Overview

The federal Broadband Equity, Access, and Deployment Program (BEAD), created under the Infrastructure Investment and Jobs Act (IIJA) in 2021, provides $42.45 billion to help states expand the availability of affordable high-speed internet, which policymakers nationwide now recognize is essential to success for American families and businesses in today’s digital world.

Since Congress enacted the IIJA, much of the discussion among policymakers and the public regarding BEAD has focused on efforts to connect low-income populations. The discussion overlooks the fact that the program requires states to ensure that, in communities where BEAD funding is used to expand internet access, “high-quality broadband services are available to all middle-class families … at reasonable prices.” However, the National Telecommunications and Information Administration (NTIA), the federal agency that administers BEAD, does not set a benchmark for such affordability, leaving each state to determine what “reasonable prices” means for its residents.

This is a challenging task for states for several reasons, including the need to avoid the perception of “rate regulation”—government authority over utility pricing, which the federal and state governments do not have for internet services. States also have to consider the absence of data and research on affordability, and the effect of broadband subscription costs on the budgets of middle-income households. The Pew Charitable Trusts sought to help states address the reasonable price requirement by demonstrating that what qualifies as affordable broadband for middle-class families could vary widely. No one standard exists for broadband affordability, but in 2016, the Federal Communications Commission (FCC) began using a benchmark of 2% of monthly household income while acknowledging that this benchmark serves “as a clear yardstick for charting changes, not as an inherently meaningful level.”

Pew used the FCC’s benchmark, which, though not binding, can offer states a baseline to create data visualizations and demonstrate broadband affordability across counties, states, and regions, and pairs those findings with data on county- and state-level broadband plan subscription rates. Together, these data points provide states with the fullest possible picture of middle-class broadband needs in their communities. Importantly, Pew is not recommending that states adopt the 2% benchmark and encourages them to consider whether a higher standard is more appropriate for their populations.  Instead, Pew is using the 2% standard to demonstrate the extent to which “reasonable prices” can vary across or within states.

Overall, Pew’s findings indicate that no single solution or standard can apply across all states. Rather, states will need to take a customized approach to their BEAD-funded broadband access projects to meet the needs of middle-class families across diverse U.S. communities.

Affordability

The 2% benchmark offers several advantages, including revealing how affordability fluctuates based on differing cost-of-living standards and how broadband fits into a household’s monthly budget. For the purposes of this analysis, Pew assumed that middle-class household incomes range from $40,000 to $150,000 nationally. Using that income range and the 2% benchmark generates a national median affordability standard of $93.21. This standard is higher than the average plan price reported by some outside organizations, such as New America, which found in 2020 that among 290 internet service plans, the average nonpromotional price was $83.41 a month. However, it is lower than the FCC’s reasonable comparability benchmark for 2023, which indicated that an unlimited data plan offering 100 megabits per second (Mbps) for downloads and 20 Mbps for uploads should cost $105.03.

Breaking the country down according to the U.S. Census Bureau's geographic regions (Northeast, Midwest, South, and West) shows a wide range of affordability. Using Pew’s income range and the 2% benchmark, median middle-class broadband affordability ranged regionally from $107.64 in the Northeast to $84.79 in the South. (See Figure 1.)

However, because incomes diverge significantly within regions, not all middle-class households could afford that benchmark. According to Pew’s income range, 51% to 57% of each region’s population would be middle class, of which 69% to 83% would be able to pay the 2% benchmark. (See Table 1.) This leaves as much as 30% of middle-class families without access to an affordable home broadband subscription and suggests that state officials should consider a wide range of potential middle-class incomes when developing this policy.

Table 1

Source: Pew analysis of data from U.S. Census Bureau, “American Community Survey 5-Year Data (2009-2021)” (2023), https://www.census.gov/data/developers/data-sets/acs-5year.html 

Applying the 2% benchmark by state reveals even greater variation in affordability. Rhode Island had the highest median affordability at $150.73 a month, while Mississippi had the lowest at $68.53, (Note: The Washington, D.C., affordability benchmark was $155.91.)

At the county level, the variation in affordability becomes most stark. County-level baselines ranged from $28.52 (Issaquena County, Mississippi, which has a median income of $17,109) to $261.37 (Loudoun County, Virginia, which has a median income of $156,821) a month. (See Figure 3.)

Even within states, counties showed some dramatic differences. For example, the median affordability price for Texas is $92.80, but in Dimmit County in South Texas, the affordable baseline was $41.67, and in Rockwall County, located in the Dallas-Fort Worth metroplex, affordability was $185.99.

Broadband subscription rates

Home broadband subscription rates generally follow the same patterns as affordability at the regional, state, and county levels. Comparing subscription rates and affordability standards for each region reveals that price alone appears uncorrelated to subscription rates. (See Table 2.) The Northeast has the most expensive affordability standards yet the highest broadband subscription rates—and the South the least expensive and lowest—even when accounting for community types: metropolitan, metro adjacent, and nonmetropolitan/rural areas.

These figures point to a key challenge facing broadband offices in developing their BEAD plans for middle-class access: Millions of Americans, ranging from 11% to 25% of middle-class households regionally, could be priced out of home broadband subscriptions, even when affordable plans, as defined by the 2% benchmark, are available. And adoption—that is, the choice to subscribe or not—can be driven by various issues, including poor network quality, limited access to internet service, and low digital literacy and skills, as well as affordability, all of which state officials will need to account for to meet their BEAD obligations and broadband goals.

Table 2

Source: Pew analysis of data from U.S. Census Bureau, “American Community Survey 5-Year Data (2009-2021)” (2023), https://www.census.gov/data/developers/data-sets/acs-5year.html 

Subscription rates were highest in coastal states even with the higher monthly affordability standards in those areas. (See Figure 4.)

The findings were repeated at the county level within each state—households in higher-income areas were more likely to have higher subscription rates. (See Figure 5.)

Considerations for policymakers and researchers

As states work to meet BEAD's middle-class affordability requirements, policymakers and researchers must navigate a range of delicate regulatory and demographic issues, including:

• Potential perceptions of rate regulation.
• Inadequate data on subscription prices. Internet service providers (ISPs) are not required to submit robust pricing data to the FCC, and their marketed prices do not always reflect the nonpromotional subscription costs. As a result, states lack reliable comparative data on consumer costs and effective enforcement mechanisms to ensure that ISPs deliver affordable broadband plans.
• Outdated data collection. States and analysts need to update their collection of data on consumer demand to reflect broadband’s emergence as a necessity, rather than a luxury good, such as expanding affordability research to include middle-income households and collaborating to address the legacy of flawed data collection at the federal level that has made it difficult to confirm how cost and quality inform customer perceptions of value.

Conclusion

As states look toward allocating BEAD funds, policymakers will need to consider local and regional variation in broadband affordability and adoption for middle-class families. Understanding what middle-class affordability means—and developing customized, data-driven solutions—for each state and community will be vital to ensuring that BEAD-funded networks make affordable internet access a reality for the millions of Americans nationwide who still lack connectivity.

Methodology

Pew’s calculations for affordability and broadband subscriptions relied on the U.S. Census Bureau’s American Community Survey (ACS) 5-Year Data for 2021. Key variables included:

• Median household income.
  • Note: Pew derived its monthly affordability standard from ACS figures for median household income by county. Incomes were divided by 12 to reach a monthly figure, and then multiplied by 2% to reach the FCC’s benchmark.
• Households with a broadband internet subscription.
• Income categories for each county.
  • Variable names were drawn from 2021 5YR API Changes and were cross-referenced with searches through the Census Reporter, a free, open-source website for searching census variables and datasets.

Pew assigned counties to the metro, metro-adjacent, or nonmetro/rural categories using the U.S. Department of Agriculture’s Rural-Urban Continuum Codes.