FCC's Lifeline Reforms Should Keep Low-Income Consumers Connected

by Deborah Taylor Tate

The FCC is seeking public comment on TracFone's petition requesting that the FCC adopt a three-year Lifeline document retention requirement. The requirement would be added to the FCC's "full certification" mandate for ensuring low-income consumer eligibility for voice services through Lifeline. Concerns have been raised that full certification would be an ineffective check on fraud, waste, or abuse absent retention of records for inspection.

But a deeper set of concerns already surrounds full certification. The FCC's mandate may do more to keep many otherwise eligible low-income consumers from receiving Lifeline service than it does to combat misuse and abuse. Implementing a record retention requirement, however necessary to administer full certification, would simply add compliance costs to the already problematic full certification mandate.

This overlooked aspect to implementing full certification raised by TracFone provides yet another reason for the FCC to rethink its approach. The FCC should rescind full certification in favor of a simpler approach that better ensures low-income consumers most in need obtain and retain service. Or at least the agency should opt for postponement until full certification can be better implemented using a nationwide database.

In its February 2012 Lifeline Report & Order, the FCC adopted full certification as a measure to cut fraud, waste, and abuse in the Lifeline program. This essentially involves eligible telecommunications carriers (ETCs) corroborating a Lifeline subscriber's enrollment in other public assistance programs in order to qualify for Lifeline service. The FCC's Report & Order adopted a requirement that ETCs enrolling low-income consumers in the Lifeline program for voice services must access available state or federal social services databases to verify eligibility. Otherwise, ETCs must review would-be subscribers' documentation to verify their eligibility.

In blog posts from earlier this year, FSF President Randolph May and I explained why a full certification mandate for Lifeline eligibility will more likely result in otherwise eligible persons not signing up for service than in cutting waste, fraud, or abuse.

To briefly restate that case: Many states do not have accessible databases or workable arrangements in place with carriers to conduct such verification. In May and June, the FCC granted several temporary waivers from its full certification mandate on account of the incapability of many states and ETCs to comply with the agency's mandate. And many low-income consumers do not possess the documentation or means of transmitting such documentation to ETCs in order to enroll in Lifeline. In states that have previously taken a full certification approach to Lifeline there is evidence that low-income consumers who are intended beneficiaries of the Lifeline program never complete the process. This has meant denial of enrollment or halted service even where consumers have disclosed their name, address, date of birth, and part of their social security number.

Full certification will likely have the unintended consequence of keeping otherwise eligible low-income consumers from subscribing to Lifeline. The harm would be felt most by those who should be the focus of any universal service program. To this extent, full certification works at cross-purposes with what should be the future course for USF.

Lifeline should be the model for the future of the USF program. By targeting subsidies directly to those in financial need, Lifeline offers a more efficient approach to ensuring universal service than other, indirect subsidies. This targeted approach should eventually replace the billions of dollars in the high-cost fund and other USF subsidies now distributed to carriers. After all, there is little accountability or way of ensuring that those indirect USF subsidies to carriers are actually keeping the price of voice services down.

And those USF subsidies hit consumers hard. USF subsidies are funded by so-called surcharges – functionally the same thing as taxes – that voice subscribers pay as a part of their monthly bills. The current USF surcharge or "tax" rate that consumers are now assessed on the long-distance portion of their monthly bills is 15.7%. Reforms for cutting fraud, waste, and abuse in the Lifeline program are important. But implementation of the FCC's November 2011 USF Reform Order and forthcoming USF contribution reforms should be the agency's priority when it comes to cutting universal service costs and spelling relief for taxpayers.

In its May 30 petition, TracFone points out why mandating eligible telecommunications carriers (ETCs) to provide full certification without retaining documents necessary to ascertain consumer eligibility makes little sense. Absent document retention, a Lifeline full certification mandate amounts to an honor system approach as to whether ETCs check consumer documentation to verify eligibility. With only ETCs’ say-so to go on, the Universal Service Administrative Company (USAC) would be unable to conduct inspections to ensure that ETCs are actually complying with full certification. 

From an administrative standpoint, postponing full certification until a document retention requirement is added would better ensure that full certification serves its intended purpose. But there is a downside. ETCs would face additional costs in retaining such documentation, ensuring that consumer privacy is maintained, and making such documentation accessible for subsequent inspection. Those additional costs may be necessary for a functioning full certification process. But they add to the cumulative case against a full certification mandate for Lifeline service eligibility.

The FCC also has before it an April petition for reconsideration of its full certification mandate. The agency should rescind that mandate. Instead, the FCC can simply require that ETCs establish the Lifeline eligibility of low-income consumers by checking name, address, date of birth, and the last four digits of the social security number. At the very least the FCC can postpone full certification until a national database can be established to allow for a more efficient and streamlined method for verifying Lifeline eligibility.