Last month, the Federal Communications Commission (FCC) voted along party lines to update the Lifeline program for the digital age (0). Established in 1985, Lifeline was designed to help low-income consumers afford telephone service, access to which “has been crucial to full participation in our society and economy. (1)” Now that the Internet has displaced the telephone as the nation’s primary communications network, the agency has decided that the Lifeline program should evolve as well. The commission is right to focus on broadband access and to work towards narrowing America’s digital divide. But its proposed order is notable for how little the agency has dared to dream. The change to Lifeline should not be evolutionary – it should be revolutionary.
Admittedly, there is much to like in the commission’s Lifeline reform proposal (2). The broad goal of subsidizing those who cannot afford broadband access is commendable. As the commission notes, an increasing amount of our daily activities are migrating online, including news, education, banking, and job applications. Those without access are at risk of being left behind – and the poorest households show the lowest broadband adoption levels (3). The order also takes long-overdue steps to reduce fraud and waste (4) in the program, primarily by removing the obvious conflict of interest created by allowing carriers to establish whether an applicant is eligible for the program. The order also proposes steps to increase the number of carriers willing to participate in the program.
But these steps, as far-reaching as they seem, fall far short of the meaningful reform that proponents sought, and that the commission has previously promised. Earlier this year, the Senate held an FCC oversight hearing (5) at which all five commissioners were questioned about the future of Lifeline. Chairman Wheeler explained that reform “is not a question of how do we take what’s there now and just do a paste here or a change there.” Rather, he argued, we have to “look at this entire program, soup to nuts” to avoid “sticking with the decisions of the past,” which were developed in a twisted-pair copper world. But ultimately, the commission’s primary reform is to take the $9.25/month that it currently offers to eligible recipients for telephone service and extend that to broadband access as well. The resulting program could be summarized as “pasting” broadband access onto a preexisting telephone program and “sticking with” numerous past decisions developed during the telephone era.
In doing so, the commission has ignored the lessons it learned from the program’s previous evolution a decade ago. Lifeline was originally designed to provide wireline access to low-income households. But as Commissioner Pai noted in his dissent (6), the commission expanded the program to include wireless access, and in the process “lost its way.” The program, designed for wireline, was ill-equipped to provide wireless service, and unscrupulous people exploited the program’s weak points. Consumers began expecting free service rather than discounted service. Recipients grew from 6.7 million to 17.2 million (7), many of which were ineligible recipients or who improperly received multiple subsidies. This fraud and mismanagement led to a 160% increase in cost (8), from $821 million to $2.1 billion.
Lifeline’s critics sought several concessions to prevent a similar derailment following the expansion to broadband. At the oversight hearing, Senator Claire McCaskill requested (9) that the commission adopt an annual budget for Lifeline to limit the program’s annual costs and asked if there was any objection by the commissioners. Four of the five commissioners seemed in agreement with this common-sense reform, yet the majority resisted the efforts of Commissioners Pai and O’Rielly to establish a budget as part of the reform process. This is a mistake. Because of fraud and cost overruns, the commission has put its other universal service programs on budgets, which have helped rein in the explosive growth of the Universal Service Fund and the surcharge that pays for it. Lifeline stands alone among programs untempered by this basic tool of fiscal restraint. Senator McCaskill also proposed (10) that reforms ensure that recipients have some “skin in the game” by requiring them to contribute some amount themselves toward monthly service, which would reduce fraud and bring Lifeline closer to its original conception as a discounted service. Again, the commissioners appeared to support this reform, yet they rejected the dissenters’ efforts to incorporate them into the proposed rule.
More fundamentally, the proposal resembles the proverbial fitting of a square peg into a round hole. As Chairman Wheeler had intimated before the Senate, it is unwise simply to graft a broadband subsidy onto a bureaucracy designed for the telephone network. It is unclear whether a $9.25 monthly subsidy, distributed to a broad base of eligible recipients, will meaningfully narrow the digital divide in a cost-efficient way. The $9.25 amount was designed to support telephone service – and as Free State Foundation President Randolph May has noted, it would not buy you a lot of broadband service (11). Moreover, as Commissioner Pai notes, approximately 42 million households (over 1/3 of all US households) are currently eligible for Lifeline (12). This means that significant Lifeline support could go to households that already subscribe to broadband service. Commissioner O’Rielly cites academic literature (13) suggesting that only 1 of 8 Lifeline subscribers would lack service absent the subsidy.
The better solution would be to craft a new broadband-specific program from the ground up. Which segments of the population are at risk of being left behind in the digital revolution, and therefore need a subsidy? What services do they need (14) in order to meaningfully participate in digital society? What type of broadband plan do those services require? And how much of a subsidy is needed to help the target population secure that plan? Only after these questions are answered can we design a revolutionary new broadband Lifeline program that assists those truly in need at minimal cost to the public.