What to Expect When You’re Expecting Lifeline Reform: A Public Interest Perspective on Making Broadband Service Affordable for All

What to Expect When You’re Expecting Lifeline Reform:
A Public Interest Perspective on Making Broadband Service Affordable for All

This month, the Federal Communications Commission (FCC) will vote to revamp a federal telephone support program, called Lifeline, to include subsidies for broadband Internet service for low-income households. This primer should get you up to speed on the key issues at play in the docket while highlighting a public interest perspective on the ongoing discussions.

Academic research increasingly points to cost being the biggest barrier to broadband adoption. (See Benton’s compilation of research findings.) A healthy, competitive Lifeline program that offers robust, meaningful broadband access to low-income Americans is one of the federal government’s most powerful tools to chip away at the cost barrier.(1)

The Commitment to Universal Service

The principle of “universal service” is the core underpinning of Lifeline. Where did it come from? The notion of “universal service” in telecommunications was borne out of AT&T’s corporate goals set by company president Theodore N. Vail in 1907. This corporate goal of connecting everyone to his phone system was not entirely altruistic, obviously, but it would later become an important tenet in the Kingsbury Commitment in 1913, part of a (in)famous antitrust settlement that AT&T made with the Department of Justice. Recognizing the need for the federal government to guarantee basic access to reasonably-priced communications services to all citizens, Congress later codified the universal service objective in law in 1934.

Using such statutorily-conferred powers, the FCC created the Lifeline Assistance Program (“Lifeline”) in 1985, partially driven by concerns about the unaffordability of phone service in the wake of the 1984 AT&T divestiture.(2) Since 1985, the Lifeline program has provided a discount on phone service for qualifying low-income households to guarantee basic connections to emergency services, family, friends, employers, etc. (For a more extensive historical account, refer to Andy Schwartzman’s Lifeline - Where Did It Come From.) By the last quarter of 2014, Lifeline supported over 12.4 million low-income American households.

Lifeline's Evolution: From Phoneline to Cellphone to Broadband

As the landscape of telecommunications evolved, Lifeline sluggishly followed suit. In 2005, the FCC shifted the focus of the program from traditional landline to basic pre-paid wireless phone service. In 2012, the FCC began reforming Lifeline, notably combating issues of fraud, waste, and abuse in the program. That year, the FCC also started a Broadband Pilot Program to explore how the Lifeline program can potentially be structured to support broadband. In June 2015, the FCC voted 3-2 on a second Further Notice of Proposed Rulemaking (FNPRM) to initiate the current proceeding that may finally allow Lifeline recipients to receive more affordable broadband service. The FCC has received about 300 sets of initial comments and over 50 reply comments. (The Benton Foundation weighed in during both rounds -- submitting comments and reply comments.) The upcoming vote will be the FCC’s most substantial move so far to make broadband Internet part of Lifeline.

Ensuring Lifeline Supports Real Broadband Service

The FCC is considering adopting minimum standards of service that Lifeline providers must meet to receive funds. Why is this important? Current Lifeline voice offerings have largely been stagnant, unlike competitive offerings for non-Lifeline consumers. Going forward, the FCC wants some guarantee that voice and broadband Lifeline provisions are not diluted to only support substandard, non-meaningful usage.

Minimum standards also encourage providers to compete for Lifeline customers. Without healthy competition, low-income consumers on Lifeline are stuck with whatever is offered, even if the cost could be directed towards better subscriptions on the general market. Standards that are too strenuous may deter providers from participating in the program. Therefore, the FCC will weigh both aims of preventing substandard offerings and motivating provider participation in developing minimum standards.

U.S. telecommunications law(3) mandates that all consumers, including low-income consumers, have access to “advanced telecommunications and information services” at rates that are reasonably comparable to those services provided in urban areas. In determining what services are eligible for subsidies, the FCC will consider the extent to which services “are essential to education, public health, or public safety” and are “subscribed to by a substantial majority of residential customers.” The FCC is considering standards to meet the bar for the “reasonably comparable” and “substantial majority” requirements. This requires looking into objective, reliable data about voice and broadband subscriptions in the U.S. as well as the particular needs of low-income households. Obviously, broadband capacity and availability evolve over time and differ by region and market. Any minimum standards will have to cater to different settings and be periodically updated to reflect evolving levels of telecommunication services.

At the core of the minimum service standard discussion is the question: “What does it mean to have meaningful broadband access?” For most, this means a reasonably-fast Internet connection that reliably supports normal daily uses:

• The ability, for all members of the household, to access information online without worrying about rationing bytes in fear of running up against data caps.
• Bandwidth above a certain threshold so content does not take forever to buffer. (This is not just about Youtube speeds. Bandwidth is an especially relevant concern for those with impairments trying to use alternative & augmentative communication applications; for rural patients accessing telehealth applications like high-definition video conferencing and remote patient monitoring; for students accessing educational resources like Khan Academy videos and massive open online courses, etc.)
• Robust wireless access for laptops and mobile devices -- something that many take for granted without realizing that actually 7% of American adults are “smartphone-dependent” and 33% of households below the poverty line rely on mobile-only Internet access.(4)

Public interest advocates have argued for Lifeline standards to protect consumers and program integrity. Low-income households should be able to apply the Lifeline subsidy towards a subscription that is robust enough to support meaningful, functional use of the Internet. Having standards for broadband delivered on Lifeline’s dime is essential to avoid watered-down market offerings from providers. These concerns are especially pertinent when there is minimal consumer choice, which has indeed proven to be the case for the Lifeline voice market. Lifeline consumers cannot pick the service that best meets their needs if robust options are not offered. As many have pointed out, broadband services available only to Lifeline subscribers should not be “a second-class service.” At the core of Lifeline is a commitment to connect all, not to foster a market for lower-tiered broadband service.

Who Verifies Eligibility

A household qualifies for a monthly Lifeline subsidy of $9.25 by having an income that is at or below 135% of the federal poverty guidelines, or by participating in means-tested federal assistance programs. Currently, Lifeline providers certify the eligibility of those who sign up for the program. In some markets, this has resulted in perverse incentives to over-enroll, contributing to fraud, waste, and abuse of the program. FCC Chairman Tom Wheeler called this “having the fox guard the hen house.” Under a new proposal, Lifeline providers will be relieved of certifying eligibility. A neutral, third-party administrator would be in charge of verification.

Many public interest advocates, as well as major telecommunications and cable trade associations and their members, overwhelmingly support the creation of a third-party entity to determine eligibility and verify enrollment. There is wide consensus that a national eligibility verifier will remove structural conflicts and improve the efficacy of benefits. The National Consumer Law Center (NCLC) offered analysis on how the national eligibility verifier may operationalize, including how to interact with the existing National Lifeline Accountability Database (NLAD) and state eligibility databases, setting up an online application, and coordination with means-tested programs such as the Veterans Pension Program. Since the process necessarily involves handling large volumes of sensitive personal data, there is discussion of mechanisms that may minimize privacy and security threats, too.

Enhancing Competition in the Lifeline Market

A key question in the current proceeding centers on whether the FCC should permit broadband providers that are not legally-defined as “eligible telecommunications carriers” (ETCs) to provide Lifeline-supported services. Currently, only ETCs can provide Lifeline-supported services so many leading service providers as well as many innovative small local providers cannot participate in Lifeline, even if they want to.

Are there broadband providers that are not ETCs, but interested in becoming new entrants to the Lifeline market? The evidence points to yes. There is clear demand for low-cost broadband and there are suppliers fulfilling that capacity currently operating outside the Lifeline framework.(5) If the FCC fails to allow these potential providers (cable providers, non-traditional providers such as municipalities, schools, libraries, and community centers, etc.) to participate in Lifeline, the agency will miss a golden opportunity to enhance competition: more providers in the Lifeline program should result in better service.

Does the FCC have legal authority to allow non-ETCs to participate in Lifeline? Public interest groups have pointed to Section 254 of the Telecommunications Act of 1996 as a source of legal authority for the FCC to make necessary modifications to allow non-ETC participation in Lifeline. In particular, they point to a subsection that says the part of the law containing the requirement that a common carrier be designated as an ETC in order to receive universal service support is not intended to affect Lifeline. Carriers have agreed with this interpretation of the law as well (e.g. see AT&T ex parte).

Regardless of whether the FCC moves to allow participation by non-ETCs, the Commission will likely implement steps to streamline the ETC designation pathway. The FCC is proposing to centralize, at the federal level, the process to certify Lifeline broadband providers. The goal is to increase provider participation, competition, and consumer choice.

Capping the Program

The FCC has explored instituting a cap or budget on Lifeline spending. This is an old discussion that has resurfaced. The call for fiscal restraint is partially rooted in outdated mischaracterizations of Lifeline as an ever-growing program rampant with abuse.

The data refutes the argument that Lifeline currently suffers from rampant fraud or runaway spending. According to data from the Lifeline annual reports, both the numbers of subscribers and the amount of funding for Lifeline disbursements have steadily declined since 2012. This is attributable both to the economy improving and serious and sustained efforts by the FCC to combat fraud, waste, and abuse in Lifeline since 2012. More importantly, the pending proposal to employ a national third-party eligibility verifier will be key in preserving fiscal responsibility and program integrity.

Many public interest advocates believe that any budget mechanism must not act as a cap. This is because the Lifeline program is already means-tested and targeted toward individuals, not carriers. All consumers who meet the bar of having an income at or below 135% of the poverty line should be able to receive the Lifeline benefit. If the FCC imposed a cap on Lifeline funding and the cap was reached, it will then have to determine which low-income households stake a greater claim to, or are more deserving of, assistance. The last point has been echoed by many beyond the public interest community as well, such as the Wireless Association (CTIA, one of the largest industry contributors to the federal universal service program) and AT&T.

Should a budget mechanism be put in place, the FCC must clearly address concerns of customer protection and offer guidance on how low-income households can consistently rely on Lifeline from month to month. The FCC will want to avoid the need to determine which eligible low-income Americans to keep out of the Lifeline program, or how much to water down its subsidies in order to fit eligible households within the budget. Fiscal responsibility in universal service funding can be achieved without America’s most vulnerable bearing the brunt of such efforts.

Public interest advocates have repeatedly pointed to broadband’s importance in job-seeking and other essential services to highlight that Lifeline is a “hand up, not a handout.” Coupled with broadband’s empirically-proven positive impact on the economy, many have argued that Lifeline should be treated as a pathway out of poverty. FCC Commissioner Mignon Clyburn argued for the “bold and visionary” goal to make reformed Lifeline “so successful and so enabling, that its recipients no longer need it or any other federal benefit program, because they no longer qualify.” Accordingly, she advocated against “an artificial budget, set at an arbitrary amount.” If Lifeline was to be vested with enough power and crafted with the right incentives, demand in the subsidies should drop over time as low-income households break out of the poverty cycle, alleviating pressure on the Universal Service Fund in the long run.

Looking Ahead

Expect the March 31 vote at the FCC to be a milestone in Lifeline’s evolution. By including broadband in the program, the FCC will be responsive to Congress’ mandate and provide a meaningful push to bridge the digital divide. If the right changes are enacted, this vote has the potential to be a meaningful and commendable feat in the government’s commitment to universal service.

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Raphael Leung is a Policy Research Fellow at the Benton Foundation and former Undergraduate Fellow at the Information Society Project at Yale Law School. He is pursuing an MSc. at the Oxford Internet Institute and holds a B.A. from Yale University. Contact him at rleung [at] benton [dot] org.

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Notes:

1. The ConnectHOME program (run by the U.S. Department of Housing and Urban Development) is another notable federal initiative that specifically targets low-income underserved Americans. Launched in July 2015, it aims to bring Internet to more than 275,000 low-income households in 27 cities and 1 tribal nation.
2. MTS and WATS Market Structure, and Amendment of Parts 67 & 69 of the Commission’s Rules and Establishment of a Joint Board, Report and Order, 50 Fed. Reg. 939 (Jan. 8, 1985).
3. See Telecommunications Act of 1996 §254.
4. The FCC has clearly signaled the desire to support both fixed and mobile broadband service, calling it “the first principle of Lifeline reform.” The draft order, circulated on March 8, proposed setting minimum standards for a) fixed: at 10 Mbps downloads/1 Mbps uploads speeds, 150 GB of monthly data usage, and b) mobile: at 500 MB per month of 3G data, increasing to 2 GB per month by the end of 2018.
5. E.g. See comments filed at the FCC by Benton Foundation (in particular Table 1: Broadband Offerings Available to Low-Income Communities), National Digital Inclusion Alliance (NDIA), and Schools, Health, and Libraries Broadband Coalition (SHLB).