Ministry of Innovation / Business of Technology

FCC’s Internet-for-the-poor plan sets up fight with Republicans

Lifeline program, marred by fraud, could expand from phone to broadband.

by Jon Brodkin -

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President Obama announces the nomination of Rep. Melvin Watt, left, as Director of the Federal Housing Finance Agency (FHFA) and Tom Wheeler, right, as Chairman of the Federal Communications Commission (FCC), on May 1, 2013.

White House

A plan to bring a phone subsidy program for poor people into the broadband age is setting up a battle between Federal Communications Commission Chairman Tom Wheeler and Republicans in Congress.
Wheeler yesterday announced his plan to overhaul Lifeline, which was founded in 1985 to provide discounts on phone service to low-income Americans. Lifeline is one of four programs paid for out of the Universal Service Fund, which is paid for by Americans through fees imposed on phone bills.
Wheeler wants LifeLine to pay for both phone service and broadband while enacting "additional protections against waste, fraud and abuse." But Republicans in Congress said not enough is being done to counter abuse of the $1.7 billion-per-year program.
A National Journal article yesterday contained reactions from several members of Congress.
"Why the FCC wants to expand this program before addressing the regular reports of ongoing fraud is beyond me," said Sen. David Vitter (R-La.) "The FCC has failed to manage Lifeline efficiently in its current form, and I cannot support any expansion of a program that has so few safeguards in place to protect the legitimacy of the program and the American taxpayers who pay into it."
Republicans have been calling Lifeline the "Obamaphone" program even though it was created under President Reagan and then expanded to cover prepaid cell phone service in 2005 under former President George W. Bush.
In 2013, the FCC accused five wireless service providers including TracFone of obtaining duplicate payments from Lifeline and demanded payment of $14.4 million in fines as well as repayment of the extra money.
"Waste, fraud, abuse, and a pervasive lack of accountability have undermined the credibility of the Lifeline program," Senate Commerce Committee Chairman John Thune (R-S.D.) said this week. "Americans deserve better than a program falling woefully short of its mission."
Reps. Fred Upton (R-Mich.) and Greg Walden (R-Ore.) "acknowledged that Internet access 'creates countless opportunities for individuals and small businesses and is a welcome generator of economic growth and jobs' and said they would support reforming FCC programs to 'meet the communications and technology environment of the 21st century,'" National Journal wrote. However, they said that "simply expanding the program without ensuring its effectiveness or longevity is the wrong approach if we're going to do right by those who pay for the program, and those who depend on it."
Wheeler did not announce changes to the overall funding of the program. On June 18, the FCC is scheduled to vote on a Notice of Proposed Rulemaking that seeks public comment to help inform the FCC's final decision. Wheeler should have the votes to pass the notice as he leads a 3-2 Democratic majority on the commission. The FCC's Republican members, Ajit Pai and Michael O'Rielly, haven't weighed in on the proposal yet.
Wheeler noted that "nearly 30 percent of Americans still haven’t adopted broadband at home, and low-income consumers disproportionately lack access." The FCC has already reduced Lifeline spending by nearly 24 percent with reforms enacted in 2012. The new proposal has three main parts:

Ensuring minimum service standards for voice and broadband. The Notice proposes to establish minimum service standards for both voice and broadband, to ensure that both Lifeline subscribers and ratepayers are getting the best possible value from the service delivered. The Notice seeks comment on what those standards should be.
Resetting Lifeline Eligibility Administration. Lifeline providers are currently responsible for ensuring the eligibility of their Lifeline customers, a situation that invites waste and burdens providers. The Notice proposes to remove providers from this process and seeks comment on other ways to verify eligibility, such as establishing a neutral third party administrator. The Notice also seeks comment on how to ensure that the program targets those most in need of the support.
Increasing Competition. Competition among providers on price and service offerings would benefit Lifeline subscribers and would ensure ratepayer dollars support an efficient program. The Notice seeks comment on how to encourage providers to participate in the program. The item also asks how to encourage participation by the states.

The reforms enacted in 2012 required documented proof of subscriber eligibility and annual recertification of eligibility, a new database to eliminate and prevent duplicate subscriptions, and independent audits of carriers every two years. Wheeler proposed expanding upon that by "Requiring providers to retain documentation regarding the eligibility of their Lifeline customers to facilitate oversight and audits; Extending all record retention requirements from three to ten years; [and] Increasing program transparency by making key performance data easily available to the public."