Wednesday, February 05, 2014

Getting the Lifeline Program on “Trac”: TracFone’s Request for Lifeline Program Reforms

On January 22, TracFone filed a petition for waiver of Lifeline program rules that it claims inhibit the Federal Communications Commission’s ability to ensure that carriers conduct thorough, accountable, and transparent eligibility determinations. And on January 31, the agency issued a notice soliciting comments on TracFone's petition.
Reforms that help ensure Lifeline subsidies are distributed only to eligible applicants, based on a proper application review process, will help achieve the commendable goals of the program. Unlike those parts of the USF program that distribute subsidies in a more indiscriminate fashion, like the high-cost fund, Lifeline provides targeted subsidies to those in need who meet income eligibility requirements. The Lifeline program is worthwhile, but it can only be sustained if it is administered efficiently and with minimal levels of fraud and abuse. That's why reforms like those proposed by TracFone are necessary to improve the Lifeline program and to maintain public confidence that Lifeline funds are not being wasted.
TracFone’s petition discusses several Lifeline program rules that should be reformed in order to increase transparency and efficiency in the eligibility review process. Specifically, TracFone asks the Commission to allow Eligible Telecommunications Carriers (“ETC”) to retain income-based and program-based eligibility documentation. The current rules require ETCs to conduct a review of subscriber eligibility, but the rules do not require proof that the review actually occurred, or of what evidence the review was based upon. In fact, the rules prohibit ETCs from retaining documentation used to determine a subscriber’s eligibility. As such, TracFone seems to have a point when it claims the rules provide no means by which the Commission or USAC can verify that ETCs have actually conducted a review, or that the review was based on the proper documentation to determine Lifeline eligibility.
By now, the Commission should be aware of its problematic rules which erect unnecessary barriers to efficient subscriber eligibility determinations. TracFone filed an Emergency Petition on May 30, 2012 asking the Commission to amend its rules to allow ETCs to retain program-based eligibility documentation. The Commission sought comment on TracFone’s petition, and all but one commenter supported the proposed amendment. The Commission has not acted on TracFone’s petition seeking to end the existing inconsistencies between the rules regarding review requirements and document retention, but it should. Doing so would further promote accountability and transparency in the Lifeline program eligibility determination process.
The Commission commendably has taken some positive steps toward decreasing fraud and abuse of the Lifeline program under the Lifeline Reform Order. The Commission developed the National Lifeline Accountability Database (“NLAD”), which will be available for ETCs to verify applicants’ Lifeline eligibility for Maryland on February 13, 2014 and for additional states on a rolling basis. This database will help identify duplicate claims for Lifeline service. But if the database fails to identify such instances, ETCs may have to initiate a redundant inquiry concerning an applicant’s eligibility, because the current rules prohibit ETCs from retaining eligibility documentation from the original application review process. As such, while the NLAD should constitute an improvement for the Lifeline program, the Commission needs to do more.
At the end of 2013, the FCC’s Office of the Managing Director announced that the universal service contribution factor for the first quarter of 2014 is 16.4%. This is even higher than the 15.6% contribution factor for the fourth quarter of 2013. In contrast, at the end of 2000, the contribution factor was not even 6%. In effect, the 16.4% fee constitutes a tax paid by every consumer of interstate and international telecommunications services, including the low-income persons the Lifeline program is designed to benefit. The dramatic increase in the size of the USF fund since 2000 – and the concomitant increase in the size of the USF fee – largely has been driven by the increase in the size of the high cost fund. As FSF’s Randolph May and Seth Cooper stated in their comments filed in August 2011 and June 2013, “the end game for the Commission's comprehensive USF reforms should be the eventual elimination, say, in ten years, of all high-cost fund subsidies." Then, the Commission should aim to limit USF support to targeted and explicit subsidy programs, such as Lifeline.
From its inception in 1985, the Lifeline program has provided much-needed resources for low-income persons. The program has helped narrow the connectivity gap between low-income and non-low income households. As Chairwoman Clyburn stated in her address to the New America Foundation on September 12, 2013, 80 percent of low-income households had telephone service in 1984, compared with 95 percent of non-low-income households. That 15 percent gap shrunk to approximately 4 percent in 2012. A well-run Lifeline program can meet its intended purpose of giving access to low-income consumers. This would mitigate the need for broader, more indiscriminate subsidies, such as the high-cost fund subsidies. However, positive aspects of the program, like many programs that provide government subsidies, can easily be overshadowed if the programs turn out to be riddled with waste, fraud, and abuse. The Lifeline program will suffer loss of public support unless the Commission continues to reform it.
While the Commission has taken positive steps to reduce abuse, there is still much work to be done to ensure that the Lifeline program is run efficiently and effectively if it is to fulfill its mission to give low-income Americans access to the vital communications tools of the digital age. That's why the proposals contained TracFone's latest petition, and similar ones, should be given prompt consideration by the Commission.