FCC Approves Lifeline Overhaul After Contentious Negotiations

Keep up with the latest developments and legal issues in the telecommunications and emerging technology sectors, with exclusive access to a comprehensive collection of telecommunications law news,...

By Lydia Beyoud

March 31 — The Federal Communications Commission (FCC) was consumed by hours of behind-the-scenes drama on March 31 during last-minute negotiations over expansion of the Lifeline subsidy program that laid bare a raw partisan schism at the agency.

The commissioners ultimately voted 3-2 along party lines to expand Lifeline to include standalone broadband service.

GOP commissioners Michael O'Rielly and Ajit Pai repeatedly said that, before the vote, Democratic FCC Chairman Tom Wheeler strong-armed fellow Democratic Commissioner Mignon Clyburn into retreating from a bipartisan agreement reached over the course of two days to set a $2 billion annual budget cap on the program and to raise the proposed minimum speed standards for both wireline and mobile broadband services to be offered through Lifeline for the first time.

According to Pai, the deal would have incorporated many of the proposed changes he issued in a March 29 compromise proposal.

“I’ve been at the FCC a long time, longer than the chairman has, and I can tell you that, in my world, when the majority reaches an agreement and you have three people on the chain who say ‘we support this proposal,’ that is the proposal unless somebody decides to renege for some reason,” Pai said, later adding that “it’s pretty clear at this point that 3-2 is the norm” for FCC votes.

Wheeler called Republican allegations that he had pressured Clyburn “balderdash.”

Clyburn told reporters after the March 31 meeting that she wasn't the sort of person to be “bullied,” and had changed her mind to return her support to the final version circulated by the chairman three weeks ago .

“Often times, I have found that there were only one, two or three things that separate us from closure and consensus. I took a risk that that was true, that there were only a couple of things that were keeping us away from a 5-0,” Clyburn said.

Clyburn said that upon reviewing the proposed edits on the morning of March 31—after Republican agency staffers said they had worked through the night to draft—she went back to the Republican commissioners' offices and asked for a final “tweak,” but said “neither part was able to move any further.”

The commission postponed the start of its meeting three times amid the last-minute maneuvering.

Clyburn said her chief concern at the last minute had been the notion of a firm cap on the program at $2 billion, rather than the $2.25 billion previously circulated.

“The word ‘cap’ always gave me heartburn,” she told reporters, adding that even a higher budget might still prevent the potential 39 million eligible households from getting into the program, thus a cap might have foreclosed on eligible households even further.

Hill Communications

The cap, as opposed to Wheeler's budget “mechanism,” was also hotly opposed by lawmakers, several Hill sources told Bloomberg BNA on background.

Pai and O'Rielly also blamed pressure from Democratic members of Congress on the morning of the March 31 vote as another reason for Clyburn's change of heart.

“Never count on a Dem to hold their vote,” O'Rielly said.

A spokeswoman for Sen. Cory Booker (D-N.J.) confirmed that Booker did communicate with Clyburn's office to voice opposition to a cap. Another Democratic congressional aide said Booker was concerned about the cap further limiting an underutilized program.

The Democratic staffer said Booker's office was made aware of the prospective deal the morning of March 31 through a courtesy “heads up” from Clyburn's office.

A Democratic House Energy and Commerce staffer told Bloomberg BNA on background that committee staff and members' offices had been in contact with several of the commissioners' offices during the morning about their concerns with the possibility of a hard budget cap and the higher speed thresholds brokered between Clyburn, Pai and O'Rielly.

Communications between members of Congress and their staff are generally exempt from prohibitions on communications under the Sunshine Act of 1976.

House Democratic Letter

Nine House Energy and Commerce Democrats sent a letter to all five FCC commissioners March 31, urging the commission to reject a hard cap.

“While we have long supported the Lifeline program and the essential assistance that it provides to low-income Americans, we cannot support any action that would severely limit the program. Demand is expected to increase as the program transitions to include broadband service, and any cap would threaten the goals and purpose of Lifeline,” wrote Reps. Doris Matsui (D-Calif.) and G.K. Butterfield (D-N.C.), who spearheaded the letter.

The committee's ranking member, Rep. Frank Pallone (D-N.J.), and Communications and Technology Subcommittee ranking member Rep. Anna Eshoo (D-Calif.) also signed on to it.

Program Expansion

Amid the bitter partisan rhetoric about how it was accomplished, the FCC ended up approving significant changes to a program intended to help low-income Americans bridge the so-called digital divide by subsidizing their access to broadband services.

Under the terms of the order, Lifeline will support fixed and mobile broadband offered both on a standalone basis and in bundles. Providers offering at least 500 GB of data and/or 500 minutes of voice service per month will receive Lifeline support starting Dec. 1, 2016. Providers will further be required to supply subscribers with Wi-Fi-enabled devices and to offer mobile hotspots.

If disbursements hit 90 percent of the $2.25 billion annual budget in any given year, FCC staff will be required to offer recommendations to the commissioners about possibly raising the budget.

The order represents the first time that Lifeline—alone of the Universal Service Fund programs of which it is a part—has ever had a budget.

With assistance from Kyle Daly

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

For More Information

Text of Pai's March 29 proposal is at http://src.bna.com/dMq.

Text of the House Democrats' letter is at http://src.bna.com/dMr.

Request Tech & Telecom on Bloomberg Law