Universal Service Fund

The American Cable Association says the Federal Communications Commission has to simplify its Connect America Fund II auction framework if it wants to get the most fiscal bang for the buck.

The largest incumbent price cap carriers--AT&T, Verizon, CenturyLink--declined about $2 billion in CAF II support for building out broadband to high-cost, generally rural, areas, in 20 states, so the FCC is opening that pot of money up to competitors, like cable broadband providers, via auction. All that money is coming from the Universal Service fund for high-cost, mostly rural, areas for which there is no business case for building out broadband absent that subsidy. ACA says the proposed auction design is "inordinately" complex, which will at best deter and at worst thwart, participation by many, including the "small town cable operators" FCC Chairman Ajit Pai has said he wanted to encourage to participate.

The Senate Homeland Security and Government Affairs Committee held a hearing Sept 14 titled, "FCC’s Lifeline Program: A Case Study of Government Waste and Mismanagement". Committee members criticized the subsidy program for phone and Internet access that was the subject of a recent watchdog report detailing cases of fraud and abuse. Chairman Ron Johnson (R-WI) said at a hearing that there “probably” needs to be a complete overhaul of the Lifeline program. “We need to completely rethink how we distribute that subsidy,” Chairman Johnson said.

Sen Claire McCaskill (D-MO) called on the Federal Communications Commission to crack down on the companies that she says are defrauding the program. “Why are we providing these companies with this massive opportunity for fraud?” Sen McCaskill said. Both Sens McCaskill and Johnson suggested diverting funds from Lifeline towards programs focused on expanding rural internet access.

Once again we will read headlines trumpeting faults in the Federal Communications Commission’s Lifeline program that do not match the realities of the day. Despite significant reforms made under the previous administration and no new evidence of waste, fraud, or abuse, the Lifeline program continues to be under attack while our nation’s most vulnerable remain on the wrong side of the digital and opportunities divide. I am especially disappointed by the current FCC majority and those who repeatedly reject real reform efforts. This administration refuses to allow new broadband providers into the Lifeline program, which will deepen and cement the digital divide while omitting the fact that the Lifeline program has one of the lowest improper payment rates of all government subsidy programs.

Continuing to vilify our nation’s only means-tested universal service program and remaining on the sidelines while communities and their residents do without connectivity, is a dereliction of the oath we were sworn to uphold. I, for one, remain committed to working with those who wish to improve the only FCC program that directly tackles the challenge of affordability in communications. Going forward, it is my sincere hope that those who are empowered to help those in need, will offer solutions, not attacks, so that we may enable all of our citizens to participate in a 21st century digital economy.

Three dozen organizations, including Common Cause, the Communications Workers of America, and the Benton Foundation, have sent letters to individual members of the Senate asking them to preserve the Lifeline communications subsidy program from what they say are Federal Communications Commission efforts to undermine it. The Lifeline program is part of the Universal Service Fund subsidy and is directed at those who can't afford access to basic communications—originally phone and increasingly internet. In the letter, the groups dub the program a "successful public-private partnership." "While critics have focused on alleged fraud and abuse as a reason to eliminate or limit the program, these critiques ignore the reforms already adopted that safeguard the program," the groups said. "Lifeline modernization involved sweeping reforms, including minimum standards obligations, additional cost-control measures, and a budget of $2.25 billion annually. These reforms are rapidly being implemented and are the most effective way to safeguard the program and ensure that program funds go to families in need. Implementation of the newly adopted independent eligibility verifier begins this year and will be complete by the end of 2019." [The Benton Foundation was a signatory on the letter]

[Commentary] Promoting universal access to modern communication services and the internet, especially for low-income and disadvantaged Americans, is a noble cause and a pragmatic objective worthy of government support, but the Federal Communications Commission’s (FCC) Lifeline program is not an effective or efficient means of achieving these goals. We need a better approach to open the doors of digital opportunity to low-income and disadvantaged Americans. Here are four principles for replacing the program with a more effective approach to advancing digital opportunity:

First, federal and state governments should work to reduce barriers to broadband deployment and adoption, and to the efficient functioning of the broadband marketplace, so as to lower prices and increase the availability of affordable broadband services.
Second, regardless of whether Lifeline is replaced or reformed, support should be targeted to those who do not already have service.
Third, the replacement for Lifeline should reflect an assessment of who needs help and of what sort.
Fourth, and finally, it is time to consider a new delivery mechanism, one that involves neither the federal regulatory agency which has so grossly mismanaged the Lifeline program nor the telephone companies that have profited so handsomely from that mismanagement.

[Jeffrey Eisenach was on the Trump FCC Transition team, and is a managing director at NERA Economic Consulting.]

Modernizing Lifeline for broadband is critical for poor people and people of color, who are more likely to be on the wrong side of the digital divide and who cite cost as a major barrier to adoption. Lifeline is the only federal program poised to increase broadband adoption and provide a pathway out of poverty for millions of people. When talking about Lifeline, we hear a lot about waste, fraud and abuse. But this narrative is overblown and frankly offensive.

I have long been troubled by the tenor of the Lifeline debate: There’s a tendency to wage war on the poor, to demonize and assume the worst about Lifeline recipients. And I cannot sit here today, especially as white supremacy is on the rise around the country and in the White House, without directly confronting the racist undertones of these assumptions. We should avoid inflated stories of waste, fraud and abuse at the expense of poor people and people of color, who rely on Lifeline to meet basic needs. The first priority should be expedient implementation of the 2016 Order. We should reject radical measures such as moving Universal Service funds to the U.S. Treasury “to offset other national debts,” as the FCC Chair’s office evidently suggested to the GAO. This could undermine all USF programs, including Lifeline and others designed to connect rural Americans, schools and libraries.

I can summarize my testimony in three sentences. First, promoting universal access to modern communication services and the Internet, especially for low-income and disadvantaged Americans, is a noble cause and a pragmatic objective which deserves Federal support. Second, the Federal Communications Commission’s current lifeline program is not an effective or efficient means of achieving these goals, nor are current reform efforts likely to make it so. Third, we cannot give up: the doors of digital opportunity must be opened for low-income and disadvantaged Americans, and it is therefore incumbent on policymakers to develop a new approach that is both effective and a good investment for the American taxpayer.

In May 2017, we published a report on Federal Communications Commission's oversight of Lifeline that identified steps FCC has taken in the last few years to enhance the integrity of the program and stated the weaknesses that remained. Specifically, this testimony discusses (1) the extent to which Lifeline demonstrates effective performance towards program goals; (2) steps FCC and Universal Service Administrative Company (USAC) have taken to improve financial controls in place for Lifeline and the USF, and any remaining weaknesses that might exist; (3) steps FCC and USAC have taken to improve subscriber eligibility verification, and any remaining weaknesses that might exist; and (4) steps FCC and USAC have taken to improve oversight of Lifeline providers, and any remaining weaknesses that might exist...

In conclusion, Lifeline’s large and diffuse administrative structure creates a complex internal control environment susceptible to significant risk of fraud, waste, and abuse. FCC’s and USAC’s limited oversight of important aspects of program operations further complicates the control environment—heightening program risk. We are encouraged by FCC’s recent steps to address weaknesses we identified, such as the 2016 order establishing a National Verifier, which, if implemented as planned, could further help to address weaknesses in the eligibility-determination process. We also plan to monitor the implementation status of the recommendations we made in May 2017.

On August 30, 2017, the National Exchange Carrier Association, Inc. (NECA) filed its 2018 Modification of the Average Schedule Universal Service High Cost Loop Support Formula. The proposed formula, if approved, would take effect on January 1, 2018, and remain in effect through December 31, 2018.

The Wireline Competition Bureau seeks comment on the proposed formula. Pursuant to sections 1.415 and 1.419 of the Commission’s rules, interested parties may file comments on or before the dates indicated above. All pleadings are to reference WC Docket No. 05- 337. Comments may be filed using the Commission’s Electronic Comment Filing System (ECFS), or by filing paper copies.

By this Public Notice, the Federal Communications Commission announces the states that will be part of the initial launch of the National Lifeline Eligibility Verifier (National Verifier). The Commission established the National Verifier in the 2016 Lifeline Order to make eligibility determinations and perform a variety of other functions necessary to enroll subscribers into the Lifeline program. The National Verifier will verify Lifeline subscriber eligibility, conduct checks to prevent duplicate benefits, recertify subscriber eligibility, and calculate support payments to eligible telecommunications carriers (ETCs). In the 2016 Lifeline Order, the Commission set as an expectation that the Universal Service Administrative Company (USAC) would deploy the National Verifier in at least five states by December 31, 2017.3 USAC has announced that the National Verifier will launch in six states – Colorado, Mississippi, Montana, New Mexico, Utah, and Wyoming – in December 2017. The National Verifier will have a soft launch date of December 5, 2017, and a hard launch date of March 13, 2018.