EBB and ACP helped broadband ISPs like Spectrum attract low-income switchers

Robert Wyrzykowski and Ricky Mariscal

With the U.S.’s Affordable Connectivity Program (ACP) approaching funding exhaustion in May, Opensignal is analyzing how this initiative has affected the U.S. fixed broadband market. 

Key findings
 

• The Emergency Broadband Benefit (EBB) and ACP subsidy programs stimulated broadband switching in the low-income segment; Opensignal saw a jump in the share of broadband competitive switching coming from low-income areas when the ACP’s predecessor the EBB was launched in May 2021, continuing through the introduction of ACP in January 2022.
• Spectrum (Charter) was an especially large beneficiary of the subsidy programs, seeing performance gains relative to other ISPs in low-income areas after the programs were introduced. This suggests the programs provided a customer acquisition benefit to operators who capitalized on the opportunity, and not just a retention benefit.
• Since the ACP stopped accepting new enrollments in February, we have seen a gradual decline in the share of broadband switching that happens in low-income areas.

To facilitate internet access for lower-income households, the U.S. government introduced the ACP in January 2022, which replaced the EBB launched in May 2021. The Infrastructure Investment and Jobs Act assigned $14.2 billion in funding to provide monthly discounts of up to $30 towards internet services subsidies for eligible households and up to $75 for households located in qualifying Tribal lands — for either mobile or fixed services. 

Out of 48 million U.S. households eligible for funding, nearly half of them enrolled in the program by February 2024, when the program stopped accepting new applicants. Today more than 10 million households are using the program for fixed broadband specifically. This accounts for more than 8% of the estimated number of households in the U.S.

Spectrum has been especially aggressive in enrolling its customers into the program; they have reported that five million of its customers are ACP subscribers, roughly half of all broadband ACP enrollees, and 17.5% of Spectrum’s residential broadband customer base. 

To measure the churn impacts of the EBB and ACP programs, Opensignal leveraged data from our Broadband Subscriber Analytics product which tracks more than one million unique residential broadband competitive customer switches per quarter in the U.S. It is important to note that this data – and the subsequent metrics using it – is limited to active broadband subscribers who switch from one ISP to another, and does not measure new-to-broadband activity or customers who disconnect broadband service entirely.

We first looked at the share of operators’ competitive switching gross adds that came from low-income areas. Opensignal defines low-income areas as ZIP Codes where more than 30% of households have a household income of less than $30,000, which is the Federal poverty line for households of four. We specifically focused on non-mover switches. Non-mover refers to switches where customers changed broadband providers but did not move to a new address–that is, they made choices based on their perception of the relative value of a competitor vs. their current provider.

The launch of the EBB led to a jump in the share of low-income broadband switching, especially for Spectrum. This suggests the EBB program provided a catalyst for increased competitive switching among customers who were able to take advantage of the program. Meanwhile, the transition from EBB to ACP in January 2022 did not lead to an increase in the share of switching gross adds from low-income areas, implying that the stimulated switching in low-income areas started by EBB carried over to ACP without a significant difference between the two programs.

Next, we analyzed the impact of the programs on competitive performance in low-income areas. To do this we used a metric called Capture Rate. Capture Rate measures how well a given carrier does at winning the potential switchers available to them by limiting the denominator to just overlapping competitors’ losses. 

Our data demonstrates that Spectrum has seen sustained success capitalizing on EBB and ACP in low-income areas. Its capture rate of subscribers in these areas has been substantially higher than it has been for other cablecos since the programs were introduced, while capture rates in other areas have been very similar for Spectrum and other cablecos. Whether this multi-year outperformance continues after the end of ACP is an open question.

The ACP subsidies are winding down, as the ACP has exhausted its funds and won’t be extended barring a last-minute shift by Congress. The program stopped accepting new applications on February 8, 2024 and Opensignal can already see gradual declines–especially for Spectrum–in the share of total broadband non-mover wins coming from low-income areas after that date.
 

In summary, we see that the EBB and ACP subsidy programs led to an increase in competitive switching activity in the low-income segment that subsequently declined with the suspension of new enrollments in February. These findings imply that  ISPs who leveraged ACP more aggressively will have to look in new directions to sustain their performance in the low-income segment, while those who did not use it as aggressively may see improved competitive performance. It remains to be seen what happens when ACP fully expires for existing enrollees; Opensignal will continue to monitor subscriber flows in the U.S. fixed broadband market as this transpires, with data available in our Broadband Subscriber Analytics product.