Universal Service Fund

In 2013, only 4 million students had access to broadband that provided internet fast enough to allow for digital learning in the classroom. Now, four years later, that number has catapulted to 39.2 million, thanks to the modernization of a federal program and a broad bipartisan coalition of federal and state lawmakers and policymakers dedicated to the cause.

"America made a historic promise to our students in 2013 to connect every school district to high-speed internet," said Evan Marwell, CEO of EducationSuperHighway. "We've made great progress since then,” he said. “However, our work is far from over. It is critical that federal and state leaders, schools, and service providers continue the hard work necessary to close the connectivity gap." But that gap now spans just 6.5 million students and it’s expected to be eliminated by 2020 based on current growth models. Under the Obama administration, in 2014, the Federal Communications Commission voted to modernize its E-Rate program, which provides funding for schools and libraries to connect to the Internet. The commission approved a $1.5 billion boost in funding and set new standards in an effort to expand access, including setting minimum recommended bandwidth levels, requiring fiber connections to every school in order to allow bandwidth to grow over time, and setting up wireless connections in every classroom to support “one-device-per-student” programs.

On July 17, 2017, Senate Commerce Committee Chairman John Thune (R-SD) sent Federal Communications Commission Chairman Ajit Pai a letter with five questions about Universal Service Fund collections and disbursements and “a description of any regulations limiting allocation of undisbursed USF funds to a particular program or use.” On Sept 5, Chairman Pai replied.

More than 39 million students in America now have access to high-speed Internet at school, a 5.1 million student increase over last year. This research shows that 94 percent of school districts nationwide now meet the minimum 100 kilobits per second (kbps) per student goal set by the Federal Communications Commission in 2014. The report confirms that America continues to make extraordinary progress in narrowing the K-12 digital divide. Overall, 39.2 million students, 2.6 million teachers, and 74,000 schools are now achieving the minimum connectivity goal that gives students equal access to digital learning opportunities. However, 6.5 million students are on the other side of the digital divide without access to high-speed Internet. A divide that is particularly wide in the 1,587 rural K-12 schools that don’t yet have the infrastructure necessary to revolutionize the way teachers teach and students learn.

“America made a historic promise to our students in 2013 to connect every school district to high-speed Internet,” said Evan Marwell, CEO of EducationSuperHighway. “We’ve made great progress since then; however, our work is far from over. It is critical that federal and state leaders, schools, and service providers continue the hard work necessary to close the connectivity gap.” Governors and state leaders across the country have taken notice and played a crucial role this year in bringing high-speed learning opportunities to every classroom. Today, a total of 46 governors have committed to upgrading their schools for the 21st century. Taking advantage of E-rate Modernization, governors have allocated nearly $200 million in state matching funds for special construction that can help connect the hardest-to-reach-schools.

The American Cable Association says the Federal Communications Commission has to simplify its Connect America Fund II auction framework if it wants to get the most fiscal bang for the buck.

The largest incumbent price cap carriers--AT&T, Verizon, CenturyLink--declined about $2 billion in CAF II support for building out broadband to high-cost, generally rural, areas, in 20 states, so the FCC is opening that pot of money up to competitors, like cable broadband providers, via auction. All that money is coming from the Universal Service fund for high-cost, mostly rural, areas for which there is no business case for building out broadband absent that subsidy. ACA says the proposed auction design is "inordinately" complex, which will at best deter and at worst thwart, participation by many, including the "small town cable operators" FCC Chairman Ajit Pai has said he wanted to encourage to participate.

The Senate Homeland Security and Government Affairs Committee held a hearing Sept 14 titled, "FCC’s Lifeline Program: A Case Study of Government Waste and Mismanagement". Committee members criticized the subsidy program for phone and Internet access that was the subject of a recent watchdog report detailing cases of fraud and abuse. Chairman Ron Johnson (R-WI) said at a hearing that there “probably” needs to be a complete overhaul of the Lifeline program. “We need to completely rethink how we distribute that subsidy,” Chairman Johnson said.

Sen Claire McCaskill (D-MO) called on the Federal Communications Commission to crack down on the companies that she says are defrauding the program. “Why are we providing these companies with this massive opportunity for fraud?” Sen McCaskill said. Both Sens McCaskill and Johnson suggested diverting funds from Lifeline towards programs focused on expanding rural internet access.

Once again we will read headlines trumpeting faults in the Federal Communications Commission’s Lifeline program that do not match the realities of the day. Despite significant reforms made under the previous administration and no new evidence of waste, fraud, or abuse, the Lifeline program continues to be under attack while our nation’s most vulnerable remain on the wrong side of the digital and opportunities divide. I am especially disappointed by the current FCC majority and those who repeatedly reject real reform efforts. This administration refuses to allow new broadband providers into the Lifeline program, which will deepen and cement the digital divide while omitting the fact that the Lifeline program has one of the lowest improper payment rates of all government subsidy programs.

Continuing to vilify our nation’s only means-tested universal service program and remaining on the sidelines while communities and their residents do without connectivity, is a dereliction of the oath we were sworn to uphold. I, for one, remain committed to working with those who wish to improve the only FCC program that directly tackles the challenge of affordability in communications. Going forward, it is my sincere hope that those who are empowered to help those in need, will offer solutions, not attacks, so that we may enable all of our citizens to participate in a 21st century digital economy.

Three dozen organizations, including Common Cause, the Communications Workers of America, and the Benton Foundation, have sent letters to individual members of the Senate asking them to preserve the Lifeline communications subsidy program from what they say are Federal Communications Commission efforts to undermine it. The Lifeline program is part of the Universal Service Fund subsidy and is directed at those who can't afford access to basic communications—originally phone and increasingly internet. In the letter, the groups dub the program a "successful public-private partnership." "While critics have focused on alleged fraud and abuse as a reason to eliminate or limit the program, these critiques ignore the reforms already adopted that safeguard the program," the groups said. "Lifeline modernization involved sweeping reforms, including minimum standards obligations, additional cost-control measures, and a budget of $2.25 billion annually. These reforms are rapidly being implemented and are the most effective way to safeguard the program and ensure that program funds go to families in need. Implementation of the newly adopted independent eligibility verifier begins this year and will be complete by the end of 2019." [The Benton Foundation was a signatory on the letter]

[Commentary] Promoting universal access to modern communication services and the internet, especially for low-income and disadvantaged Americans, is a noble cause and a pragmatic objective worthy of government support, but the Federal Communications Commission’s (FCC) Lifeline program is not an effective or efficient means of achieving these goals. We need a better approach to open the doors of digital opportunity to low-income and disadvantaged Americans. Here are four principles for replacing the program with a more effective approach to advancing digital opportunity:

First, federal and state governments should work to reduce barriers to broadband deployment and adoption, and to the efficient functioning of the broadband marketplace, so as to lower prices and increase the availability of affordable broadband services.
Second, regardless of whether Lifeline is replaced or reformed, support should be targeted to those who do not already have service.
Third, the replacement for Lifeline should reflect an assessment of who needs help and of what sort.
Fourth, and finally, it is time to consider a new delivery mechanism, one that involves neither the federal regulatory agency which has so grossly mismanaged the Lifeline program nor the telephone companies that have profited so handsomely from that mismanagement.

[Jeffrey Eisenach was on the Trump FCC Transition team, and is a managing director at NERA Economic Consulting.]

Modernizing Lifeline for broadband is critical for poor people and people of color, who are more likely to be on the wrong side of the digital divide and who cite cost as a major barrier to adoption. Lifeline is the only federal program poised to increase broadband adoption and provide a pathway out of poverty for millions of people. When talking about Lifeline, we hear a lot about waste, fraud and abuse. But this narrative is overblown and frankly offensive.

I have long been troubled by the tenor of the Lifeline debate: There’s a tendency to wage war on the poor, to demonize and assume the worst about Lifeline recipients. And I cannot sit here today, especially as white supremacy is on the rise around the country and in the White House, without directly confronting the racist undertones of these assumptions. We should avoid inflated stories of waste, fraud and abuse at the expense of poor people and people of color, who rely on Lifeline to meet basic needs. The first priority should be expedient implementation of the 2016 Order. We should reject radical measures such as moving Universal Service funds to the U.S. Treasury “to offset other national debts,” as the FCC Chair’s office evidently suggested to the GAO. This could undermine all USF programs, including Lifeline and others designed to connect rural Americans, schools and libraries.

I can summarize my testimony in three sentences. First, promoting universal access to modern communication services and the Internet, especially for low-income and disadvantaged Americans, is a noble cause and a pragmatic objective which deserves Federal support. Second, the Federal Communications Commission’s current lifeline program is not an effective or efficient means of achieving these goals, nor are current reform efforts likely to make it so. Third, we cannot give up: the doors of digital opportunity must be opened for low-income and disadvantaged Americans, and it is therefore incumbent on policymakers to develop a new approach that is both effective and a good investment for the American taxpayer.