Lifeline on the Line?

There are two bills currently in Congress worth monitoring:

Rural Spectrum. The first is called the Advancing Innovation and Reinvigorating Widespread Access to Viable Electromagnetic Spectrum (AIRWAVES) Act (S. 1682) in the Senate. This was introduced by Senators Cory Gardner (R-CO) and Maggie Hassan (D-NH) and aims to encourage the FCC to continue to free up spectrum for both commercial and unlicensed use.

There are still significant chunks of spectrum that are restricted to government use, and there are other blocks of spectrum that are underutilized due to various restrictions that the FCC has put in place on their usage in the past. The FCC needs to keep looking hard at every viable slice of spectrum to make sure we are getting the best use for each slice.

The one feature of this bill that bothers me is that it would set aside 10% of any future spectrum auctions to directly build wireless broadband infrastructure in rural areas. The goal of freeing more spectrum for rural broadband is obviously a good idea, particularly freeing more unlicensed spectrum. But as we’ve seen from the CAF II program, handing billions of dollars to a company like AT&T to beef up cellular towers does not automatically equate to providing better rural broadband. The federal government needs to stop subsidizing AT&T and Verizon and instead aim any federal funding towards getting real rural broadband. The 10% giveaway is nothing more than a subsidy for these giant companies.

Lifeline Reform. A group of nineteen republicans in Congress recently introduced a bill that would curtail the federal Lifeline program. That program is part of the Universal Service Fund and provides a $9.25 monthly subsidy for lower income homes for telecommunications, which today can be used for landline telephone, cellular telephone or landline broadband, with only one such subsidy allowed per household.

The legislation would eliminate the Lifeline subsidy for cellular service. The wording is not clear, but it seems to also eliminate the subsidy to be used for broadband. The discussion of the bill in the press makes it sound like the intent of this bill is to restore the program to its original goal of only subsidizing landline telephones. With the diminished interest in landlines that original goal now seems largely out of touch.

If enacted this would significantly reduce the payments from the Lifeline fund, and the most troublesome aspect of the bill would be that it would then send these excess lifeline dollars to the US treasury. The entire Universal Service Fund is funded by monthly surcharges on Interstate telecom services. Every telephone subscriber, cellular subscriber and interstate transport customer currently pays these fees. The current surcharge is at a whopping 17.1% added to interstate telecom services – far higher than when the fund first started. The surcharge is now so high that it pushes service providers to engage in arbitrage to define services as something other than Interstate – in effect to cheat and lie about what they are selling.

The FCC and Congress have always worked hard to avoid defining the USF surcharge as a tax – but instead it’s defined as a ‘fee’ that had the purpose of funding the same kinds of telecom services in rural America that are available in urban America. But if Congress raids the USF fund they will have openly made it clear that is just another federal tax. If they are going to reduce the outflow from the USF fund then they need to then reduce the monthly fees.

It’s been obvious for years that the USF funding base needs to be expanded, with the logical expansion to add the fee to broadband services. If that was done the fee would be reduced to a tiny percentage of the cost of broadband instead of the 17.1% surcharge on interstate telecom service. But for reasons I can’t understand it still seems to be off-limits to put tax on broadband services, even though this is now the primary product sold by the industry.

It offends me as both a taxpayer and as a telecom industry guy if the payments made into the Universal Service Fund are now just going to become another hidden federal tax. The USF has done a lot of good over the years to bring better telecom and broadband to rural America. If this funding is not going to be used for that mission then the fee charged to customers needs to be reduced.

I think that current bad press might have prompted this bill. It’s been reported that there is fraud in some of the cellular Lifeline programs. But the way to clean that up is to cut off the offending service providers, not to penalize people for whom this is their only source of Internet connectivity. Studies have shown that for most of the people in the USF cellular programs the cellphone is their only source of Internet connectivity. These subsidies are not being used to subsidize expensive iPhones, as the press sometimes insinuates, but the companies providing the service provide inexpensive basic phones that come with a tiny capped amount of voice minutes and data downloads. A lot of the subsidized phones go to the homeless and other marginalized parts of society and the Lifeline phones provide them with a connection to services that would otherwise be out of their reach. I just can’t see the logic behind keeping the subsidy for landlines but not cellphones.

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