What’s All This Fuss about Lifeline? It may not be what you think.

Sometimes, when I start writing pieces like this, I write an outline and just put the whole document together. Other times, like for this piece, I have rewritten the outline 4 times, as I learned more and have found that the issues that have forced Lifeline into the spotlight are not always what they appear—at least to outsiders. The focus also keeps changing.  There are so many issues at multiple levels at play here that it’s tough to know not only where to begin, but where the matter is going.

However, the big issue that has kept Lifeline in the headlines recently really has nothing to do with the actual provision of Lifeline services in the forms of credits or other subsidies. The Battle Royale that’s in process is the result of action taken by the former Democratic-led FCC Chariman, Tom Wheeler in adding broadband to the services that Lifeline funds will support, although not fund entirely.

The new action creates a federal process for providers to obtain eligibility rather than leaving that designation authority, which is incredibly valuable,  to states.  Broadband is federally regulated, while traditional voice services are handled at the state level. By bringing broadband into the subsidy-eligible world, the states no longer have the authority to certify eligible providers for Lifeline reimbursement.  State PUCs and their powerful organization NARUC (National Association of Regulatory Utility Commissioners) have been very vocal with their displeasure in the decision, and it seems that they have a friend who is now FCC Chair, Ajit Pai. 

A little history should put at least some of these issues in context.  The federal Lifeline assistance program was established in 1985 to provide a discount on the cost of basic telephone service to ensure that all Americans would have access, according to the FCC, to both “the opportunities and security that phone service brings.”  The goal was to preserve and promote telephone subscribership among very low-income Americans during a time of industry and marketplace changes.  The program, which is administered by USAC (Universal Service Administrative Company), expanded over time in scope and size. In 2015 (the last year for which there are complete records) roughly one-third of U.S. households were eligible for the available subsidy that had supported, in the form of subsidies, wireless voice service, the basic mobile device and even some data usage.

However, as a result of the combination of its rapid expansion and insufficient monitoring and controls, the program was abused.   In fact, according to the FCC, there have been a total of $9.7 million in payments made to those who claimed to be eligible for credits who were not.  As recently as the past 12 months, a $51 million fine was levied against one provider for defrauding Lifeline.

In March of last year (2016), the FCC adopted reforms to the Lifeline program, most notably by including a credit to offset the cost of broadband to the same eligible set of low-income consumers.  The 2016 Lifeline Modernization Order allowed for providers, designated as LBPs (local broadband providers), to be eligible to receive Lifeline reimbursement for qualifying broadband internet access service provided to eligible low income consumers.

Any time change is proposed (and that’s good or bad change), a constituency is unhappy. Specifically, in its March 2016 action, the FCC proposed to eliminate support for voice-only service after December, 2021. The concern for consumer advocates is that by eliminating a subsidy for voice-only, many low income consumers, for whom broadband is not an option, will be forced off of phone service entirely. 

However, the biggest challenge of the proposed changes is who has the authority to determine which providers are eligible to receive Lifeline funds. While the voice-only support will continue to exist for the next 4.5 years, the main issue is who gets to decide which providers are eligible for subsidy and which are not. The other issues, including support, in the form of monthly credits, are really secondary.  This is a state v. federal fight, and now that a Republican is chairman of the FCC, the states find themselves in a stronger position to object to what they deem as a federal trespass on their turf.