FCC Votes to Reform Lifeline Fund, Launch Broadband Pilot Program

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By Paul Barbagallo  

The Federal Communications Commission voted 3-0 to approve a number of changes to the federal Lifeline program, including creating a database to prevent duplicate subsidies and launching a pilot program aimed at hastening the adoption of broadband among low-income consumers, the program's key beneficiaries. FCC Chairman Julius Genachowski said the changes adopted by the agency could save as much as $200 million in 2012 and $2 billion over the next few years.

“Broadband has gone from being a luxury to a necessity in the 21st century,” Genachowski said in remarks at the agency's Jan. 31 meeting.

The Lifeline program was started in 1984 to ensure that everyone would have telephone service during emergencies. To be eligible for a $10 monthly discount on phone service, which comes from a tax applied to phone bills, a person must meet federal low-income guidelines or qualify for one of a handful of social service programs, including food stamps or Medicaid.

Although Lifeline has been successful in helping lower-income families maintain basic telephone service, the program has also been beset by fraud and abuse. In recent cases, phone companies and wireless carriers have sought and received reimbursement for service to the same residence.

Fund Growing.

And the fund is growing. The size of the Lifeline fund has increased from $667 million in 2000 to $1.3 billion in 2010, leading officials to increase fees that consumers pay to support it. According to a November report from the Government Accountability Office, the increases are also due to the addition of prepaid wireless service from America Movil SAB's TracFone, a marketer of subsidized SafeLink phones.

Among the changes approved by the FCC, the $10 monthly Lifeline subsidy will now be limited to one phone line per home, which means some consumers who may have received a subsidy for both a landline phone and a wireless phone will have to choose.

The FCC will set up a national database to prevent individuals from collecting subsidies from two companies.

The agency has already eliminated nearly 270,000 duplicate subscriptions in 12 states following review of over 3.6 million subscriber records, saving $33 million. But the database, which will be created no later than the end of 2013, will provide guarantees.

Meanwhile, companies participating in the program will also now undergo independent audits every two years.

All told, Genachowski said, the agency will use these savings—estimated to be as much as $25 million—to begin a pilot program that will shift subsidy funds from telephone service to broadband internet service.

Starting this year, the program will solicit applications from broadband providers and will select a number of projects to fund, the FCC said.

McDowell Dissents From Parts of Ruling.

FCC Commissioner Robert McDowell, the senior (and currently the sole) Republican member of the agency, dissented from parts of the rulemaking over the agency's authority.

McDowell raised concern about relying on the 1996 Telecommunications Act's Section 706, which he sees as a “deregulatory” statute, to reorient the Lifeline fund to support broadband. He also urged caution on overburdening telephone consumers who contribute to the Lifeline fund and are not the wealthiest of Americans. He added that it would be “fiscally imprudent” to create programs that could raise costs.

Commissioner Mignon Clyburn supported the broad aims of the rulemaking, but criticized the chairman's decision to impose a cap on future Lifeline spending, which some consumer watchdog organizations argue could leave minorities and other disadvantaged Americans behind.