didn't agree to report their numbers to the FCC or to meet specific marketing benchmarks. But through 2012 and 2013, to varying extents depending on the company, C2C discount programs did get established, advertised and used by low-income families throughout the country.¹⁴

A second round of merger cases: Comcast (2), AT&T, Charter and Altice

Following Obama's re-election, in early 2013 Chairman Genachowski announced his resignation to return to private practice. His successor, former cable executive Thomas Wheeler, was confirmed by the Senate and took office in November.

Three months later, in February 2014, Comcast announced it had a deal to acquire Time Warner Cable.

Three months after that, in May, AT&T announced an agreement to acquire DirecTV.

Over the next two and a half years, the FCC and its staff:

considered and ultimately helped block¹⁵ Comcast’s proposal to a) acquire Time Warner Cable, and then b) trade about three million customers to and from Charter Communications, and spin another 2.5 million off to a new company partially owned by Charter;
considered and agreed to Charter’s subsequent bid to acquire Time Warner for itself, along with Bright House Networks¹⁶;
considered and agreed to AT&T’s acquisition of DirecTV¹⁷; and
considered and agreed to Netherlands-based Altice’s acquisition, in rapid succession, of SuddenLink and CableVision, making Altice USA the country’s fourth biggest cable provider¹⁸.

These decisions resulted in five of the nation’s largest cable providers consolidating into just two, while the biggest telecom corporation acquired the biggest satellite TV provider -- all in less than three years.

Here are the low income discount Internet plans that emerged from all this dealmaking:

Comcast, whose original Internet Essentials obligation ended in 2014, made a commitment to extend the program indefinitely¹⁹. That commitment wasn’t rescinded when its merger proposal was blocked. It has been enhanced since then.²⁰ ²¹
Charter proposed and agreed to its own plan as part of the Time Warner-Bright House acquisition, with a $15 rate for 30 Mbps service for school lunch families and some very low-income seniors²².
After meeting with Commissioner Clyburn in the late stages of its DirecTV merger case, AT&T proposed a plan to offer 12 months of 1.5 Mbps service for $5 a month, or 5 Mbps for $10, to Supplemental Nutrition Assistance Program (SNAP) households²³. Negotiations resulted in agreement by AT&T to offer SNAP households a $5 rate for the fastest available speed up to 5 Mbps, or $10 for 10 Mbps, for up to four years. This agreement was included as a condition of the FCC’s merger approval²⁴.
In its CableVision merger case, Altice made commitments to both the New York Public Service Commission and the FCC²⁵ to create a $15 per month, 30 Mbps rate offer for school lunch families, similar to Charter’s. Altice later announced it was extending this “Economy Internet” program to former SuddenLink service areas²⁶.

As the Obama Administration ended its second term, Chairman Wheeler, Clyburn and their colleagues could point to discount programs for school lunch families and some other low- income consumers being planned or offered by all five of the largest U.S. cable providers -- Comcast, Charter, Altice, Cox Cable and Mediacom -- as well as discount service for SNAP households from the largest U.S. telecom provider, AT&T. One other merger-based program, CenturyLink’s, had largely come to an end, but even it was (and still is) operating in three states²⁷. The oldest and biggest of the merger-originated programs, Comcast Internet Essentials, was (and still is) on an expansion track, well beyond the company’s original merger obligation, with no apparent end in sight.

References

[3]: Philanthropy News Digest. (June 16, 2006). AT&T Announces %100 Million Internet Access, Technology Initiative. Retrieved from: https://philanthropynewsdigest.org/news/at-t-announces-100-million-internet-access-technology-initiative (Back to text)

[4]: San Jose Mercury News via Associated Press. (June 18, 2007). AT&T quietly introduces $10 DSL plan, part of BellSouth merger concessions, Retrieved from: https://www.mercurynews.com/2007/06/18/att-quietly-introduces-10-dsl-plan-part-of-bellsouth-merger-concessions/ (Back to text)

[5]: National Telecommunications and Information Administration. (n.d.). Broadband Technology Opportunities Program. Retrieved from: https://www.ntia.doc.gov/category/broadband-technology-opportunities-program (Back to text)

[6]: National Telecommunications and Information Administration. (n.d.). BroadbandUSA Connecting America’s Communities: Grants Awarded- Public Computer Center Projects. Retrieved from: https://www2.ntia.doc.gov/computercenters (Back to text)

[7]: National Telecommunications and Information Administration. (n.d.). BroadbandUSA Connecting America’s Communities: Grants Awarded- Sustainable Broadband Adoption. Retrieved from: https://www2.ntia.doc.gov/sustainableadoption (Back to text)

[8]: Federal Communications Commission. (March 17, 2010). National Broadband Plan. Retrieved from: https://www.fcc.gov/general/national-broadband-plan (Back to text)

[9]: Federal Communications Commission. (January 18, 2011). FCC Grants Approval of Comcast-NBCU Transaction. Retrieved from: https://docs.fcc.gov/public/attachments/DOC-304134A1.pdf (Back to text)

[10]: Federal Communications Commission. (March 18, 2011). FCC Conditionally Approves Centurylink/Qwest Merger. Retrieved from: https://docs.fcc.gov/public/attachments/DOC-305278A1.pdf (Back to text)

[11]: Federal Communications Commission. (January 18, 2011). Statement of Chairman Julius Genachowski. Re: Applications of Comcast Corporation, General Electric Company and NBC Universal, Inc., For Consent to Assign Licenses and Transfer Control of Licenses¸ MB Docket 10-56, FCC 11-4 Retrieved from: https://docs.fcc.gov/public/attachments/DOC-304134A2.pdf (Back to text)

[12]: Federal Communications Commission. (January 18, 2011). Statement of Commissioner Mignon L. Clyburn. Re: Applications of Comcast Corporation, General Electric Company and NBC Universal, Inc., For Consent to Assign Licenses and Transfer Control of Licenses¸ MB Docket 10-56, FCC 11-4 Retrieved from: https://docs.fcc.gov/public/attachments/DOC-304134A5.pdf (Back to text)

[13]: Eggerton, John. (November 9, 2011). Cable Commits to Sweeping Broadband Adoption Program. Retrieved from: https://www.broadcastingcable.com/news/cable-commits-Sweeping-broadband-adoption-program-59512 (Back to text)

[14]: Acohido, Byron. (March 29, 2013). Cheap broadband offered to 100 million underprivileged. Retrieved from: https://www.usatoday.com/story/tech/2013/03/28/connect2compete-digital-divide-underprivileged-cheap-interent-access/2029565/ (Back to text)

[15]: Robertson, Adi. (April 24, 2015). Comcast announces Time Warner Cable dead. Retrieved from: https://www.theverge.com/2015/4/24/8488997/comcast-time-warner-cable-merger-dead (Back to text)

[16]: Kang, Celcia & Steel, Emily. (April 25, 2016). Regulators Approve Charter Communications Deal for Time Warner Cable. Retrieved from: https://www.nytimes.com/2016/04/26/technology/charter-time-warner-cable-bright-house-cable-deal.html (Back to text)

[17]: Kastrenakes, Jacob. FCC Approves AT&T-DirecTV merger. Retrieved from: https://www.theverge.com/2015/7/24/8876267/att-directv-merger-approved (Back to text)

[18]: Shepardson, David. (May 3, 2016). FCC Approves Altice Purchase of Cablevision Systems. Retrieved from: https://www.reuters.com/article/us-altice-cablevision-cable-idUSKCN0XV00I (Back to text)

[19]: Selyukh, Aliana & Baker, Liana B. (March 4, 2014). Comcast expands low-income service as merger review nears. Retrieved from: http://www.chicagotribune.com/business/ct-xpm-2014-03-04-sns-rt-us-usa-comcast-internet-20140304-story.html (Back to text)

[20]: Brodkin, Jon. Comcast expands $10 low-income Internet plan. (July 15, 2016). Retrieved from: https://arstechnica.com/information-technology/2016/07/comcast-expands-10-low-income-internet-plan/ (Back to text)

[21]: Wolff-Mann, Ethan. (August 21, 2015) “Comcast to Offer Low-Cost Internet to Seniors.” Retrieved from: http://time.com/money/4005476/comcast-cheap-internet-seniors/ (Back to text)

[22]: Baumgartner, Jeff. (November 16, 2016). Charter Launches Low-Cost Broadband Service. Retrieved from: https://www.multichannel.com/news/charter-launches-low-cost-broadband-service-409143 (Back to text)

[23]: AT&T Inc. via Federal Communications Commission. (July 1, 2015). Re Applications of AT&T Inc. and DIRECTV for Consent To Assign or Transfer Control of Licenses and Authorizations, MB Docket No. 14-90, Notice of Oral ex parte presentation. Retrieved from: https://ecfsapi.fcc.gov/file/60001111711.pdf (Back to text)

[24]: Federal Communications Commission. (July 28, 2015). Memorandum Opinion and Order: In Matter of Applications of AT&T, Inc.and DIRECTV for Consent to Assign or Transfer Control of Licenses and Authorizations. Retrieved from: https://docs.fcc.gov/public/attachments/FCC-15-94A1.pdf (see pp. 164-166) (Back to text)

[25]: Cablevisions Systems Corporation via Federal Communications Commission. (April 26, 2016). Retrieved from: https://ecfsapi.fcc.gov/file/60001692027.pdf (Back to text)

[26]: Baumgartner, Jeff. (September 19, 2017). Altice USA Broadens Reach of Low Cost Broadband Option. Retrieved from: https://www.multichannel.com/news/altice-usa-broadens-reach-low-cost-broadband-option-415382 (Back to text)

[27]: CenturyLink. (n.d.). CenturyLink Internet Basics. Retrieved from: https://www.centurylink.com/home/internetbasics/ (Back to text)