Piecemeal Lifeline Reform Efforts Unlikely to Fix Its High Costs

Lost among the outrage over the Federal Communications Commission’s largely inconsequential decision to revoke Lifeline Broadband Provider status from nine carriers is the problem of the program’s economic costs. The FCC’s own estimates suggest it may cost between 25 and 41 cents to provide a dollar of subsidy. Another estimate done by four economists (this writer being one of them) found the cost might be closer to 65 cents per dollar.

These costs, ironically, are largely the result of the Commission’s well-intentioned effort to combat earlier fraud in the program. They tell a story of how poorly-designed rules can create a cycle of increasing costs as a patchwork of changes tries to fix problems as they are revealed.

[Olga Ukhaneva is a Research Assistant Professor at McDonough School of Business at Georgetown University]