FCC Will Expand Lifeline Program to Include Broadband
March 11, 2016 | by Andrew Regitsky
On March 8, 2016, FCC Chairman Tom Wheeler circulated an Order that would expand the Lifeline program to enable low-income consumers to use their $9.25 monthly subsidy to pay for stand-alone broadband access to the Internet. The Order is expected to be approved by a 3-2 party line vote at the Commission’s March 31st meeting. Unfortunately, in the Order, the Commission apparently does not provide any information on how the expanded program will be paid for.
For those unfamiliar with Lifeline, it was established in 1985 as a key component of the Universal Service Fund (USF). Lifeline provides a monthly subsidy for wireline or wireless service for Americans earning below 135 percent of the poverty line. The subsidy is supposed to help pay for a single 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 and its costs grew tremendously.
Once of the major criticisms of the current program is that telecommunications carriers bear the sole responsibility of confirming eligibility. They do so by verifying income levels or enrollment in Medicaid or the food stamp program. In this way, Lifeline is unlike any other federal low-income support program in outsourcing eligibility verification. The modified Lifeline program attempts to rectify the problem by appointing a neutral company to determine eligibility. Here are more details from a “Fact-Sheet” about the Order released by the Commission.
I. The Expanded Lifeline Program Provides Support for Robust BroadbandAllows Lifeline support for stand-alone mobile or fixed broadband Internet access service;
Lifeline consumers may also receive support for bundling of fixed or mobile voice and broadband;
Supports mobile voice with unlimited talk through the end of 2019, after which Lifeline providers of mobile services will be required to include broadband as part of any supported service;
Support for fixed-only voice service remains in light of ongoing affordability challenges.
II. Ensures that Lifeline Subscribers Receive Services Meeting 21st Century Needs
Sets minimum standards for broadband to enable consumers to fully participate in digital society;
Fixed speed standard based on what a substantial majority of consumers receive (currently 10 Mbps downloads/1 Mbps uploads);
Sets minimum monthly fixed broadband usage allowance standard of 150 GB;
Anticipates technological advances in the convergence of mobile voice and data. Support for standalone mobile voice will be gradually phased down over three years: reduced from $9.25 per month to $7.25 on Dec. 1, 2017, $5.25 on Dec. 1, 2018, and no support after Dec, 1, 2019;
Mobile voice remains eligible for full support as part of a mobile voice and data bundle.
III. Builds on 2012 Reforms and Closes any Remaining Vulnerabilities to Curb Waste, Fraud and Abuse
Establishes a National Eligibility Verifier as neutral third-party entity that removes the opportunity for providers to enroll ineligible subscribers;
Refines list of federal programs that may be used to validate Lifeline eligibility to those that support electronic validation, are most accountable, and best identify people needing support (SNAP, SSI, Medicaid, Veterans Pension, Tribal), along with income-based eligibility;
Increases transparency by making program data publicly available and understandable, including subscriber counts by provider and uniform disclosure of annual subscriber recertification data.
IV. Establishes Budget Mechanism to Minimize Impact on Ratepayers
Sets budget of $2.25 billion, indexed to inflation, sufficient to allow for increased participation generated by support for broadband service.
Requires FCC’s Wireline Competition Bureau to notify Commission when spending reaches 90 percent of the budget and to prepare an analysis of the causes of spending growth, followed by Commission action within 6 months.
Like so many recent decisions, the Order will not be supported by the two Republican Commissioners. They criticized both the process and the Order itself. They are especially concerned about the cost of the expanded program and who will pay for it. Commissioner Pai issued a statement listing his concern about the process:
Hours after the Chairman launched his press campaign and multiple sources reported he had circulated this item, it has just landed in my inbox. I haven’t had a chance to review all 150 pages yet, but as usual, the “Fact Sheet” released this morning raises more questions than answers. It’s impossible to tell whether the “budget mechanism” is actually a budget in any real sense of the word. It is unclear what “Commission action” would take place when spending gets close to the amount specified – would the full Commission get a vote? And what is the rationale to justify increasing spending on this Universal Service program – but not others – by $750 million, an increase of 50%? These are the answers I will be looking for as I review the Order. But since they are not actually given in the information made public so far, under the current rules I will be barred from discussing them. This fiasco seems to add fuel to my arguments for releasing the document to the public or at minimum to stop censoring Commissioners with rules that aren’t being applied equally.
While Commissioner O’Rielly is concerned about the effect of increased Lifeline costs on the USF monthly contribution percentage and who will eventually pay or the expanded program:
[The Lifeline program expansion] would have a dramatic effect on calculating the “contribution” factor, which translates into the fees Americans pay on a portion of each month’s phone bill. If you plugged this additional Lifeline spending into the 2016 first quarter formula, the percentage of Americans’ phone bills that goes toward the FCC’s USF spending (as opposed to service-related purposes or state and local taxes) would increase from 18.2 percent to 26.7 percent, [7] based on the FCC data. But this underestimates the actual effect since telecommunications revenues continue to shrink yearly (Michael O’Rielly March 3, 2015 blog).
O’Rielly believes that requiring broadband Internet access providers to contribute to the fund would only mask the true costs of the expanded program.
While I agree that the Commission should move contribution reform, it is disingenuous to treat it as a solution to unrestrained Lifeline spending. By incorporating new payers (people, devices or services) into the system, it merely masks the true increase in spending. In other words, expanding the denominator to impose fees on more services, like Internet access, just dilutes the current contribution factor but it does nothing to address the growing numerator (i.e., overall spending). And, it means that instead of one fee on voice services, as in today’s collection process, there would be smaller fees on multiple services that collectively will total more than consumers are currently paying. That’s the hidden agenda. Under this construct, families will pay more, possibly unknowingly, to the Federal government when all of the new services are subjected to the Commission’s fee mandates (Id).
Thus, we once again have the outcome in which the Commission makes a key change to the industry through a straight party-line vote, even in a situation such as this when all five Commissioners actually favor including broadband Internet access in the Lifeline program. The disagreements regarding a budget for the program and how the additional costs should be recovered could have and should have been worked out collectively. The fact that the Commission could not do so, shows how truly broken it is.
By Andy Regitsky, CCMI
