Lifeline/Low-Income Consumers

Federal Communications Commission Chairman Ajit Pai sent a letter to Rep Colleen Hanabusa (D-HI) on August 21, 2017, in response to her letter regarding communications service to the Hawaiian Home Lands residents and the Commission's investigation of Sandwich Isles Communications. Pai responded to Hanabusa’s questions on whether Universal Service Funds have been paid to SIC since the suspension of payments by USAC in 2015, whether SIC was certified by the Hawaii PUC as an ETC at the time USF funds were suspended, if SIC remains eligible for the receipt of 2015 funds and the total amount of USF funds withheld from SIC in 2015.

The Universal Service Administrative Company, the nonprofit organization responsible for administering the E-rate program and other federal universal-service funds, announced August 8 that it would transfer more than $9 billion it oversees out of the private banking market and into the US Treasury.

Moving the funds into the Treasury was one of the recommendations in a report on problems with the Lifeline program recently issued by the Government Accountability Office. Among the reasons GAO cited for recommending such a move: lower fees, better management practices and regulatory safeguards, and the opportunity for the federal government to use the funds as an offset for its debts. The Aug 8 announcement prompted some concerns in a K-12 sector already jittery about the direction of the FCC—and especially its plans for the E-rate—under President Donald Trump and the chairman he appointed, Ajit Pai.

"While there might be some efficiencies associated with switching the E-rate program to a Treasury-managed account, we have concerns that program beneficiaries would lose the benefit of the significant interest that universal-service funds accrue in the private market," said Reg Leichty, a lawyer and lobbyist for the Consortium for School Networking, a professional association representing school technology officers. Leichty also expressed concern that the transfer of funds into the Treasury could be a step towards Congress assuming responsibility for universal-service funds, including an annual determination of how much should be allocated for initiatives such as the E-rate. "We would not want this successful program to be subject to the whims of the annual appropriations process, which has not functioned well for a significant period of time," he said.

The Lifeline Connects Coalition met with Federal Communications Commission Wireline Competition Bureau staff on August 10, 2017 to discuss the Lifeline National Eligibility Verifier. The Coalition discussed improvements to the timing of subscriber proof of eligibility for migration to the National Verifier, the recent decision not to provide a service provider application programming interface to the National Verifier, and the proper interpretation of the June 29, 2017 Public Notice regarding service provider liabilities under the National Verifier. The Coalition also discussed its Petition seeking reconsideration of minimum service standards and the GAO Lifeline Report.

A bipartisan quartet of Senators want the Government Accountability Office to fork over some details about the waste, fraud and abuse it identified in the Federal Communications Commission-administered Lifeline low-income broadband subsidy program. Sens Tom Carper (D-DE), Claire McCaskill (D-MO), Ron Johnson (R-WI) and Rob Portman (R-OH) sent the letter to the GAO asking it to send to the FCC and the FCC inspector general (currently David Hunt) details on the specific instances it identified in a report on Lifeline released by McCaskill in June.

They want the FCC IG to be able to identify and pursue the culprits if warranted. The senators also added a plug for the GAO report's recommendations on how the FCC can improve oversight of the program, something new chairman Ajit Pai has long called for. They also want GAO to turn over the results of its undercover testing of the Lifeline program to the committee.

The Universal Service Administrative Company (USAC) filed an updated version of the Lifeline National Verifier Plan, which was created in response to the Lifeline Modernization Order on January 19, 2017. USAC said the plan contains a section detailing each of ten key components, as well as an introduction and a glossary of key terms. It also contains a section responding to public comments received on its draft plan, and has been approved by the Federal Communications Commission’s Wireline Competition Bureau and the Office of the Managing Director. This updated version reflects progress of the system build and its related processes.

Rep Austin Scott (R-GA) brought back his End Taxpayer Funded Cell Phones Act before House lawmakers left town. That’s the legislation that GOP leadership fast-tracked straight to floor consideration immediately after its introduction in 2016. (They tried to advance it under suspension of the rules, and it went down 207-143.) It now has 18 GOP backers, triple what it had before. “My bill will reform the Lifeline Program and restore it to its original purpose of providing landline services and prohibit Universal Service support for mobile services,” Rep Scott said. A GOP leadership aide said there’s no talk on when and if the measure may be brought to the floor this time around.

In a letter to Universal Service Administration Company CEO Vickie Robinson, Federal Communications Commission Chairman Ajit Pai responded to a recent Government Accountability Office report on potential waste, fraud and abuse in the FCC’s Lifeline program and additional internal FCC investigations. “In light of these investigations and their findings, I believe immediate action is warranted.” He called on USAC to implement safeguards in six areas to ensure Universal Service Fund monies are not used by “unscrupulous eligible telecommunications carriers (ETCs)”:

• Audit the ten ETCs with the highest number of potential ineligible Lifeline subscribers
• Review a sampling of Lifeline subscribers each month to determine if they are eligible
• Require ETCs to verify Lifeline subscribers’ eligibility and de-enroll any subscribers who are not eligible
• Refer ETC abuses to the FCC’s Office of Inspector General for possible civil or criminal action
• For addresses with 500 or more Lifeline subscribers, require ETCs to de-enroll subscribers who cannot verify their address and confirm they are “independent economic households” from other Lifeline subscribers -- and, on a quarterly basis, review in a similar way a sampling of addresses with 25 or more subscribers
• Recapture improper payments associated with de-enrolled Lifeline subscribers
• Explore automating the process of detecting oversubscribed addresses
• Step up efforts to identify “phantom,” deceased and duplicate subscribers, de-enroll them, and prosecute ETCs who collect USF funds for serving these fictitious customers
• Require Lifeline sales agents to register with USAC, block new subscribers enrolled by sales agents who are registering too many customers, and stepping up prosecution of fraudulent sales agents.

Chairman Pai asked USAC to report to him on implementation of these safeguards by August 8, 2017.

[Commentary] Suppose you started a program to improve the reading abilities of the 80 percent of lower-income students who cannot read at grade level. This is a worthy cause, so let’s assume that you are spending more than $1 billion annually to fix this. Then someone studies the effectiveness of your program and finds: (1) The children who enroll already read at or above grade level, (2) the percentage of lower-income children reading below grade level has barely changed since you started, and (3) some of the people administering your program are stealing from it. Would you keep your program, or ditch it? If you were the Federal Communications Commission (FCC), you would probably keep it. At least, that is how the agency is treating its Lifeline program, which received another failing grade from the Government Accountability Office (GAO) in 2017.

The GAO had already given the program a failing grade seven years ago in 2010. As I have written before, a less complex, less costly, and less corruption-prone way to provide Lifeline’s income benefits would be to provide direct income subsidies to low-income households. This would save the FCC considerable time and effort that it currently devotes to patching Lifeline and would save the GAO the expense of giving the program another failing grade seven years from now.

[Mark Jamison is the Gunter Professor of the Public Utility Research Center at the University of Florida]

[Commentary] Thanks to a 2016 change in Federal Communications Commission policy, a small school district in central Virginia may have found a way to the bridge the “homework gap.” The homework gap is the lack of digital access at home that can hurt students’ academic performance and interfere with their ability to complete assignments.

Brette Arbogast, director of technology for the Appomattox County School District in Virginia, saw problems with E-Rate in 2015, in part because of a lack of competition among technology companies bidding on school business. Arbogast figured out his school district could save a lot of money if it built a network itself rather than hiring a private internet-service provider. Though the savings potentially amounted to hundreds of thousands of dollars a year, without internet access in students’ homes, the program would do nothing to address the homework gap. A recent amendment in FCC policy was a game changer. Until last year, E-Rate-funded networks could only serve the grounds of schools or libraries. In 2016 the FCC reformed the rules so that networks funded with E-Rate could reach off-campus to serve students during non-school hours. The district quickly capitalized on the change. The school district became a certified ISP and an E-Rate provider – a process that takes about a year. Once they had built the network to serve the school, they cooperated with a municipality that helped finance Wi-Fi radios, which the school connected to the network. Those Wi-Fi devices provide internet access to students in their homes after 4 p.m., thus getting them online to complete their homework.

[Craig Settles is a broadband industry analyst and consultant to local governments]

The Federal Communications Commission’s Universal Service Fund initiatives are important, complex programs that are as necessary as they are challenging to manage. The Government Accountability Office Lifeline report provides additional evidence that flaws in these programs can be used by unscrupulous actors seeking to line their own pockets at the expense of taxpayers and populations truly in need; and that while the FCC’s Lifeline program is essential to those that need it, there is significant room for both improved efficiency and performance.