Results tagged “low income fund”

October 21, 2013 4:02 PM

Lifeline Series, Part 2: the Sound and the Fury

In the last post we mentioned the letter from the 44 House Republicans, who with no sense of self-awareness, sent the FCC a letter during the shutdown where they referred to the Lifeline program as representing "everything wrong with Washington."  Sure, it was wildly hyperbolic, but--admittedly--not completely baseless.  

But before we get started in discussing the "state of the debate," it helps to know some history--because understanding the real facts--is necessary to fully appreciate the bedlam that characterizes the current state of the "conversation."  The best piece I can recommend--which keeps with the theme of "why are we here?"--is this entertaining and informative blog by Harold Feld, explaining the ironies of Lifeline.

Where We Are:  The "Uncivil" War

If you've paid any attention to Lifeline over the past few years, you'll also recognize that the House Republican letter is hardly the first time that the Lifeline program has been portrayed as some kind of political litmus test, implying that if you support Lifeline you are na´ve at best, and grossly irresponsible at worst.  For a debate in which few, if any, of the program's opponents have any experience with the Lifeline program, the level of rancor in this "debate" is truly without equal.

Even worse, some "political activists" on the "anti-Lifeline" side try to generate opposition/hostility toward the program by associating the Lifeline program with the most appalling, frequently racial, stereotypes of poor people.  For example, who can forget the "Obamaphone lady?"  More recently, there was this deceptive video that circulated over the Summer from political activist (and pseudo-journalist) James O'Keefe.   

What's notable about O'Keefe's video is that it features actors, acting out the worst stereotypes of low income people.  People viewing the videos aren't reacting to anything that is actually being depicted in the video, rather they are being manipulated by a storyline created by the narratives of actors with a political agenda.

But there wouldn't be a rancorous debate unless both sides were participating.  So, as dishonest and deplorable as the "kill Lifeline" side is, the advocacy of the "save Lifeline" side is as insipid as it is unpersuasive.  The "save Lifeline" crowd has a website called Lifelineconnects.org.  On the website, you can look through their news clippings on their advocacy activities.  The group has done some advocacy at the Commission, and they have had advocates for the program testify before Congress.  Do you know what their message is?  Lifeline is good.  Beyond anecdotes of how Lifeline is helping a few deserving people, there is very little of substance on the web site.  

How We Got Here

The one uncontroverted fact about the state of the Lifeline program is that it has become wildly controversial over the last several years.  But, how did it get to this?  It didn't start that way; Lifeline started as a reasonable, bipartisan program to ensure that all Americans had access to basic communications services.  The addition of wireless service to the program in 2005 was merely an evolution of the program's founding principle.

So, when it became necessary to update the program--only a few years ago--it was clear that the program needed changes.  Starting in 2009--which, it should be noted, was a very bad year for the U.S. economy--the USF's low income fund began to grow dramatically.  

In early March of 2011, the FCC released its Lifeline/Link Up NPRM to discuss changes to the Lifeline program that would help modernize the program and put it on a more stable foundation for the future.  The NPRM identified the dramatic growth in the low income fund as the primary factor leading to the conclusion that the Lifeline rules needed to be revised.  

While the growth in the fund was the real issue that needed to be addressed, rather than to try to understand the basis of this phenomenon and to deal with the larger implications of the growing low-income fund in a holistic way--addressing USF contribution reform along with reforms to the Lifeline program--the Commission took a short cut and assumed that most of the problem was the result of the influx of prepaid wireless "Lifeline-only" service providers, who must have been running amok. New rules on service providers, the Commission said, would surely solve the problem.

This one lazy assumption is what set the table for all of the successive, unproductive, rancorous debate over Lifeline's future.  Because, after all, when you limit the possible explanations for fund growth to one--waste--then every service provider and every consumer participating in the program becomes part of the problem. Thus, the eventual result of the Commission's approach--that the future of the Lifeline program would be the victim of an unproductive war of political values--was hardly unforeseeable at the time, as I explained in this blog.

Given where we are, in terms of the level of the conversation about the future of Lifeline, does anyone honestly think that a solution to Lifeline's real problems is going to come out of this protracted "Sumo match" of opposing political values?  Neither do I.  But, if the Commission is to rescue Lifeline, they'll have to start understanding the relevant facts.  

In the next installment in this series, we'll look at how the wireless Lifeline business works, and how the Lifeline Reform Rules are working.  Finally, in our last installment, we'll talk about realities that the Commission must recognize, and the changes that must be made in order to stabilize the Lifeline fund.  

March 10, 2011 3:29 PM

Lifeline Reform: The FCC's "Welfare Cadillac" ?

I recently saw an interesting program about the life of American music icon, and champion of the underdog, Johnny Cash.  Johnny Cash met and performed for every President, from Richard Nixon on.  When he agreed to perform requests for President Nixon, Cash felt two of the songs requested (neither of which were his) were unfair to the poor, or to the young (the "hippies"), and he refused to sing them.  The song that was unfair to the poor was called "Welfare Cadillac", and portrayed those on public assistance (which Cash's childhood home was built with) as scammers, based on a few anecdotes of people who had abused the system.
 
For some reason, I thought about this story while reading the FCC's Lifeline/Link Up NPRM, released Monday.  It goes without saying that in any government subsidy program, there are certainly going to be some that will use the plight of the poor as an excuse to rip off the program.  But, these few scammers don't justify the unbecoming way in which the FCC portrays the growth of the fund in order to limit, or reduce, its size--without any regard to what the true size of the fund should be at this moment in time.
 
So, let's look at what's unfair about the NPRM.  First, consider the "panic" about the growth of the low income fund.  While it's true that the low income fund is growing quickly, that fact alone means nothing.  The Commission seems to forget that--if the purpose of the low income fund is to make voice, or broadband, services affordable to America' poor--the fund should be growing as quickly as America's poor.  That's not just a fact, but it's a fact that the FCC ignore, choosing, instead, to demean the purpose of the fund through unfair innuendo.
 
If you look at Paragraph 27 of the NPRM, the FCC cites some pretty "alarming" growth statistics about the fund, but here is where the NPRM begins to mislead, by exaggerating the "problem."  The paragraph describes the increase in the fund through the years, noting that the fund dispersed an inflation-adjusted $817 million in 2002 (n. 48, p.12).  The fund now stands at an estimated $1.3 billion for 2010. 

The next sentence, though, inflames the fears the FCC seeks to instill in the public, stating that "in the last several years, a number of pre-paid wireless providers have become Lifeline-only ETCs, fiercely competing for the business of low-income customers by marketing 'free' phone service."  The Commission goes on to conclude that, while this "development" has expanded choices for consumers, "it has also led to significant growth in the fund." The paragraph ends with the haunting specter that "[p]re-paid wireless ETCs now account for one third of all Lifeline reimbursements."
 
Now, let's just "unpack" those "facts" and get a little perspective.  The low income fund is supposed to give a monthly, need-based, allowance to low income Americans to help defray the cost of phone service.  Before leaping to its "reefer madness" conclusion, did the FCC ever consider the possibility that--regardless of how, or from whom, eligible consumers are getting their service--the number of poor Americans may have a hand in the fund's growth?
  
In 2002, 34.6 million Americans lived in poverty.  By 2009, more than 9 million more Americans lived in poverty.  Low income fund disbursements in 2009 were $1 billion.  The "average" household in America consists of a little over 2.5 people (based on 2000 Census data at 4).  If we do the math, then we learn that there were about 3.5 million more poor households added between 2002 and 2009.  Keep in mind, also, that the eligibility requirements for Lifeline can be as high as 150% of the Federal Poverty Guidelines (for LIHEAP participation--a Lifeline-qualifying program), so these estimates are the minimum increases in Lifeline-eligible households.
 
What would you expect to happen even if only a third of the new households living in poverty were served by Lifeline?  Well, the fund disbursements would have been slightly less than $1 billion in 2009 (assuming Tribal participation at today's rate)--in other words, about right.  If all of the newly-poor households had participated (and no new ones were added in 2010), the low-income fund would have been well over $1billion in 2009--about what it is expected to be in 2010.  Hmm?  A "fact-driven" explanation for the growth?  That's no way to build panic and urgency. 
 
But wait!  Aren't there still all those blood-sucking, pre-paid wireless, Lifeline-only ETCs?  Well, there are really only two--TracFone Wireless and Virgin Mobile (now owned by Sprint).  What about all the other names listed in n. 50 of the NPRM?  The FCC found that it was in the public interest to allow those companies to provide more service choices for low income Americans, but the FCC has not yet granted these companies the further approvals that would allow them to actually participate in the Lifeline program.
 
Even if the FCC had awarded ETC certification to all those companies, though, what disgrace is that?  The Commission acknowledges that more than a quarter of Americans have "cut the cord" (para 25), so why should it be surprising if a slightly larger number of low income customers have done the same?  The Commission clearly wants more low-income Americans to be able to choose broadband as a means of communication; why not wireless?
 
It's good for the FCC to be concerned that fraud and duplication are limiting the efficiency of the low-income fund, and, I give the Commission credit for proposing a national validation/verification database.  Such an improvement would be a welcome reform to carriers, administrators, and recipients.
 
Nonetheless, the tone of the NPRM, its misleading characterizations of the causes of fund growth, and many of the recommendations it makes (though the FCC concedes Lifeline has helped the poor (para 26)) conveys at best a grudging compliance with the Act's requirement that the USF serve low income Americans.  At worst, though, a reasonable person could be forgiven for considering this NPRM the regulatory successor to "Welfare Cadillac."  It's too bad there's no Johnny Cash on the Commission . . . .