California Is Spending Billions On ‘Broadband For All,’ But Critics Say It Will Not Lower Internet Prices

Californians spend an average of $84 per month to connect to the internet — and some of the most vulnerable groups, including older adults, veterans and people with disabilities, tend to pay even more.

For those on a tight budget, it may take the place of other essentials. And those who simply can’t afford it remain disconnected from digital life.

So the state is spending billions of dollars to make broadband more affordable and available under its Broadband for All plan. It’s creating a new public backbone network called the “middle-mile” across 10,000 miles of California, and offering funding for companies to build the “last mile,” the final leg of the network that brings service to your home.

The idea is that increased competition will force the large internet companies to drop their rates. Right now, in many neighborhoods, there are only one or two service providers to choose from. It’s hoped that by using the state’s new middle-mile network, new providers, like nonprofits or local governments, could enter the market and offer internet service at a competitive rate — ultimately lowering prices for everyone.

But LAist has found that large internet providers are also applying for those billions of dollars of government funding, hoping to use it to expand their service territory into underserved areas. However, they largely do not plan to connect to the state’s public network. Instead, companies want to use their own already-built middle mile infrastructure, which gives them control over prices.

Without that element of competition, some say internet bills would likely stay the same or even increase.

California Assemblymember Tasha Boerner, who sets on the state’s Middle-Mile Advisory Committee, says if incumbent providers get public money for their own private networks, the main aim of the program will likely not be met.

“It will not lower internet prices in California. That’s not going to happen,” she said.

Cristal Mojica of the Michelson Center for Public Policy is also worried about potential price increases for California residents. She said advocates hoped the money would go to community-owned projects, “both for long term sustainability, but also to ensure that community interests and voices were really going to be considered in the build out.”

Large providers make up 73% of the pool

LAist did a deep dive into the 484 applications for $4.6 billion in grant funding and discovered that larger providers like AT&T and Spectrum make up 73% of the pool.

The rest come from nonprofits, local government agencies, small private companies and other “alternative” providers. Of all the applicants, LAist found only 22% have committed to using the state’s open-access network to service residents.

The initial goal was to help community-focused groups enter the market, as they have “less pressure to generate profits” and are committed to serving “entire communities,” according to the California Public Utilities Commission (CPUC).

But commercial internet companies argue that they’re in the best position to maintain broadband infrastructure in the long-run.

“Running these networks is a scaled business. When you think about what it takes to offer customer service, technical support… having a bunch of little small companies out there trying to each do this is not the most efficient way,” said AT&T CEO John Stankey in an interview with LAist.

Stankey said the company would voluntarily offer $30 plans to eligible customers, but did not elaborate on potential pricing.

Many advocates are frustrated that companies aren’t required to provide low-cost plans in order to win grant funding. It had been an original requirement, but after significant pushback from internet service providers, the CPUC dropped that mandate when it finalized its rules for the program in 2022.

Mojica said the money should come with basic accessibility and affordability standards like other public utilities, “just based on the role [the internet] plays in people’s lives.”

The last mile

AT&T is asking for a combined $1.4 billion for projects across the state, including $35 million in Los Angeles County. Stankey, AT&T’s CEO, said there’s an abundance of middle mile infrastructure throughout that is owned by private companies, and that it’s seeking money to build last-mile connections because that’s the “most expensive” part of the process.

The company says it has “a lot of fiber” in L.A. County but would consider using the state’s middle mile in more rural areas where it has no network of its own, depending on the state’s terms and prices.

Traditionally, internet companies have been the ones to build middle infrastructure — and they can charge higher rates to recoup their investment. Liana Bailey-Crimmins, the state’s chief information officer, says that with California shouldering construction costs, it allows more companies to offer affordable plans.

She said she can’t speak to the prices that these providers will ultimately offer customers, but that having an open-access network would still give companies “a whole new opportunity” to expand their service territories.

The state plans to offer access to its middle mile network at a wholesale price, rather than aiming to generate profits. While prices have not been publicly disclosed, Bailey-Crimmins says the goal is for it to be affordable to anyone who wants to use it.

“The last thing we want is for it to be so costly that even though we provide the connectivity, no one has the ability to afford it,” she said.

What’s next

The CPUC will be allocating the “last mile” grant money and is currently reviewing the applications, with winners being announced as early as June.

It’s a competitive process, with the agency saying it will select projects that are the “most deserving” of funding through allocating points for certain commitments.

For example, applicants that offer low-cost plans will receive additional points. So will those who commit not to raising prices for at least five years.

However, additional points will also be awarded for things like matching funds and for investing in fiber optic cable.

“I don’t know how many [of these grants] we’ll win when it’s all said and done,” Stankey said. “But there is a significant amount of private funding that comes in to ultimately match that public grant subsidy.”

If it wins the $1.4 billion it is asking for, AT&T has pledged to match an additional $1.7 billion to complete its projects.

“Getting that last [mile] piece out is the hard part,” Stankey said. “That’s when you want the right public subsidy programs to come in and say, ‘If the private sector hasn’t built there, how do you get them to be incented to go get that particular area?’”

University of Southern California communication professor Francois Bar says a top priority for the broadband plan should be affordability for those who need internet access.

In a best-case scenario, “you take the subsidy money and in exchange for that, you have to provide either some discount on the prices or some specially priced plans for people who can’t afford it,” Bar said.

Otherwise, he added, the state’s plan is “not going to work very well.”

Once winners are announced, the money will likely be distributed in one or more additional funding rounds “in future years,” according to the CPUC.

LAist is funded by the California Community Foundation. LAist funders have no influence on the assigning, reporting or editing of our stories.