Friday, November 10, 2017

A Properly Run Lifeline Program Is Important

At its November 16 meeting, the FCC will consider changes to its Lifeline program that provides subsidized communications services to low income persons. As readers of this space know, for many years, even decades, I have been a supporter of a properly run, efficient Lifeline program. So, as the Commission considers certain rule changes, I offer these thoughts about what the Commission has proposed.

First, I am unabashedly free market-oriented. For as long as I have been a Lifeline supporter, at the same time, I also have been a forceful (I hope) advocate of eliminating or curtailing unnecessary, costly FCC regulations – of which there are too many.

Second, I do not consider my support for Lifeline to be inconsistent with my free market disposition because I consider Lifeline service a “safety net” for qualifying low income persons who otherwise might not have access to communications services. But I emphasize, as I did in Senate testimony in June 2015: “Lifeline should be a ‘safety net’ that operates within boundaries to aid those truly in need, not another federal entitlement program that is structured, or that evolves, in a way so that its subsidies inexorably expand to subsidize those further up the income scale who are not truly in need.”

Third, like other “safety net” programs, it is very important that Lifeline be run efficiently and that waste, fraud, and abuse of the program is absolutely minimized. To the discredit of the Commission, and especially of those who knowingly abused the program, this has not always been the case in the past. Yet, over the past few years, corrective measures have been initiated, and they have had some positive impact. It is imperative that the Commission continue these efforts, such as implementing the National Lifeline Eligibility Verifier, to enhance and maintain the program’s integrity. At a time when the USF fee (yes, a “tax”) paid by consumers on all interstate and international calls is nearly 20%, the public will not long support one of the Universal Service programs if waste and fraud is prevalent. Nor should they. So, the FCC must continue the efforts it has begun in this regard, especially by targeting “bad actors.”

Fourth, even though I have made clear on many occasions that policies incenting facilities-based providers should be favored over those that do not provide such incentives, the Commission’s proposal to eliminate non-facilities-based providers from Lifeline participation gives me substantial pause. Approximately 70% of current Lifeline subscribers are served by resellers, and a large proportion of those 70% are served by wireless providers. Moreover, surveys consistently show a significant proportion of low-income households are “wireless only.”

For whatever reason – and the reason may well be that Lifeline-eligible persons understandably are not as profitable to serve as those with higher incomes – the evidence appears to show, at least thus far, that facilities-based providers have not targeted this market segment. So, the Commission ought to be concerned about its proposal to eliminate resellers from participation in the program, at least at this time when they serve such a large proportion of eligible subscribers.

Of course, the Commission should continue to pursue policies, including reducing unnecessary regulations, to stimulate facilities investment in all areas of country, particularly underserved rural areas. FCC Chairman Ajit Pai deserves much credit for calling attention to the rural-urban “digital divide” and for proposing ways to address it. But the primary objective of the Lifeline program is to provide a “safety net” for those who demonstrate their eligibility. The Commission shouldn’t lose sight of that objective.