Universal service is the principle that all Americans should have access to essential communications services, like phones and broadband. You may not have heard much about it, but a universal service crisis is right around the corner.

Due to Federal Communications Commission inaction, nearly 800,000 people could lose phone service on December 1. On that day, changes in the FCC’s Lifeline program, which provides a modest monthly discount for communications services, mean that voice-only services like a home landline telephone and/or a cellphone will no longer be eligible for the discount. The changes could mean people losing service at a time they need it most.

As the December 1 deadline approaches, the FCC should quickly act, first, to ensure low-income people do not lose their essential telephone service during the COVID-19 pandemic.

And the FCC should come to grips with the reality that Lifeline’s $9.25/month subsidy is too small to connect low-income households with robust broadband service.

With the rollout of the Emergency Broadband Benefit, and the possibility, on passage of the infrastructure bill, of a permanent American Connectivity Plan, the FCC should think about low-income subsidies for communications services holistically to allow low-income households to be connected as most middle- and upper-income people do: with both a wireline broadband subscription and a cellular data plan.

Lifeline Households

Lifeline households by definition are low-income. The median income for Lifeline-eligible households, in 2019, was $19,500. For households in deep poverty (that is, those whose incomes are 50% of the federal poverty level) that figure was just $2,400. Voice calling is the most important part of Lifeline service for 23% of subscribers, but two-thirds (68%) say voice, text and data are all equally important to them.

Although most Americans, even low-income Americans, have phone service, it isn’t affordable for many people. Low-income Americans pay a significant portion of their income for telephone service. Analysis of the Census Bureau’s Consumer Expenditure Survey (CES) shows that households whose annual incomes are below $15,000 pay about $500 per year for telephone service—or 3.3% of their income. For households in deep poverty (whose median incomes are only $2,400 annually), phone service might be as much as 15% of their gross incomes (assuming such households pay less than $500 per year). For all Lifeline eligible households, assuming a cell phone bill annually of $550 (or $45 per month), service is close to 3% of gross income.

The FCC views 2% of income as the threshold of affordability for phone service. The analysis of CES data, then, indicates that poor Americans are spending beyond the threshold of affordability for phone service. Many depend on the Lifeline subsidy to keep their phone.

Changes to Lifeline

In 2016, the FCC plotted a new course and started a transition of Lifeline from a program that primarily supports voice services to one with a greater focus on supporting broadband internet access service. The change in focus reflected a reality that nearly everyone in the U.S. has phone service—even nearly all Lifeline-eligible households.

The FCC adopted minimum service standards for the Lifeline program and a process by which those standards would increase over time to ensure that the supported service would “remain robust as technology improves.” Paired with the minimum service standards, the FCC also defined a process to phase down support for voice-only services so funding would be focused on supporting broadband internet access service. The FCC adopted a gradual reduction of the Lifeline support amount for voice-only services from $9.25 to $0. The current reimbursement amount for voice-only support stands at $5.25 but will be zeroed out after December 1, 2021.

The FCC tasked the Wireline Competition Bureau with determining if the transition should be completed as planned back in 2016 or if it should be delayed.

In June 2021, the FCC’s Wireline Competition Bureau released the Report on the State of the Lifeline Marketplace to inform the commission about the current state of the Lifeline marketplace, offering considerations relevant to the Lifeline program’s continued ability to ensure that low-income Americans have access to affordable communications services. The report found that the phase-down and ultimate phase-out of voice services by December 1, 2021 may negatively impact 797,454 Lifeline consumers (that's over 10 percent of all Lifeline enrollees) who use voice-only services for fundamental needs. So that's nearly 800,000 households that could face being disconnected from phone service this winter.

What Universal Service Really Looks Like in 2021

The FCC should act now to make sure Lifeline subscribers don’t lose service. But the more striking issue that the commission has ignored for far too long is that $9.25/month can’t deliver on the promise of universal service in 2021, which means that every household must have both a wireline broadband subscription and a cellular data plan.

The table below, based on analysis of 2019 American Community Survey data, illustrates the stark differences in technology adoption by income in the U.S.

Adoption of digital tools by income & Lifeline-eligibility status

The majority (60%) of American households have annual incomes of more than $50,000. Most of these households (75.1%) have both wireline broadband and a cellular data plan. That is more than twice the rate (36.3%) for low-income households. At upper income levels—the 15% of homes whose annual incomes exceed $150,000—85.1% had both wireline and cellular data subscriptions.

The FCC’s current $9.25 a month support level is woefully insufficient if we are going to ensure that everyone can get connected. Policymakers should adopt permanent, coordinated support that is sufficient to ensure that low-income households can enjoy the same access to wired and wireless voice and data services as higher income households.

John Horrigan is a Benton Senior Fellow and a national expert on technology adoption, digital inclusion, and evaluating the outcomes and impacts of programs designed to promote communications technology adoption and use. He served at the Federal Communications Commission as a member of the leadership team for the development of the National Broadband Plan. Additionally, as an Associate Director for Research at the Pew Research Center, he focused on libraries and their impact on communities, as well as technology adoption patterns and open government data. Horrigan is leading Benton’s research on the FCC’s Lifeline program.

The Benton Institute for Broadband & Society is a non-profit organization dedicated to ensuring that all people in the U.S. have access to competitive, High-Performance Broadband regardless of where they live or who they are. We believe communication policy - rooted in the values of access, equity, and diversity - has the power to deliver new opportunities and strengthen communities.

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