FCC Adds Low-income Internet Subsidy Program

Daily News Article   —   Posted on February 7, 2012

(by Tim Devaney, WashingtonTimes.com) – The Federal Communications Commission [last week] overhauled two telephone subsidy programs for low-income Americans while adding a new broadband Internet subsidy.

The FCC voted 3-0 to eliminate Link Up, a one-time $30 credit that covers the cost of the installation fee for landlines or activation fee for cellphones. The commission is also making major changes to its sister program, Lifeline, which provides a $10 monthly credit to subsidize phone service.

“These reforms we’re adopting today are major,” FCC Chairman Julius Genachowski said at the hearing. “This is a fundamental overhaul.”

The reforms are meant to address corruption in the two programs. They could save $2 billion over the next few years, Mr. Genachowski said, including $200 million in 2012.

The commission plans to use $25 million of the savings to create a Broadband Adoption Pilot Program that will bring high-speed Internet to low-income Americans.

“I believe the Lifeline service can do for broadband affordability what it has done for telephone affordability,” Commissioner Mignon Clyburn said. “Access to broadband service is not a luxury. It’s a necessity.”

Lifeline has been growing. The program has about 12.5 million subscribers, up from 7.1 million in 2008, according to the Universal Service Fund, a division of the FCC that oversees the program.

That has led to an increase in costs. The program spent $1.6 billion in 2011, up from $772 million in 2008. It has projected spending $2.1 billion this year.

Much of this growth was due to corruption.

Many fraudsters were taking advantage of the two telephone subsidies. Phone companies would sometimes approve duplicate customers who are already using the program with another carrier. They would also approve customers who did not meet the low-income requirements.

These reforms are meant to fix the programs.

“We will not tolerate waste or misuse of funds,” Mr. Genachowski said. “It says to anyone considering gaming the system, ‘Don’t bother, you’ll get caught and punished.’”

Link Up, in particular, provided an incentive for companies to “sign up as many customers as they can,” because much of the $30 fee can be pocketed by the phone provider, FCC Commissioner Robert McDowell said.

It was “one major mechanism that was incentivizing waste, fraud and abuse,” Mr. Genachowski explained.

“This piece of it was not working,” he said. “It provided a bounty, in effect, for companies that sign people up.”

The program will, however, stay open to Native American communities.

The FCC plans to fix the Lifeline program with a series of reforms.

The commission is creating a National Lifeline Accountability Database, which will be up and running within 12 months, to streamline the program to prevent multiple carriers from receiving support for the same subscriber.

In 2011, the system was tested in 12 states and caught 270,000 duplicate subscribers, saving $33 million. That showed that about 7 percent of subscribers had multiple subscriptions.

“Part of the problem was Company A had no way of knowing whether Company B was already providing a phone,” Mr. Genachowski explained. “That’s going to happen very quickly.”

But aside from addressing the duplicate problem, it would do little to ensure customers meet the low-income eligibility requirements, Mr. McDowell said.

Customers would be required to show proof that they participate in other subsidy programs such as Medicaid, food stamps, the National School Lunch Program’s Free Lunch Program, or Section 8 Housing. But photo identification would not be required.

“Currently, there’s no way to verify who’s eligible with certainty,” he said.

So a second eligibility database, which would require subscribers to prove who they are and that they qualify, will also be up and running by the end of 2013.

Copyright 2012 The Washington Times, LLC.  Reprinted from The Washington Times for educational purposes only.  Visit the website at washingtontimes.com.


1.  Define subsidy and subsidize.

2.  a) What are Link Up and Lifeline?
b)  Why is the FCC overhauling these programs?  Be specific.

3.  a) How much money did the FCC’s Lifeline program spend in 2011 to give phone service to low-income Americans? – How much did it spend in 2008?
b)  How many Americans were given Lifeline in 2011 as compared to 2008?

4.  What is the FCC doing to end the fraud associated with Link Up and Lifeline?

5.  a) How much fraud did the National Lifeline Accountability Database catch in 2011?
b)  How much money do you think was stolen by cheaters between 1996 when the program was first implemented by President Clinton’s law, and 2011, when the FCC finally attempted to put an end to the fraud?

6.  Re-read para. 18-25.  How effective do you think the overhaul of these government subsidies will be?

7.  a) What is the Broadband Adoption Pilot Program?
b)  For what reason have the 5 members of the FCC board voted to implement this program?
c)  What is the purpose of the FCC?
d)  The money to pay for Link Up, Lifeline, and now the Broadband Adoption Pilot Program come from taxes/fees added onto every person and business’ phone bill.  
Is high-speed internet access a necessity to every home?  Should the government, through the FCC, provide high speed internet access to low-income residents by charging fees to those who pay for their own phone and internet?  Explain your answers.

CHALLENGE QUESTION:  How much does your family pay through government fees on the phone bill to subsidize landlines and cell phones for low-income households? The USF (Universal Service Fund) may have different names on the bill, depending upon your service provider.  Also, check both local and long distance plans on the bill–both parts of the bill include a separate USF fee.  (Look for terms such as “Federal Fees and Surcharges,” “Federal Subscriber Line Charge” or “Federal Universal Service Fee.”)
a) Check your family’s cell phone bill for the monthly USF fee.  Multiply by 12. 
b)  Check your family’s landline (home phone) bill for the USF fee.  Multiply by 12. 
c)  Add the two numbers together for the total of how much money you pay toward the government’s Lifeline program.

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  • The Federal Communications Commission (FCC) is an independent agency of the U.S. government … it was established by the Communications Act of 1934…and is charged with regulating all non-federal government use of the radio spectrum (including radio and television broadcasting), and all interstate telecommunications (wire, satellite and cable) as well as all international communications that originate or terminate in the U.S.
  • The FCC is directed by five commissioners appointed by the U.S. president and confirmed by the U.S. Senate for five-year terms, except when filling an unexpired term. The president designates one of the commissioners to serve as chairman. Only three commissioners may be members of the same political party. [NOTE: Currently there are 3 commissioners serving on the FCC, and 2 vacancies]
  • The FCC has an estimated 2011 budget of $335.8 million …and has a proposed budget of $354.2 million for 2012…
  • The FCC has 1,898 federal employees.

As specified in section one of the Communications Act of 1934 and as amended by the Telecommunications Act of 1996, it is the FCC’s mission to “make available so far as possible, to all the people of the United States, without discrimination on the basis of race, color, religion, national origin, or sex, rapid, efficient, nation-wide, and world-wide wire and radio communication services with adequate facilities at reasonable charges.”[sic] The Act furthermore provides that the FCC was created “for the purpose of the national defense” and “for the purpose of promoting safety of life and property through the use of wire and radio communications.”

Consistent with the objectives of the Act as well as the 1993 Government Performance and Results Act (GPRA), the FCC has identified six goals in its 2006-2011 Strategic Plan. These are:

  • Broadband: “All Americans should have affordable access to robust and reliable broadband products and services. Regulatory policies must promote technological neutrality, competition, investment, and innovation to ensure that broadband service providers have sufficient incentives to develop and offer such products and services.”
  • Competition: “Competition in the provision of communication services, both domestically and overseas, supports the Nation’s economy. The competitive framework for communications services should foster innovation and offer consumers reliable, meaningful choice in affordable services.”
  • Spectrum: “Efficient and effective use of non-federal spectrum domestically and internationally promotes the growth and rapid development of innovative and efficient communication technologies and services.”
  • Media: “The Nation’s media regulations must promote competition and diversity and facilitate the transition to digital modes of delivery.”
  • Public Safety and Homeland Security: “Communications during emergencies and crisis must be available for public safety, health, defense, and emergency personnel, as well as all consumers in need. The Nation’s critical communications infrastructure must be reliable, interoperable, redundant, and rapidly restorable.”
  • Modernize the FCC: “The Commission shall strive to be highly productive, adaptive, and innovative organization that maximizes the benefits to stakeholders, staff, and management from effective systems, processes, resources, and organizational culture.” (excerpted and adapted from wikipedia)



Visit the FCC website at: fcc.gov/what-we-do.