FCC Moves to Make Broadband More Affordable

Cost. Literacy. Relevance. Time and again research identifies these three barriers to broadband adoption. On May 28, Federal Communications Commission Chairman Tom Wheeler proposed to modernize the FCC’s Lifeline program to address the first great barrier: cost. Nearly 30 percent of Americans still haven’t adopted broadband at home, and low-income consumers disproportionately lack access. While more than 95 percent of households with incomes over $150,000 have broadband, only 48 percent of those making less than $25,000 have service at home. Nearly 50% of low-income Americans have had to cancel or suspend smartphone service due to financial hardship. Because low-income consumers disproportionately use smart phones for Internet access, this puts them at a disadvantage at a time when broadband access is essential for access to education and information, for managing and receiving health care, for daily tasks like accessing government services, checking bank balances, finding bargains on goods and services, and more.

“I am circulating new proposals to ‘reboot’ Lifeline for the Internet age,” said Chairman Wheeler as he announced a proposal now being reviewed by his fellow FCC commissioners. “A world of broadband ‘haves’ and ‘have-nots’ is a world where none of us will have the opportunity to enjoy the full fruits of what broadband has to offer.”

Lifeline’s History

Since 1985, the Lifeline program has provided a discount on phone service for qualifying low-income consumers. The Lifeline program is available to eligible low-income consumers in every state, territory, commonwealth, and on Tribal lands. Consumers with proper proof of eligibility may be qualified to enroll. To participate in the program, consumers must either have an income that is at or below 135% of the Federal Poverty Guidelines or participate in one of many Federal or state assistance programs.

Earlier this month in the Digital Beat, Andrew Jay Schwartzman reminded us of Lifeline’s origins -- which really reach back to the Postal Service Act of 1792. As Andy writes, “the Lifeline program is a modern embodiment of a century-old commitment to bring telephone services to all Americans.” Chairman Wheeler is looking to restructure and modernize the program so that it can efficiently and effectively help low-income consumers afford access to essential communications services in the 21st Century, including broadband. Here’s what the proposal looks like.

Building on 2012 Lifeline Reforms

In early 2012, the FCC addressed Lifeline administrative issues by adopting new rules:

• Creating a National Lifeline Accountability Database to prevent multiple carriers from receiving support for the same subscriber. The database will build on FCC efforts in 2011 that eliminated nearly 270,000 duplicate subscriptions in 12 states following review of over 3.6 million subscriber records, saving $33 million.
• Creating eligibility databases from governmental data sources, enabling fully automated verification of consumers’ initial and ongoing Lifeline eligibility.
• Establishing a one-per-household rule applicable to all providers in the program, defining household as an “economic unit” so that separate low-income families living at the same address can get connected.
• Establishing clear goals and metrics to measure program performance and effectiveness.
• Phasing out support for services such as Toll Limitation – subsidies to carriers for blocking or restricting long-distance service—and ending Link Up – subsidies to carriers for initial connection charges. Link Up will continue in Tribal lands.
• Reducing burdens on carriers by establishing a uniform, interim flat rate of reimbursement, allowing carriers to obtain a subscriber’s signature electronically, and streamlining enrollment through uniform, nationwide eligibility criteria. The FCC also instituted independent audits of carriers every two years.

The reforms of 2012 put the program on a more stable footing, Chairman Wheeler stressed this week. The reforms reduced Lifeline spending by nearly 24% as they became fully effective in 2013-14.

This week, Chairman Wheeler asked his fellow FCC commissioners to vote on new rules – in what is called a Report and Order – that would build on and strengthen the 2012 reforms by:

• Requiring providers to retain documentation regarding the eligibility of their Lifeline customers to facilitate oversight and audits;
• Extending all record retention requirements from three to ten years; and
• Increasing program transparency by making key performance data easily available to the public.

Modernizing Lifeline to Meet 21st Century Needs

The proposal Chairman Wheeler circulated to his fellow commissioners this week asks them to launch a public proceeding -- called a Notice of Proposed Rulemaking -- seeking input on how best to modernize Lifeline so the program can help low-income consumers access the communications technology they need to participate in today’s society. As outlined by the Chairman, the proposal has these main tenets:

• Ensuring minimum service standards for voice and broadband. The proceeding proposes to establish minimum service standards for both voice and broadband, to ensure that both Lifeline subscribers and ratepayers are getting the best possible value from the service delivered. The FCC would seek comment on what those standards should be.
• Resetting Lifeline Eligibility Administration. Lifeline providers are currently responsible for ensuring the eligibility of their Lifeline customers, a situation that invites waste and burdens providers. The Chairman proposes to remove providers from this process and seeks comment on other ways to verify eligibility, such as establishing a neutral third party administrator.
• Encouraging Carrier Participation. The FCC would ask how to encourage more providers to participate in the program, increasing competition and consumer choice on price and service offerings.
• Targeting Support. The proceeding would also seek comment on how to ensure that the program targets those most in need of the support.
• Increasing Competition. Competition among providers on price and service offerings would benefit Lifeline subscribers and would ensure ratepayer dollars support an efficient program.

The Notice of Proposed Rulemaking would seek comment on how to encourage providers to participate in the program. The item also asks how to encourage participation by the states.

Reaction

FCC officials hoped that their plan might be able to win Republican support. While their plan would allow poor consumers to use Lifeline money towards their Internet bills, it wouldn't necessarily increase the overall size of the program, which is funded through fees on all phone bills. In fact, the FCC plans to consider whether to cap the size of the program for the first time, something Republican have been pushing for years. So consumers would be allowed to spend their $9.25 monthly subsidy on voice, data, or home Internet access, but the size of that subsidy might not actually increase under the plan. That would keep consumers from having to pay higher government fees on their phone bills. FCC officials said they were optimistic that by incorporating Republican ideas designed to save federal money, they could get unanimous support for their plan.

"If it's going to balloon the size of the fund, I think the vote will fall along party lines," said Robert McDowell, a former Republican FCC commissioner. But if the overall fund stays the same size, he added, "then there's the potential for a unanimous vote."

But Republicans on Capitol Hill did not wait to launch an attack on the proposal.

House Republicans seemed skeptical of Chairman Wheeler’s proposal. “Broadband adoption creates countless opportunities for individuals and small businesses and is a welcome generator of economic growth and jobs. The time is ripe for reforming the Universal Service Fund to meet the communications and technology environment of the 21st century – unfortunately, this proposal misses the mark on the reforms we need,” said House Commerce Committee Chairman Fred Upton (R-MI) and Communications and Technology Subcommittee Chairman Greg Walden (R-OR). “We have long called for the need to cap the USF, and each fund within it, to ensure that ratepayer dollars are spent wisely. Simply expanding the program without ensuring its effectiveness or longevity is the wrong approach if we're going to do right by those who pay for the program, and those who depend on it.”

In the Senate, the Commerce Committee’s Subcommittee on Communications, Technology, Innovation, and the Internet will discuss the Lifeline program at a June 2 hearing that will “examine the Federal Communications Commission’s progress in reforming Lifeline … and how to prevent waste, fraud, and abuse in the program.” The hearing, at least according to a Subcommittee announcement, is in reaction not to the Wheeler proposal but a recent Government Accountability Office's report recommending that the FCC evaluate the efficiency and effectiveness of Lifeline.

The GAO report found that the number of participating households had fallen to about 12 million in 2014 from about 18 million in 2012, suggesting more households were being held to one subsidy. “The reforms had some impact, but whether they’ve reduced all of the fraud, we can’t tell,” said Michael E. Clements, an acting director at the GAO who helped write the report. Clements said that of the 11 primary reforms the FCC had said it would make in 2012, four had yet to be completed, according to his office’s review.

"Waste, fraud, abuse, and a pervasive lack of accountability have undermined the credibility of the Lifeline program," Senate Commerce Committee Chairman John Thune (R-SD) said. "Americans deserve better than a program falling woefully short of its mission."

"Why the FCC wants to expand this program before addressing the regular reports of ongoing fraud is beyond me," said Sen. David Vitter (R-LA), a longtime critic of the program. "The FCC has failed to manage Lifeline efficiently in its current form, and I cannot support any expansion of a program that has so few safeguards in place to protect the legitimacy of the program and the American taxpayers who pay into it."

In the spirit of disclosure, the Benton Foundation welcomed the news from the FCC. Our Director of Policy, Amina Fazlullah, said, "The FCC’s January 2012 reforms of its Lifeline program have saved U.S. ratepayers billions, strengthening oversight and eliminating waste, fraud and abuse. With these reforms now implemented, the Benton Foundation welcomes today’s action by FCC Chairman Tom Wheeler to take the next step and modernize Lifeline to reflect the reality of 2015: home broadband service is no longer a luxury, but an essential service for education, public health, public safety, jobs and the economy. In 1996, Congress decided that 'universal service' should be an evolving level of telecommunications services. Broadband services to the home are widely deployed and subscribed to by households that can afford them. Now is the time for the FCC to begin support for families that are not able to afford broadband. In addition to Chairman Wheeler, FCC Commissioners Mignon Clyburn and Jessica Rosenworcel have articulated the need to modernize the Lifeline program. Benton thanks them for their efforts.”

At Public Knowledge, Kristine DeBry said, “People increasingly depend on the Internet for access to jobs, education, news, services, communications, and everything else under the sun. Employers assume prospective employees have it and school systems assume their students can access materials online. In times of emergency, we depend on broadband to provide life-saving information and to keep us in touch with our loved ones. We no longer need to debate if broadband is essential to the lives and well-being of all Americans, for it has become obvious from the experience of our daily lives. The proposal to ‘reboot’ the Lifeline program to include broadband subsidies for our most poor and vulnerable follows in a long, bipartisan tradition of ensuring that all Americans have access to basic communications services. The FCC should move quickly to adopt this proposal as the first step of upgrading our national communications lifeline for the digital age.”

“I know from personal experience that Lifeline is a vital pathway out of poverty for millions of Americans. It is the only federal program that directly addresses the affordability of communications services for the poor,” said Jessica J. Gonzalez, the Executive Vice President and General Counsel at the National Hispanic Media Coalition. “Universal broadband access and adoption is becoming increasingly important. For instance, without it we are unable to educate our nation’s students. According to recent statistics, nearly 100% of high school students reported needing broadband to complete homework assignments. Yet 5 million U.S. households with school age children don’t have access at home. Our students need the tools to succeed. We must immediately address this educational inequality. This is crucial to ensuring future generations are able to fully participate in our 21st century society and economy.”

Free Press Policy Counsel Lauren Wilson said, “The FCC is right to ask how it can modernize its low-income telephone-subsidy program to reflect the central role the Internet plays in our daily lives. For 30 years, our nation’s most vulnerable communities have relied on Lifeline to connect with loved ones, access medical care and seek job opportunities. Today, participating meaningfully in our society and economy means getting online. Internet access must not be reserved only for those who can afford the high prices charged by cable and telephone giants. But getting all Americans online isn’t a challenge just one agency can address. Policymakers at every level — from the White House and Congress to local school boards — need to explore the most effective and efficient ways to connect people, and especially those in disadvantaged communities.”

“Chairman Wheeler’s announcement marks an important step forward in ensuring that all Americans can thrive in today’s economy. In today’s information age, the Internet is as vital to the lives of everyday Americans as electricity was in the last century, and can play a critical role in moving people out of poverty and into the new economy by providing access to job opportunities, health care, social services, and education,” said Wade Henderson, president and CEO of The Leadership Conference on Civil and Human Rights. “And yet, there are still far too many disparities in Internet adoption, particularly among communities of color, low-income communities, people with limited English proficiency, and people with disabilities. The FCC has the power to address this disparity by modernizing the Lifeline program to include broadband. Modernizing the program will give broadband access to millions of low-income people. At a time when those most in need of the advantages of broadband do not or cannot use it because of cost, reducing the high cost of broadband service is a concrete step our nation can take toward an inclusive economic recovery.”

What's Next

The Lifeline debate is likely to focus on a few key issues, analysts say. First will be how Lifeline recipients can apply their discount to broadband. Wheeler's proposal is expected to offer program participants a choice of either phone service, broadband or "a mix of both."

Another point of contention is who should be responsible for determining participants' eligibility, and how. Telecom companies are required to perform checks to ensure that no Lifeline recipient is benefiting from the program more than once. But this approach places unwelcome burdens on companies, said the FCC.

The coming fight over Lifeline raises inevitable questions over who should help pay for the low-income discounts. The program is funded by fees from telephone companies and consumers. But with the FCC poised to add broadband to the program, it's possible that the agency could ask Internet providers to chip in, too. For the moment, the FCC has explicitly decided not to do so. The agency is waiting for a formal recommendation on the matter from a bipartisan group of state and federal officials known as the Federal State Joint Board on Universal Service. But on the heels of the FCC's net neutrality rules — which technically open the door to fees for Lifeline and other programs — industry advocates fear Internet providers would be required to pay up.

At Benton, we’ll be tracking this debate as the FCC presumably launches this proceeding at its June 18 meeting. On our Lifeline page you can find more background and links to the latest news, analysis and upcoming debates surrounding Lifeline. Check it out – and we’ll see you in the Headlines.