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Shrinking the Digital Divide: FCC Adopts Lifeline Broadband Subsidy

March 31, 2016 , ,

Today, the Federal Communications Commission took a major step to help all Americans connect to the Internet. The FCC voted to adopt an Order that, for the first time, allows low-income subscribers to use the Lifeline subsidy to help pay for critical Internet service that connects us all to education, jobs, healthcare, commerce, and other services.

Since 1985, Lifeline has helped make phone service more affordable for low-income communities. Today, broadband is the critical communications service that households need to stay connected to the world. This is why FCC Chairman Tom Wheeler and Commissioner Mignon Clyburn initiated the FCC’s work to modernize the Lifeline program, and why Commissioner Jessica Rosenworcel has highlighted the importance of broadband for low-income students to succeed in the classroom and beyond.

Consider education — seven in ten teachers assign homework requiring access to the Internet, and students with a computer and broadband access at home have six to eight percentage point higher graduation rates.

For people seeking jobs, 80 percent of Fortune 500 companies — such as Wal-Mart, Target, and ExxonMobil — require online applications. And more than half of all jobs require digital literacy skills, with that number expected to rise to more than three quarters of jobs within a few years.

For healthcare, 70 percent of Internet users look for health information online, and broadband access can help those who live far away from their doctor, improving healthcare access and outcomes.

Internet access can also help low-income households to save money — one study shows that households with broadband Internet access save $8,400 per year on things like housing, food, transportation, and clothing.

Modernizing the Lifeline program to make broadband more affordable is key, as low-income households are less likely to be connected to the Internet. Only 48 percent of households earning less than $25,000 per year subscribe to broadband Internet access service, while 95 percent of those with incomes over $150,000 are online. Studies show that low-income households are likely to cite financial concerns as the primary barrier to home Internet service. Pew Research Center recently found that 66 percent of non-adopters cite financial factors as the main reason they aren’t online.

How the Order Modernizes Lifeline

So, how does the FCC’s Order move the Lifeline program from the telephone era to the Internet era?

First, the Order gives consumers the choice of which service they use. Subscribers will have the option to use the $9.25 per month subsidy toward stand-alone or fixed broadband Internet service, including bundled service.

Lifeline-supported standalone fixed and mobile voice service will continue as an option until 2021, and after 2021, providers will be required to include broadband, which can be bundled with a voice service.

Second, the Order ensures that broadband offerings are sufficient to allow participation in the digital world, ensuring that Lifeline subscribers aren’t relegated to second-class service and that Universal Service Fund (USF) money doesn’t support subpar offerings. For fixed service, this means a speed standard based on what a substantial majority of consumers receive (currently 10 Mbps downloads/1 Mbps uploads), and a monthly fixed broadband usage standard of 150 GB. Mobile minimum standards will be phased in, starting at 500 Megabits per month of 3G data, increasing to 2 Gigabits per month by the end of 2018. Importantly, the Order promotes Lifeline supported mobile devices with WiFi functionality so that broadband use can be portable and traffic can be offloaded.

Third, the Order will increase competition amongst providers and choice for consumers in Lifeline broadband providers. The Order creates a new category of “Lifeline Broadband Providers” with streamlined nationwide regulatory approval, making it easier for more providers (like cable companies) to join the market. Competition should increase the quantity and quality of product offerings and lead to lower prices, improving the return on every USF dollar invested in the program.

Fourth, the Order shores up the integrity of the Lifeline program by establishing a National Eligibility Verifier as a neutral third-party verifier to enroll subscribers and ensure that no funds go to ineligible applicants. The Order also focuses on eligibility through existing federal programs like Supplemental Nutrition Assistance Program, Supplemental Security Income, Medicaid, Veterans Pension, and Tribal, that support electronic verification. Income-based eligibility, at 135 percent or below of the federal poverty guidelines, remains an option.

Finally, the program includes administrative safeguards. Transparency is increased, and a budget of $2.25 billion is set, indexed for inflation, and a mechanism for review is triggered if demands reach 90 percent of the budget.

The FCC’s Lifeline modernization Order is a critical step toward bringing millions of low-income Americans online and helping the Commission achieve its universal service mandate. Public Knowledge applauds the FCC for working to bring low-income Americans online and shrinking the digital divide.