FCC Lifeline Overhaul Could Spur Cable to Enter Market

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By Lydia Beyoud

March 8 — The Federal Communications Commission is hoping a plan to transform the Lifeline program into a broadband-centric subsidy for low-income households will usher in a host of new providers, including cable broadband providers such as Comcast Corp. and wireless Internet service providers.

The proposal circulated March 8 by FCC Chairman Tom Wheeler and Commissioner Mignon Clyburn would streamline the regulatory approval process for companies to become Lifeline providers, giving companies the option to go directly to the agency for program eligibility certification rather than through multiple state regulators, FCC officials told reporters during a March 8 background briefing. The FCC is expected to approve the proposal at its March 31 meeting.

Traditional voice service providers such as AT&T Inc., Verizon Wireless Inc. and TracFone Wireless are among current Lifeline providers. FCC officials said they were very optimistic that the proposed program overhaul and streamlined administrative procedures would entice many companies to enter the Lifeline market.

“This provides them with a good business case for participation—and provides Lifeline consumers with more competitive options,” Wheeler and Democratic Commissioner Mignon Clyburn said in a joint March 8 blog post.

Comcast's David L. Cohen, senior executive vice president and chief diversity officer, welcomed the proposal but added that Lifeline “only addresses one of the barriers to adoption.” Cohen pointed to Comcast's public-private partnership with schools, libraries and nonprofits through its Internet Essentials program as another means to addressing the digital divide, according to a blog post.

The high cost of broadband service is one of the primary barriers for Internet adoption in low-income households, according to FCC statistics. Only 41 percent of households with less than $20,000 in annual income subscribe to broadband services, according to a Pew Research Center study.

“Internet access has become a pre-requisite for full participation in our economy and our society, but nearly one in five Americans is still not benefitting from the opportunities made possible by the most powerful and pervasive platform in history,” Clyburn and Wheeler said in their blog post.

The proposal to incorporate standalone broadband into the Lifeline program would benefit consumers, John Windhausen Jr., executive director of the Schools, Health & Libraries Broadband Coalition told Bloomberg BNA by e-mail. But making libraries, schools and cities eligible would better help to close the digital divide.

“The U.S. needs a holistic approach to broadband adoption that recognizes the important role of our nation’s schools, libraries, health care providers, municipalities, and other public and non-profit institutions in promoting digital literacy and offering innovative broadband services,” Windhausen said. “Low-income consumers will benefit most if our nation’s non-profit community institutions are included as part of the Lifeline solutions,” he added.

Budget of $2.25 Billion

The proposal would establish an inflation-indexed budget of $2.25 billion while maintaining the current $9.25 per household monthly subsidy. Current program costs are slightly more than $1.5 billion for 2015, and FCC officials said they didn't expect to immediately reach the budget cap if the item is approved at the March 31 FCC meeting.

Wheeler is likely to have at least enough votes to pass the item by a party-line vote: Clyburn has made Lifeline modernization one of her core initiatives during her tenure at the commission and fellow Democratic Commissioner Jessica Rosenworcel has championed ways to help close the “homework gap” for low-income families .

GOP Commissioner Michael O'Rielly has been calling for a program budget cap since the draft rules were first approved by a contentious party-line vote in June 2015 . O'Rielly said he would be looking for details in the 150-page proposal about how the budget mechanism would work, and a rationale for increasing spending on the Lifeline program but not other Universal Service programs, according to a statement. He added that the lack of detail on those issues in an agency fact sheet underscored the need for greater transparency and process reforms at the FCC.

Service Requirements

Wheeler and Clyburn are proposing a number of minimum service requirements Lifeline providers would have to offer, including a minimum speed of 10 megabits per second (Mbps) downloads/1 Mbps uploads with a 150 gigabyte minimum monthly usage allowance for fixed-line broadband. The proposal would phase in different minimum standards for mobile broadband, starting at 500 MB/month of 3G data, increasing to 2 gigabits/month by the end of 2018.

Lifeline providers would have to offer standalone mobile or fixed broadband services or bundled voice and broadband services. Lifeline devices would have to include Wi-Fi functionality, a provision targeted at providing a means for students to get Internet access to do their homework, FCC officials said . Support for standalone mobile voice service would be phased out by Dec. 1, 2019.

As expected, the proposal would also establish an independent verifier for Lifeline recipient eligibility, a measure intended to relieve service providers of administrative burdens and tamp down on waste, fraud and abuse of the program.

While wireless Internet service providers (WISPs) could stand to benefit from the proposed rules, the speed benchmarks could undermine the commission's goals of connecting more low-income households, said Alex Phillips, president of the Wireless Internet Service Providers Association (WISPA) and owner of Harrisonburg, Va.-based WISP High Speed Link.

Using the FCC's former benchmark speed of 4 Mbps down/1 Mbps up for wireline broadband services would have enabled digital subscriber line (DSL) providers potentially to reach far more consumers than at the proposed higher speeds, Phillips said.

“I just think 10/1 is too high of a mark to address an issue that is really important: to make sure that folks that aren’t able to afford broadband services today can have access to it,” he said.

To contact the reporter on this story: Lydia Beyoud in Washington at lbeyoud@bna.com

To contact the editor responsible for this story: Keith Perine at kperine@bna.com