Chairman Pai Plans to Put an End to the U.S. Commitment to Universal Service and Affordability

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Last year, the Federal Communications Commission voted to modernize the Lifeline program for the digital age to help low-income families, veterans, and children gain access to the internet. Tomorrow, FCC Chairman Ajit Pai is poised to initiate steps to drastically roll back the program, ultimately leaving millions of Lifeline subscribers and eligible families without a service provider. 

Some background: The Lifeline program is a universal service program aimed at making basic telecommunications service (historically, telephone service, and now, broadband) affordable for the poor as part of America’s longstanding commitment to universal service. Lifeline was created by the Reagan-era FCC, updated to support wireless service during the George W. Bush Administration, and updated again by the Obama-era FCC to support broadband.

The 2016 update was lauded because it recognized that internet access is a basic necessity in American life -- with access often a prerequisite for children to do homework, job seekers to fill out job applications and acquire skills, and caregivers to access health information resources and use telemedicine to reach health care professionals and improve health outcomes. The 2016 Lifeline update also took critical steps to improve program integrity while also encouraging more widespread provider participation, with the goal of maximizing the value of every dollar spent in the Lifeline program and removing administrative overhead, uncertainty, and roadblocks to carriers that provide Lifeline-subsidized service.

Unfortunately, the Lifeline program’s critics at the FCC couldn’t be persuaded to vote to bring Lifeline into the 21st Century without demanding concessions that would’ve threatened the long-term viability of the program. This week, those same critics, now in charge at the agency, are back to kneecap Lifeline and affordable telecommunications for the millions of families, veterans, and children that use the program.

Under the guise of promoting network investment and deployment and enhancing consumer choice, Chairman Pai’s attack on the Lifeline program does the complete opposite. His plan proposes to kick all non-facilities-based service providers out of the Lifeline program, which includes wireless carriers like Tracfone’s Safelink Wireless or TAG Mobile, that don’t have their own networks but lease capacity from facilities-based providers (e.g., AT&T, Sprint) and serve approximately 70 percent of Lifeline subscribers. In many states, facilities-based providers have opted out of offering Lifeline-supported service altogether and prefer to allow non-facilities-based wireless providers to serve Lifeline subscribers and the low-income segments of the wireless market. The largest wireless carriers profit from this arrangement by leasing excess network capacity rather than letting it sit unused. Instead of promoting new network deployments and consumer choice, Chairman Pai’s plan would eliminate a profitable revenue stream for wireless carriers, while also eliminating non-facilities-based providers as a choice for Lifeline subscribers.

Rather than incentivizing wireless carriers to enter the market, Chairman Pai actually proposes to erect barriers to entry, leaving Lifeline subscribers with vastly fewer choices. In 2016, the FCC listened to facilities-based providers like AT&T, which said a prerequisite to entering the Lifeline market was a streamlined, centralized certification process. Chairman Pai’s proposal eliminates this centralized process, while also raising additional barriers to entry and disincentives to offer Lifeline-supported service.

The Chairman’s plan would drive out both subscribers and providers by creating a hard spending cap on the Lifeline program, proposing automatic cuts when spending appears on pace to exceed the cap. Additionally, the Chairman floats the idea of implementing a co-pay requirement for Lifeline subscribers. Both proposals are counterproductive to the Lifeline program’s mission of closing the digital divide by making broadband affordable for low-income families. First, the Chairman’s “self-enforcing” budget would require either slashing the subsidy amount, creating waiting lists for new enrollees, or kicking existing subscribers out of the program. Second, the co-pay requirement would create significant attrition in the program since most subscribers are on plans that provide no-cost service and many Lifeline subscribers lack bank accounts and access to basic financial services. These consequences stand in contrast to the goal of the program -- to make basic telecommunications service, like broadband, affordable to those that need it most, and to be available to those that need it during times of economic distress. Further, in his rush to slash the social safety net, the Chairman’s plan would not only eliminate broadband access for needy families, but it would create significant uncertainty about the program’s funding on a year-to-year, or even a month-to-month basis, and require participating facilities-based carriers remaining in the program to establish costly new new payment processing systems to comply with the co-pay mandate.

Altogether, facilities-based providers will see the elimination of a profitable funding stream, coupled with increased administrative burdens, barriers to entry, and higher costs to serve a customer segment that generates low margins. Rather than increasing customer choice, Chairman Pai’s plan is likely to strand millions of Lifeline subscribers without a service provider and push the remaining facilities-based carriers out the door.

There is already widespread consensus in the FCC’s docket by consumer advocates, civil rights organizations, Tribal groups, and telecommunications service providers that the FCC’s new anti-Lifeline proposals are wrongheaded and counterproductive to Chairman Pai’s oft-stated goal to close the digital divide. Of the 50+ filings in the docket in the three weeks since the FCC published its Lifeline proposal, there is no support for the FCC’s plan, and dozens of filings from veterans, senior citizens, civil rights organizations, Tribes, and the wireless industry explicitly urge the FCC not to move forward with its plan to stifle affordable broadband access for America’s most vulnerable. Rather than attempting to undermine Lifeline and reject America’s historic commitment to universal service, this Commission instead should begin in earnest to make broadband affordable and available for all.

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