Wednesday, May 02, 2012

Maintaining a Lifeline Safety Net

For well over a decade, I have been critical of the FCC's Universal Service Fund high-cost subsidy program for the indiscriminate way in which the program's subsidies have been distributed to telephone carriers. For too long, the USF high-cost subsidy program has been administered in an economically inefficient manner which not only is wasteful of societal resources, but which also has had the effect of deterring the introduction of new lower-cost – unsubsidized -- communications technologies and services.
And, as the high-cost subsidies grew year after year, they were the major contributor to the rapid increase in the size of the USF tax, which now stands at over 17% for all interstate and international calls. This 17% tax obviously discourages use of telecom services.
While the measures did not go far enough in curtailing the excesses and inefficiencies of the high-cost subsidy program, the FCC did finally adopt reforms in an order released last November. For at least taking some important steps in the right direction down the reform path, I commended the Commission's action.
For as long as I have urged meaningful reform of the high-cost subsidy program, I have supported the FCC's Lifeline program that subsidizes the cost of telephone service for qualified low-income persons. In today's world, there are social and economic imperatives favoring the notion that those who cannot afford a minimum level of telephone service should receive subsidized support.
And there is another separate, compelling reason I have supported Lifeline service. It always has been my view that the existence of a well-functioning, competently-administered Lifeline service, with its subsidies targeted to the poor, is a persuasive argument against continuation of the more indiscriminate, less economically efficient, more competition-distorting high-cost fund subsidies. In other words, the Lifeline subsidies go to support access to telephone service for poor people, whether they are living in New York City or Aspen, while the high-cost fund, in effect, subsidizes telephone service for an awful lot of rich folks who choose to live in Aspen and Jackson Hole.
That said, it is important, of course, that the Lifeline program be administered in a manner that is not wasteful and which does not invite fraud or abuse. The FCC's Lifeline Reform Order, released February 6, 2012, is intended to address such concerns. I generally support the Commission's efforts to modernize the program so that it can fulfill its worthwhile objective in an economically efficient manner.
In my view, however, it would be a mistake for the Commission to adopt such an overly rigid stance regarding administration of the Lifeline program that its objective – supporting access to telecom services for poor people – is unnecessarily, if not deliberately, undercut. Thus, the Commission should not condition Lifeline eligibility on implementation of state databases that are variable in their reliability and in their information resources. Such conditioning on state eligibility databases, or requiring documentation that is often referred to as "full certification," may well result in denial of support to otherwise qualified low-income persons. Instead, the Commission should proceed with plans to establish a reliable national database that, when ultimately operable, can be accessed efficiently by carriers. This national database would permit all certified carriers to determine eligibility based on a low-income person's participation in recognized programs, such as the Medicaid or food stamp programs.
Other limitations suggested by the Commission also may have the effect of unnecessarily limiting access to Lifeline support in a way inconsistent with the program's objectives. For example, there appears to be no sound reason for excluding text messages from the definition of usage eligible for support. Or to require that Lifeline recipients must activate their own phones before receiving benefits as opposed to having the carriers activate the phones at the time of purchase. Limitations such as these don't seem to comport with the program's objective to support access for low-income persons.
I have spent well over a decade arguing in favor of adoption of desperately needed free market-oriented regulatory reforms that comport with the realities of our fast-changing, technologically-dynamic communications and Internet markets. We still have a long way to go to achieve such fundamental reforms, including meaningful reform of Universal Service programs.
At bottom, a well-functioning Lifeline program – a "safety net" in today's parlance – is not only consistent with pursuing further market-oriented regulatory reforms. It is, in my view, a prerequisite for advocating such reforms effectively, and in a principled manner.