Universal Service Fund

[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]

In this Report and Order, by eliminating several rules that are either duplicative of other reporting requirements or are simply no longer necessary, we streamline the annual reporting requirements for eligible telecommunications carriers (ETCs) that receive high-cost universal service support. We also re-emphasize the importance of providing the public with access to non-confidential information filed by ETCs, and we direct the Universal Service Administrative Company (USAC) to work closely with state and Tribal governments and other stakeholders to improve public access to the information that ETCs will continue to file. In doing so, we reduce ETCs’ regulatory burdens while strengthening the tools for program oversight in furtherance of our goal of protecting the high cost universal support program against waste, fraud, and abuse.

[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.

[Commentary] The Government Accountability Office issued a blistering report on the Federal Communications Commission’s efforts to assist low-income families. The report criticized the agency for spending $1.7 billion annually without knowing — or caring — whether any of this money actually helps narrow the digital divide. I advocated that Congress eliminate the Universal Service Fund’s shady, self-funding off-budget funding mechanism and instead make it a line item in the federal budget. This would make the program more transparent and subject to greater congressional oversight, which would help reduce fraud and abuse and keep program expenses tied to a fixed budget. Overall, the GAO report points to the difficulties that the FCC has, and will continue to have, by deciding simply to extend a Reagan-era telephone subsidy to cover broadband access. Unquestionably, the government should offer assistance to low-income consumers at risk of falling on the wrong end of the digital divide. But that assistance should be designed from the ground up, tailored to the needs of the population it seeks to serve, with controls to protect against fraud and abuse. As we have argued before, Lifeline needs revolutionary, not evolutionary, change.

[Lyon is an associate professor at Boston College Law School]

In its analysis of data from 2012 through 2014, the Government Accountability Office was unable to confirm the eligibility of 30 percent of Lifeline users it examined. Opponents hail this finding as proof of widespread fraud. However, the GAO didn’t determine that these individuals were ineligible; it was simply unable to verify whether providers had complied with eligibility guidelines. The GAO also conducted undercover investigations, submitting a total of 21 Lifeline applications using false information and fabricated supporting documents. Investigators were able to secure service from 12 of the 19 Lifeline providers. Notably, the GAO underscored that the tests were “for illustrative purposes to highlight any potential internal control vulnerabilities and are not generalizable.”

Although investigators were able to leverage their expertise to deceive certain Lifeline providers, the GAO itself admits this effort doesn’t prove that the program is plagued by fraud. But none of that will stop Lifeline critics — including Federal Communications Commission Chairman Ajit Pai — from using the GAO report to intensify attacks on the program and malign its users. They will continue to dismiss the tremendous opportunities Lifeline has provided for millions of people — and the millions more whose lives can be improved with Lifeline’s new broadband offerings.

The Federal Communications Commission’s Wireline Competition Bureau reminds eligible telecommunications carriers (ETCs) of their primary responsibility to ensure the eligibility of Americans seeking Lifeline support. Even as the FCC implements reforms to the Lifeline program to further protect the Universal Service Fund from waste, fraud, and abuse, ETCs are, and will remain, responsible for any fraud that forms the basis of their claims for Lifeline reimbursement.

Although there has been great progress extending broadband’s reach to more and more Americans, there remain too many households and communities that are not enjoying the benefits of broadband. Research shows, for example, that families earning under $25,000 a year are about half as likely to have the Internet at home as families that are the most well-off. The Federal Communications Commission’s Lifeline program brings the many benefits of reliable, robust Internet access to low-income households. That means better access to job listings and workforce training, to education and healthcare, and allows people to fully engage in today’s society. In 2016, the FCC outlined plans for a Lifeline National Eligibility Verifier that would relieve from carriers the responsibility of checking on households’ Lifeline eligibility. We urge the FCC to move swiftly to implement those plans and ensure the program’s financial health.

The Lifeline program gives affordable access to broadband and telephone services in rural and urban areas alike. It provides a lifeline for working families to employment opportunities, elderly people to health care, veterans to critical services, children to education and everyone to 911. Low-income households across the country should not be punished for recently discovered discrepancies that do not reflect the behavior of the vast majority of program participants. The following are statements from advocates in support of the Lifeline program

On June 29, the U.S. Government Accountability Office published a report on the Federal Communications Commission’s Lifeline program’s application process. The GAO investigated multiple Lifeline providers and failed to confirm the eligibility of roughly a third of participants.

A Summary of the Report can be found here: Additional Action Needed to Address Significant Risks in FCC’s Lifeline Program

Lifeline Advocates Urge FCC Chairman Pai to Stand by his First Statements as Chairman and Safeguard the only Federal Program Targeting the Digital Divide

FCC Chairman Ajit Pai: "“Last year, I led an investigation into the Lifeline program that revealed serious weaknesses in federal safeguards. Today’s GAO report confirms what we discovered then: Waste, fraud, and abuse are all too prevalent in the program. Commission staff and the Office of Inspector General have already been developing recommendations to better safeguard taxpayer funds. I stand ready to work with my colleagues to crack down on the unscrupulous providers that abuse the program so that the dollars we spend support affordable, high-speed broadband Internet access for our nation’s poorest families.”

FCC Commissioner Mignon Clyburn: “We have a statutory obligation as a Commission to ensure all Americans, including low income consumers and those living in rural and insular areas, have affordable voice and broadband access. Recognition of this responsibility goes hand-in-hand with my long stated belief that we must aggressively root out waste, fraud, and abuse in all of our universal service programs, including Lifeline. In recent years, the Commission has taken numerous steps to achieve this goal, including setting up a national eligibility verifier, adopting a periodic recertification requirement and ensuring that people who are signed up are actually using their service. The Lifeline program already has a very low improper payment rate of 0.45%, and it must be noted, that many of the issues highlighted by the GAO’s report will be addressed by the national eligibility verifier. I am pleased that the work on this effort is proceeding as planned, and will work with my colleagues to address all of the GAO’s recommendations. Today the FCC’s Lifeline program remains the only means-tested universal service program, where only the consumers who cannot afford to be connected are given the ability to do so. So while we invest in the infrastructure needed to bring connectivity into every community in America, we must not forget that ‘if we build it, they will come’ only holds true if the services are affordable. Some may use the limited findings of this report as justification to cut back on the Lifeline program even further, but that would be catastrophic for those most in need. The answer is not denying access to those who cannot afford connectivity and access to critical services like 911, the next steps should include rolling up our sleeves and addressing any imperfections that remain. We have a choice to make: be short-sighted and weaken a program designed to assist our nation’s most vulnerable or fix what may be broken so that this agency is actually upholding its Congressional mandate to ‘make available, so far as possible, to all the people of the United States…a rapid, efficient, Nation-wide, and world-wide wire and radio communication service with adequate facilities at reasonable charges…for the purpose of promoting safety of life and property….’ Instead of widening the digital divide, let us have an honest conversation about how to make voice and broadband even more affordable and accessible for economically challenged Americans.”

FCC Commissioner Michael O'Rielly:“I am not surprised by the revelations in GAO’s latest examination of the Lifeline program. It’s why I sought to address fraud, waste and abuse prior to expanding the scope of the program and pushed unsuccessfully for a host of needed reforms, including the adoption of a budget for the program. I have little confidence, at this point, in the changes adopted by the Commission over the last number of years, or in the ability of USAC to stem the tide of problems. More significant reform is needed, including completely rethinking USAC."