FCC Whacking the Lifeline Program

A few weeks ago the FCC took steps a few weeks ago that are going to significantly cut back on the Lifeline program. This is a program that has historically provided a subsidy of $9.25 per month off phone service, but which was expanded under the Tom Wheeler FCC to to also be able to cover broadband.

We had a strong hint that this was coming when one of the first acts of new FCC Chairman Ajit Pai was to halt new carriers from becoming eligible to participate in the Lifeline program.

One of the primary stated reasons for the changes are that the Lifeline program is full of fraud and waste. This is something that was identified by the FCC over two years ago and they put in place a remedy to fix the fraud issues. Lifeline goes to households that qualify for various federal welfare programs. The main reasons for fraud was providing the subsidy to those that weren’t eligible or continuing eligibility after people no longer qualified for welfare.

The obvious fix for this was for the FCC to maintain a database of those that are eligible and require providers to verify eligibility for each customer each month. That fix was started two years ago and is apparently still two years from being implemented. I find it astounding that it would take four years to put together what is basically a database lookup, especially for an industry that maintains numerous complex databases. This sounds like something a corporate IT team could implement in a few months and failure to make this work in a timely manner speaks mostly about the failure of government to be able to implement technical systems. Since the fix would largely eliminate the fraud I find it disingenuous for the FCC to still be looking for changes to the program due to fraud issues – this is something they should have fixed long ago.

There are a few changes to the program to be implemented immediately along with a list of proposed future changes. The immediate change to the Lifeline program include the following:

  • Limit Lifeline on Indian reservation to only carriers that are facility-based. This eliminates resellers, who are the primary providers of cellular service in rural areas and on tribal lands. Since AT&T and Verizon don’t actively promote Lifeline this likely means that many eligible customers will lose the subsidy. Even where a customer can change to a facility-based option, it’s often more expensive, which effectively would eliminate any savings from lifeline.
  • Eliminated Lifeline plans that rely on WiFi networks instead of cellular networks. In cities there a number of carriers today that sell WiFi only plans, which are affordable and effective where there is widespread WiFi. These phones use VoIP over WiFi instead of cellular and it seems odd to eliminate based upon the technology used.

The big changes are those proposed for the future. As we’ve seen often in the past, specific changes proposed by the FCC tend to get implemented unless there is big pushback by the industry. The proposed changes include:

  • Requiring people to pay a percentage of their phone bill. Today there are cellular carriers willing to only charge $9.95 for a barebones Lifeline plan that has limited minutes, and the FCC wants all Lifeline customers to pay a share of the cost of the service.
  • Extending the requirement that Lifeline is only available for facility-based carriers. In the cellular world that means AT&T, Verizon, T-Mobile and Sprint. It would eliminate the many cellular resellers from participating in the program. Today over 70% of Lifeline recipients are through resellers.
  • Setting some kind of cap on the whole Lifeline program to stop it from growing.

It seems clear to me that this FCC would eliminate Lifeline completely if they could. Since the program was created by Congress it would be impossible to eliminate it without additional Congressional action. But all of the FCC’s proposed changes will significantly cut back on eligibility and make it harder to households to take part in the program.

I will be honest in that I never gave Lifeline a lot of thought in the past. But a few years ago I was introduced to a program that supplied Lifeline phones to the homeless. The carriers provide the phone and the service for $9.25 per month with no cost to the homeless. These are not smart phones, but very basic older-technology phones. And the plans were not lavish, but provides users with some limited minutes during the month plus some basic texting and web connection. The homeless people participating in the program said that it was transformational in that it allowed them to use the phone to connect to social services, to search for work and to communicate with loved ones. The FCC’s proposal would largely eliminate programs like this one, to the benefit of nobody.

Solving the Urban Digital Divide

old computerI can remember talking about the digital divide twenty years ago. At that time the main issue was to get computers to low income households so that they could buy DSL. There were some fairly successful programs around, mostly run by volunteers or with grant funding to try to make this work.

But now twenty years later most cities I visit are still trying to solve the digital divide. But today it’s a different divide and the urban divide is now mostly one of affordability. There are isolated pockets in many cities that don’t have broadband, but the vast majority of people in urban areas have physical access to broadband. But there are numerous surveys that show that somewhere between 10% and 20% of households in most cities say that they can’t afford broadband.

In the last twenty years broadband has gotten a lot more expensive. And I think we are headed for a time when it’s going to become even more expensive. The big telcos and cable companies are now looking for broadband to be their major source of revenue growth. The cable companies added over 3 million new broadband customers last year and are expected to do so again this year. But you don’t have to look very far into the future to foresee the time when growth will be slow for every ISP. They will be forced to raise broadband rates to meet Wall Street earnings expectations.

There are some cities that have built their own networks – cable HFC networks or fiber networks – but even these cities have not done a very good job of providing broadband to all of their low-income households. It’s expensive to build the last mile and particularly expensive to connect homes to a fiber system.

There are some solutions that can solve part of the problem:

  • There are a number of cities that have built to or purchase broadband for public housing projects. But generally this only covers a small percentage of the households that need broadband.
  • There are some large ISPs that bring broadband to public housing. I recall seeing announcements recently where both Google and AT&T have brought broadband to public housing in one or two cities, and of course they crowed loudly about it. And while these gestures are nice, they solve a tiny slice of the problem.
  • There are cities that have tried to build ubiquitous outdoor WiFi. But these networks are expensive to build and the technology doesn’t seem to last for many years. I know of a number of these networks that have been discontinued in the past.
  • There are also cities experimenting with trying to beam WiFi into low income homes, but this is even more expensive than building outdoor WiFi.
  • Communities everywhere have put broadband into libraries, figuring that having a place for people to get access to broadband is better than nothing at all.

But I see that the digital divide topic is back in vogue and a lot of cities are having the discussion again of how to bring broadband to where people need it. There was a time in the past where broadband was something that was nice to have, but today it is becoming a necessity for most people. And not having affordable broadband puts people at a major disadvantage. There are a lot of people today that use their smartphone for Internet access. This works for a lot of purposes, but it can quickly get dreadfully expensive if you actually use the broadband much.

I don’t have a solution. I was just in a city last week that owns their own cable network and I reminded them that using that network to solve the digital divide is by far the most cost effective way to do this. This city was extremely interested in the new federal lifeline program for data and that might be enough of an incentive for them to develop a lifeline product that can be afforded by a lot of the households in their city.

When I look around at the number of households that want broadband and the numbers that will be eligible for the federal program I wonder if the USF Lifeline Fund is large enough to help everybody who needs it. I saw that Congress is already trying to cap this fund, but if we want to get broadband everywhere then the USF fund might be a powerful tool for getting broadband into a lot more homes.

Lifeline and Rural America

FCC_New_LogoEarlier this year Chairman Tom Wheeler of the FCC proposed to change the Lifeline program to support broadband in addition to voice. In that proposal he suggested that a household should get at least 10 Mbps download and 1 Mbps upload in order to qualify for a Lifeline subsidy.

Here is where it gets weird. Frontier has filed comments that the 10/1 Mbps threshold is too high and that using such a high standard will stop a lot of rural households from getting Lifeline assistance. They are right, of course, but their solution is to lower the Lifeline threshold to whatever level is necessary to meet actual speeds in a given rural market.

Meanwhile, Frontier has taken a huge amount of money recently from the Connect America Fund for the purpose of raising rural DSL up to the 10/1 Mbps level. But they have six years to get to those speeds, and most of us in the industry think that even after all of their upgrades a lot of the rural households in the upgraded areas still won’t get 10/1 speeds. It’s going to be very hard for Frontier to do that with DSL in a rural setting where people are on scattered farms or back long lanes. I find it unlikely that Frontier, or any of the big telcos, are going to put enough fiber in the rural areas to actually achieve that goal.

But far more importantly, 10/1 DSL is not broadband. It’s not broadband by today’s current FCC definition that says broadband must be at least 25/3 Mbps, and it’s not broadband for real life applications.

I use my own household as the first example. There are two adults and one teenager. We work at home and we are cord cutters and get all of our video online. We have a 50 Mbps cable modem, and as cable modems tend to do, sometimes it slows down. When our speed hits 25 Mbps we’re all asking what is wrong with the Internet. So our household needs something greater than 25 Mbps for normal functioning. If we get less than that we have to cut back on something.

I have a friend with two teenage boys who are both gamers. He has a 100 Mbps Verizon FiOS connection on fiber, and when there are multiple games running everything else in the house comes to a screeching halt. For his household even 100 Mbps is not enough speed to meet his normal expected usage.

And yet here we are having discussion at the federal level of setting up two major programs that are using 10/1 Mbps as the standard goal of Internet speed. As a nation we are pouring billions of dollars into a project to improve rural DSL up to a speed that is already inadequate and by the time it is finally finished in six years will be massively below standard. It won’t take very many years for the average household to need 100 Mbps and we are instead taking six years to bring a huge amount of the rural parts of American up to 10/1 DSL.

I know that the FCC is trying to help. But it’s sad to see them crowing about having ‘fixed’ the rural broadband problem when instead they are condemning millions of households to have nearly worthless broadband for the next couple of decades. Imagine if they had instead allowed those billions of dollars to become matching funds for communities willing to invest in real broadband? Communities wanting to do this are out there and many of them were hoping to get some federal help to bring broadband to their areas. Building rural fiber is expensive, and even a little federal help would be enough to allow many rural areas to find the rest of the funding needed to build their own solutions.

And the problems are going to get worse, not better. Verizon didn’t even bother to take the federal subsidies to improve DSL because they don’t want to invest anything in rural copper. AT&T has told the FCC repeatedly that they want to tear down copper to millions of households and put rural households on cellular data. And while Frontier is going to try to make their rural copper plant better, how much can they realistically accomplish with 50–70 year-old copper that was neglected for decades before they bought it?

I just shake my head when I see that Frontier and the FCC are going to be wrangling about households getting Lifeline subsidies for speeds slower than 10/1 Mbps. The FCC has already decided that they are going to throw billions at rural copper and call it job done. It’s about time that we instead start having a conversation about bringing real broadband to rural America.

The Homework Gap

Generic-office-desktop2A newly released Pew Research Center poll looks at the impact of household income on the percentage of homes with Internet connectivity. The study shows that homes with children and with annual household incomes under $50,000 have significantly lower broadband penetration than higher income homes.

FCC Jessica Rosenworcel issued a statement after the release of the poll and called this phenomenon the ‘homework gap”. There have been discussions since the 1990s about the digital divide; this survey shows that the divide is still there and that it correlates with household income.

This finding comes at a time when computers are routinely integrated into schools. Most classrooms and schools now have computers. Also, though I was unable to tie down any precise statistic, what I’ve read suggests that a majority of teachers assign homework that requires a computer. There is also a new way of teaching becoming vogue. Referred to as the ‘flipped classroom’, this teaching philosophy requires students to watch videos and other online content at home and be prepared to discuss the materials in class (as opposed to the traditional way of showing content in class).

As somebody who has been helping carriers sell into different kinds of neighborhoods for years, the statistics are not surprising to me. The Pew study shows that over 31% of households with children do not have high-speed Internet at home. This low-income group makes up about 40% of all households with school age children. This contrasts to only 8% of homes with kids who make over $50,000 that lack Internet access.

The study looked at a wide range of incomes and is one of the more complete surveys I’ve seen showing broadband penetration rates. For example, it shows that all households under $25,000 per year have a 60% penetration of broadband while households making more than $150,000 per year have a penetration of 97%.

One thing this study didn’t consider was the other digital divide, which is the urban/rural one. According to the FCC statistics, there are at least 14 million homes in the country that don’t have physical access to broadband. And as I’ve written a number of times, I think that number is too low and skewed due to the underlying statistics being self-reported by the large carriers.

The FCC is considering if it should expand its Lifeline program to include broadband coverage for low-income households. Today that fund will chop a few dollars per month off of a phone for low-income families. The Universal Service Fund spends approximately $1.5 B per year for the program.

I understand the sentiment behind this kind of assistance. But I would be surprised if a few dollars per month will make much impact on whether a household can afford to buy broadband. It’s going to take a whole lot more than $1.5 billion per year to solve the obviously large gap for student homes without broadband. And of course, such a program will do no good in those rural places where no broadband exists.

This is not going to be an easy issue to solve. To close this gap we have to find a way to get broadband into many millions more homes. But we also would need to make sure that those homes have working computers that are up to the tasks required by homework. I’ve seen numerous studies over the years that show that low-income households have an equally low penetration of home computers as they do broadband. There are many school systems today that give laptops to kids for the school year and perhaps that would at least solve half of the issue if this was more widespread. But until all kids in a school can use those laptops at home, the kids without internet access are going to fall behind those that have it.