If you can’t travel to be with family and friends at the holidays, phone and video calls are the next best thing. When you’re watching a niece or nephew open up presents via Skype, it’s easy to take for granted the degree to which access to reliable, affordable phone and internet service makes staying in touch with family possible. But for far too many households, these telecommunications necessities must be weighed against many others such as food and electricity, decisions that are particularly challenging against the backdrop of other holiday expenses.
Fortunately, the Lifeline program at the Federal Communications Commission helps to bring these services within financial reach. Lifeline was initiated under President Reagan to provide modest subsidies to low-income households for landline telephone service. Under President George W. Bush, Lifeline expanded to include cellphone and mobile internet service. Then, during the Obama administration, the program was modified to support stand-alone broadband service. Today, the program provides a $9.25 monthly subsidy for qualifying households to purchase broadband, phone service, or wireless phone and data service. (It can be slightly more under some circumstances, but the vast majority of people get the $9.25.) While that amount may not seem like much, it can often go a long way in making service affordable—some budget, Lifeline-focused cellphone plans are even designed so that the subsidy covers or nearly covers the fee for service. Across the country, approximately 10 million low-income families rely on Lifeline to ensure that they can stay connected to their loved ones and access critical tools and resources that have increasingly moved online. But now this literal lifeline is at risk of being cut.
In November 2017, the FCC proposed sweeping reforms that would effectively gut the Lifeline program. These changes include removing support for prepaid wireless providers (which serve about 70 percent of all Lifeline subscribers and operate using a completely different business model than postpaid providers like Verizon and AT&T), ending support for stand-alone broadband, limiting the length of time households could stay a part of the Lifeline program, and placing an arbitrary and overly restrictive cap on the funds available.
These reforms could leave millions of people without basic communications services. Many wireless providers would be forced to exit the market, meaning many communities would find themselves without any Lifeline-supported voice options. The reforms would also cement the FCC’s 2017 decision to repeal net neutrality and abdicate its oversight of the broadband industry—leaving the Lifeline program with only a limited number of voice-only providers, and Lifeline users with increasingly few options.
While critics often claim that the program is rife with fraud as a justitfication for shrinking the program, Lifeline is notably underutilized by eligible households, and the FCC’s proposal would worsen this problem by drastically capping the amount of funds allocated to it through what the FCC calls a “self-enforcing budget cap.” In its 2016 reforms to the program, the FCC imposed a modest cap of $2.25 billion, which the commission reasoned would be sufficient to allow new households to connect to the program. The proposed change would ratchet that budget down if expenditures were predicted to be rising in a given year, creating an inherent disincentive for signing up new, eligible customers. Besides worsening the low adoption rates of the program, a budget cap is a classic example of a solution in search of a problem, as annual Lifeline expenditures have actually been falling for years. The FCC should be working to bring on more qualifying Americans who cannot afford communications services as subscribers to Lifeline.
Unsurprisingly, the proposal faced swift backlash from public interest groups. Perhaps more surprising, the proposal faced backlash from nearly everyone, including some of the country’s largest wireless providers, including Verizon, Sprint, and wireless-industry trade associations. That’s because the proposal would destroy the Lifeline market by prohibiting certain types of wireless providers from being eligible for participation. It would instead shift the program to rely solely on what the industry calls “facilities-based providers,” despite the fact that those providers have largely exited Lifeline because participation in the program would require them to serve populations that don’t fit into their current business model. Facilities-based providers are the big names you’ve almost certainly heard of—like AT&T and Verizon—and they don’t tend to participate in Lifeline because it doesn’t fit well in their business model. Another type of providers uses a different model for offering service. They are called “wireless resellers” because they lease spectrum from the big providers, rather than acquiring their own spectrum directly, and they tend to be the providers that offer prepaid service, where customers can buy their minutes and data as they go, rather than pay a flat monthly fee after the fact. Remember those budget plans that are essentially covered by the $9.25 Lifeline subsidies? It’s the wireless resellers that are offering them, and the FCC is proposing to eliminate them from the program.
Ultimately, the proposal would turn Lifeline from a consumer-centric affordability program into an industry-centric infrastructure program that supports the biggest phone providers, against the explicit directive of Congress in the FCC’s governing laws. Leave it to this FCC to turn a pro-consumer subsidy into an industry welfare program for an industry that doesn’t seem all that interested in the program in the first place.
Nonetheless, the proposal remains active at the FCC, with rumors circulating each month about an imminent vote. Even a pared-down version of this proposal would be dangerous, as any one of the proposed reforms could prove devastating for low-income families. Happy holidays, America!
Fortunately, the proceeding is still open for public comment, which means that anyone (including you!) can submit a comment telling the FCC to reject this harmful proposal. And with a new Democratic majority in the House with an already-evident appetite for oversight hearings, committees like the House Energy and Commerce Committee are well-suited to hold the FCC’s leadership accountable. I hope they do. And as we cross items off our shopping lists and check in for our cross-country travel, I hope we don’t forget that for many, the ability to simply make a phone call home may be simply out of reach.