In his rebuttal to the FCC’s Open Internet Order, Commissioner Ajit Pai noted that one of the benefits of classifying broadband Internet access service as a Title II telecommunications service is that those revenues become fair game for the Universal Service Fund. Although the Commission chose to forbear from immediately enforcing this requirement pending a recommendation from the Federal-State Joint Board, Pai believes broadband Internet access providers will soon be contributing to the Fund and potentially financing an expansion in the Lifeline program.

The federal government is sure to tap this new revenue stream soon to spend more of consumers’ hard -earned dollars. Indeed, it’s been publicly reported that the FCC is itching to use the Universal Service Fund to extend the Lifeline program to broadband. That won’t come cheap. In order to provide discounted broadband service to millions of Americans, the FCC will have to find the money somewhere. With this Order, that somewhere is your wallet. So when it comes to broadband, read my lips: More new taxes are coming. It’s just a matter of when (Open Internet Order, Docket 14-28 p. 326).

While Pai’s prediction of a new stream of universal service funds has for now, not come true, he was correct in predicting that the Commission will expand its Lifeline program. In the May 28, 2015 Official FCC Blog, Chairman Tom Wheeler stated that he is circulating new proposals to “reboot Lifeline for the digital age.”

First, we propose to make Lifeline more efficient and impactful by establishing minimum standards of service for voice and broadband, so both beneficiaries and those who pay into the fund can know that they are getting the best value…But establishing minimum service levels is not enough to ensure that this program is serving its core mission. We also propose an overhaul of the way we determine eligibility for Lifeline. Currently, Lifeline providers are responsible for ensuring eligibility, a situation that invites waste and fraud while burdening those providers who do want to comply. We also ask about ways to target the Lifeline subsidy to those low-income consumers most in need of the support…We also seek comment on how to encourage more providers to participate in the program, increasing competition and consumer choice on price and service offerings.

For those unfamiliar with Lifeline, it is a part of the Universal Service Fund that was established in 1985. It provides a subsidy of up to $10.00 a month for wireline or wireless service for Americans earning below 135 percent of the poverty line. Lifeline provides this subsidy for only one phone per household, but over the last decade, with poor oversight and the rise of wireless phones, households have often fraudulently but successfully claimed more than one subsidy and the program grew tremendously. 

While there is almost universal support among carriers such as AT&T and Verizon for including broadband Internet access service in Lifeline, they are legitimately concerned because as Chairman Wheeler acknowledged, determining eligibility for the program falls entirely on them. The New York Times noted in a June 2, 2015 article:

Meanwhile, the FCC proposal has drawn praise from service providers like AT&T. James W. Cicconi, a senior executive vice president of AT&T who worked in the Reagan White House when the Lifeline subsidy was created in 1985, said this week that he saw Internet access as “the more important Lifeline technology for the 21st century.” But he took issue with the burden the program put on service providers. Under the current framework, carriers like AT&T bear the sole responsibility of confirming eligibility, verifying income levels or enrollment in Medicaid the food stamp program. Lifeline is unlike any other federal low-income support program in outsourcing eligibility verification.

In addition, as Commissioner Pai detailed, there is also concern that the inclusion of broadband Internet access in Lifeline will result in an inevitable increase to the Universal Service Fund and an increase to end user charges (since virtually all carrier universal service costs are passed through to end users). 

And while the FCC Chairman apparently does not recommend new funding for Lifeline in his new proposals, it is likely that such an increase is coming, especially now that the new pile of broadband Internet access revenues may soon be available. 

The Commission is going to adopt and unveil its new Lifetime proposals at its June 18, 2015 meeting.  With all the questions swirling around the program, it will be interesting to see the reception these proposals receive from carriers and Congress.

By Andy Regitsky, CCMI