Tag Archives: Lifeline

New Mexico’s New Broadband Affordability Plan

The legislature in New Mexico approved a broadband affordability plan, which it labels as LITAP (Low-Income Telecommunications Assistance Program). This plan is intended as a direct replacement of the expired federal Affordable Connectivity Plan (ACP).

Like the ACP plan, the New Mexico plan would provide a $30 monthly subsidy to qualified households, with up to $75 for those living on tribal lands. The total subsidy is capped at $10 million in the first year, and up to $45 million in future years.

The plan will be funded by the existing State Rural Universal Service Fund (SRUSF), which is administered by the Public Regulatory Commission. This program has historically been funded by surcharges on customer bills for telephone, VoIP, or cellular service. The SRUSF is currently being used to subsidize telephone bills, carrier support for access charges, and for broadband programs to help bring broadband to rural areas. The current surcharge on customers is $0.61 per month for 2026, down from $1.13 in 2024. It’s estimated that when the LITAP plan goes fully into effect, the surcharge might climb to $2 per month.

One feature of the legislation is that this new broadband subsidy will supersede the existing subsidies for telephone service. The legislation requires any ISP that uses the revised program to participate in the Lifeline program. The federal plan currently provides a $9.25 monthly subsidy for eligible households, and up to $34.25 on qualifying tribal lands.

Households will be eligible for the subsidy if they participate in two New Mexico plans for need-based health care assistance, or for “at-risk” students in the home. LITAP will also be available for any customer who is eligible for the federal Lifeline program. When fully funded at $45 million, the new fund will subsidize approximately 120,000 households.

The legislation was prompted by a recognition by legislators that affordability is the largest barrier to residents buying broadband. This makes sense in the state since New Mexico is ranked 46th in terms of household incomes. The state has also consistently been in the top three of states with the highest level of poverty.

This is the first state plan I’ve seen that largely mimics the now-defunct federal ACP subsidy. New York has a plan that requires larger ISPs to offer $15 rates to qualified low-income households. Hopefully the New Mexico plan will be welcomed by ISPs in the State, particularly those who are building grant-funded networks. This plan will make it far easier to achieve needed customer penetration rates.

It seems unlikely that the new plan can easily be challenged in court. The SRUSF was created in 1999 and has been providing subsidies for telephone bills since its inception.

Perhaps this will prompt other states to do something similar. There are a lot of other states that already have a Universal Service Fund for telecom that is based on surcharges to customers.

The Supreme Court Tackles the USF

The Supreme Court has agreed to review a decision from the 5th Circuit Court of Appeals, which ruled earlier this year that the Universal Service Fund (USF) is unconstitutional. Multiple lawsuits were filed by Consumers’ Research, a conservative non-profit advocacy organization. The Supreme Court accepted the case after there were conflicting rulings on the matter. Both the 6th Circuit and 11th Circuit recently ruled in similar cases that the USF is constitutional. The original lawsuits also alleged that the FCC acted unlawfully by delegating the operation of the USF to USAC.

The heart of the lawsuits relies on the nondelegation doctrine. This is a constitutional principle that believes that Congress can’t give its legislative authority to other parts of the government. In this specific case, the challenge is that Congress erred in delegating responsibility for the USF to the FCC, which is part of the executive branch of government. The nondelegation doctrine relies on Article I of the Constitution, which grants legislative authority to Congress, and argues that Congress can’t expand or delegate that responsibility. This hasn’t been used as a legal argument since the 1930s, in lawsuits filed to try to stop Franklin Roosevelt from creating New Deal agencies.

The Universal Service Fund was specifically created as part of the Telecommunications Act of 1996. This fund was originally created to support universal access to affordable telephone service, particularly in rural and low-income communities.

The function of the USF has been expanded over time to include four major programs: Connect America Fund, Lifeline, E-Rate and Rural Health Care. The Current USF is roughly $9 billion per year. USF is currently paying for the rest of the RDOF subsidy to build rural broadband infrastructure. The fund will also be covering the EACAM subsidy to fund faster infrastructure for rural telcos and cooperatives. The FCC recently announced it would be using USF funds to cover the $9 billion 5G Fund for Rural America.

Aside from this lawsuit, USF was already a hot topic in DC since it’s clear that the current way of funding USF is not sustainable. Currently, the USF is funded by a fee on interstate and international telecommunications services – a revenue stream that has been steadily shrinking. The new FCC Chairman Brandon Carr has been lobbying to spread the USF assessment base to include tech companies like Google and Facebook. Senator Ted Cruz, who will likely be the Chairman of the Senate Commerce Committee, has been suggesting that the USF should be funded with general tax revenues so that Congress can have a more direct say in how the money is spent.

The USF has also been in the news as a possible vehicle for funding a low-income subsidy for broadband. The USF currently supports the Lifeline program, which provides a $9.25 subsidy for qualifying households for telephone or broadband service. There was a lot of discussion during 2024 about trying to somehow move the now-dead ACP plan into the USF. This was the plan that provided a $30 monthly subsidy for broadband bills for qualifying households.

It’s not clear what might happen if the Supreme Court rules that the FCC doesn’t have the authority to operate the USF and to assess the fees that pay for it. Congress would have to intervene somehow to keep USF alive. Congress could do this by directly funding the effort. It could also create a specific tax to pay for the fund as a replacement for the FCC fees. If Congress is forced to jump through these hoops, it also seems likely that there will be an overall review of all parts and functions of the USF. This would include the role of USAC and the operating details of each of the four major USF funds.

Benefits of the Universal Service Fund

The FCC recently released a short document that highlights the benefits that come from the Universal Service Fund. I have to imagine they published this in response to the Universal Service Fund being under fire by the courts and other critics. The biggest current controversy is how the USF is funded, which is mostly on the backs of telephone and cellular customers.

The U.S. Court of Appeals for the Fifth Circuit in New Orleans recently ruled, in a 9-7 vote, that the FCC’s Universal Service Fund structure is unconstitutional. If that case holds up through an appeal to the Supreme Court, the entire fund could be ended. That would force action by Congress to redefine the USF rules to keep the fund operating.

The FCC touts the following benefits from the Universal Service Fund:

E-Rate Program

This program provides subsidized broadband connectivity to schools and libraries. From 2022 to 2024, 106,000 schools and 12,597 libraries received over $7 billion in benefits to reduce the cost of broadband connectivity and internal connections. This benefitted over 54 million students.

Rural Health Care Program

This program provides discounted connections for rural nonprofit healthcare providers. From 2021 to 2023, this fund provided over $1.6 billion to benefit 16,080 health care providers with connectivity costs.

The fund also provided over $98 million in the Connected Care Pilot Program to support 107 projects that are exploring creative ways to provide telehealth services.

Lifeline Program)

As of March 2024, over 7.5 million low-income households were receiving the $9.25 monthly discount for phone and/or broadband service.

High-Cost Program

In 2023, carriers nationwide received over $4.2 billion to build infrastructure to bring better broadband to rural communities.

There are critics of some of these programs. There have been claims over the years of fraud in the Lifeline program. That may still be true to some degree, but the FCC created a fairly effective portal used to qualify Lifeline recipients that should have greatly tamped down the opportunity for fraud.

There are many who think the high-cost programs pay out too much money to rural telcos. In the past, much of this money was a simple subsidy, but more recently these funds are aimed more directly at funding rural infrastructure.

I’ve heard industry folks complain that the E-Rate Program mechanism encourages ISPs to charge higher rates for school broadband since those rates are mostly paid by the USF.

Maybe ACP Isn’t Dead

There are still those in Congress that don’t want the Affordable Care Plan (ACP) to end. Both the House and the Senate made recent moves to advance the resurrection of ACP. As a reminder, the ACP plan provides a $30 subsidy for broadband for low-income households, with some homes eligible for a $75 discount.

In the House, the team of Rep. Nikki Budzinski (R-IL) and Rep. Mike Carey (R-OH) introduced the Secure and Affordable Broadband Extension Act. The bill was quickly co-sponsored by a bipartisan list of representatives including Angie Craig (D-MN), Nicole Malliotakis (R-NY), Joe Courtney (D-CT), Jen Kiggans (R-VA), Susan Wild (D-PA), Jack Bergman (R-MI), Raja Krishnamoorthi (D-IL), James Moylan (R-GU), Annie Kuster (D-NH) and Jenniffer González-Colón (R-PR).

The Act also includes funds for the completion of the rip-and-replace of Chinese wireless electronics from Huawei and ZTE. The bill would be funded by an FCC auction of the AWS-3 band of spectrum. This includes three bands of spectrum from 1695-1710 MHz, 1755-1789 MHz, and 2144-2180 MHz – spectrum that is desirable for cellular broadband. The Act also recommends lowering the size of the ACP by decreasing eligibility from 200% of the poverty level to 135% – the level that has been used for years by the FCC’s Lifeline Fund.

The Senate also has a current ACP replacement bill – the Affordable Connectivity Program Extension Act. The original Act was co-sponsored by a bipartisan group including Sen. Peter Welch (D-VT), JD Vance (R-OH), Jacky Rosen (D-NV), Kevin Cramer (R-ND), Sherrod Brown (D-OH), and Roger Marshall (R-KS). This bill recently made it past the first hurdle and was advanced by the Commerce Committee, including an amendment to provide $7 billion in funding. The Senate bill also also now includes $3 billion to complete the rep-and-replace.

The laws are just at the beginning of the legislative process. They would have to be passed by the House and Senate floor, reconciled to have matching provisions, and get signed by the President.

A long list of ISPs have expressed support for these bills. But I have to wonder how a renewed ACP plan will be received in practice. If ACP starts over, ISPs will have to go through the process of recertifying every customer and can’t just restart for former ACP customers. It’s also likely that some customers were unable to pay their first bill after the end of ACP and would now be considered as bad debt customers and possibly ineligible by many ISPs to participate.

The whole idea of funding ACP one year at a time brings other baggage. It seems like that many ISPs are going to be less than enthusiastic about signing customers when there is a good likelihood in a year that the fund will run dry again and the process will repeat. ISPs are not reimbursed for the big effort of recertifying customers or of processing the monthly payments to the FCC. I have to think that many ISPs will voice support, but won’t not try very hard during a reconstituted ACP.

The ACP plan holds great promise if it is permanently funded. If ISPs can count on the subsidy, there are numerous ways to use ACP as part of the solution for solving the lack of broadband in low-income urban neighborhoods. But after this last fiasco with the funding going dry, there is no bank or other lending source that will count ACP revenues as a reliable source of income for an ISP – and they shouldn’t. Anybody who builds a business plan reliant on ACP will likely struggle or fail whenever the funding abruptly stops.

If passed, these bills give ACP life for another year or so. But the bills fall far short of fixing ACP.

ACP Fraud

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.

Don’t Forget Lifeline

There has been a big push nationwide to get customers enrolled in the Affordable Connectivity Program (ACP), that provides a $30 monthly subsidy for broadband providers – a discount that can be applied to any broadband product. With the ACP discount, a qualifying customer can buy a broadband product normally priced at $60 for $30.

Most ISPs seem to have forgotten about the FCC Lifeline program that can provide a monthly discount of $9.25 off a telephone or broadband bill for qualifying customers. Consumers can qualify for the Lifeline discount if the household income is at or below 135% of the Federal Poverty Guidelines or else by participating in Medicaid, SNAP (formerly Food Stamps), SSI, Federal Housing Assistance, VA Veterans pension, or VA survivor’s pension.

It’s a little easier to qualify for ACP since it is available to homes at or below 200% of Federal Poverty Guidelines. The ACP discount is also available to those who participate in Medicaid, SNAP, Federal Housing Assistance, WIC, SSI, or Lifeline.

That last requirement is the important one – customers can qualify for both the ACP discount and Lifeline, meaning an ISP can collect a total subsidy of $39.25 for a qualifying customer.

The FCC made some changes to the Lifeline program in July. The most important change for ISPs is that the cap for a lifeline subscriber was increased to 1.28 gigabytes per month – which is higher than the data cap for ISPs like Comcast. The FCC set the new annual budget for 2023 at $2.57 billion and changed the rule so that the size of the funding will be increased each year using the Consumer Price Index.

There have been a few barriers that have kept many ISPs from participating in Lifeline. Many of them thought that the $9.25 subsidy was too small to bother with. There also is a requirement that an ISP must be an Eligible Telecommunications Carrier (ETC), a status that is granted by State regulatory Commissions. Years ago, this implied that an ETC gained carrier of last resort obligations, which meant they were required to serve anybody in a service area. But since broadband has been largely deregulated, carrier-of-last-resort doesn’t have much meaning these days.

A lot of ISPs said that Lifeline was a pain to implement. There was no easy way for ISPs to know if a household qualified, and audits of the program would often mean rebating funds to the FCC. That issue has largely been resolved since the FCC now maintains a database that is updated monthly of homes that participate in the various federal subsidy programs. An ISP can feel safe in giving the discount to a household on this list.

Any ISP that is participating in ACP in order to reach low-income households should consider the Lifeline discount as well. Extending a $39.25 discount to households is a significant saving.

There are still a few nuances for ISPs that try this. Practically everybody that qualifies for Lifeline will qualify for ACP, but not everybody that qualifies for ACP can get Lifeline due to the lower limit on household income.

There are still a lot of questions about how many ISPs are actually trying to implement the ACP discount. Most ISPs have a lot of customers that qualify, but ISPS don’t seem to be pushing the discount. But for any ISP that wants to bring broadband to as many folks in a community as possible, a $39.25 customer discount can make it a lot easier to make broadband affordable.

The Future of the Universal Service Fund

The FCC adopted a Notice of Inquiry on December 15 that asks for comments about the future of the Universal Service Fund. There is not a lot of time to respond with the holidays in the middle since comments are due on January 18. But the NOI is asking the right questions.

High-Cost Programs. On the topic of the High-cost programs, it asks how the giant BEAD grants will impact the future of the FCC broadband awards. It asks if there should be an additional round of RDOF. It asks if some of the highest-cost areas constructed with the BEAD grants will need ongoing high-cost support. It asks if the FCC should adopt a standard of 100/20 Mbps as a requirement for future high-cost support. It asks about the use of future reverse auctions.

Lifeline. The NOI asks about the future of the existing Lifeline fund in light of the funding given to the EBB program and now to the ACP program that provides a larger monthly broadband subsidy.

E-Rate. The NOI asks if the E-Rate program for schools and libraries should be changed due to anything that came out of the Infrastructure Act. It asks about ways to protect against waste, fraud, and abuse.

Rural Health Care. The NOI asks if the program changes due to telehealth funding in the Infrastructure Act.

Funding. The NOI asks if the method of funding the USF should be changed.

I’ve written about all of these questions before. Here are a few quick thoughts I have on these questions – each question deserves a much longer response:

The FCC’s high-cost funding has outlived its usefulness. While this funding did a lot of good and helped telcos build rural fiber, it also made some telco owners rich through overpayments. The overpayments became obscene when the FCC gave $11 billion in CAF II funding to the big telcos and then ignored the reports that upgrades weren’t being done. The RDOF reverse auction is a giant mess and will turn into a disaster if the FCC doesn’t soon kill off unworthy awards in favor of BEAD grants. It’s time to kill this program completely, get the FCC out of the broadband funding business, and downsize the USF accordingly. The need for broadband funding can always be revisited in a decade if some rural places still need ongoing support. But even revisiting the idea is suspect because the FCC is always going to rely on poor mapping and inadequate cost models to determine who gets funded.

The $9.95 Lifeline fund still has some use to support cellphone for homeless and other forgotten communities. But the monthly subsidy is too small to make home broadband more affordable. The FCC should either re-purpose the Lifeline fund to strictly support low-income cellphones or kill the program.

The E-Rate program provides noticeable benefits to schools and has brought gigabit broadband to some of the poorest parts of the country. I’ve never heard anything but good about the Rural Health Care funding.

As far as funding – if the High-cost fund and Lifeline programs are curtailed or eliminated then the amount of needed funding drops drastically. But I think a more fundamental question needs to be asked. Why is the FCC still being allowed to operate a giant slush fund? A huge percentage of the funding over the years has gone to the big ISPs. The USF has been riddled with stories of abuse and fraud. The primary problem with the USF is that regulators are trying to run national one-size-fits-all programs without the needed facts or staffing to do it right. I think it’s time to have a conversation about ending the Universal Service Fund. The E-Rate and Rural Health Care programs are successful, but they are something that should be funded by Congress. Let’s get regulators out of the funding business and aim the agency back towards their primary goal of regulating the broadband industry – instead of funding the companies the FCC is supposed to be overseeing.

The FCC and Urban Broadband

Chairman Ajit Pai recently said during an interview in Buffalo that he supported what he called Gigabit Opportunity Zones as a way to get fiber built to poor neighborhoods in downtown areas of cities like Buffalo.

The idea of Gigabit Opportunity Zones comes from a bill that was introduced in the last Congress in November of 2019 by Georgia Representative Doug Collins. The bill is H.R. 5082 – the Gigabit Opportunity Act.

The bill would mimic many of the provisions of the Opportunity Zones that were created in the Tax Cuts ad Jobs Act of 2017. That law intended to spur infrastructure investment in low-income Census blocks. The original tax change allowed investors to gain two major tax benefits from investing in qualified infrastructure. They could defer or erase existing capital gains by investing capital gain profits into qualified projects for at least ten years. Investors would also see no capital gains from profits made on an opportunity zone investment.

The proposed broadband bill has similar, but different benefits. First, governors would have to

nominate areas in their state that would be eligible for the gigabit tax breaks. Such areas would have to

  • Face obstacles to economic development due to a lack of geographic broadband coverage or speed;
  • Are the focus of mutually reinforcing state, local, or private economic development initiatives;
  • Are poised for economic growth that requires access to high speed broadband for commercial purposes; and
  • Represent the areas of a state where such service would result in the highest return on investment.

Just like with the existing opportunity zone rules, an investor could defer or eliminate existing capital gains by bringing capital gains proceeds to a new qualified project. Even better than the existing opportunity zones investing, the new project could expense the cost of building the fiber network in the first year, thus realizing a huge capital loss in the first year (which is a great way to wipe out capital gains).

It doesn’t look like the bill has moved forward since introduction beyond being referred to the Subcommittee on Communications and Technology. The purpose of the blog is not to say anything negative about the bill. It would be great if something like this would help spur building fiber to urban neighborhoods that might otherwise never see fiber. It does seem to me that the provisions that a qualified investment must result in the highest return on investment makes it likely that this would benefit the richest neighborhoods rather than the poorest. But those kinds of details get worked out during the legislative process.

What I found a bit disturbing is that this bill was brought up in response to the question of what the FCC could do for cities like Buffalo. The Chairman offered the following responses to the question:

  • He said the FCC had expanded the opportunity for people to qualify for the Lifeline program. From what I can see, this FCC has done the exact opposite and would like nothing better than to eliminate this part of the Universal Service Fund.
  • He mentioned E-Rate programs to bring better broadband to schools and libraries. The FCC did make it a bit easier for schools to turn that broadband outward to the parking lots during the pandemic, but otherwise this FCC hasn’t improved the E-Rate program.
  • Chairman Pai said he had asked Congress for the authority to provide hotspots to poor urban neighborhoods, but that Congress hasn’t given him that authority. This highlights that the FCC gave away their authority over broadband and now has no authority to do things like promote hotspots.
  • He mentioned the RDOF grant process as one that is bringing broadband to those that need it, without mentioning that the ‘R’ in RDOF stands for rural – none of that money is going to Buffalo.
  • He mentioned regulatory reform. By that, he is sticking with his story that deregulating the big ISPs will result in more investment in places like Buffalo. From what I can see, none of the big ISPs have responded to ‘light-touch’ regulation by building fiber to poor neighborhoods.
  • Finally, he cited the Gigabit Opportunity Zone legislation. That’s a stalled piece of legislation that might bring benefits, but which has nothing to do with the FCC.

The Chairman’s response should have been that the FCC is not seriously looking at solving the digital divides in cities. The FCC has done its best to write itself out of the broadband picture. The FCC still must administer the Universal Service Fund because it has no choice. The FCC Chairman is sticking to the pure fiction that the big ISPs will solve the broadband problems of the world in response to being deregulated. But in reality, the FCC is doing almost nothing for urban broadband and has no intentions of doing so.

FCC Modifies Lifeline Rules

The FCC released new rules for the Lifeline program in November. These rules will make it harder for some companies to participate in the program, but it opens up the door to many new participants.

The FCC has obsessed for years about fraud in the program. There are numerous cases over the years of the program providing Lifeline subsidies to people who are no longer eligible or who even died. However, a lot of that blame has to placed on the FCC. Carriers have never had any ways to know if Lifeline participant gets a job and is no longer were eligible, or even if the eligible family member dies and the subsidy continues to go to the household. The FCC has finally taken the steps to fix such problems through the creation of the National Lifeline Eligibility Verifier – a database updated monthly by government agencies that provide the support that makes participants eligible.

The following new rules are lifted directly from the FCC, which says the new rules will improve the program by:

  • Prohibiting participating carriers from paying commissions to employees or sales agents based on the number of consumers who apply for or are enrolled in the Lifeline program
  • Requiring participating carriers’ employees or sales agents involved in enrollment to register with the program administrator, the Universal Service Administrative Co. (USAC)
  • Strengthening prohibitions barring Lifeline providers from claiming “subscribers” that are deceased
  • Taking additional steps to better identify duplicate subscribers, prevent reimbursement for fictitious subscribers, and better target carrier audits to identify potential FCC rule violations
  • Increasing transparency by posting aggregate subscribership data, including data broken out at the county level, on USAC’s website
  • Increasing transparency with states by directing USAC to share information regarding suspicious activity with state officials
  • Restoring the states’ traditional role of designating carriers to participate in the Lifeline program.

One of the requirements is somewhat unusual in that ISPs need to identify those employees responsible for enrolling participants in the Lifeline plan. For most ISPs, that’s going to be the customer service staff. The requirement is a headscratcher because it’s hard to conceive of any possible good way that the FCC can use this information.

The last bullet point highlights an opportunity for ISPs that want to participate in the program. For the last several years it’s been exceedingly difficult for an ISP to enter the Lifeline program. During that same period, we’ve seen big telcos like AT&T withdraw from the plan in most of the states where they operate.

An ISP that wants to offer a low-price broadband product for low-income households can collect the Lifeline subsidy to offset price discounts. For example, an ISP could offer a low-income broadband connection and collect $20 from a customer and also collect the $9.25 Lifeline subsidy from the Universal Service Fund. The Lifeline funds are paid directly to the ISP from the Universal Service Fund.

More importantly, ISPs now can apply to become eligible for Lifeline with state regulators rather than from the FCC – which has been blocking new applications for several years. There is a particularly good opportunity for tribal ISPs since the Lifeline subsidy on tribal lands can be as high as $34.25 per qualified recipient.

Enrolling in the Lifeline program is another tool to help ISPs attack the homework gap. ISPs can use the subsidy to provide lower price broadband to qualifying homes with school students. If an ISP serves customers that qualify for a discount, it’s hard to justify not joining the program and giving such customers a break on rates.

The Census Bureau and the Digital Divide

John Horrigan recently wrote an interesting article in The Daily Yonder that cited the results of a survey done by the Census Bureau. The agency conducts an annual survey called the American Community Survey (ACS) of 3.5 million households. In recent years the survey has included a few questions about broadband. The most recent ACS survey included questions about the digital divide. The results are at first glance a bit surprising.

The survey shows that more than 20.4 million homes have no broadband subscription at home. The survey shows that 5.1 million homes with no broadband connection are rural and 15.3 million homes are non-rural. Anybody who tracks rural broadband instantly doesn’t think those numbers can be right. However, the Census Bureau uses its own definition of rural which is different than the way most of the world thinks or rural versus urban.

According to the Census Bureau definition, rural is everything that is not urban. The Census bureau looks at the country by regional clusters of population. They count two kinds of urban areas – urbanized areas (UAs) are clusters with 50,000 or more people and urban clusters (UCs) which have between 2,500 and 50,000 people. Most of us would consider many of the UCs to be rural because within this category are a lot of rural county seats and the immediately surrounding areas. The Census statistics count a lot of people who live just outside of towns as urban when our industry considers homes past the last cable company connection as rural.

Horrigan interpets the results of the Census Bureau survey to mean that affordability is a bigger reason today than connectivity for why people don’t have broadband. He reached that conclusion by considering a recent Pew Research poll on the same topic that shows that more homes cite reasons other than availability as reasons they don’t have broadband.

The Pew Research survey asked households why they don’t have broadband. Respondents could supply more than one response.

  • 50% claimed that price was a major factor and 21% cited this as the primary reason.
  • 45% said that their smartphone could do everything they need.
  • 43% said they had good access to the Internet outside the home.
  • 31% said they couldn’t afford a computer.
  • Only 22% said that they couldn’t order a broadband connection, and only 7% said that was the primary reason they didn’t have broadband.

The Census Bureau also correlated their results with household income, and it’s not surprising that low-income households have a much lower broadband connection rate. The Census Bureau survey showed that only 59% of homes that make less than $20,000 per year have broadband. The subscription rate for all households making more than $20,000 is 88%.

Interestingly, the FCC doesn’t ask why people don’t have broadband. They interpret their mission to measure broadband availability and they count homes with or without broadband connections. This raises a few questions. What exactly is the FCC’s mandate from Congress – to get America has connection to reach the Internet or to make sure that America makes those broadband connections? I read the FCC’s mandate from Congress to have some of both goals. If availability is not the primary reason why homes don’t have broadband, the FCC might get more bang from their buck by putting some effort into digital inclusion programs. According to the Horrigan article, there are now more homes that can’t afford broadband than homes that don’t have a connectivity option.

This implies the need for a much-improved Lifeline Fund. The current Lifeline program is likely not making a big difference in digital inclusion. It provides a small monthly subsidy of $9.25 per month for qualifying households to save money on either their telephone bill or their broadband bill. It’s becoming increasingly hard to qualify for Lifeline because the big telcos like AT&T are backing out of the program. Some cable companies provide low-cost cable lines to homes with school students, but to nobody else – and cable companies don’t operate outside of towns.

In addition to a more effective Lifeline program, digital inclusion also means getting computers into homes that can’t afford them. I’ve written before about the non-profit group E2D that provides computers to school students in Charlotte, NC. Perhaps some of the Universal Service Fund could be used to assist effective groups like E2D to get more computers to more households.

My firm CCG conducts surveys and we’ve seen anecdotal evidence in a few recent surveys in poor rural counties that a lot of homes don’t buy the slow DSL option available to them because of price. These homes tell us that price mattered more than connectivity. I don’t have any easy answer for the best way to promote digital inclusion. But there are folks in the country who have made amazing progress in this area and perhaps the FCC should consider giving such groups some help. At a minimum, the FCC needs to recognize that now that most homes have a broadband connection that price is a major barrier for the majority of those who are not connected.