Millions Could Lose Service if FCC 'Reforms' Lifeline Program

Adrianne B. Furniss

In the 21st century, the U.S. can’t afford for anyone to be disconnected. It is the law of the land and just common sense. “The future belongs to the connected,” says Federal Communications Commissioner Jessica Rosenworcel, “and this agency does its best work when it extends that future to more people in more places.” Unfortunately, the FCC is currently considering its own proposal that threatens to disrupt affordable phone service and internet access for more than 8.3 million U.S. households. That’s unacceptable.

The FCC’s Lifeline program provides discounts on the monthly phone and broadband bills of our most economically vulnerable neighbors – senior citizens, veterans, low-income families, and the poor. Currently, 70 percent of Lifeline participants receive service from a telecom reseller (in wonkspeak, a “non-facilities-based provider”) – a company that buys network capacity in bulk and then resells it to consumers. Increasingly, the largest telecom providers (the “facilities-based providers”) – think AT&T, T-Mobile, and others – have decided they’d rather not participate in the Lifeline program. They are happy to let the resellers customize their offerings to meet the special needs of low-income consumers.

Wireless resellers are helping to drive adoption rates and close the digital divide. With only 33 percent of qualifying households currently enrolled in the Lifeline program, non-facilities-based providers are playing a vital role in reaching communities that have fallen through the cracks of the market.  It is no coincidence that the six states with the lowest Lifeline participation rates are also the states with two or fewer resellers that offer Lifeline services. 

On its own initiative, the FCC is now considering banning resellers from the Lifeline program. They want to give exclusive market access to these low-income consumers to the largest telecom providers that, yes, have already indicated they’re not interested in marketing services to. It’s a crazy idea that will result in fewer choices, and less competition and innovation in this marketplace. Millions of people could lose their affordable services, disconnecting them from friends and families, emergency safety services, and educational and employment opportunities. That’s widening the digital divide, not bridging it.

Without any evidence, the FCC says that limiting Lifeline support to facilities-based providers will “improve the business case for deploying facilities to serve low-income households” and “[make] deployment of the networks more economically viable.” That’s doubtful.

Serving Lifeline subscribers on a retail, rather than wholesale, basis will not increase net profits for facilities-based providers enough to induce greater investment. The fact is that when large nationwide providers sell their excess network capacity to wireless resellers, they recoup wholesale costs while avoiding the high costs of providing retail service. Wireless resellers are successful at targeting these niche segments of the Lifeline market because they differentiate their retail offerings to cater to those specific segments. For example, many resellers embrace targeted marketing and distribution approaches, such as point-of-sale displays in local businesses. They offer innovative technology, marketing, distribution, and customer service offerings, including bilingual service representatives and specialized hardware. This differentiation can be profitable for resellers targeting specific market segments, but costly for the big guys who generally target broader markets. Thus, the big providers can avoid the costs of marketing, sales, service packaging, distribution, customer billing, customer service, and Lifeline compliance and verification that come with serving Lifeline subscribers.

The FCC’s proposal to eliminate Lifeline support for non-facilities-based providers undermines the goal of the Lifeline program and runs counter to the FCC’s longstanding commitment to promote universal access and adoption through competition and consumer choice. Rather than disrupt the Lifeline service of over 8.3 million low-income households, the FCC should continue to provide Lifeline support for these innovative and competitive providers.

Benton has joined literally hundreds of organizations that are asking the FCC to ensure Lifeline voice and broadband service for low-income households, with minimal disruption to the people who depend on the program for a consistent connection to the world via their telephone or internet connection. We're asking that the FCC:

  1. Keep the focus of Lifeline on people, not networks: The Lifeline program was designed to help low-income households afford modern communications service by addressing the major barrier to consistent subscription: price. Lifeline helps lower this barrier by providing low-income households a modest monthly discount off their monthly bills. There is already another much larger program focused on network buildout to rural, remote regions of the country, so the focus of Lifeline should remain on helping people afford service so that they can maintain connectivity. Furthermore, the elimination of non-facilities-based providers will leave large portions of the country without a choice in Lifeline providers and could result in no Lifeline coverage for some parts of the country.
  2. Save Lifeline Voice Service for All Consumers, Not Just For Those in Rural America: The FCC is proposing to support subsidized voice services in rural areas, but not in urban areas. All low-income households should be free to choose voice services. Most current Lifeline consumers have a voice/data bundle, as voice service is critical for access to 911 emergency services. Communities benefit when everyone can report criminal activity, fires, or other emergency conditions.
  3. Avoid rationing Lifeline which will hurt the poor and hurt the country: The FCC is proposing to limit the reach of Lifeline service by: 1) placing an arbitrary budget cap on the Lifeline program and asking who amoung the poor should be prioritized when the cap is reached; and 2) asking if individuals' participation in the program should be subject to a lifetime cap. These proposals will be incredibly disruptive, detering participation by telecommunications providers and will lead to loss of service for customers. In essence, the caps will ration Lifeline, increase the cost of program administration, and lead to serious consumer confusion. These proposals would profoundly limit the ability of Lifeline to focus on helping connect the poor to communications service.
  4. Continue to allow free service packages: The FCC is proposing to take a heavy hand to the marketplace to eliminate the “free” Lifeline services that are the most popular Lifeline products in the marketplace. These are the prepaid wireless Lifeline services that do not have a deposit requirement, do not require a credit check, do not require a checking account or some other means to make a monthly payment, and do not have late fees. These prepaid Lifeline services provide either a monthly allotment of minutes (at least 750 minutes a month) or a bundle of voice and data for the month. These products serve some of the most economically-fragile low-income households: those without bank accounts, domestic violence survivors, households that frequently experience homelessness, and other vulnerable populations. The proposal to require a mandatory co-pay will increase household financial stress and add cost to some carriers’ business models.

The future belongs to the connected. Any changes to Lifeline should connect more, not less, people to the essential communications networks of today. 

Adrianne B. Furniss manages staff and our relationships with Benton experts, partners, and supporters in service to Benton's mission and in consultation with Benton's Trustees and Board of Directors. Previously, she held management positions at both non-profit and for-profit content creation companies, focused on program development, marketing, and distribution.

By Adrianne B. Furniss.