Lifeline: Continue Reform, Or Throw It Out With the Wastewater?

Submitted on September 8, 2017

Lifeline: Continue Reform, Or Throw It Out With the Wastewater?

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Robbie's Round-Up for the Week of September 4-8, 2017

Lifeline -- a hand up, not a hand out -- comes under fire again at Congressional hearing

The Senate Commerce Committee held a hearing on waste, fraud, and abuse in the Federal Communications Commission’s Lifeline program, which provides discounts on telecommunications services for eligible low-income consumers. In 2016, Lifeline disbursed about $1.5 billion in subsidies, making crucial communications services more affordable for 12.3 million households. In June, the Government Accountability Office (GAO) issued a report, based on 2014 subscriber data, that pointed to fraud and inefficiencies in the program, leading to Wednesday’s hearing.

Setting the Stage

Why do we have Lifeline? As South Dakota Public Utilities Commissioner Chris Nelson testified this week, “A 2015 FCC Lifeline Order states it well: ‘The purpose of the Lifeline program is to provide a hand up, not a hand out, to those low-income consumers who truly need assistance connecting to and remaining connected to telecommunications and information services.’”

Lifeline was created in the mid-1980s to promote traditional, wireline telephone subscribership among low-income households. In the mid-2000s, Lifeline support was expanded to include wireless communications.

Over the years, the Lifeline program has endured numerous claims of waste, fraud and abuse. In early 2012, the FCC addressed many Lifeline administrative issues with the adoption of new rules. By 2014, the FCC had implemented the National Lifeline Accountability Database to help crack down on waste and fraud by flagging existing duplicates for elimination while preventing enrollment of new duplicates. The FCC and the Department of Justice also stepped up enforcement action, cracking down on carriers that were abusing the program.

First proposed in 2015, the FCC, led by then-Chairman Tom Wheeler, passed in 2016 an order that modernized the program to include broadband. Former Counselor to Chairman Wheeler Gigi Sohn wrote that the Lifeline Modernization Order:

was not only about providing affordable broadband service to low-income people; the FCC also reformed the program to ensure it is efficient. To decrease administrative burdens on service providers while also cracking down on waste, fraud, and abuse, the FCC established a National Eligibility Verifier, taking the task of determining whether a person is eligible for Lifeline support out of the hands of carriers. And the FCC established, for the first time, a budget mechanism for Lifeline.

But the Lifeline program has been targeted by conservative policymakers as a waste of taxpayer funds. In an early act as FCC Chairman, Ajit Pai revoked the designations of nine companies, making them unable to participate in the Lifeline program [I wrote about this move in The FCC Is Sucking The Life Out Of Lifeline]. Sohn noted at the time that Pai’s reasoning failed to mask a clear truth: He, and fellow FCC Commissioner Michael O'Rielly, fundamentally disagree with the structure and goals of the Lifeline program and, “will seek to undermine it in word and deed.”

The 2017 GAO Report

The 2017 GAO report concluded that the Lifeline program is plagued by massive fraud and waste, as well as "recurring failures of evaluation and oversight.” The study of 46 states and the District of Columbia found that 1.2 million subscribers could not be confirmed as being eligible for Lifeline benefits — out of 3.5 million accounts analyzed by the GAO. By analyzing Lifeline's database and also matching it against Social Security Administration records, GAO found 5,500 duplicate beneficiaries, as well as 5,400 who had actually been dead for more than a year. These individuals accounted for roughly $1.2 million of wasted funds every year, the GAO concluded.

Chairman Pai responded to the GAO report saying, “I stand ready to work with my colleagues to crack down on the unscrupulous providers that abuse the program so that the dollars we spend support affordable, high-speed broadband Internet access for our nation’s poorest families.”

FCC Commissioner Mignon Clyburn said:

Some may use the limited findings of this report as justification to cut back on the Lifeline program even further, but that would be catastrophic for those most in need. We have a choice to make: be short-sighted and weaken a program designed to assist our nation’s most vulnerable or fix what may be broken so that this agency is actually upholding its Congressional mandate to ‘make available, so far as possible, to all the people of the United States…a rapid, efficient, Nation-wide, and world-wide wire and radio communication service with adequate facilities at reasonable charges…for the purpose of promoting safety of life and property.’

The GAO report included seven recommendations to FCC Chairman Pai:

Require FCC Commissioners to review and approve, as appropriate, spending above the Lifeline budget in a timely manner;
Maintain and disseminate an updated list of state eligibility databases available to Lifeline providers that includes the qualifying programs those databases access to confirm eligibility (this step, GAO said, would help ensure Lifeline providers are aware of state eligibility databases and could also help ensure USAC audits of Lifeline providers can verify that available state databases are being utilized to verify subscriber eligibility);
Establish time frames to evaluate compliance plans and develop instructions with criteria for FCC reviewers how to evaluate these plans to meet Lifeline’s program goals;
Develop an enforcement strategy that details what violations lead to penalties and apply this as consistently as possible to all Lifeline providers to ensure consistent enforcement of program violations; the strategy should include a rationale and method for resource prioritization to help maximize the effectiveness of enforcement activities;
Ensure that the preliminary plans to transfer the USF funds from the private bank to the U.S. Treasury are finalized and implemented as expeditiously as possible [Editors note: On August 8, 2017, USAC announced it is formulating the plan to transfer the funds of the Universal Service Fund (USF) to the U.S. Department of Treasury.];
Require a review of customer bills as part of the contribution audit to include an assessment of whether the charges, including USF fees, meet FCC Truth-in-Billing rules with regard to labeling, so customer bills are transparent, and appropriately labeled and described, to help consumers detect and prevent unauthorized charges; and
Respond to Universal Service Administrative Company (USAC, the administrator of the FCC’s Universal Service Fund) requests for guidance and address pending requests concerning USF contribution requirements to ensure the contribution factor is based on complete information and that USF pass-through charges are equitable.

September 6 Hearing: What’s Our Commitment to Connecting Everyone?

The aim of this week’s hearing was to reassess the Lifeline program in light of the 2017 GAO report. In his opening statement, Senate Commerce Committee Chairman John Thune (R-SD) said, “I have no doubt that the Lifeline program provides a critical service for many low-income Americans, including my constituents, but I think we need an honest assessment of how best to deliver such services to those who need them the most.”

The GAO’s Seto Bagdoyan reiterated the conclusions from the GAO report, saying:

Lifeline’s large and diffuse administrative structure creates a complex internal control environment susceptible to significant risk of fraud, waste, and abuse. FCC’s and Universal Service Administrative Company (USAC)’s limited oversight of important aspects of program operations further complicates the control environment—heightening program risk. We are encouraged by FCC’s recent steps to address weaknesses we identified, such as the 2016 order establishing a National Verifier, which, if implemented as planned, could further help to address weaknesses in the eligibility-determination process. We also plan to monitor the implementation status of the recommendations we made in May 2017.

Jeffrey Eisenach, a visiting scholar at the American Enterprise Institute, also appeared at the hearing. Eisenach, you might recall, led President Trump’s Transition Team focused on telecommunications issues. He summarized his testimony in three sentences:

Promoting universal access to modern communication services and the Internet, especially for low-income and disadvantaged Americans, is a noble cause and a pragmatic objective which deserves Federal support.
The Federal Communications Commission’s current lifeline program is not an effective or efficient means of achieving these goals, nor are current reform efforts likely to make it so.
We cannot give up: the doors of digital opportunity must be opened for low-income and disadvantaged Americans, and it is therefore incumbent on policymakers to develop a new approach that is both effective and a good investment for the American taxpayer.

Eisenach recommended the FCC step away from its low-income assistance work. “I hold Chairman Pai and the other members of the FCC in high regard, but the FCC has demonstrated repeatedly, under talented management from both political parties, that it is not very good at the low-income assistance business,” he said. “Maybe it’s time to try another path.”

Free Press Deputy Director Jessica González argued in favor of the program highlighting reforms passed by the FCC in 2016 and not captured in the GAO’s study period:

When talking about Lifeline, we hear a lot about waste, fraud and abuse. But this narrative is overblown and frankly offensive. I have long been troubled by the tenor of the Lifeline debate: There’s a tendency to wage war on the poor, to demonize and assume the worst about Lifeline recipients. And I cannot sit here today, especially as white supremacy is on the rise around the country and in the White House, without directly confronting the racist undertones of these assumptions. We should avoid inflated stories of waste, fraud and abuse at the expense of poor people and people of color, who rely on Lifeline to meet basic needs.

We should not allow this narrative to excuse the FCC’s new leadership, which is stalling implementation of the agency’s 2016 Order. The FCC’s foot-dragging is stranding over 17,000 recipients who had already started receiving service, and denying potential service to countless others.

Nor should we tolerate the sensationalized narrative surrounding the 2017 GAO Report. The outdated report’s findings are an old snapshot of a program already modernized and improved several times over. The investigation period predates implementation of much of the FCC’s 2012 reforms and nearly all of its 2016 reforms to address waste, fraud and abuse.

Moreover, during questioning from Sen. Ed Markey (D-MA), González noted that the level of waste, fraud, and abuse in the Lifeline program is significantly lower than programs across the Federal government. Implementing the FCC's planned reforms should minimize this level even more.

Conclusion

When the GAO report was released, former FCC Commissioner Michael Copps said, “The bottom line is the FCC must fix what little needs repair and get on with the job of making broadband accessible to those who cannot afford the high prices providers charge for something everyone must have.” The question is: Will the FCC continue Lifeline reform efforts -- or will the Lifeline be thrown out with the wastewater?

We’ll continue to cover -- and see you in the Headlines.

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