Lifeline Reform Reaches the Home Stretch

The Federal Communications Commission is likely to vote on its Lifeline reform proceeding at its March 31 public meeting, including its plans to expand Lifeline from supporting only voice telephone service to include broadband Internet access.

Because I previously delved into the history of the Lifeline program since its inception during the Reagan Administration, this post will review the policy justification for Lifeline and then focus on some of the specific issues the FCC is likely to consider.

As the FCC describes it on its website,

Lifeline is a government benefit program that provides a discount on monthly telephone service for eligible low-income subscribers to help ensure they can connect to the nation's communications networks, find jobs, access health care services, connect with family and their children's schools, and call for help in an emergency. Lifeline is supported by the federal Universal Service Fund (USF).

While policymakers are, quite properly, devoting their attention to the mechanics of modernizing and managing the Lifeline program, it is easy to lose sight of broad goals which underlie the century-old, national policy of promoting universal telecommunications service and, indeed, why there is a Lifeline program at all. This matters, because a good bit of opposition to the Lifeline program is rooted in the misperception that Lifeline is simply a “welfare program” designed to help low-income consumers. Lifeline does, indeed, provide critical assistance to people who need it, but it is much more; simply stated, expanding access to telecommunications networks benefits everyone. A modern formulation of the value of universal service is Metcalfe’s Law, which posits that the value of a network is proportional to the number of people connected to it. This means that every person joining a network increases its value to every other user who can now connect to that person. Businesses gain improved access to existing customers and access new customers, allowing the companies to increase revenues and decrease costs. Family members and other individuals, who have had limited or no contact with friends and loved ones, can reach them much more easily. When new users have improved educational and health opportunities, this helps the entire nation by reducing social ills and lowering the cost of government.

In light of the societal benefits of connecting everyone to telecommunications networks, Congress recognized (in the Broadband Data Improvement Act) that broadband deployment and adoption are vital to America’s future because it promotes enhanced economic development, public safety, healthcare and educational opportunities. (Deployment and adoption are closely related to each other: Increased deployment reduces costs and facilitates adoption.)

There is no serious dispute that expanding broadband adoption and deployment is a critical public policy challenge facing state and federal telecommunications policymakers. The FCC has several other tools at its disposal that can help promote them, the most important of which is its E-rate program that helps pay for Internet connectivity for schools and libraries. In addition, having first found in July 2010 that advanced telecommunications technologies, (including broadband Internet access), were not “being deployed to all Americans in a reasonable and timely fashion,” the FCC has been able to invoke additional regulatory powers under Section 706(b) of the of the 1996 Telecommunications Act. (Perhaps most importantly, it has used that authority to preempt state laws restricting municipally-owned broadband systems.)

As this recent Benton Foundation paper shows, there are several elements to promoting broadband adoption, but the most significant barrier is cost. And, while no existing federal or state projects, including extending Lifeline support to broadband, will make a significant dent in closing the broadband deployment deficit, Lifeline expansion can nonetheless be an important step in the right direction.

Section 254 of the 1996 Telecommunications Act specifically recognizes that

Universal service is an evolving level of telecommunications services that the Commission shall establish periodically under this section, taking into account advances in telecommunications and information technologies and services.

Because of that language, no one seriously disputes that the FCC has the power to redefine the Lifeline program to include broadband so the FCC can deploy USF funds for that purpose. However, doing so requires the FCC change its rules and raises a number of thorny policy questions the FCC must now consider. A non-comprehensive list of these issues include the following:

• Size of the Lifeline subsidy - Given political and financial constraints, the FCC has proposed leaving in place the current Lifeline benefit level of $9.25 per month, at least for broadband.
• Establishing a “budget” or cap - The FCC is under pressure to establish a budget or spending cap for Lifeline to limit the total amount of funds that the program can draw from the Universal Service Fund.
• Developing and adjusting minimum standards - The FCC has noted that prices have gone down while minutes (and texts) have gone up for most wireline and wireless service plans in recent years. However, Lifeline service plans and prices have remained static. Retention of the $9.25 benefit thus raises the question of how much broadband service carriers can provide and what minimum standards the FCC should establish for both fixed and mobile broadband service. Taking into account the statutory admonition that universal service levels should be “evolving,” the FCC is considering what mechanisms it must employ to provide ongoing review of Lifeline participants’ needs and to make appropriate adjustments over time.
• Retaining voice only service - The FCC recognizes that many consumers will not want or need (or at least think they need) broadband. Thus, it must consider what standards it must adopt to insure that adequate standalone voice service remains available for Lifeline participants. In light of the declining cost of voice service, the FCC is also examining whether it should reduce the voice-only subsidy below $9.25.
• Determining who verifies Lifeline eligibility - Currently, Lifeline providers solicit and process applications from new customers. This system gives providers an inherent conflict of interest, since a favorable determination is to their benefit. The FCC has proposed to transfer this responsibility to third parties and to manage the process on a national basis. The proposed system would have several advantages, including allowing Lifeline eligibility to be tied to other benefit programs, such as the Supplemental Nutrition Assistance Program (SNAP) and veterans’ benefits. There are many considerations that would arise with such a mechanism: for one thing, the FCC has to consider how to integrate a new process with existing state-approval mechanisms. The FCC must also address the fact that there would generally be a delay while applications were processed. Yet another of the many issues the FCC would have to resolve is to decide what kind of documentation must be collected and kept by the verifier and whether there should be periodic reverification requirements. (The obvious privacy concerns have already generated litigation in which the Benton Foundation is involved.)
• Determining who can provide Lifeline service - Increasing the number of Lifeline providers would make the service available to more users and promote competition among the providers. Currently, a company seeking to provide Lifeline-supported services must be qualify as an “eligible telecommunications carrier” (ETC). For wireless carriers, this can require obtaining approval in multiple states and, depending on the state, FCC approval as well. The FCC has asked if it should revisit its 1997 decision to limit Lifeline participation to ETCs. Alternatively, the Commission is considering whether to make it easier to become an ETC by “streamlining” the application process.
• Tribal Lands - Lifeline is especially important for residents of Tribal lands. Many elements of the Lifeline program have been specially adapted for these users. The Commission is considering taking additional steps to meet the needs of residents of Tribal lands and must configure any new rules to meet these needs as well.

Lifeline support was never intended to be a complete solution to a difficult problem, but the reforms that the FCC is likely to adopt will nonetheless bring important relief to many people who need it.