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FCC Chair Outlines Lifeline Reforms

The Federal Communications Commission is taking yet another step in its move of the government's regulatory policy focus from traditional communications service to broadband Internet.

FCC chairman Julius Genachowski will circulate an order Tuesday proposing reforms to its Lifeline program, which currently provides up to $10 in phone service subsidies to low-income households.

The goal, as it was with reforming the Universal Service phone subsidies for rural and hard-to-reach areas, is to migrate the fund to broadband while reducing duplicative service, fraud and abuse, and putting the fund on a budget.

At a speech in Washington Monday, the chairman announced the draft order and said that the proposed reforms to the fund, a subsidy he conceded had been the subject of abuse and duplicative service that drove up the cost to businesses and consumers, could produce an estimated $2 billion in savings to the government.

As part of the reforms, the chairman said that ISPs would have an opportunity to apply to participate in a pilot broadband adoption program funding with savings from other programs. Many cable operators have already pledged to participate in an FCC-backed low-cost broadband adoption program modeled on Comcast Essentials, which offers broadband for $9.95 to households that qualify for the school lunch program. Genachowski said the FCC would be "rigorously analyzing" data from that and other programs to understand the best way to migrate the subsidy to promoting broadband. He also said participants in the Lifeline pilot program would need to address issues of cost of devices and digital literacy.

Rep. Anna Eshoo (D-Calif.), ranking member of the House Communications Subcommittee, praised the Lifeline reforms. "For many years, the Lifeline program has provided low-income Americans across the country with affordable access to basic monthly telephone service," she said in a statement. "It has also been beset with many problems. It's time to modernize the program by bringing it into the 21st century, with support of broadband access for low-income Americans. I applaud Chairman Genachowski for recognizing the importance of the Lifeline program, and for working to strengthen it by reforming it."

Other highlights of the Lifeline reforms:

  • Creating a national Lifeline accountability database to prevent multiple carriers from subsidizing the same households. The commission last June took a step in that direction by clarifying that Lifeline-eligible recipients may receive either a landline or wireless subsidy, but not both.
  • Cracking down on alleged scammers who sign up households not eligible for the subsidy. The chairman said Monday there are multiple FCC investigations into reported fraud. He said that if those prove true, the FCC will penalize them and "make it clear it does not pay to rip off the government."
  • Establishing standard national eligibility criteria, to which states could add. The chairman said the old rules have invited "end runs" and the reforms aim to close those loopholes.
  • Establishing "clear goals and metrics" for the program.
  • Setting up biennial audits.
  • Making reimbursement more transparent so carriers only get funds for subs they actually serve.

"We support the Chairman's efforts to reform and modernize the Lifeline fund to ensure that this important program accomplishes its goals in the most efficient way possible," said USTelecom president Walter McCormick Jr. "In addition, the Chairman's proposal to begin a data-driven pilot program process to understand the role that the Lifeline program should play in today's broadband world makes sense and should produce valuable insight."

The Civil and Human Rights Coalition added their qualified shout-out, praising reforms to migrate the subsidy to broadband and cut down on abuse, but raising red flags over the plan to put the fund on a budget.

"We strongly support the announcement of sensible steps to eliminate fraud," said coalition member Wade Henderson, president and CEO of The Leadership Conference on Civil and Human Rights. "However, the Chairman also announced he is moving ahead with a preemptive budget controlling costs for the program, even though the agency is still evaluating how the program could best be updated for modern technology and needs. We should not confuse questions about the program's size with the limited problem of fraud and abuse."

Henderson called it an important step, but short of the "quantum leap" needed to reach everyone who must participate in the digital economy, including the 100 million people who don't subscribe to broadband, predominately because of cost, he said.

Given that the FCC figures show that the current 10 million lifeline participants are less than a third (325) of the total who are eligible, "limiting a program that only reaches one-third of its eligible participants before the FCC can fully assess the changes it announced today to eliminate fraud would seem counterproductive."

The chairman also spoke more broadly about FCC efforts to reform its rules and procedures, saying that the commission had gotten rid of more than 200 unnecessary rules and data collections, and that it had collected a record $67 million in penalties and settlements.