New Rules are Mostly Housekeeping; Broadband Pilot Program has Promise
The Genachowski Commission continued its mission to go down in history as the Commission that modernized telecommunications regulation for a broadband world (or at least attempted to do so) with its latest sweeping revamp of the Universal Service Fund. The Lifeline Reform Report and Order and FNPRM was released on February 6, 2012, following the Commission’s January 31 vote to approve the rules. The new rules might be a bit short of a “sweeping revamp,” but they do appear to thoroughly close loopholes and accomplish a considerable amount of administrative reform in the Lifeline program in order to move towards a more streamlined, effective and organized support system for low income Americans. The FCC attempts to create balance between meeting the communications needs of low-income consumers and minimizing the contributions burden on those who pay into the Fund. The FCC also attempts to minimize administrative burdens for ETCs who provide Lifeline discounts while also ensuring that only individuals who truly qualify are enrolled.
While most of the rules largely constitute housekeeping, the proposed pilot programs for Lifeline-supported broadband may prove more interesting. As it is challenging to pinpoint where to draw the line between a service that should be subsidized and a service that is not a basic living necessity, the broadband pilot program may bring some controversy too. However, as Commissioner Mignon Clyburn is prone to saying, broadband is rapidly becoming a necessity, not a luxury.
For rural independent telecom providers, the new Lifeline rules generally appear favorable. However, the various benefits (like controlling the growth of the Lifeline fund) may come at a cost of increased administrative obligations, according to NTCA director of legal and industry Jill Canfield. She explained to JSICA that the FCC attempted to strike a balance between controlling the size of the fund and expanding the benefits of Lifeline for consumers, but the direct impacts of the new rules on RLECs still remains to be seen. Canfield commented that NTCA is working with its RLEC members who are interested in participating in the broadband pilot program. She explained that some RLECs are already experimenting with low-income broadband programs similar to Comcast’s Internet Essentials and the FCC-driven Connect to Compete; but since these programs are locally-tailored, they tend not to “get the big splash” of media attention. Canfield also warned that the underlying networks must be supported in order for a broadband Lifeline program to be successful. The Order itself states, “For broadband to be ‘available’ to low-income consumers, a broadband network (or networks) must have been deployed to the consumer, and the broadband service offered over the network must be affordable and provide a sufficient level of robustness (e.g. bandwidth) to meet basic broadband needs.”
The new rules will attempt to bring Lifeline, a patchwork quilt of state-by-state eligibility and administrative procedures, under an umbrella of uniform nationwide standards. The FCC adopts “minimum floor” requirements for eligibility and enrollment, where participants must have a household income at or below 135% of the Federal Poverty Guideline or be in one participating federal assistance program. The FCC hopes that uniform eligibility criteria will ease auditing burdens, help consumers who move between states to stay in the program, and streamline the enrollment process.
The FCC further adopts a one-per-household rule, where a household is flexibly defined as one “economic unit,” which will still allow individuals who live in group homes, shelters, Tribal communities and other such residences to receive a supported phone as long as the applicants “affirmatively certify that other Lifeline residents residing at the address are part of a separate household.” ETCs will also be required to confirm a residential address, not a P.O. box, of Lifeline recipients in order to help reduce duplicative support, waste, fraud and abuse. John Staurulakis, Inc.’s Darla Parker commented that “The one-discount-per-household rule will be a task to implement for all ETCs, simply because service addresses will have to be precise and recognizable as an ‘economic unit’ in the words of the FCC.”
The FCC intends to curtail enrollment abuse by requiring documentation of federal assistance program-based eligibility. A new rule requires ETCs “prior to enrolling a new subscriber in Lifeline, to access state or federal eligibility databases, where available.” According to the FCC, “Lifeline subscribership data reflects troubling evidence suggesting that ineligible consumers may be enrolling in the program at a particularly rapid rate;” and “Up to an estimated 15 percent of existing Lifeline subscribers could be ineligible for Lifeline benefits, potentially representing hundreds of millions of dollars in support.” The FCC acknowledges that these problems are especially severe in states that do not require certain documentation for enrollment. For example, enrollment increased 1,565% in Louisiana from 2008 to 2011 where documentation of federal assistance program participation is not required; enrollment increased 105% in Kansas where such documentation is required.
The National Lifeline Accountability Database is likely one of the most significant and needed reforms in the Lifeline Order. The proposed core functions of this database include, “the ability to receive and process subscriber information provided by ETCs to identify whether a subscriber is receiving a Lifeline benefit from another ETC…utilize subscriber data provided by ETCs to identify and reduce current instances of duplicative support… [and] be capable of accepting queries from an ETC to enable them to determine if a subscriber is already receiving Lifeline support from another ETC.” The FCC anticipates that the cost of the database, maybe around $10m, will be far outweighed by the benefits of eliminating duplicative support, which is as much as $200m per year. The database will require ETCs to submit the full name, address, phone number, enrollment or de-enrollment date, means of eligibility, last four digits of the participant’s social security number, amount of support received each month, if the subscriber received a Link Up discount (although Link Up will be eliminated as per the Order), and whether the participant has a non-traditional address. The database is supposed to be up and running within one year, and ETCs will have 60 days following a Public Notice to provide the necessary information.
JSI’s Darla Parker commented that the database “could be a burden lifted from the rural ILECs, where today they must figure and must certify if a customer meets the Lifeline eligibility criteria.” Parker also discussed how RLECs could risk losing customers who are currently receiving duplicative support: “The intent appears to make the dual-discount customer choose only one service provider’s discounted service. Understandable, yes, but that customer may keep both services, one that’s discounted, or may drop the undiscounted service which could be the RLEC.” Although it is important to reduce the contributions burden by eliminating duplicative support, it appears as though lost customers could be a negative side effect of this particular reform.
Finally, the Broadband Pilot Program is adopted in the Order, and the FCC solicits comments on this program (as well as the database and other issues) in the FNPRM. The pilot program will be funded by $25m saved from duplicative support elimination, and “will focus on testing the necessary amount of subsidies for broadband and the length of support.” Pilot programs will run for a duration of 18 months—3 months for administration and 12 months for testing the programs. The FCC will seek “diversity” in programs, “with different amounts and durations of subsidies, different types of geographic areas (e.g., urban, rural), and different types of broadband networks (e.g. fixed and mobile) and technologies.” The FCC will give preference to programs that will offer at least 4/1 Mbps, and the FCC encourages ETCs to partner with third parties such as libraries. Projects should focus on households that do not currently have broadband. The FCC does not intend for the pilot program “to retread the ground already covered by public and private broadband adoption projects, but to benefit from the work already done.”
Overall, the Lifeline Order appears to be a positive step toward modernizing Lifeline for a broadband world and reducing administrative and contributions burdens on ETCs and non-low-income consumers. However, the success of broadband Lifeline in rural areas is contingent upon rural networks actually existing, which the high-cost USF and ICC reform threatens to upset. Furthermore, it is becoming more and more evident that the FCC needs to quickly act on contributions reform.
What do you think of the Lifeline Order and FNPRM? Share your ideas on JSICA’s LinkedIn USF Forum.