What's Going on With the FCC's Lifeline Program?

Benton Institute for Broadband & Society

Friday, January 24, 2020

Weekly Digest

What's Going on With the FCC's Lifeline Program?

 You’re reading the Benton Institute for Broadband & Society’s Weekly Digest, a recap of the biggest (or most overlooked) broadband stories of the week. The digest is delivered via e-mail each Friday.

Round-Up for the Week of January 20-24, 2020

Kevin Taglang

We hate to get ahead of the news at the Weekly, but Monday, January 27, 2020 will be a big day for the Federal Communications Commission's Lifeline program. For nearly 35 years, the program has provided discounts on phone service for qualifying low-income consumers. Over the years, the program has been reformed to include other critical communications services, including wireless and broadband. On Monday, a new set of changes, adopted back in October, will go into effect while the public gets to weigh in on additional proposals to reform the program.

All month, we've been publishing articles on broadband adoption. For many people who haven't yet started using broadband internet access service, cost is a major obstacle. Lifeline is the largest effort to make broadband services more affordable for low-income households. Any changes to the program could have major impact on the digital divide. 

I. The Latest Changes to Lifeline

In October 2019, the FCC adopted a number of changes to the Lifeline program. The changes were mainly focused on redefining states’ role in designating eligible telecommunications carriers (ETCs) to participate in the Lifeline program, clarifying the obligations of participating carriers, and reducing waste, fraud, and abuse in the program. 

1. Elimination of the Centralized Lifeline Broadband Provider ETC Designation Process

Back in 2016, the FCC modernized Lifeline allowing low-income consumers to receive discounted broadband service. As part of the reform, the FCC found that states, that traditionally had the authority to decide which telecommunications carriers were eligible to provide government-subsidized service, did not have the authority over broadband internet access service provided in the Lifeline program. The FCC created the Lifeline Broadband Provider ETC; the aim was to make it easier for carriers to participate in the program, so Lifeline participates would have competitive choices for service.

In the FCC's latest decision, it overturned the previous decision, finding that only states are responsible for designating ETCs. The FCC now eliminates the Lifeline Broadband Provider ETC. The move could result in fewer broadband companies offering services to Lifeline participants which would mean fewer competitive choices.

In her dissent on the FCC's latest Lifeline actions, FCC Commissioner Jessica Rosenworcel noted the Commission's reclassification of broadband internet access service: "the effort to put eligible telecommunications carrier designation for Lifeline with state public service commissions grants those closer to service with an important role. But it doesn’t clearly square with the FCC’s decision to reclassify broadband and roll back net neutrality. It was, after all, this agency that tried to take authority out of the states when it pronounced broadband an information service." The FCC has created a legal quagmire, Rosenworcel said, that means greater uncertainly for the Lifeline program. 

2. Increasing Lifeline Transparency

The Universal Service Administration Company (USAC) administers the four programs of the FCC's Universal Service Fund -- including the Lifeline program. In its latest action, the FCC is requiring USAC to compile and make available on its website aggregate Lifeline subscribership data, including data broken out at the county level and by service type. Moreover, USAC is required to develop a process by which it will share with the FCC and relevant state agencies’ information regarding suspicious activity. USAC is further instructed to make suspicious reports and trends available upon request from the state officials.

3. Program Enrollment and Recertification

The FCC's October order establishes new rules and limitations on Lifeline providers and recipients. As of January 27, ETCs’ cannot pay commissions to enrollment representatives based on the number of people they sign up to participate in Lifeline. Further, all ETC enrollment representatives must register with USAC.

FCC rules limit Lifeline service to one subscription per household, but there are instances where multiple subscribers share the same residential address while still considered independent economic households (for example, multiple subscribers living in a shelter may share the same address). The Independent Economic Household (IEH) worksheet asks several questions that help the ETC and subscriber determine if the subscriber is an independent household in the event that another subscriber lives at the same address. Moving forward, the FCC will only permit an ETC to record an IEH worksheet if a Lifeline participant shares an address with another Lifeline subscriber. The FCC believes that limiting IEH records will make it easier for USAC to identify duplicate addresses and weeding out waste, fraud, and abuse.  

The FCC's order codifies current USAC practices aimed at preventing Lifeline support for Lifeline participants who may be deceased. On a quarterly basis, USAC checks a sample of Lifeline subscribers against the Social Security Death Master File and de-enrolls subscribers and recoups reimbursements as appropriate. USAC also checks the Social Security Death Master File when validating a consumer’s identity, which prevents a consumer appearing on the Social Security Death Master File from enrolling in the program unless the consumer successfully disputes the result which, as we all know, is hard to do if, in fact, you are dead. If an ETC has claimed reimbursement for a period during which a subscriber was deceased, USAC is directed to reclaim reimbursements back to the time of enrollment or recertification if the subscriber was deceased and listed on the Social Security Death Master File at the time of enrollment or recertification. 

The FCC has also codified an existing practice meant to limit the subscribers for which an ETC may claim and receive reimbursement. FCC rules require that reimbursement for providing Lifeline service is provided directly to the ETC “based on the number of actually qualifying low-income customers it serves directly as of the first day of the month.” That number now may not exceed the number of qualifying subscribers the ETC directly serves as indicated by the National Lifeline Accountability Database (NLAD) which is used to check on a real-time, nationwide basis whether a consumer is receiving a Lifeline Program-supported service.

Each year, Lifeline participants must be recertified as eligible to be in the program. Under the FCC's new rules, ETCs must collect eligibility documentation from the subscriber at the time of recertification if the subscriber’s eligibility was previously verified through a state or federal eligibility or income database and the subscriber’s continued eligibility can no longer be verified through that same database or another eligibility database. The FCC order says, "This rule change creates a more rigorous and verifiable recertification process and is tailored to provide additional focus on subscribers who have changes in their eligibility from year to year." 

3. Risk-Based Auditing

Currently, USAC is responsible for conducting, either itself or through third parties, Beneficiary and Contributor Audit Program (BCAP) audits and Payment Quality Assurance (PQA) reviews of Lifeline carriers. And ETCs receiving $5 million or more in reimbursements from the Lifeline program are required to obtain an independent audit that is intended “to assess the ETC’s overall compliance with the program’s requirements.” The FCC is revising its rules to require audits based on risk instead of total reimbursements. USAC is now tasked with developing a list of proposed risk-based factors that would trigger a Biennial Audit.

II. The Latest Lifeline Proposals

In addition to these latest changes, the FCC is requesting public comments on a new slate of Lifeline proposals. The proposals center around adding a program goal (broadband adoption) and how to measure the program's impact on that goal, program integrity, and privacy protections.

1. Broadband Adoption as a Program Goal -- and How to Measure Lifeline's Impact

The FCC is proposing to add a new goal for the Lifeline program: increased broadband adoption for consumers who, without a Lifeline benefit, would not subscribe to broadband. Concerning the goal, the FCC asks:

  • Is such a goal a component of preserving and advancing universal service, as directed by federal law? 
  • How would this goal relate to the principles of promoting the availability of quality services at just, reasonable, and affordable rates and promoting access to reasonably comparable telecommunications and information services for low-income consumers?

To measure progress toward the goal, the FCC seeks comment on the appropriate method of measuring broadband adoption by low-income consumers. 

In addition, the FCC proposes to ask Lifeline applicants questions in the enrollment process regarding how the program has impacted their broadband adoption. The FCC asks what those questions should be:

  • Should the FCC ask Lifeline applicants whether they already subscribe to voice or broadband service, and whether they would be able to afford their Lifeline-supported service without the Lifeline discount?
  • Should the also add questions to determine whether the Lifeline program is effectively reaching specific demographics, like veterans or households with children?

What other methods and data could the FCC explore to determine the impact of the Lifeline benefit on broadband adoption? Should the FCC rely on other FCC reports or data sources? For purposes of this goal, how should the FCC identify low-income consumers or areas if other FCC reports or data sources are used? The FCC seeks comment on how best to measure the impact of Lifeline on broadband adoption to the groups of consumers described above. Should the FCC consider fixed and mobile broadband services differently?

FCC Commissioner Geoffrey Starks noted when the Commission posed these questions that "I don’t believe we’ve ever probed elderly Medicare recipients on how much they actually value their medical services; nor should we probe vulnerable, Lifeline recipients on how much they value their connectivity. These are government programs and services designed and targeted for the benefit of particular citizens, and frankly our chief concern should be exploring how to make sure that they are fully utilized."

The FCC proposes examining the effectiveness of the Lifeline program by recognizing that Lifeline-supported broadband Internet access service and some other forms of broadband Internet access service are, to various extents, substitutable. For example, some Lifeline consumers may value broadband access so highly that they would purchase some level of broadband service even in the absence of a Lifeline benefit. Other consumers who currently use a Lifeline-supported broadband Internet access service would prefer to not purchase broadband Internet access service (or purchase broadband access intermittently) without Lifeline support. Finally, some consumers currently do not subscribe to any broadband Internet access service at all. In this context, how can the FCC identify, measure, and analyze the effect of the Lifeline program on increasing broadband adoption? Is the degree of substitution between Lifeline-supported and unsupported broadband Internet access service affected by the characteristics of Lifeline service (such as download speeds, data caps, etc.) of the Lifeline-supported broadband Internet access service? The FCC also seeks comment on additional criteria to consider as it evaluates the program’s impact on broadband adoption.

2. Program Integrity Proposals

Although the FCC has just adopted new rules to help in the fight against Lifeline waste, fraud, and abuse, there always seems like there's more to be done. The FCC is proposing additional measures to reach this goal:

  • Requiring ETCs to upload their internal customer account numbers into the National Lifeline Accountability Database (NLAD) in order to help USAC match its records with those of the ETC.
  • Requiring ETCs and the Lifeline National Verifier, the centralized system that determines whether subscribers are eligible for Lifeline, to record and retain a Lifeline applicant’s eligibility proof number and the type of proof the applicant used to qualify for the program.
  • Requiring ETCs to provide the NLAD or National Verifier with access to the same data maintained by the ETC, including non-usage data and the time the customer enrolled.
  • Clarifying ETCs’ obligation to act promptly to notify subscribers when the ETC has reason to believe that the subscriber is not eligible for the Lifeline program.
  • The FCC also seeks comment on the best ways to ensure that consumer usage is accurately measured and defined.

The FCC seeks comment it should prohibit Lifeline providers from distributing handsets in person. Lifeline providers often offer a free handset with the activation of Lifeline service. Many of the ETCs offering free handsets also provide Lifeline service that is free to the subscriber where there is no regular billing relationship between the subscriber and the ETC. Often the device is handed directly to the consumer at enrollment without requiring any payment by the consumer, and this practice has been the subject of reports that focus on ineligible consumers enrolling in Lifeline. So the FCC is seeking comment about the practice of in-person distribution of free handsets and its possible role in encouraging ineligible Lifeline customers to attempt to enroll in the program. 

  • How prevalent is the in-person distribution of free handsets today?
  • Is this practice primarily associated with free-to-the-end-user Lifeline plans?
  • Would such a restriction eliminate incentives for ineligible consumers to attempt to enroll in Lifeline?
  • Does the promise of an immediate free phone along with a free service provide improper incentives to potential subscribers?
  • The Lifeline program currently does not provide support for equipment used with the supported service. Does the FCC have the statutory authority to prohibit ETCs from distributing free handsets to Lifeline subscribers or otherwise regulate the distribution of handsets to ETCs?
  • Does the long-standing restriction on using the Lifeline subsidy for equipment support a new requirement that all Lifeline subscribers must pay a fee for the cost of the handsets used to provide the supported service?
  • What are the costs and benefits of such a requirement?
  • Would delaying the distribution of free handsets, or allowing the in-person distribution of handsets only to Lifeline subscribers who, either up front or through a payment plan, have paid an end-user fee, help eliminate fraud within the program?
  • Would such requirements discourage participation in the program by eligible subscribers?
  • What would be the impact on broadband adoption if Lifeline subscribers had to pay a fee in exchange for a handset?
  • What sources of data or industry studies could be helpful to estimate the magnitude of these effects?
  • How should the FCC evaluate the savings to the Universal Service Fund from reduced waste, fraud, and abuse against the lower consumer benefits to Lifeline subscribers who would no longer subscribe because of an increased cost to the customer?
  • Would a charge for the handset ensure that the carriers are providing handsets that customers value?
  • Would the potential program integrity and consumer benefits of requiring ETCs to charge Lifeline subscribers for handsets distributed in person outweigh any potential burdens to ETCs and Lifeline subscribers?
  • How would limitations on the distribution of free handsets impact these other activities such as in-person training on how to use the handset?
  • Are there other changes that could be made to this practice that would eliminate opportunities for fraud while ensuring that customers have access to affordable handsets?
  • Has the implementation of recent changes to the Lifeline rules reduced the opportunities for fraud that were associated with the distribution of free handsets?
  • Will the National Verifier further reduce the opportunities for fraud associated with this practice?
  • Do any of these program or system changes reduce the risk of problems associated with in-person distribution of free handsets and obviate any need to require ETCs to charge a fee for receiving a handset at an in-person enrollment or for the Commission to place other restrictions on this practice?
  • The FCC eliminated a rule requiring that ETCs charge Tribal Lifeline customers a minimum of $1 per month. What lessons should the FCC learn from the now eliminated $1 minimum service charge for Tribal Lifeline customers?
  • If the Commission were to require ETCs to charge Lifeline subscribers a nominal fee for handsets distributed in person, is there a significant risk that ETCs would not actually collect that fee from Lifeline subscribers? How would we design any such requirement to address that risk?
  • Would requiring that ETCs charge Lifeline customers a fee in exchange for a handset constitute a minimum charge for Lifeline service?
  • Alternatively, would requiring ETCs to assess a regular fee on subscribers for the Lifeline supported service mitigate any problems associated with providing in-person free handsets?

Requiring a charge for devices or a monthly fee for Lifeline serves would create obstacles for Lifeline participation. 

3. Certifying Privacy Protection Efforts

Since USAC now operates databases with personal information about Lifeline participants, should the FCC require ETCs and state agencies to certify that they have given their employees and enrollment representatives appropriate privacy training before those individuals may access the databases? Should the FCC require state commissions and ETCs to provide written confirmation that they have conducted background investigations of their staff with access to the databases?

III. Next Steps

Absent in the FCC's latest Lifeline proceedings is any recognition of the impact of its net neutrality decision on this program. Benton Senier Fellow Jonathan Sallet notes that the implications of the D.C. Appellate Court’s October 1, 2019 ruling on FCC’s repeal of the previous Open Internet Order may be important in preserving the ability of Lifeline to support broadband services. Although the court upheld the FCC’s decision to reverse the application of common-carrier provisions of the Communications Act to broadband internet-access services, it also held that the FCC erred by failing to consider adequately the impact of that decision on the ability of the Commission to continue providing Lifeline support for broadband services. On remand, the FCC must consider whether it can find another basis to support the Lifeline broadband efforts. If not, absent legislation, the fate of net neutrality may presage the loss of a critical means by which lower-income Americans access the Internet, an outcome contrary to the public interest.

Comments on the latest Lifeline proposals are due Monday, January 27 (hey, we said it would be a big day). But that's not your last chance to tell the FCC what you think. Reply comments are due February 25, 2020.  A FCC decision could come as early as this summer. Stay tuned in with Headlines.


Quick Bits

Weekend Reads (resist tl;dr)

ICYMI from Benton

Upcoming Events

Jan 28 -- State of the Net (Internet Education Foundation)

Jan 28 -- Spectrum Management Advisory Committee Meeting (Department of Commerce)

Jan 29 -- Empowering and Connecting Communities through Digital Equity and Internet Adoption (House Commerce Committee)

Jan 30 -- Open Meeting (FCC)

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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Kevin Taglang

Kevin Taglang
Executive Editor, Communications-related Headlines
Benton Institute
for Broadband & Society
727 Chicago Avenue
Evanston, IL 60202
headlines AT benton DOT org

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