A few points:
> how does one pay rent or mobile phone bills
Often you don't. Or, you have enough money for rent but not for internet. Or, even if you can technically afford internet, it's unwise because you can't save even a pittance for minor emergencies (which maybe suggests a direct cash infusion as a better policy, but trickle-down economics with a few targeted sob stories and personas who will reap the benefits for something other than drugs are what get funding to actually materialize).
> 20x the Internet bill
(1) Your cost estimates are potentially quite low. In tons of locales, the worst Spectrum plans currently start at $50 in advertised price, that price isn't locked in for any reasonable length of time, you still have to worry about a router, and that's only if you have a bank account and are willing to use it for autopay (doing so opens you up to abuse by the ISP, abuse that usually targets people who can't afford two days off work to wait on hold or the filing fee for small claims). Many low-income individuals, for tons of reasons, are unbanked and could never qualify for that rate anyway. Not to mention that you need to renegotiate every year or two to maintain those rates, and that itself requires taking time off work. I'd be very surprised if the average, all-in cost of Spectrum internet was under ~$65/mo for a low-income household (if they paid full price).
(2) Your rent costs are potentially quite high. Not that many years ago, my studio was $385/mo in one of many states Spectrum supports. A decent 900 sq ft 2-bed 1-bath was, much more recently, $700-$800/mo. Even now I'm seeing plenty of passable apartments under $700. This change probably matters less for places like The Bay with higher minimum wages and more for the lower-density locales the federal funding was initially aiming to support.
(3) I see your point about an additional 5%, in theory, only meaning that you have to work another 5% more hours. I do think it's important to think about this in terms of hours though. $50/mo is 8hr/mo in post-tax federal minimum wage income. Suppose you are stuck in one of the places with slightly higher rent and lower wages (and I do mean "stuck" -- if you're on the edge, it takes _ages_ to save up for bus tickets or a new down payment or gas money or however you're going to actually move), with $1000/mo rent, $50/mo internet, $7.25/hr as the going wage, and $200/mo in all other expenses (food, health insurance, utilities, a used pair of shoes when you can see too many toes, ...). You're already talking about 193hr/mo to scrape by, much less improve your situation. Toss in the high interest you're probably paying on something because one month you didn't have enough saved up to handle an emergency, the higher grocery bills because you can't afford to buy in bulk, and all the other expenses of being poor, and it adds up to a major problem.
(3a) Note that my baseline in that example in (3) is an average of 193hr/mo assuming no breaks for any reason. Back when that was my life, I preferred 80hr+ weeks. Some manager decided to cut my hours to 30 so that he could still call me in last-minute without having to pay overtime, and my entire budget was shot for a little while. If you're working at some 8am-8pm business in a blue-laws state, you might only have ~80hr/week total available to you (unless you can convince somebody to let you work 8pm-10pm or something), and switching that might entail temporarily lowering your hours so that you're available for the remaining hours at a new job, or if you try to not do that then you might lose the 1st when you take the 2nd and still be down income for a little while. Circumstances vary, but averaging a large number of hours can be very different from just working an 80hr week once in awhile.