It seems like every time there is talk about increasing or renewing federal funding for broadband subsidies, the industry is flooded with stories about rampant fraud in the current subsidy programs. While there is some fraud and abuse, I have to think part of the reason for the stories is political and is raised by opponents of subsidies.
I’ve seen several recent stories talking about fraud in the ACP program. The stories say that unscrupulous ISPs are enrolling folks into ACP and then continuing to bill the FCC after customers no longer are getting broadband service. It’s not hard to believe that this is true.
We heard similar stories for years about the FCC’s Lifeline program which is funded by the Universal Service Fund. The big complaint for Lifeline fraud was that carriers would sign up customers that weren’t eligible for the program. The FCC took some major steps to address this issue by creating the National Lifeline Accountability Database (NLAD). This database is populated by the federal agencies that operate the programs that are used to qualify a household for Lifeline. By all accounts, this database got rid of a lot of the problems since the FCC won’t process payments for customers who are not included in the database.
But the current accusation that ISPs are billing for service that isn’t being delivered is a lot more troublesome. Other than minor infractions caused by billing errors, any ISP doing this is committing criminal fraud. This is a lot harder for USAC, the agency that handles Lifeline and ACP, to monitor and uncover.
I have a suggested fix for the problem. I would wager that most of the supposed ACP fraud is coming from cellular carriers. The ACP monthly $30 subsidy can be applied to either a cellphone plan or to home broadband. In some parts of the country, that subsidy can now be as high as $75 – which is going to invite even more fraud. My suggestion is that we stop using ACP to subsidize cellular service. The underlying concept of ACP is to get better broadband to folks, and I don’t care how you try to justify it – cell phone data is not a substitute for home broadband. Many people claim that they only use their cellphone as a broadband connection, but if they are more than a casual broadband user, they are probably getting most of their broadband through WiFi connections on somebody else’s broadband connection.
ACP should be used to subsidize home broadband. The Quello Center, which is part of the Department of Media and Information at Michigan State University, released a definitive study in 2022 that showed that students without home broadband and a computer at home struggle to become computer literate. One of the most startling findings was that an 11th grader without home broadband has about the same level of computer literacy as an eighth grader with home broadband.
I don’t want to sound heartless. I know that subsidies on cell phones provide a much-needed service to a lot of people. But the cellphone service being subsidized by ACP is not broadband – it’s limited access to the Internet. There ought to be a different program to provide subsidized cellphone service to those who need it.
I would guess that eliminating the cellular companies from ACP would eliminate most of the fraud. Many of the cellular companies participating in ACP do not own cellular networks and are reselling wholesale service from somebody else. These are not facility-base carriers or ISPs.
There may be landline ISPs also committing fraud, and if so, I hope that USAC and the FCC nails them. But most ISPs I know are not going to endanger their network business by chasing extra dollars through fraud. Any network owner that does this should be penalized with huge fines and also prohibited from participating in any federal broadband program for at least a decade. That means no ability to win grants or subsidies. That would mean no ability to sell services using the Schools and Library funds or the Rural Healthcare funds.
I am sure that there are cellular carriers participating in ACP who are good actors and are not committing fraud. But bad actors are endangering the whole program that is vital for millions of low-income households to get affordable broadband. It’s really hard to make a case that cellular service is equivalent to a home broadband connection, and we should stop pretending that it is. Eliminating cellular carriers from ACP probably instantly eliminates most of the fraud problem and would have the additional benefit of extending the life of the ACP fund.