The FCC Is Considering A Big Change To Lifeline — But What Is It, And How Does It Work?

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The FCC is going to be voting this week on a proposal to make a big change to one of their programs, Lifeline. The program — a subsidy that helps low-income consumers pay for phone service — may expand to help them pay for broadband, too. The topic is politically charged and coverage can be a bit confusing, so here’s a guide on what the FCC currently does with it and what they’re planning to do next.

What is Lifeline?

Lifeline is a program managed through the FCC that provides a subsidy for phone service to eligible low-income Americans. It launched in 1985 as a discount on landline service, and in 2008 expanded to allow for using the credit on pre-paid mobile service instead.

The Universal Service Administrative Company (USAC) is the entity responsible for administering the details of the plan.

Who is eligible?

Lifeline is eligible to anyone at 135% or less of the federal poverty level, or who is already enrolled in one of several existing state or federal assistance programs like Medicaid or SNAP (food stamps).

Poverty levels are calculated annually and vary by family size. As of this year, the federal government officially considers “poverty” to be an income of less than $11,770 annually for an individual or $24,250 for a family of four. The maximum income cap for Lifeline eligibility, therefore, is $15,889 for an individual or $32,737 for a family of four.

Currently, there are approximately 12 million Lifeline subscribers.

How big is the subsidy?

$9.25 per month.

That’s total, not per service — you have to choose whether to apply it to landline or mobile service. And it’s by household, not by individual, so a family of five all living together, for example, still only gets one.

How much does the program cost? How is it funded?

The program costs about $1.7 billion, and the money for it comes from the Universal Service Fund.

The USF is a fund into which telecommunications service providers pay. The amount they contribute is based on a percentage of their telecom revenues, but basically Verizon, AT&T, Comcast, Time Warner Cable, and anyone else who provides copper-wire or VOIP service is contributing, as are all of the mobile companies.

Those companies have a tendency to pass through the charge as an extra fee — a few cents, a dollar and change — on their subscribers’ monthly bills. (Though the FCC stresses that there is no requirement they do so, and each company gets to make its own business decision about the suitability of passing through the charge.)

In short, everyone contributes to the USF.

What does the FCC want to change?

Short version: FCC chair Tom Wheeler wants to tweak Lifeline so that eligible consumers can use the credit for land lines, mobile phones, or broadband service as they deem fit.

Long version: The FCC began a pilot program testing Lifeline’s adaptability to broadband service way back in 2012. Throughout 2013 and 2014, 14 different kinds of pilot programs experimented with different methods of connection, subsidies, and so on. The final report (PDF ) was published in May of this year.

After the report came in, Wheeler circulated a proposal to “reboot” Lifeline to other members of the Commission, and in their June, 2015 open meeting the FCC will vote on whether or not to consider that proposal.

What are the benefits of Lifeline? Why is it necessary? Why add broadband?

Have you ever tried to apply for a job without a phone number they could use to call you back? Deal with doctors’ appointments or pharmacies? Apply for an apartment or reach your landlord? Find out

if your kid has gotten sick or injured at school?

To be a contributing and functioning member of society in the 1980s, you needed a phone at home. By 2005, it was clear that “a phone” didn’t mean “at home” but instead something you could keep with you. And now, thirty years after the program started, it’s clear that an internet connection is just as essential.

Everything is online: job applications. Applications for and help with government and social services. Access to doctors. Education. Schools. You name it: any kind of service you need or connection you need to make is going to be online. That’s true for everyone now, at every level. And access is most definitely tied to economic class: as the FCC points out, over 95% of households with incomes over $150,000 have home broadband access, but less than half of those making less than $25,000 do.

As Hannah Sassaman, from the Philadelphia-area Media Mobilizing Project put it to Consumerist, “You can’t apply for a job at Walmart, let alone to college, without a high speed broadband connection at home. A subsidy aimed at families who can’t afford the internet could be transformational for elders looking for healthcare, workers looking for family-sustaining jobs, and youth trying to access a dignified education.”

Our colleagues at Consumers Union (the advocacy arm of Consumerist’s parent company, Consumer Reports) agree. “Our organization supports the FCC in its efforts to transition the program to support broadband to help bring all citizens online,” CU policy counsel Delara Derakhshani said in a statement when the expansion plan was announced.

“Our nation continues to face a serious gap in broadband availability that leaves millions of Americans unable to realize the economic, educational, entrepreneurial, and social benefits that flow from these services,” she added. “We applaud the Commission’s work to get affordable broadband to as many people as possible.”

So what are the sticking points?

Lifeline is a highly politically charged topic in the current environment, and debates will be polarizing. However, there are two main areas of concern likely to show up.

1.) Fraud. There has been fraud in Lifeline in the past. Eligibility can be difficult to re-determine, and as people move around — as households dissipate and re-form in new combinations — you can end up with households getting more than one benefit.

However, the FCC put in place processes to reduce fraud and minimize waste back in 2012, including the creation of a national database that administrators could use to check for duplicate subscriptions. In the 2013-2014 year, after those changes took place, spending on the program dropped by about 24% and the number of participants dropped from 18 million to about 12 million.

Additionally, the new modernization proposal, according to the FCC fact sheet. would not only add broadband to the list of eligible services but also would change, centralize, and more easily track the way consumers prove eligibility.

2.) Sufficiency. $9.25 a month for phone or internet service doesn’t get you very far. Comcast’s Internet Essentials. for example, is a program that low-income families with school-age children at home can enroll in for about $10 a month. But the $9.25 subsidy doesn’t quite cover that $10, and would leave a family using it without a subsidy available for mobile phone use.

What happens next?

Once the FCC votes on the Notice of Proposed Rulemaking — probably 3-2 — the matter moves into the public comment phase and goes through the back-and-forth pleading process for a couple of months before being edited and potentially adopted. The Commission could hold their final vote on whether or not to make a change as early as this fall.


Category: Forex

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