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FCC begins scaling back internet subsidies for low-income homes

FCC begins scaling back internet subsidies for low-income homes

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The Federal Communications Commission voted yesterday to begin overhauling a program known as Lifeline that provides discounted internet and phone service to low-income homes. The changes immediately affect discounts available on tribal lands by vastly limiting who can receive them. The commission also said it would begin considering a laundry list of proposals that include putting a spending cap on the program, severely constraining which providers can offer discounted service, and giving up federal approval of providers as well.

FCC chairman Ajit Pai began halting the Lifeline program back in February, immediately after stepping into his new role. The program offers $9.25 off of phone or internet service every month to households near or below the poverty line. Households on tribal lands are also eligible for an additional $25 discount. But Pai has argued that the program is rife with wasted spending and is doing a poor job of encouraging service providers to reach homes that remain unconnected.

“Lifeline consumers will be told they cannot use their preferred carrier.”

Yesterday’s vote passed a rule that will immediately limit the additional tribal discounts to people in rural areas only, whereas before it was available more broadly “in recognition of not only the low income levels but also the particularly poor connectivity on many Tribal lands.” Pai hopes that by limiting the additional subsidies to rural areas, it’ll encourage providers to build networks that cover those lands.

FCC commissioner Mignon Clyburn said that the commission had failed to properly consult with tribes before making this change. “The Tribes have told us that losing enhanced Lifeline support would be devastating,” she said in a dissenting statement.

Those are the immediate changes, but what’s coming next could be even more damaging for low-income consumers. The commission also approved a proposal to consider limiting Lifeline subsidies to providers that own and operate their own networks — meaning that MVNOs wouldn’t be able to offer the discount. Clyburn says this rule could mean that “over 70 percent of wireless Lifeline consumers will be told they cannot use their preferred carrier and preferred plan.”

Republican FCC commissioners view the proposal as a way to target money to companies that are actually capable of building out networks and therefore reaching new areas and serving new consumers. This logic doesn’t really add up: MVNOs pay network owners for the service they use; there’s still no reason for Comcast and the like to spend millions building out to a rural area to serve a small number of consumers; and this does nothing to help people actually afford internet service, which is the real goal of Lifeline. But I guess if the goal is to give those companies more money and cross your fingers hoping they do something good with it, then this accomplishes everything the commission could dream of.

A spending cap and state approval could constrain the program

While that’s only a proposal for most of the US, the commission actually went ahead and voted that rule in for tribal lands already.

On top of all of this, the Republican commissioners still want to make a bunch of changes to reduce perceived waste and abuse in the system. Last year, a Government Accountability Office report that said the program is losing money to fraud to has oversight issues, though it was conducted on a small sample and done before additional reforms were put in place.

To reduce those issues, the FCC will now consider putting a hard spending cap on the Lifeline program, which basically means it won’t be able to scale if the system needs to grow to accommodate more low-income households. For a program with the goal of getting low-income homes connected, that could dramatically limit its effectiveness.

The FCC is also considering handing a lot more control of the program over to states. When the Lifeline program was revamped to include broadband service two years ago, the commission took control of the ability to approve companies to offer subsidized service. The purpose of this was to make it easy for companies to sign up — rather than risk letting states delay or reject them — so that the commission could get as many as possible on board and give as many low-income households as possible the ability to get Lifeline discounts. Now, however, the commission is looking at handing that ability to the states, which would slow the program’s expansion.

As of today, the biggest changes are limited to tribal lands. But next year, the commission is certain to consider a final version of these proposals — one that will very likely curtail low-income consumers’ ability to get subsidized service in the name of limiting waste and encouraging infrastructure spending from massive internet providers by giving them more money.

Commissioner Clyburn summed the day’s proceeding up sadly and succinctly, with a reference to the commission’s earlier approval of zero-rating programs: “I could go on pointing out how this administration enables providers to provide free data to consumers,” she said, “but not if they are economically poor.”