The past year has seen some key improvements in America’s access to internet and, most importantly, broadband speeds. Overall, access to the internet has improved by 3 percent, with just over 102 million American households now enjoying a fixed internet connection (not including smartphone-only connections, but including Fixed Wireless Access). Not only has the number of connections improved, but also the speed, with a 4% increase in homes that now have broadband speeds. In total, according to the Connected Intelligence Broadband America Report, 69% of all homes now enjoy broadband speeds, with the fastest improvement seen in the 300 Mbps category (up 5% compared to a year ago).
More significant than the national improvements are the states that are seeing the greatest improvement as these are some of the more poorly penetrated markets. We can thank infrastructure buildouts (both fixed, cable solutions such as fiber, as well as fixed wireless access) with physical cable rollouts benefiting from the BEAD (Broadband Equity, Access and Deployment) initiative.
But it’s also about affordability. When we consider homes that have added internet access in the past year, more than half of them have a household income of less than $20,000. These are households that could not afford internet access before, but thanks to the Affordable Connectivity Program (ACP) have been able to find enough room in their household budget. Indeed, over 23 million households signed up for ACP subsidies since it was launched in 2021.
But this brings us back to the title, where I describe these improvements as potentially short-lived.
ACP is Dead
ACP is now defunct: it ran out of money last year and there are clearly no plans to revive it. The good news is that some internet service providers continue to support the price cap, meaning that they have not increased the price that these lower-income households pay. But no additional homes are likely to benefit from that pricing. Add to that the current macro-economic pressures, and how they are impacting household budgets, and it is unlikely that any lower-income home that hasn’t yet added internet will. Indeed, we expect some households to pull back on internet expenditure, reasoning that mobile phone service is more important and provides individuals with internet access.
BEAD for the Stars
BEAD has clearly helped drive infrastructure rollouts to parts of the country that are not financially viable for carriers. The money is specifically designated to support expansions to small markets that would take a lifetime of service fees to justify the initial expense. Satellite services have not benefited from BEAD, primarily because the speeds supported did not meet the BEAD requirements, but also because satellite expansion is not specifically aimed at these under-served markets. A constellation of satellites supports access to all homes, rather than specifically targeted the underserved ones.
While it can be argued that satellite services are only likely to be purchased by consumers who do not have fixed (and cheaper) alternatives, there lies the rub. Services such as Starlink are priced in excess of $100 per month which makes it unaffordable for many lower-income homes. Starlink just launched a “Lite” version with slower speeds at $80, but that is still nearly three times the ACP rate. Some states, such as Maine, are partnering with Starlink to offer a more affordable version, priced at $30, which does have clear merit as long as the satellite service is accessible (i.e., no trees blocking the signal).
Under the new US administration, we expect Starlink to gain access to BEAD funds. This, in turn, means there is less funding for preferred terrestrial solutions and that could significantly slow progress in reaching the final 19% of homes that do not currently have fixed internet access. And it should be noticed that the improvement in household internet access cited at the beginning of this blog has not been impacted by satellite. While overall household internet connectivity improved by 3%, none of this growth came from satellite services according to the Connected Intelligence data.
The Ripple Effect that Impacts Consumer Tech Ownership
Time will tell what the impact of these two significant steps is, but it is likely that we will see a decrease in households that can afford internet connectivity. It’s not just the lack of ACP funds, of course, but also the increased pressure on household finances caused by the macro-economic factors. But still, the net result will be lower adoption of internet in homes that are under financial pressure.
That, in turn, has a ripple on effect that impacts consumer tech ownership and related services. As we see in our Broadband Consumer Report, there’s an obvious correlation between internet access (and the access speed) and consumer tech purchasing. There’s less need for a large, smart TV if the consumer cannot use the “smarts” due to poor internet access… and this means less use of streaming video services too. Indeed, we see an increased ownership of DVD players – and related purchases – in homes that have very slow internet speeds.
And so, the opportunity for Fixed Wireless Access increases as possibly the only cost-effective way to reach these final net-less homes. But even FWA will hit roadblocks, with spectrum limitations potentially limiting the rollout. And indeed, we are already beginning to see a slowdown: in Q4 2024 FWA net adds were less than expected due to capacity issues. Carriers are having to be selective in allocating bandwidth to FWA so that it does not impact the core smartphone service levels (and so the FWA experience meets expectations).
The Connected Intelligence Broadband service tracks the speed, and penetration, of internet service across the continental United States for consumer homes at a county level. The service also provides a survey-based analysis of the impact of internet speed on the adoption of consumer technology, mobile, and related streaming TV services.