March 4, 2011 2:52 PMnews release, describing the FCC's proposed reforms was available.
The Commission's motivation in undertaking reform of the Lifeline fund was the Federal-State Joint Board's Recommended Decision from last November. The Recommended Decision focused on expanding eligibility and participation in Lifeline, asking the Commission to explore more aggressive means to curtail waste, fraud, and abuse (for example, through the development of a national eligibility verification database), and drawing attention to the rapid growth of the low income fund in the period since the FCC first authorized TracFone to provide competitive, wireless Lifeline service in 2005.
In adopting the Lifeline NPRM yesterday, the FCC predictably recommended that consumers be allowed to use Lifeline assistance toward the purchase of broadband service, and the FCC wisely announced its intention to create a national verification/eligibility database. This solution has been proven to be successful at curtailing waste and fraud in states like CA and FL that have developed state databases. However, the Commission's reaction to growth in the low income fund did not stop at simply targeting waste in the program.
The Commission also seeks to "weed out" existing, qualifying recipients of Lifeline service that do not "use" their service for 60 days. For "free" prepaid wireless carriers, this makes sense. But, for every consumer actually paying for service, it makes no sense. Considering the additional medical expenses of America's seniors, some in the government have suggested that 1 in 6 elderly Americans live in poverty. Let's hope they don't ever require short-term care outside their homes--they might lose their wireline eligibility. This recommendation, though misplaced, is not the most outrageous suggestion in the NPRM.
The "most bizarre" distinction goes to the FCC's decision to consider "capping" the low income fund. Does the Commission also plan to "cap" the number of Americans living in poverty? For the Commission to even consider such a notion only six months after the U.S. Census Bureau has reported that the highest recorded number of Americans (in the 51 years the Bureau has been collecting poverty data) are living in households with incomes at or below the poverty level, suggests that the Commission is out-of-touch with reality (at best) or simply uncharitable (at worst). Notably, Commissioners Clyburn and Copps expressed concern over this suggestion.
Cutting waste and fraud only makes sense. But, when 44 million Americans are living at or below the poverty level, and at least 50 million Americans live in households that are income-eligible for the Lifeline program (based on Medicare participants, which are subject to the same income qualification as the Lifeline program), it is alarming that the Commission is willing to "cap" the low income fund, because of its "alarming" growth. The Commission's recommendation is not only disconcerting, but contrary to the purpose of the fund--given that the current rates of participation by Lifeline eligible consumers remain relatively low, despite the fund's growth.
Currently, the low income fund stands at $1.3 billion. The part of the high cost fund that goes to "competitive" high-cost ETCs--which the FCC knows is highly duplicative--is slightly higher than the current size of the entire low income fund, so it is hard to understand the FCC's plans to evaluate capping the low income fund. Rather than lighten the contribution base by an amount greater than any waste in the low income fund, the FCC has chosen to "repurpose" these wasted, duplicative funds to create the newly-proposed Connect America Fund. See High Cost Reform NPRM, Paras. 243-244.
That the FCC would consider capping low-income assistance is all the more disturbing in light of the NPRM the FCC released last month on "reforming" the high cost fund. Recipients of high cost subsidies are supposed to be reasonably efficient. Yet, the Commission asks whether it might be appropriate--at some point--to "presumptively" cap existing high cost subsidies at $3,000/line/year (para. 210), however, carriers could always show that they really need more money. Meanwhile, the FCC also proposes allowing these same carriers to receive existing subsidies, whether or not they decide to provide broadband service--and potentially get more subsidies from the newly-created CAF. High Cost Reform NPRM, Para. 281.
What does the tale of two fund reforms tell us? Check out this excellent paper by Scott Wallsten of the Technology Policy Institute, and I think you'll understand. The paper shows that rural carriers spend 59 cents out of every "high cost" subsidy dollar received on "overhead" like lobbying expenses. Sure, it's a waste of our money, but could you really say it's a "wasteful" expense to the rural LECs?