The U.S. has one of the most dynamic broadband networks in the world. Providers have poured more than $500 billion into building and upgrading broadband networks since 2019. The price of internet access has dropped 10% over the past 10 years, according to the Bureau of Labor Statistics, even while the overall price level has soared. All together, the share of consumer spending going to telecom, broadband and related services fell from 3% in 2014 to 2.4% in 2024. Moreover, many providers offer robust, low-cost services for economically disadvantaged populations.
But a piece of legislation under consideration by the California State Assembly, AB 353 could derail this success story in the nation’s largest state. It would require California internet providers to offer “eligible households” internet at $15 or less per month (inclusive of any recurring taxes and fees) with at least 100 megabits per second downstream and 20 megabits per second upstream. “Eligible household” means at least one resident of the household participate in a long list of qualified public assistance programs.
This type of regulatory burden — actually writing a price ceiling into law — is likely to impede investment and expansion by both new and existing providers. If there’s anything that economics teaches us, it’s that price ceilings result in less service and fewer competitors rather than more.
California already has one of the most competitive broadband markets in the country, with multiple providers offering a wide range of products, services and price points. This includes many that already offer low-cost services for families in need. Heavy-handed regulation will only serve to scare away investment and competitors, as recently seen in New York State.
From this perspective, AB 353 is a bad idea. However, if it is the intent of the legislature to proceed with some form of this bill, several commonsense changes should be made. These include narrower qualification standards, greater flexibility in speed requirements, and tying the price of the low-income service to the CPI. Additionally, to ensure a level playing field, the requirements of the legislation should apply to all broadband providers, regardless of whether they are public or privately owned. All of these would reduce the financial risk to providers, and thus not shut off the flow of future investment.
