What Does Chairman Pai Mean for Lifeline?

Lifeline significantly strengthens many facets of our society by providing low-income families with access to affordable communications services. The program’s recent modernization to include broadband internet access could not have come at a more critical time. By helping low-income Americans get online, we advance a number of societal goals—such as ensuring that kids can complete their homework, accessing efficient healthcare, getting people back to work, and maintaining public safety. By providing eligible participants with a modest subsidy, Lifeline can help bridge the digital divide and ensure that Americans living on the margins can connect to these critical services when they fall on hard economic times.

The new Chairman of the Federal Communications Commission believes Lifeline is a “broken” program plagued with waste, fraud, and abuse. So, what does his leadership mean for Lifeline?

Under new leadership at the FCC, the fate of Lifeline and its ability to accomplish its intended goal of keeping people connected have recently come into question. To get a glimpse of the future of the Lifeline program under his leadership, we must look to his past statements.

Recent developments make this analysis of Chairman Pai’s statements on Lifeline even more critical. As part of a massive “Friday News Dump” on February 3, 2017, the Wireline Competition Bureau put out an order revoking nine Lifeline Broadband Providers’ designations. Public interest groups quickly came together to blast the FCC’s Lifeline Reversals. Chairman Pai responded by writing a Medium blog post called “Setting the Record Straight on the Digital Divide,” in which he complained that media headlines “sensationalized” this story. As Gigi Sohn, former Counselor to Chairman Wheeler, points out, Chairman Pai’s arguments in defense of the order are weak, and the truth is that “the new FCC majority fundamentally dislikes the Lifeline Program and will seek to weaken it by any means possible.”

In regards to Lifeline, there are many points on which the views of NHMC and Chairman Pai’s diverge. Here are a few:

Lifeline Does Not Need A Cap

Chairman Pai has repeatedly proposed the institution of a budget to prevent “future runaway spending and reduce fraud.” Pai reasons that a budget would promote fiscal responsibility, ensuring that “funds are spent more wisely,” and would increase incentives to eliminate the waste, fraud, and abuse in the program. The amount of his proposed budget has shifted over time. In Pai’s dissent after the 2015 Lifeline Order, he proposed that the budget for the program should be $1.6 billion through the end of 2018, with an annual increase to account for inflation.  In March 2016, he proposed a $1.75 billion hard budget. Finally, in a joint letter in April 2016 to the former Chairman of the House Energy and Commerce Communications and Technology Subcommittee (and the current Chairman of the full Committee), Greg Walden, Pai and Commissioner Mike O’Rielly stated that a majority of Commissioners at the FCC had briefly agreed to adopt a firm $2.0 billion cap before the “agreement was undermined.”

A budget cap could harm the program in several ways – consumers could see a reduction in their monthly benefits or even be forced to join wait lists before participating, and carriers could potentially be discouraged from participating in the program. Currently, only one-third of people eligible for Lifeline actually participate in the program. Capping the program at close to its current budget would automatically close off the program to two-thirds of all those currently eligible. This frustrates the FCC’s mission to ensure “universal service.”

Lifeline Consumers Do Not Need “Skin In The Game”

Chairman Pai believes that Lifeline subscribers should “pitch in” as a condition for service, noting that the minimum contribution should be at least 25% of the cost of service. Pai stresses that consumers must have “skin in the game”—ensuring that Lifeline “return to its original purpose of a discounted service, rather than a free service.” According to Pai, requiring customers to make minimum monthly contributions would discourage program abuse. Pai has also suggested reviewing the size of the $9.25 monthly subsidy and considering whether or not it should be reduced.

For many low-income consumers, a cost increase for service could mean the difference between getting online and remaining on the wrong side of the digital divide.  Moreover, suggesting that families struggling to make ends meet do not already have sufficient “skin in the game” is offensive. Many feel that access to communications services is a necessity and acquiring such services should be highly prioritized. For families that would otherwise qualify for Lifeline, taking on a bill for communications services necessarily comes at the expense of other important needs such as food, healthcare costs, clothing, school supplies, and any number of other things that so many take for granted. It does not suggest that providing these households with a modest subsidy is a poor use of funds.

Lifeline’s Current Minimum Standards Should Be Maintained

Chairman Pai has proposed raising the minimum Lifeline broadband standard to 25 Mbps for wired connections and 4G LTE for wireless plans. This is significantly higher than the 10 mbps fixed and 3G wireless standards established in the Lifeline modernization order. In his dissent from that order, Pai said that by establishing these standards, the “FCC has decreed that Lifeline subscribers will be stuck in the slow lane.”

The current minimum standards should be viewed as only the floor and not as the ceiling for service—companies participating in the program can provide higher speeds than those set in the order if doing so makes economic sense.  Increasing the minimum standard, even if under the guise of good intentions, could severely impair the participation of broadband providers that cannot provide prohibitively high speeds to some of its neediest customers. An increase in the minimum standards could potentially increase the cost of service for consumers, meaning the $9.25 subsidy may not be able to fully cover the monthly bill.

Lifeline Should Be For All Eligible Consumers, Not Just the “Neediest Citizens”

Chairman Pai has stated that his main priorities will include closing the digital divide. When the FCC was first considering modernizing Lifeline to include broadband service, he stated that “Lifeline should target our neediest citizens,” and that the FCC should focus on “increasing broadband adoption.” In suggesting this admirable goal of connecting the poor, Pai also states that the Lifeline program should exclude a large class of eligible low-income consumers because they “already subscribe to broadband.”

The view that Lifeline should be for the “neediest citizens” is an argument that can be best described as a wolf in sheep’s clothing. Such an approach would narrow eligibility requirements, making it harder for deserving low-income customers to subscribe. Some families subscribe to broadband one month but then disconnect other months because service is no longer affordable. The eligibility requirements for the Lifeline program should stay as-is, and any action to further narrow the group of individuals eligible for the program would go against Chairman Pai’s stated goal of bridging the digital divide. 

Support the Careful and Planned Roll-Out of the National Verifier

Chairman Pai critiqued the National Verifier in his dissent from the 2016 order because the “national eligibility database still doesn’t exist,” despite the Commission’s previous efforts to create it or that “we’ve seen this song and dance before.” The order directs USAC to devise a plan for the National Verifier, but Pai has his reservations stating that, “given the FCC’s failure to follow through on its promises on this front for almost half a decade, I doubt this time will be any different.” This sentiment was reiterated in his more recent blog post, again pointing out that the National Verifier would not be fully operational in all states until the end of 2019.

USAC submitted their Draft Lifeline National Verifier Plan on November 30, 2016 to the FCC, solicited comments from the public, and then on January 19, 2017 released the updated plan. In a letter to USAC, NHMC and several other consumer-interest organizations stated that the National Verifier has the “potential to increase consumer control over their Lifeline options, and automate application and recertification processes, while protecting sensitive personal information and protecting the integrity of the Lifeline program.” Because the Chairman has focused on ridding the Lifeline program of waste, fraud, and abuse, he should support the careful and planned roll-out of the National Verifier.

The FCC Established Its Legal Authority to Designate Lifeline Broadband Providers

The Lifeline order allows the FCC to designate Lifeline broadband providers. In his dissent, Pai questioned the FCC’s authority to do this under section 214(e)(6) of the Communications Act. He raises several procedural explanations for his views, and he believes that such broadband designations should be left in the hands of the state commissions. This question of preemption was one of the seven reasons that Pai gave in his blog post for revoking the designations of nine Lifeline broadband providers. He reasons, “The FCC has repeatedly, and for many years, recognized states’ primary role in this area. By preempting the states’ role in certification, the federal designations appear to run afoul of this legal framework.” According to the Chairman, the FCC must “make sure the process is legally defensible.”

The 2016 Lifeline Modernization Order interprets section 214(e) of the Communications Act to “permit carriers to obtain ETC designations specific to particular mechanisms of the overall universal service fund.” Therefore, to provide the FCC authority to designate LBPs under section 214(e)(6), the carrier “need only to provide some service or services – not necessarily the supported service – that constitutes ‘telephone exchange service and exchange access’ to qualify for designation by the Commission.” Claiming that the FCC lacks authority is a long-time favorite argument of Chairman Pai. As Gigi Sohn pointed out in her blog post, “He used this excuse recently in declining to defend the FCC rules that lowered prison phone rates, and he will certainly do the same when addressing the FCC’s privacy rules for broadband and, ultimately, its network neutrality rules.”

If it were up to the Chairman, he would instill his suggested changes to the Lifeline program, all under the guise of preventing waste, fraud, and abuse. Lifeline would only be a shadow of its former self. What will be left of the program? Nothing but a chasm in the digital divide.  

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