Expert Opinion
We believe 25% of the 23 million households who enjoyed the ACP benefits will drop their connections, 25% will maintain connectivity, and 50% will fluctuate to on-and-off service.
The author of this Expert Opinion is Adlane Fellah. His bio is below.
According to the National Low Income Housing Coalition, there are 7.1 million affordable units housing over 14 million people. For the sake of our analysis, we focus on the opportunities and trends of affordable connectivity in multi-family housing from our latest research report.
The digital divide
The 2022 American Community Survey (ACS) data from the Census Bureau showed that for households whose annual incomes fall below $25,000, more than 40% lacked a wireline subscription as of 2023 with the majority of them residing in multi-family units.
The digital divide exists because either service providers do not invest in service areas, they deem unprofitable, or, because unconnected consumers cannot afford these broadband services. With monthly broadband bills averaging $50 to nearly $70 nationally and sometimes reaching as high as $85 with taxes and fees, broadband access are out of reach for these households without subsidies.
The digital divide can also result from outdated or lacking infrastructure. Much of the affordable housing stock predates broadband. Additionally, some buildings have never been wired for broadband, while others have outdated wiring and use older technologies that cannot meet modern needs.
The end of the ACP can be an opportunity
Six million U.S. households will lose their broadband connectivity as a result of the ending of the Federal Communication Commission’s Affordable Connectivity Program on May 30, 2024. We believe 25% of the 23 million households who enjoyed the ACP benefits will drop their connections, 25% will maintain connectivity, and 50% will fluctuate to on-and-off service based on promotional programs. The ongoing FCC Lifeline program, which has 7.6 million participants—half of which are using it for their mobile service—only provides a fraction of what the APC contributed; thus, it will not reduce the digital divide in the current conditions.
However, the end of the ACP could represent an opportunity to rethink how government’s broadband consumer subsidy programs are structured. We argue that Lifeline and other subsidy programs should be made eligible to bulk internet deals to encourage long-term, favorable deals which benefit an entire property. As we explain in the next section, bulk internet, when done and priced right, removes any friction for the resident: no application, no credit check, no deposit, and no late fees. We recommend this approach at a time when the FCC is seeking to ban bulk billing for multifamily tenants altogether, a plan that is fiercely opposed by groups who are advocating for more broadband inclusion.
A successful public-private partnership
Grants and subsidies are aimed to make the business case for providing affordable connectivity in affordable housing more attractive for all stakeholders. Generally speaking, the business case becomes sustainable if the CapEx required to switch on the internet in the building is paid for by the various government entities, and the property owner picks up the tab for the ongoing cost of operating the network as just another cost item of running the building.
Given the lower average revenue per unit (ARPU)—which is in the low US $20s—contracts of 5 years or more are needed for the service to be profitable for managed service providers (MSPs).
Conclusions
There are more than 100 government-led broadband expansion efforts which are currently administered by 15 different agencies with quite some overlaps and inefficiencies. Providing affordable connectivity in multifamily housing can be a sustainable business model under the right public-private partnership. Affordable connectivity can be a very lucrative market for MSPs delivering reasonable, long-term, non-exclusive deals to property owners. It can meet both residents’ and management’s connectivity requirements for the 21st century at the most effective costs.
This Expert Opinion is based on findings from our latest report, “Managed Connectivity for Affordable Housing in the United States 2024-2029,” which includes interviews with leading service providers and property owners active in the market. It also includes market-sizing projections for managed services from 2024 to 2029.
Adlane Fellah is a veteran industry analyst and investor with 25 years of experience in the telecom sector. He has authored landmark reports on Wi-Fi, 5G, and technology trends in various industries, including residential, enterprise, and Industry 4.0. Fellah is a wireless expert and administrator, and regularly serves as a judge for the Glomo Awards, Fierce, Glotel, and WBA Awards. This Expert Opinion is is exclusive to Broadband Breakfast.
Broadband Breakfast accepts commentary from informed observers of the broadband scene. Please send pieces to commentary@breakfast.media. The views expressed in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC.
