Critics Bash Lifeline Phone Program as Government Waste

Josh LongIn a speech last year, Mignon Clyburn of the Federal Communications Commission characterized broadband as “the greatest equalizer of our time.”

She has envisioned a future in which all Americans – even the downtrodden – have speedy access to the Internet.

Broadband “is key in helping to break the cycle of persistent poverty,” said Clyburn, a Democrat who was appointed two years ago to the FCC by President Barack Obama, during a Nov. 12 speech for the American Enterprise Institute. “Children living in poverty may have access to a world-class education, enabling them go to college and have a chance at a better life if they have connectivity.”

Last month, FCC Chairman Tom Wheeler proposed a solution to make the Internet affordable for low-income Americans: Include broadband in the multibillion-dollar Lifeline program. Dating back to the Reagan administration, Lifeline provides discounts of up to $9.25 per month on basic home phone or cellular service.

FCC's Mignon ClyburnWheeler said nearly half of poor Americans have been forced to cancel or suspend smartphone service due to financial hardships.

Wheeler’s idea is popular with Democrats, including lawmakers in the U.S. Senate who have introduced legislation to extend broadband to Lifeline, but some conservatives who have cited previous issues of abuse and fraud in the 30-year-old program are less than enthused. A representative for FCC Commissioner Ajit Pai, a Republican, said he had no comment on Wheeler’s proposal, while the chief of staff for fellow Republican Michael O’Rielly didn’t respond to a request for comment.

But last July, O’Rielly raised concerns in a blog that universal service and interstate telecommunications relay services funds are set to reach $11 billion in 2024, thanks largely to growth in the Universal Service Fund. The projections by the Congressional Budget Office, he wrote, “represent an ever growing strain” on the finances of “the average American.”

“If the FCC adds broadband to Lifeline, it would further cement the president’s handout legacy,” Jillian Kay Melchior wrote for National Review as a Thomas L. Rhodes Fellow for the Franklin Center. “The pervasive waste, fraud and abuse of Obamaphones proves …

… that this isn’t a program that can be adequately reformed.”

From 2008 to 2012, annual disbursements in Lifeline program rose 167 percent to $2.2 billion from $820 million, according to Michael Clements, acting director of Physical Infrastructure Issues with the U.S. Government Accountability Office (GAO), a nonpartisan agency that works for Congress.

But the FCC adopted reforms in early 2012 to crack down on abuse, fraud and waste in the program. Among several other reforms, Lifeline limited subsidies to one subscription per household and established a database to prevent multiple carriers from receiving support for the same subscriber.

Lifeline participation dropped to 12.4 million households by the end of last year, from 18.1 million homes in mid-2012, while disbursements declined to $1.7 billion, Clements reported during a June 2 Senate communications subcommittee hearing.

While there is generally broad support for the idea of subsidizing broadband, many stakeholders want to ensure the program is sustainable and not subject to abuse.

“In short, Internet access has quickly become the more needed Lifeline technology for the 21st century,” Jim Cicconi, an AT&T senior executive vice president, wrote in a June 1 blog. “If we still believe this part of the social safety net was soundly conceived and is still needed today – and I do – we need to focus on fixing the program to eliminate abuses and modernizing it to meet today’s needs, all while preserving the essence of the program’s good intentions.”

One observer noted broadband would substantially raise the total subsidies offered. Devices such as laptops and smartphones are more expensive than phones needed to access basic voice service, said Randolph May of the Free State Foundation, a research and education foundation in Rockville, Maryland.

“Support for ‘access’ without the means to acquire the associated devices is meaningless,” he said during the Senate subcommittee hearing.

In 2012, the FCC launched a broadband pilot program to explore how Lifeline could evolve. The 14 pilot projects enrolled around 12 percent of the 74,000 low-income Americans the FCC had indicated would receive service, and roughly $1.7 million of the $13.8 million available was disbursed, according to the GAO’s Clements.

FCC and pilot-project officials told GAO the participation rate was high for service that was free or highly discounted.

“This information raises questions about the feasibility of including broadband service in …

… the Lifeline program,” Clements said during the Senate subcommittee hearing, “since on a nationwide scale, offering broadband service at no monthly cost would require significant resources and may conflict with FCC’s goal to minimize the contribution burden.”

Clements was referencing the percentage of interstate end-user revenues that telecommunications carriers must contribute to the Universal Service Fund. The proposed factor for the second quarter was 17.4 percent.

“There are many benefits of broadband,” said Sen. Roger Wicker, a Republican from Mississippi and chairman of the Senate communications subcommittee, as reported by The New York Times. But “before again expanding the program, we need to consider what problems remain and how we can address them since consumers are funding the program with increasing phone bills.”

Daniel Lyons, an associate professor of law at Boston College Law School and a visiting fellow with the American Enterprise Institute, cited a number of hurdles to including broadband in a universal service program, most notably cost.

“Paying for a broadband subsidy likely means cutting other USF programs (which is politically unpopular), extending the surcharge to broadband plans (which the FCC vowed it would not do), or raise the 17% [contribution] figure,” Lyons said in an emailed statement. “The right answer, I think, is to bypass the Byzantine funding system for Lifeline and instead adopt a new program by legislation, one tied to a federal budget line item and therefore subject to Congressional oversight–which would alleviate some of the concerns about fraud and waste.”

On June 1, Democrats in the House and Senate introduced legislation to make broadband subsidies available under the Lifeline program. Lawmakers said the broadband penetration rate is significantly lower (less than half) in households that earn less than $30,000 annually compared to homes with higher incomes.

“In today’s economy there is no communication service more important to a family’s success than access to broadband,” said Sen. Richard Blumenthal, a Democrat from Connecticut who sponsored the Broadband Adoption Act of 2015.

Jessica Gonzales, executive vice president and general counsel of the National Hispanic Media Coalition, told lawmakers that more than 80 percent of Fortune 500 companies only accept job applications online, while the percentage of jobs that require digital literacy skills over the next decade is the roughly same.

“I can think of no better way of improving the effectiveness of Lifeline than by supporting the FCC’s efforts to modernize it for the broadband age,” she said, “and encouraging the agency to complete the process by the end of this year.”

But the FCC will have to make some potentially controversial decisions, including specifying the amounts that will be subsidized. Unlike basic phone service, broadband is available in various speeds and different prices.

“Subsidizing access to websites, email, job searches, and news is important,” Lyons of Boston College Law School said. “But right now, Netflix comprises 1/3 of all Internet traffic. An argument that the subsidy must be large enough to allow recipients to stream video will generate some pushback–after all, we never subsidized cable television for those who could not afford it.”

Leave a comment

Your email address will not be published. Required fields are marked *

The ID is: 89822