The Importance and Effectiveness of the Lifeline Program

Benton Institute for Broadband & Society

Monday, August 28, 2023

Digital Beat

The Importance and Effectiveness of the Lifeline Program

Adrianne B. Furniss

The Benton Institute for Broadband & Society is greatly concerned with the preservation and advancement of the Federal Communications Commission’s Lifeline program—a vital Universal Service Fund program that must continue to be improved to achieve its goals, broaden its reach, and expand access to those who can benefit the most.

Many poor households are likely to purchase phone and internet service at the expense of other items

Lifeline was created nearly 40 years ago with the aim of providing low-income households with low-cost landline telephony options. Now, nearly all U.S. households have telephone service and the Lifeline program plays an essential role in ensuring affordability.

Prior to the pandemic, the Lifeline program provided mainly wireless communication services for low-income households; however, its $9.25/month subsidy resulted in service plans that restricted voice and data usage.

As of June 20, 2021, approximately 6.9 million subscribers were enrolled in the Lifeline program—enrollees include low-income consumers, Veterans, people with disabilities, people on tribal lands, and other eligible Americans. Approximately 94 percent of all Lifeline participants subscribe to a mobile offering. Voice calling is the most important part of Lifeline service for 23 percent of subscribers, but two-thirds (68 percent) say voice, text, and data are all equally important to them.

Low-income Americans pay a significant portion of their income for telephone service. The FCC considers affordability in the context of “the extent to which voice and broadband service expenditures exceed two percent of low-income consumers’ disposable household income.” The FCC views two percent of income as the threshold of affordability for phone service.

Analysis of the Census Bureau’s Consumer Expenditure Survey (CES) by Benton Senior Fellow John Horrigan shows that households whose annual incomes are below $15,000 pay about $500 per year for telephone service—or 3.3 percent of their income. Households in the $15,000-to-$30,000 income range pay $660 per year for telephone service, or 2.2 percent of their income (using the upper range as the denominator). For households in deep poverty (whose median incomes are only $2,400 annually), phone service might be as much as 15 percent of their gross incomes (assuming such households pay less than $500 per year). For all Lifeline-eligible households, assuming an annual cell phone bill of $550 (or about $45 per month), service is close to 3 percent of gross income. Seventy-eight percent of Lifeline subscribers say they cannot afford a Lifeline co-pay of $10 per month.

The analysis, then, indicates that poor Americans are spending beyond the threshold of affordability for phone service.

And this analysis is only for phone service. According to BroadbandNow, ordinary, entry-level broadband plans start in the range of $40 to $50 per month. Carriers such as Verizon, Comcast, Spectrum, and AT&T have promotional rates that start at $40 or $50 per month; Cox starts at $30. After a year, Cox’s plan increases by $15 to $45 per month and AT&T’s rate increases $20. This means that low-income households, to be comfortable paying for monthly broadband service, would require a subsidy that is far greater than Lifeline’s current $9.25. For many, $30 might suffice in that it would put a $50 monthly plan within reach (with the household covering the remaining $20). Other households might need to use a $30 subsidy in conjunction with a discounted offer in order to have service without making outlays themselves.  A broadband bill, even if reduced with a $30-per-month Affordable Connectivity Program subsidy, could put spending on connectivity for many low-income households above 4 percent of monthly gross income.

So many poor households are likely to purchase phone and internet service at the expense of other items. Low-income consumers benefit from both Affordable Connectivity Program and Lifeline discounts either used on separate wireline and wireless service—and by combining both benefit subsidies for the same service.

Lifeline is Inadequate to Meet the Needs of Low-income Households in the 2020s

As currently structured, Lifeline is inadequate to meet the connectivity needs of low-income households in the 2020s.

The number of Lifeline subscribers fell from 18 million in 2012 to under 12 million in 2016. The ensuing four years saw further decreases in Lifeline participation, driven by administration changes that resulted in making sign-ups for the benefit more burdensome for potential beneficiaries. By 2021, 6.5 million households subscribed to the Lifeline program. Given a pool of 33.2 million households that qualify for the benefit, that is a participation rate of just 20 percent.

Not only has Lifeline participation fallen in recent years, but participation rates in Lifeline compare poorly with other programs. A Bureau of Labor Statistics analysis of 2014 data found that 84.1 percent of eligible families received Medicaid and that 51.6 percent of eligible families received Supplemental Nutrition Assistance Program (SNAP) benefits. The Center on Budget and Policy Priorities, in comparing the number of people using SNAP with those at 130 percent of the poverty line (or less), indicates that SNAP participation rates rise in times of economic stress, increasing to as much as 70 percent. At the same time, Lifeline’s participation rate exceeds those for housing assistance (21.8 percent) and Supplemental Security Income (9.9 percent).

Low program awareness is a major barrier to participation in Lifeline, the Emergency Broadband Benefit, the Affordable Connectivity Program, and discounted connectivity plans. Survey data shows that as of July 2021, just 23 percent of lower-income Americans were aware of the Emergency Broadband Benefit program. In research Benton Senior Fellow John Horrigan conducted in 2021, he found that just 38 percent of Philadelphia households had heard of the Emergency Broadband Benefit, the PHLConnectED program, or discounted offerings from broadband providers like Comcast's Internet Essentials or T-Mobile's Project 10Million. For Philadelphians who did not have broadband at home, the numbers were very different. Just 24% of those without a broadband subscription at home had heard of any of these initiatives.

This data points to a need for outreach to eligible households so that they are aware of the benefits of Lifeline and the Affordable Connectivity Program.

But program awareness may not be the most important factor in Lifeline’s declining participation. Over the past decade, most of the energy devoted to the Lifeline program went into improving its administrative apparatus and limiting participation.

In 2012, the FCC released a Lifeline reform order that sought to both modernize the program to include broadband and “constrain the growth of the program in order to reduce the burden on all who contribute to the Universal Service Fund.” The 2012 order codified a “one subscriber per household” rule and improved processes for verifying consumer eligibility while increasing protections against carriers being reimbursed multiple times for the same customer. As the FCC’s order said, the goal of the reforms was “to ensure that qualifying low-income consumers can access the voice and broadband networks of this nation to fulfill Congress’ goal of providing universal service, and the Commission’s goal of modernizing the program, while safeguarding it from waste, fraud, and abuse and constraining the growth of the [Universal Service] Fund to make it more efficient and effective to better serve consumers.” With these reforms, spending on Lifeline fell by 23 percent from 2012 to 2014.

Subsequently, the FCC took additional steps aimed at making Lifeline more “broadband friendly” for consumers while improving customer verification and encouraging new service providers to participate in the Lifeline market. The FCC’s 2016 Lifeline and Link Up reform and modernization order set minimum service standards for supported voice and broadband services, established a third-party verification system for customers, and tried (unsuccessfully) to make it easier for firms to qualify as eligible telecommunications carriers (ETCs), a regulatory status needed in order to be eligible to receive USF support.

In the 2016 Lifeline order, the FCC stated that it does “not interpret and implement the concept of ‘affordability’ under sections 254(b)(1) and 254(i) by looking narrowly at whether and when a customer would not purchase a service at all but for discounts made possible, directly or indirectly, by universal service support.” Even though affordability is a “central touchstone” of Lifeline, the program’s resources should focus on “supporting those services that are otherwise unaffordable to consumers, but for the Lifeline discount.” Caught between consumer need and ever-rising contribution factors for supporting the program’s budget, the FCC responded to the reality of limits on the program’s funding base.

One move was to establish a budgetary cap for Lifeline. The initial cap was set at $2.25 billion annually (indexed to inflation). Under these reforms, the FCC was to be notified if expenditures reached 90 percent of the budget cap. Unsurprisingly, this led to arguments over the size of the budget cap, and new FCC leadership seeking to disrupt the careful balance by proposing (but not specifying) a lower budget.

All of this built the foundation to further shrink the effectiveness and reach of the program, using several features of the program as leverage to make it harder for the Lifeline market to function.

Minimum Service Standards

When the FCC first instituted minimum service standards, it set a benchmark for services that would be eligible for Lifeline’s $9.25-per-month subsidy. These included 500 minutes for mobile voice (now 1,000 minutes), a wireline speed standard that, in 2016, was set at 10 megabits per second (Mbps) download and 1 Mbps upload for broadband, and a phased-in mobile broadband data allotment that started at 500 megabits per month in 2016 and increased to 2 gigabits per month in 2018. The 2016 order also decreased the amount of support for voice-only over time to $5.25 per month by December 1, 2018, and nothing after December 1, 2021 (which did not go into effect).

The very idea of minimum service standards is an administrative balancing act. Such standards should establish a benchmark that provides beneficiaries voice and data services that meet modern communications needs (and that are consistent with how Congress defined universal service). At the same time, the standards cannot be too generous. If they are, the cost of providing services that meet such standards may discourage companies from participating in the Lifeline marketplace. Minimum service standards have an inherent potential for frustration. No (or low) standards may mean bad service for beneficiaries. Standards that are too high may wind up reducing the availability of service (given existing subsidy levels) or result in plans that are too expensive for participating households to afford. The standard that is “just right” is both subjective and evolving – and needs to be evaluated based upon the best available data, evidence, and the law.

However, in some cases, the existence of minimum service standards has been abused with the effect (and perhaps the intent) of limiting participation in the Lifeline market.

The technique was to raise standards while keeping the subsidy the same. They proposed limiting Lifeline’s $9.25-per-month subsidy to services that met the FCC’s threshold speed for broadband: 25 Mbps, a service combination either impossible for the market to provide or requiring a significant (and likely unaffordable) co-pay from Lifeline-eligible households.

Subsequent FCC action called for an increase in the minimum service standard for data that also

had the potential to discourage provider participation in Lifeline. In 2020, the FCC issued an order requiring Lifeline’s mobile carriers to provide 4.5 GB of data per month, up from the 3 GB standard prior to that. With, according to industry sources, 4.5 GB plans priced at between $25 and $40 per month, a co-pay would be necessary for Lifeline customers for such plans (assuming no change in the $9.25-per-month subsidy). Given that 78 percent of Lifeline customers say they cannot afford any co-pay more than $10 per month and 68 percent could not afford any co-payments for Lifeline service, the proposal threatened participation in the program.

Verification of Eligibility

Verification of household eligibility for Lifeline is critically important, but has been implemented in ways that has unfortunately become a barrier to program participation and can be further improved and streamlined.

The Lifeline National Eligibility Verifier (National Verifier) for Lifeline eligibility was an outgrowth of the FCC’s 2016 Lifeline and Link Up Reform and Modernization order. The National Verifier’s goal was simple: Reduce the potential for fraud by developing a database that could determine in real time whether an applicant was eligible for the benefit or not. If the database were linked to state databases whose participation confirms Lifeline eligibility (such as the Supplemental Nutrition Assistance Program or Medicaid), a Lifeline provider could determine on the spot if an applicant should receive the Lifeline benefit.

As a practical matter, the rollout of the verifier has too often stymied enrollment, not facilitated it. The National Verifier initially launched in a handful of states and, importantly, did not have access to all the databases that would help determine eligibility. This resulted in applicants being rejected when they were perhaps eligible. Those determined to be ineligible then had to get appropriate documentation and return to an enrollment site a second time. This is not a trivial burden for Lifeline’s target population; it can and does act to reduce subscribership. In Mississippi and Wyoming, where the verifier system rolled out in 2018, Lifeline participation dropped by one-third. The focus on accountability, in this context, served as a barrier to participation.

Today, the verifier is widely available, but it still does not have access to a wide-enough scope of databases to make it truly useful for facilitating enrollment in Lifeline or the Affordable Connectivity Program. Fewer than half of all states list the Supplemental Nutrition Assistance Program on their list of automated data sources to determine eligibility. There have also been issues in matching data from service providers to the data found in government databases; many potential beneficiaries have been rejected because their street address is not exactly the same in internet service provider and government databases. When an applicant does not qualify using the verifier and has to undergo manual review of their application, two-thirds do not complete their application.  More needs to be done to advance the goal of a seamless application process that can accurately determine eligibility in a digital instant, and ensure once and for all that the application process itself is not the barrier to expanding digital opportunity.         

Limiting Participation in the Market and Raising Supplier Costs

One of the proven ways that the Lifeline program can most effectively reach its goals is by taking advantage of robust market participation in the program.  We’ve seen how efforts to limit market participation can limit program participation, for example, when the FCC at one point sought to either reduce the number of companies offering Lifeline-supported services or raise their cost of doing business by rescinding the approvals for nine companies to be broadband Lifeline service providers. Additional efforts to require that all Lifeline companies be facilities-based carriers, which would have removed from the market wireless carriers that did not own wired or wireless infrastructure, also had negative effects. Because 70 percent of Lifeline customers have service from resellers, the action would have vastly reduced participation in the program. It is also worth noting that this took place at a time when many facilities-based carriers were ending their participation in Lifeline. The proposal to rescind the approvals for nine companies was widely criticized and never implemented, but it nonetheless helped chill provider participation.

Between rising minimum service standards and increasing audit compliance costs, Lifeline providers have had to curtail investments in marketing. In places with generous Lifeline support, such as tribal areas, companies have the resources to open retail stores or engage in face-to-face marketing at community events to appeal to qualified customers. Purely online marketing—to which some carriers have had to retreat—is far from ideal for a customer base that is not internet savvy, if connected at all.  Therefore, in order to fulfill Lifeline’s important service goals, it is critical that policymakers continue to advance efforts to encourage broad participation by providers, and sustain the accompanying outreach that helps ensure that the program is able to more broadly reach, and efficiently enroll, eligible participants.

Some federal programs require reforms to address waste, fraud, and abuse, but Lifeline is not one of them. In April 2023, the U.S. Government Accountability Office identified government operations with vulnerabilities to fraud, waste, abuse, and mismanagement, or in need of transformation. While it’s always important to protect against waste, fraud, and abuse, and to maximize a program’s effectiveness, it is important to note that none of the USF programs appear on the GAO’s High-Risk List of the 37 federal programs most at risk of waste, fraud, and abuse.

The result in recent years is that efforts to eliminate all possible sources of inefficiency turned a focus on accountability into a barrier for eligible people to have access to the benefit and for providers to participate.

The 2021 FCC Lifeline Marketplace report essentially asked the following question: Are minimum service standards and the current $9.25 benefit level suppressing Lifeline enrollment or not?

The decline over time in Lifeline participation – outside of states that supplement the $9.25 subsidy with their own funds – indicates that the federal $9.25 level may inhibit enrollment— and that opportunities to further lower cost as a barrier to participation can help further achieve program goals. Separate data shows seventy-eight percent of Lifeline subscribers say they cannot afford a Lifeline co-pay of $10 per month.

The FCC also found little concern with respect to the impact of minimum service standards, although it rightly points out the need for better data to fully answer the question. The Lifeline Marketplace report found that 93 percent of Lifeline customers used less than 3 GB of data per month (below the 4.5 GB minimum service standard) and 85 percent use fewer than 500 minutes of voice per month. These figures diverge from findings from a 2021 National Lifeline Association (NaLA) survey of Lifeline customers. That survey found that 75 percent of users say they needed 1,000 minutes or more per month for voice. And 55 percent of Lifeline users in the NaLA survey said they needed more than 10 GB of data per month, with 44 percent saying they needed more than 20 GB. This gap – between data thresholds on people’s plans and their actual use – may be due to how the presence of limits influences behavior. Those of us with unlimited cell phone minutes think nothing of how much we use. However, knowing that there is a cap causes many low-income individuals to economize on use–meaning their monthly usage of minutes or data may be quite low.

A Path Forward for Lifeline

As Benton Senior Fellow John Horigan concludes in Reimagining Lifeline: Universal Service, Affordability, and Connectivity, there is a path forward for Lifeline that ensures the market for universal connectivity is well functioning:

  • Establish a “connectivity baseline” for Lifeline: Having both wireline and wireless data is the norm for a majority of Americans. That is the goal on which policymakers should set their sights. Policymakers should also consider service speeds for plans offered in connection with the Affordable Connectivity Program. Low-income households should not have internet speeds that do not support applications necessary for working from home, distance education, or telehealth.
  • Increase the Lifeline subsidy: This report recommends increasing Lifeline’s $9.25 subsidy level to at least $20 per month. That level gives providers a better chance to serve qualified low-income households at wireless service levels adequate for contemporary usage.
  • Prioritize outreach and communications:  Although carriers will inevitably conduct some of this outreach, research shows that low-income consumers are more likely to trust public libraries than internet service providers for information on programs such as Lifeline and Affordable Connectivity Program. Funding community anchor institutions for program outreach would therefore make sense. Schools, for example, could help educate families enrolled in free and reduced-price school lunch and the school breakfast programs about Lifeline and the Affordable Connectivity Program.
  • Ensure that enrollment is straightforward: Whereas the Lifeline market has been hampered by challenging enrollment processes and sometimes limited marketing, a new Affordable Connectivity Program/Lifeline market must be simple for both participating consumers and carriers. The FCC’s Affordable Connectivity Program order provides resources for focus groups of potential program beneficiaries, and these provide an opportunity to explore in depth any pitfalls in program enrollment processes. The FCC has also launched a pilot program for Affordable Connectivity Program to allow trusted third parties to have access to the National Verifier as a means to encourage enrollment. The FCC should extend this pilot to Lifeline services (i.e., trusted third parties could use the verifier to enroll people in Lifeline plans).
  • Provide a reliable funding stream: The current contribution method for the Universal Service Fund is strained. By law, there must be specific, predictable, and sufficient federal and state mechanisms to preserve and advance universal service, including Lifeline. (See more in Sustaining Universal Service Programs)

Policymakers should never lose sight of the goal of universal service: to ensure that essential communications services are available and affordable for all. Expanding broadband usage can enhance U.S. economic growth and build stronger democratic institutions. Expanding broadband usage can improve lives, opens windows on the world, connect people to people, and connect people to services.

For more of my thinking about the Importance of the Universal Service Fund see:

Adrianne B. Furniss is the Executive Director of the Benton Institute for Broadband & Society.

The Benton Institute for Broadband & Society is a non-profit organization dedicated to ensuring that all people in the U.S. have access to competitive, High-Performance Broadband regardless of where they live or who they are. We believe communication policy - rooted in the values of access, equity, and diversity - has the power to deliver new opportunities and strengthen communities.

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