Heather Boushey, Chief Economist, America’s Investment Cabinet
Access to affordable, reliable, and high-speed Internet is a cornerstone of the American economy and essential to economic growth. This is also a bipartisan view—Congress has found that “[a]Access to affordable, reliable, high-speed broadband is essential to full participation in modern life in the United States.” However, nearly a quarter of American households continue to lack high-speed Internet access at home due to high costs and, in some communities, a lack of the necessary infrastructure. In particular, communities of color, Native communities, rural communities, and low-income families are disproportionately cut off. That’s why, as part of his “Internet for All” initiative, President Biden committed to connecting every household in America by 2030, committing more than $80 billion in federal funds to expand affordable Internet access , reliable and high speed throughout the country.
Central to the success of the President’s plan is the Affordable Connectivity Program (ACP), which provides eligible households with up to $30 per month (or $75 per month for households on qualifying tribal lands) off their Internet bill. ACP is the largest and most successful Internet affordability program in our nation’s history, with over 23 million households enrolled—one in every six households. Because the Administration worked with Internet providers to offer high-speed Internet plans that are fully covered by the Affordable Connectivity Program, most of these 23 million households received free high-speed Internet.
Without further funding from Congress, the Affordable Connectivity Program will end today. This expiration would raise the price of Internet for more than 23 million households enrolled in the program with significant economic implications. Those 23 million include nearly 11.5 million military families, 4 million seniors, 5.75 million African-American families, 5.75 million Latino families and 320,000 families on tribal lands. Many households would lose Internet all together—a recent FCC study found that more than three-quarters of respondents would have service outages while losing their ACP benefit. Depriving these families of this funding would leave them without money to spend on other needs such as food, education or health care. In some states like Kentucky, Ohio and Nevada, one in four families are registered.
That’s why, since last October, President Biden has called on Congress to extend this benefit through 2024. Democratic members and senators have joined him in that effort. But Republican leaders in Congress have failed to act. President Biden is once again calling on Republicans in Congress to join their Democratic colleagues in support of expanding funding for the Affordable Care Act so that tens of millions of Americans can continue to have access to this essential benefit. .
This blog describes the economic benefits of affordable high-speed Internet access and the consequences of allowing the ACP to expire, with a particular focus on the role of Internet access in supporting small business creation and economic growth.
The importance of high-speed Internet access to the American economy
The COVID-19 pandemic has brought into focus the importance of affordable, reliable, and high-speed Internet for American businesses and households in the 21st century.str economy of the century. Even before the pandemic, an extensive literature pointed to the importance of affordable, reliable, and high-speed Internet access for a variety of economic outcomes, including small business formation and economic growth. Small businesses, in particular, are an essential part of local economies and communities—they are responsible for more than 40% of America’s economic output and two-thirds of net new jobs.
Internet access is now a necessity for creating and running businesses in the American economy. Businesses engage with customers, suppliers and services (such as banking and accounting) online; online sales account for 15.9 percent of total retail sales, nearly nine percent more than a year ago; and most job seekers now look for jobs online. Several recent studies have found causal links between the expansion of broadband access (high-speed Internet) and the creation of new businesses, as well as the growth of existing businesses, in urban and peri-urban areas. The literature shows that rural broadband expansion is also likely to affect business growth and formation, particularly in knowledge-intensive industries.
These results can stem from increased access to new ideas, supply chains and customers. Additionally, some researchers have described the effects of the Internet as allowing businesses in smaller cities or more rural areas to “borrow”—to enjoy the benefits of larger cities without the costs associated with physical location. in those cities.
The economic benefits of high-speed Internet access extend beyond small business formation to health and education. Researchers have found that virtual visits with trained medical professionals can improve patient outcomes at a lower cost and lower risk of infection than traditional in-person care. Unfortunately, a study of community-based health centers found that, among those not using telehealth, lack of broadband access was a barrier to adoption, especially for those living in rural areas. In education, survey data show that students in rural school districts with high-speed Internet at home had higher grades and standardized test scores than their peers without access, with economic effects that followed.
These effects and others mean that affordable high-speed Internet supports a stronger and more resilient economy. A study comparing countries belonging to the Organization for Economic Co-operation and Development between 1996 and 2007 found that a 10 percentage point increase in broadband penetration was associated with a 0.9 to 1.5 percentage point increase in growth economic per capita. Another study focused on the United States estimated that counties that gained broadband access in the early 2000s experienced a 1.8 percentage point increase in employment rates. Overall, a number of studies support the benefits of broadband Internet for employment, labor productivity, and economic sustainability.
Expanding reliable and high-speed Internet access
Despite the importance of affordable, reliable, high-speed Internet to equity and economic growth, in 2022, only 75.9 percent of American households had high-speed Internet service at home according to the American Community Survey with adoption varying by income, race. and the density of their community (Figure 1).
This change means that increased access and adoption of broadband is important for reducing economic inequalities. Furthermore, it points to two particular challenges to broadband adoption. First, some households – especially those in rural communities – do not have access to broadband because it is not available in their community. According to the latest data from the Federal Communications Commission, 7.2 million physical locations – whether homes or small businesses – are unable to access broadband Internet due to a lack of the necessary infrastructure. A second challenge is that some families are unable to afford it; in early 2021, 15 percent of home broadband users reported having trouble paying for high-speed Internet service, including 34 percent of users in households with less than $30,000 in income.
Through its Investing in America agenda, the Biden-Harris administration is making targeted investments in addressing both of these challenges and thereby reaping the benefits of widespread adoption of high-speed Internet for business formation, employment, health, education and economic growth. The Broadband Equity Access and Deployment Program, created by the Bipartisan Infrastructure Act, invests over $40 billion in building high-speed Internet infrastructure in every US state and territory. In addition, $2.75 billion is included for the Digital Equity Act, which provides grants for communities to take advantage of high-speed Internet connections. At the same time, the Affordable Connectivity Program lowers the price of internet for eligible households.
Over time, these investments will connect every American to affordable, reliable, high-speed Internet. But connectivity is not enough, it is essential that Americans can afford the service. The Biden Harris administration is asking Congress to extend funding for the Affordable Connectivity Program so that millions of families don’t lose the connections that enable them to run their businesses, access telehealth and participate in education in distance and virtual.
CONCLUSION
Without action from Republican leaders, funding for the ACP will soon expire. That means households will see their internet bills rise by $30 or more, and communities across the country will lose the economic benefits of connectivity. When accounting for lost economic opportunities, education and telehealth services, one study found that vulnerable communities are projected to lose over $20 billion annually in economic benefits. Additionally, the first two years of the Biden-Harris administration were the two highest start-up filing years on record — the third year is on track to surpass both. The loss of ACP subsidies could threaten to slow this pace, because many of these businesses rely on high-speed Internet access to succeed.
The economic benefits of programs that expand access to high-speed Internet, such as the Affordable Connectivity Program, are well established. Continued funding for the Affordable Connectivity Program would not only benefit the 23 million households who are able to afford high-speed Internet through the program, but also all Americans who benefit from thriving small businesses and strong economic growth. stable and equal.
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