FCC Contemplates Subsidized Broadband Services

[Commentary] The Federal Communications Commission is contemplating a new universal service program that would subsidize broadband services for low-income consumers, and it is looking to use its Lifeline program, which currently subsidizes low-income telephone service consumers, as the model to follow. However, a closer look at the history of the billion-plus Lifeline program shows a wasteful and fraud-laden program that taxes virtually all telephone service consumers and subsidizes millions ineligible consumers in order to help a few.

A recent Government Accountability Office report strongly concluded that an evaluation of the program is needed before going forward. Rather than serve only the truly needy, the Lifeline program has more recently morphed into a wireless telephone service giveaway program. Using a measure of price sensitivity calculated by a group of economists in their Lifeline study, I estimate that providing a 50 percent price reduction to 100 low-income households would stimulate just one new subscriber at roughly the cost of $1,000 per month. In other words, the program pays a lot of money and it taxes a lot of people for very little benefit to society as a whole. This is all the more reason for the current program to be revamped, dramatically downsized and better targeted to those truly needy, such as those in homeless shelters, remote Indian reservations and similarly impacted groups. Lifeline is certainly not the model worth replicating for the burgeoning broadband services market. Simply put, more regulations and higher taxes are not the solution to advancing broadband service penetration. The FCC needs to rethink its position and revamp Lifeline.

[Steve Pociask is president of the American Consumer Institute Center for Citizen Research]