In the Matter of Bridging the Digital Divide for Low-Income Consumers (WC Docket No. 17-287), Lifeline and Link Up Reform and Modernization (WC-Docket No. 11-42), and Telecommunications Carriers Eligble for Universal Service Support (WC Docket No. 09-197)
Comments of Thomas A. Schatz President Citizens Against Government Waste
January 23, 2018
Citizens Against Government Waste (CAGW) is a private, nonprofit, nonpartisan organization dedicated to educating the American public about waste, mismanagement, and inefficiency in government. On behalf of the more than one million members and supporters of CAGW, I offer the following comments regarding Bridging the Digital Divide for Low-Income Consumers (WC Docket No. 17-287), Lifeline and Link Up Reform and Modernization (WC Docket No. 11-42), and Telecommunications Carriers Eligible for Universal Service Support (WC Docket No. 09-197).
The concept of universal service for all Americans traces its origins to the Communications Act of 1934, which in its General Provisions Title, states,
…so as to make available, so far as possible, to all the people of the United States, … for the purpose of the national defense, for the purpose of promoting safety of life and property through the use of wire and radio communication, and for the purpose of securing a more effective execution of this policy by centralizing authority heretofore granted by law to several agencies and by granting additional authority with respect to interstate and foreign commerce in wire and radio communications, there is hereby created a commission to be known as the ‘Federal Communications Commission,’ which shall be constituted as hereinafter provided, and which shall execute and enforce the provisions of this Act.[1]
Universal service was refined and expanded in the Telecommunications Act of 1996, which created the current mechanism for collecting fees to support the universal service fund (USF), and authorized the creation of the Universal Service Administrative Company (USAC).
On September 6, 2017, Senate Commerce, Science, and Transportation Committee Chairman John Thune (R-S.D.) stated that universal service has been a “bedrock of our nation’s communications policies for more than 80 years, and programs that efficiently and prudently further the goal of universal service have contributed greatly to our nation’s economy, and to the safety and well-being of Americans.”[2]
However, as the program has expanded, waste, fraud, and abuse has become problematic. On January 31, 2012, the FCC approved a report and order to reform and modernize the Lifeline and Linkup programs.[3] The order created the National Lifeline Accountability Database (NLAD), ensured that providers understood the one-per-household rule, and established clear goals and metrics to measure the program’s performance and effectiveness.
On March 31, 2016, the FCC expanded the Lifeline program by adding subsidized broadband internet service at the amount of $9.25 per month per eligible household, and increased the annual budget for Lifeline from $1.75 billion to $2.25 billion, without a spending limit or cap.[4] This decision also stripped the ability of states to designate Eligible Telecommunications Carriers (ETCs) to administer the USF. The FCC also established a National Verifier System to assist in ensuring that only qualified households can participate in the Lifeline program. However, some ETCs have found ways to skirt the verification system.
In 2016, FCC Commissioner (now Chairman) Ajit Pai reviewed issues within the Lifeline program relating to continued duplicate enrollment fraud, and narrowed the problem down to the manner in which carriers are able to override the verification system, including the use of an independent economic household (EIH) override[5] and Third-Party Independent Verifications (TPIV).[6] These processes permitted carriers to subscribe more than one resident of a household for service through the Lifeline program, which is limited to one service per household.
Commissioner Pai also questioned the USAC as to why 400,000 subscribers were enrolled in the program without first being verified as eligible through the NLAD.[7] One result of the FCC’s investigation was a December 2016 settlement with Total Call Mobile, which included a $30 million fine and the termination of the company’s participation in the Lifeline program.[8]
On May 30, 2017, the Government Accountability Office (GAO) released a report that detailed continuing problems in verifying the eligibility of subscribers to the Lifeline program.[9] According to GAO, the program disbursed about $1.5 billion in subsidies to 12.3 million households in 2016; of the 3.5 million subscribers reviewed by GAO, 1.2 million individuals (36 percent) could not be confirmed as eligible for the program.[10]
On July 11, 2017, Chairman Pai directed the USAC to safeguard the Lifeline program from further fraud and abuse by 1) identifying and auditing the top 10 ETCs with the highest number of potentially ineligible subscribers identified in the GAO study to determine whether they are properly verifying subscriber eligibility; 2) reviewing a statistically valid sample of subscribers to determine whether they are eligible to participate in the Lifeline program; 3) requiring all ETCs with GAO-identified potentially ineligible subscribers to verify the eligibility of the subscribers, and de-enrolling any ineligible subscriber from the Lifeline program; and, 4) referring the substantial enrollment or recertification of ineligible subscribers by any ETC to the FCC’s Office of Inspector General for evaluation, and to the Enforcement Bureau.[11]
On September 6, 2017, the Senate Committee on Commerce, Science, and Transportation held an oversight hearing entitled, “Addressing the Risk of Waste, Fraud and Abuse in the Federal Communications Commission’s Lifeline Program.” CAGW Director of Technology and Telecommunications Policy Deborah Collier testified regarding the problematic history of the Lifeline program, particularly following its expansion to include wireless services in 2008. During the hearing, Ms. Collier emphasized the important role the National Verifier System will play in providing improved verification of eligible subscribers, currently slated to begin in 2018. She also reiterated the need for continued maintenance and updates to the database to ensure strict adherence with the eligibility requirements by those distributing Lifeline services.
In addition, Ms. Collier stressed the importance for the FCC to reach out to state stakeholders to obtain memorandums of understanding, enabling the sharing of eligibility data between state and federal agencies to ensure appropriate eligibility criteria is maintained, while keeping secure the privacy and personal data of individual subscribers. A copy of her testimony is attached for the record (Appendix A).
During his testimony, economist Dr. Jeffrey Eisenach discussed the inevitable waste, fraud, and abuse that has been built into the Lifeline program from its inception. According to Dr. Eisenach, the Lifeline program,
… is administered by over 2,000 companies, most of them resellers of services actually provided by others, which can be certified for participation by any of 55 or so state and territorial entities, plus the FCC. The companies receive checks from the Universal Service Administrative Company (USAC) based on how many qualifying customers they claim to serve. Once a customer is signed up, the payments – about $9.25 per month, unless one happens to be serving a customer on an Indian reservation, in which case the amount is tripled – keep coming, even if the customer never actually uses the service. The companies self-certify that the participants are eligible, but in just over a third of the cases it recently reviewed, the GAO could not verify that the subscriber actually qualified for the subsidy.[12]
In other words, the Lifeline subsidy program encourages the distribution of improper payments to companies through the self-certification process. GAO Director for Audit Services, Forensic Audits & Investigative Service Seto Bagdoyan testified that the USAC currently engages in a pay-and-chase activity to retrieve the funds already disbursed to the subscriber’s ETC,[13] which is an inefficient method to recoup improper payments. It is better to verify eligibility at the front end through the National Verifier System before payment is made to an ETC.
On January 19, 2017, USAC awarded the contract to develop the National Verifier System to Accenture Federal Services.[14] Swift and effective deployment is critical to the future success of the Lifeline program. It is a disservice to those who are truly in need and taxpayers who foot the bill for the Lifeline program to continue to provide services to ineligible individuals and households.
II. FOURTH REPORT AND ORDER
CAGW agrees that the same definition for “urban” and “rural” currently applied to the USF’s E-Rate program for schools and libraries should also apply to the Lifeline Tribal support programs. These definitions should be consistent not only throughout all USF programs, but also other federal government agencies. Uniform definitions will also improve data gathering for future rural and urban broadband deployment reports, and help determine where there is true lack of access to broadband services, often called the “digital divide.”
However, before these determinations can be made, broadband maps must be updated. The National Broadband Map was last updated in 2014, and the Rural Broadband Report was last updated in 2011. Current data and mapping of existing broadband capabilities is critical to any proposal intended to bridge the digital divide, and reduce the homework gap. As noted by Commissioner Jessica Rosenworcel during her testimony before the House Energy and Commerce Committee on October 25, 2017,
Nearly nine years ago, in the American Recovery and Reinvestment Act, Congress had a good idea. It created a National Broadband Map, identifying where deployment has and has not occurred. But if you check that map online now you will see that it was last updated over three years ago. In the Internet age, three years is an eternity. … You cannot manage what you do not measure. So, I think it’s time for a National Broadband Map that offers an honest picture of wired and wireless broadband across the country.[15]
This information is key to bridging the digital divide and ensuring that areas without broadband service can obtain service.
V. NOTICE OF PROPOSED RULEMAKING
With respect to the Notice of Proposed Rulemaking, CAGW supports the reauthorization of state commissions to designate Lifeline ETCs. The states’ role within the Lifeline program will become even more important as the National Verifier System is activated. CAGW encourages the USAC to initiate memorandums of understanding (MOUs) with each of the states that will create data sharing agreements in keeping with the privacy protection afforded to consumers and their personal data within state boundaries. These MOUs will be critical to the integrity of the National Verifier System, and will help ensure that benefits will only be provided to those who truly need the program.
CAGW also encourages the FCC to continue enforcement actions against companies seeking to take advantage of the subsidies by subscribing as many households as possible without proper vetting. However, CAGW is concerned about Section B1 of the proposed rule, which would restrict the Lifeline broadband subsidies to facilities-based providers only. This provision would make it impossible for non-facilities based wireless providers to remain in the program, leaving many Lifeline subscribers in search of a new provider.
According to the FCC’s 2016 Universal Service Monitoring Report, there are more than 12.5 million subscribers to the Lifeline program, 68.5 percent of whom obtain their service through non-facilities based providers.[16] While some providers have engaged in practices leading to the subscription of ineligible subscribers (as detailed in Ms. Collier’s testimony and the FCC’s list of USF enforcement activities[17]), a total ban on non-facilities based resellers of wireless services could have a negative impact on eligible subscribers.
While the desire to promote broadband capable services for Lifeline support is understandable, the commission should consider the potential use of wireless/mobile broadband services using Smartphones as an additional means to bridge the digital divide in communities where either access to facilities-based providers is difficult to achieve or cost-prohibitive for lower-income Americans.
A 2015 Pew Internet study found that nearly two-thirds of Americans were Smartphone owners, and 10 percent of Americans owned a Smartphone with a data plan, but had no other form of high-speed internet access at their home.[18] A March 2017 Pew Research Center report found that among individuals earning less than $30,000 annually, 64 percent owned a Smartphone; 56 percent owned a desktop or laptop computer; 53 percent had a broadband connection to their home; 32 percent owned a Tablet computer, and 17 percent had all of these items.[19] According the Department of Health and Human Services, 50.5 percent of households have only wireless service.[20] Among households with small children, that figure is 60.7 percent.[21]
CAGW urges the commission to reconsider the proposal to ban non-facilities based providers until after the National Verifier system has become fully tested and operational. If abuses continue once the National Verifier System is in place, then this issue can and should be revisited. If, at that time, the FCC determines that moving to a facilities-based provider structure only is the best resolution, then the commission should provide a straightforward method for eligible households currently enrolled through a non-facility based provider to migrate to a new service provider without disruption of service.
CAGW applauds the efforts by the FCC to include further safeguards to the Lifeline enrollment and recertification process by adding requirements for Lifeline agents and their representatives to register with the USAC, and by prohibiting practices engaged in by ETCs that have encouraged sales and marketing agents to disregard eligibility criteria when enrolling individuals to the program, enroll consumers into the program without their consent, or any other practice that increases waste, fraud, and abuse within the program.
Because of the sensitive personal information provided for enrollment verification, all ETC customer enrollment representatives should be registered, trained, and certified by the USAC prior to submitting information into the NLAD or National Verifier systems. This would provide additional protection for the personal identifying information and verification of Lifeline subscribers, as well as provide for a tracking mechanism to root out fraudulent activity should it occur within the systems.
Adopting a Self-Enforcing Budget
CAGW agrees with FCC Commissioner Michael O’Rielly that there should be a cap on the Lifeline budget. While the 2012 and 2016 Reform Orders slowed the increase in costs of the program to consumers, placing a budgetary cap on the program, as suggested in the NPRM, provides an actionable limit on the amount of Lifeline support that can be allocated within a given year. Should that cap be met or exceeded, the commission would have the opportunity to reevaluate the program and make any necessary adjustments before additional funding is expended. This is a fiscally responsible approach to managing costs and an appropriate method for the commission to restrain the growth of a program whose budget has exponentially increased over many years. CAGW also supports the establishment of a self-enforcing budget mechanism within the Lifeline program.
In addition, since the contribution factor is determined by the USAC on a quarterly basis, it would behoove the USAC to be in constant communication with the FCC on the status of the self-enforcing budget expenditures, so that appropriate adjustments can be made prior to reaching the budgetary limit set annually by the FCC.
VI. NOTICE OF INQUIRY
The Notice of Inquiry seeks to determine whether households receiving a Lifeline subsidy are concurrently subscribed for either telephone, wireless, or broadband service at a non-subsidized rate. As noted by the GAO, the FCC has not had a very effective metric to determine adoption rates. The FCC should include in its metrics a factor determining whether those who subscribe for service through the Lifeline program already subscribe to a non-Lifeline provided phone or internet service.
Commissioner O’Rielly and Rep. Marsha Blackburn (R-Tenn.) wrote in 2015 that “the program must be better targeted to eligible low-income individuals who would not otherwise sign up for service,”[22] since GAO found that only 1 in 8 subscribers would not have service without the Lifeline subsidy. They made it clear that adoption of advanced communications should be the highest priority, as set forth in the 1934 Act, and used as a performance metric for the program.[23]
There are several key factors in whether a household would adopt advanced communications, including a potential consumer’s or subscriber’s perceived lack of relevance, lack of computer skills, or affordability of service offerings.[24] If the FCC intends for the Lifeline program to address adoption rates across the U.S., then there must be clearly-defined metrics for eligible subscribers that include whether these subscribers would have adopted the technology if not for the availability of the subsidy program to reduce their overall costs. According to GAO, the FCC does not know how many of its Lifeline recipients also have non-Lifeline phone service.[25]
Conclusion
Combatting waste, fraud, and abuse in the Lifeline program through the use of the National Verifier System, a self-enforcing budget, and strong enforcement against those who would undermine the eligibility process would enable the FCC to address the needs of eligible households, while protecting taxpayers from increased universal service fund costs on their telecommunications bills. CAGW appreciates the FCC’s efforts to rein in abusive practices, while working to improve the effectiveness of the Lifeline Program.
[3] In the Matter of Lifeline and Link Up Reform and Modernization (WC Docket No. 11-42), Lifeline and Link Up (WC Docket No. 03-109), Federal-State Joint Board on Universal Service (CC Docket No. 96-45), Advancing Broadband Availability Through Digital Literacy Training (WC Docket No. 12-23), Federal Communications Commission, Adopted January 31, 2012, Released February 6, 2012, https://apps.fcc.gov/edocs_public/attachmatch/FCC-12-11A1_Rcd.pdf.
[4] Third Report and Order, Further Report and Order, and Order on Reconsideration, In the Matter of Lifeline and Link Up Reform and Modernization (WC Docket No. 11-42), Telecommunications Carriers Eligible for Universal Service Support (WC Docket No. 09-197), and Connect America Fund (WC Docket No. 10-90), Adopted March 31, 2016, Released April 27, 2016, Federal Communications Commission, https://apps.fcc.gov/edocs_public/attachmatch/FCC-16-38A1.pdf.
[9] “Telecommunications: Additional Action Needed to Address Significant Risks in FCC’s Lifeline Program,” U.S. Government Accountability Office, GAO-17-538, May 30, 2017, https://www.gao.gov/assets/690/684974.pdf.
[16] Universal Service Monitoring Report 2016 (Data Received Through September 2016), Federal and State Staff for the Federal -State Joint Board on Universal Service, Federal Communications Commission, December 2016, pp. 22-30, https://apps.fcc.gov/edocs_public/attachmatch/DOC-343025A1.pdf.
[20] Stephen J. Blumberg and Julian V. Luke, “Wireless Substitution: Early release of estimates from the National Health Interview Survey, July – December 2016,” National Center for Health Statistics, Center for Disease Control and Prevention, U.S. Department of Health and Human Services, May 2017, https://www.cdc.gov/nchs/data/nhis/earlyrelease/wireless201705.pdf.
[24] “Broadband: Intended Outcomes and Effectiveness of Efforts to Address Adoption Barriers Are Unclear,” U.S. Government Accountability Office, June 2, 2015, GAO-15-473, https://www.gao.gov/assets/680/670588.pdf.
[25] Bagdoyan, Testimony before the Senate Commerce, Science, and Transportation Committee, September 6, 2017.
[PDF DOWNLOAD]
BEFORE THE
FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C.
In the Matter of Bridging the Digital Divide for Low-Income Consumers (WC Docket No. 17-287), Lifeline and Link Up Reform and Modernization (WC-Docket No. 11-42), and Telecommunications Carriers Eligble for Universal Service Support (WC Docket No. 09-197)
Comments of
Thomas A. Schatz
President
Citizens Against Government Waste
January 23, 2018
Citizens Against Government Waste (CAGW) is a private, nonprofit, nonpartisan organization dedicated to educating the American public about waste, mismanagement, and inefficiency in government. On behalf of the more than one million members and supporters of CAGW, I offer the following comments regarding Bridging the Digital Divide for Low-Income Consumers (WC Docket No. 17-287), Lifeline and Link Up Reform and Modernization (WC Docket No. 11-42), and Telecommunications Carriers Eligible for Universal Service Support (WC Docket No. 09-197).
The concept of universal service for all Americans traces its origins to the Communications Act of 1934, which in its General Provisions Title, states,
Universal service was refined and expanded in the Telecommunications Act of 1996, which created the current mechanism for collecting fees to support the universal service fund (USF), and authorized the creation of the Universal Service Administrative Company (USAC).
On September 6, 2017, Senate Commerce, Science, and Transportation Committee Chairman John Thune (R-S.D.) stated that universal service has been a “bedrock of our nation’s communications policies for more than 80 years, and programs that efficiently and prudently further the goal of universal service have contributed greatly to our nation’s economy, and to the safety and well-being of Americans.”[2]
However, as the program has expanded, waste, fraud, and abuse has become problematic. On January 31, 2012, the FCC approved a report and order to reform and modernize the Lifeline and Linkup programs.[3] The order created the National Lifeline Accountability Database (NLAD), ensured that providers understood the one-per-household rule, and established clear goals and metrics to measure the program’s performance and effectiveness.
On March 31, 2016, the FCC expanded the Lifeline program by adding subsidized broadband internet service at the amount of $9.25 per month per eligible household, and increased the annual budget for Lifeline from $1.75 billion to $2.25 billion, without a spending limit or cap.[4] This decision also stripped the ability of states to designate Eligible Telecommunications Carriers (ETCs) to administer the USF. The FCC also established a National Verifier System to assist in ensuring that only qualified households can participate in the Lifeline program. However, some ETCs have found ways to skirt the verification system.
In 2016, FCC Commissioner (now Chairman) Ajit Pai reviewed issues within the Lifeline program relating to continued duplicate enrollment fraud, and narrowed the problem down to the manner in which carriers are able to override the verification system, including the use of an independent economic household (EIH) override[5] and Third-Party Independent Verifications (TPIV).[6] These processes permitted carriers to subscribe more than one resident of a household for service through the Lifeline program, which is limited to one service per household.
Commissioner Pai also questioned the USAC as to why 400,000 subscribers were enrolled in the program without first being verified as eligible through the NLAD.[7] One result of the FCC’s investigation was a December 2016 settlement with Total Call Mobile, which included a $30 million fine and the termination of the company’s participation in the Lifeline program.[8]
On May 30, 2017, the Government Accountability Office (GAO) released a report that detailed continuing problems in verifying the eligibility of subscribers to the Lifeline program.[9] According to GAO, the program disbursed about $1.5 billion in subsidies to 12.3 million households in 2016; of the 3.5 million subscribers reviewed by GAO, 1.2 million individuals (36 percent) could not be confirmed as eligible for the program.[10]
On July 11, 2017, Chairman Pai directed the USAC to safeguard the Lifeline program from further fraud and abuse by 1) identifying and auditing the top 10 ETCs with the highest number of potentially ineligible subscribers identified in the GAO study to determine whether they are properly verifying subscriber eligibility; 2) reviewing a statistically valid sample of subscribers to determine whether they are eligible to participate in the Lifeline program; 3) requiring all ETCs with GAO-identified potentially ineligible subscribers to verify the eligibility of the subscribers, and de-enrolling any ineligible subscriber from the Lifeline program; and, 4) referring the substantial enrollment or recertification of ineligible subscribers by any ETC to the FCC’s Office of Inspector General for evaluation, and to the Enforcement Bureau.[11]
On September 6, 2017, the Senate Committee on Commerce, Science, and Transportation held an oversight hearing entitled, “Addressing the Risk of Waste, Fraud and Abuse in the Federal Communications Commission’s Lifeline Program.” CAGW Director of Technology and Telecommunications Policy Deborah Collier testified regarding the problematic history of the Lifeline program, particularly following its expansion to include wireless services in 2008. During the hearing, Ms. Collier emphasized the important role the National Verifier System will play in providing improved verification of eligible subscribers, currently slated to begin in 2018. She also reiterated the need for continued maintenance and updates to the database to ensure strict adherence with the eligibility requirements by those distributing Lifeline services.
In addition, Ms. Collier stressed the importance for the FCC to reach out to state stakeholders to obtain memorandums of understanding, enabling the sharing of eligibility data between state and federal agencies to ensure appropriate eligibility criteria is maintained, while keeping secure the privacy and personal data of individual subscribers. A copy of her testimony is attached for the record (Appendix A).
During his testimony, economist Dr. Jeffrey Eisenach discussed the inevitable waste, fraud, and abuse that has been built into the Lifeline program from its inception. According to Dr. Eisenach, the Lifeline program,
In other words, the Lifeline subsidy program encourages the distribution of improper payments to companies through the self-certification process. GAO Director for Audit Services, Forensic Audits & Investigative Service Seto Bagdoyan testified that the USAC currently engages in a pay-and-chase activity to retrieve the funds already disbursed to the subscriber’s ETC,[13] which is an inefficient method to recoup improper payments. It is better to verify eligibility at the front end through the National Verifier System before payment is made to an ETC.
On January 19, 2017, USAC awarded the contract to develop the National Verifier System to Accenture Federal Services.[14] Swift and effective deployment is critical to the future success of the Lifeline program. It is a disservice to those who are truly in need and taxpayers who foot the bill for the Lifeline program to continue to provide services to ineligible individuals and households.
II. FOURTH REPORT AND ORDER
CAGW agrees that the same definition for “urban” and “rural” currently applied to the USF’s E-Rate program for schools and libraries should also apply to the Lifeline Tribal support programs. These definitions should be consistent not only throughout all USF programs, but also other federal government agencies. Uniform definitions will also improve data gathering for future rural and urban broadband deployment reports, and help determine where there is true lack of access to broadband services, often called the “digital divide.”
However, before these determinations can be made, broadband maps must be updated. The National Broadband Map was last updated in 2014, and the Rural Broadband Report was last updated in 2011. Current data and mapping of existing broadband capabilities is critical to any proposal intended to bridge the digital divide, and reduce the homework gap. As noted by Commissioner Jessica Rosenworcel during her testimony before the House Energy and Commerce Committee on October 25, 2017,
This information is key to bridging the digital divide and ensuring that areas without broadband service can obtain service.
V. NOTICE OF PROPOSED RULEMAKING
With respect to the Notice of Proposed Rulemaking, CAGW supports the reauthorization of state commissions to designate Lifeline ETCs. The states’ role within the Lifeline program will become even more important as the National Verifier System is activated. CAGW encourages the USAC to initiate memorandums of understanding (MOUs) with each of the states that will create data sharing agreements in keeping with the privacy protection afforded to consumers and their personal data within state boundaries. These MOUs will be critical to the integrity of the National Verifier System, and will help ensure that benefits will only be provided to those who truly need the program.
CAGW also encourages the FCC to continue enforcement actions against companies seeking to take advantage of the subsidies by subscribing as many households as possible without proper vetting. However, CAGW is concerned about Section B1 of the proposed rule, which would restrict the Lifeline broadband subsidies to facilities-based providers only. This provision would make it impossible for non-facilities based wireless providers to remain in the program, leaving many Lifeline subscribers in search of a new provider.
According to the FCC’s 2016 Universal Service Monitoring Report, there are more than 12.5 million subscribers to the Lifeline program, 68.5 percent of whom obtain their service through non-facilities based providers.[16] While some providers have engaged in practices leading to the subscription of ineligible subscribers (as detailed in Ms. Collier’s testimony and the FCC’s list of USF enforcement activities[17]), a total ban on non-facilities based resellers of wireless services could have a negative impact on eligible subscribers.
While the desire to promote broadband capable services for Lifeline support is understandable, the commission should consider the potential use of wireless/mobile broadband services using Smartphones as an additional means to bridge the digital divide in communities where either access to facilities-based providers is difficult to achieve or cost-prohibitive for lower-income Americans.
A 2015 Pew Internet study found that nearly two-thirds of Americans were Smartphone owners, and 10 percent of Americans owned a Smartphone with a data plan, but had no other form of high-speed internet access at their home.[18] A March 2017 Pew Research Center report found that among individuals earning less than $30,000 annually, 64 percent owned a Smartphone; 56 percent owned a desktop or laptop computer; 53 percent had a broadband connection to their home; 32 percent owned a Tablet computer, and 17 percent had all of these items.[19] According the Department of Health and Human Services, 50.5 percent of households have only wireless service.[20] Among households with small children, that figure is 60.7 percent.[21]
CAGW urges the commission to reconsider the proposal to ban non-facilities based providers until after the National Verifier system has become fully tested and operational. If abuses continue once the National Verifier System is in place, then this issue can and should be revisited. If, at that time, the FCC determines that moving to a facilities-based provider structure only is the best resolution, then the commission should provide a straightforward method for eligible households currently enrolled through a non-facility based provider to migrate to a new service provider without disruption of service.
CAGW applauds the efforts by the FCC to include further safeguards to the Lifeline enrollment and recertification process by adding requirements for Lifeline agents and their representatives to register with the USAC, and by prohibiting practices engaged in by ETCs that have encouraged sales and marketing agents to disregard eligibility criteria when enrolling individuals to the program, enroll consumers into the program without their consent, or any other practice that increases waste, fraud, and abuse within the program.
Because of the sensitive personal information provided for enrollment verification, all ETC customer enrollment representatives should be registered, trained, and certified by the USAC prior to submitting information into the NLAD or National Verifier systems. This would provide additional protection for the personal identifying information and verification of Lifeline subscribers, as well as provide for a tracking mechanism to root out fraudulent activity should it occur within the systems.
Adopting a Self-Enforcing Budget
CAGW agrees with FCC Commissioner Michael O’Rielly that there should be a cap on the Lifeline budget. While the 2012 and 2016 Reform Orders slowed the increase in costs of the program to consumers, placing a budgetary cap on the program, as suggested in the NPRM, provides an actionable limit on the amount of Lifeline support that can be allocated within a given year. Should that cap be met or exceeded, the commission would have the opportunity to reevaluate the program and make any necessary adjustments before additional funding is expended. This is a fiscally responsible approach to managing costs and an appropriate method for the commission to restrain the growth of a program whose budget has exponentially increased over many years. CAGW also supports the establishment of a self-enforcing budget mechanism within the Lifeline program.
In addition, since the contribution factor is determined by the USAC on a quarterly basis, it would behoove the USAC to be in constant communication with the FCC on the status of the self-enforcing budget expenditures, so that appropriate adjustments can be made prior to reaching the budgetary limit set annually by the FCC.
VI. NOTICE OF INQUIRY
The Notice of Inquiry seeks to determine whether households receiving a Lifeline subsidy are concurrently subscribed for either telephone, wireless, or broadband service at a non-subsidized rate. As noted by the GAO, the FCC has not had a very effective metric to determine adoption rates. The FCC should include in its metrics a factor determining whether those who subscribe for service through the Lifeline program already subscribe to a non-Lifeline provided phone or internet service.
Commissioner O’Rielly and Rep. Marsha Blackburn (R-Tenn.) wrote in 2015 that “the program must be better targeted to eligible low-income individuals who would not otherwise sign up for service,”[22] since GAO found that only 1 in 8 subscribers would not have service without the Lifeline subsidy. They made it clear that adoption of advanced communications should be the highest priority, as set forth in the 1934 Act, and used as a performance metric for the program.[23]
There are several key factors in whether a household would adopt advanced communications, including a potential consumer’s or subscriber’s perceived lack of relevance, lack of computer skills, or affordability of service offerings.[24] If the FCC intends for the Lifeline program to address adoption rates across the U.S., then there must be clearly-defined metrics for eligible subscribers that include whether these subscribers would have adopted the technology if not for the availability of the subsidy program to reduce their overall costs. According to GAO, the FCC does not know how many of its Lifeline recipients also have non-Lifeline phone service.[25]
Conclusion
Combatting waste, fraud, and abuse in the Lifeline program through the use of the National Verifier System, a self-enforcing budget, and strong enforcement against those who would undermine the eligibility process would enable the FCC to address the needs of eligible households, while protecting taxpayers from increased universal service fund costs on their telecommunications bills. CAGW appreciates the FCC’s efforts to rein in abusive practices, while working to improve the effectiveness of the Lifeline Program.
[1] Communications Act of 1934, Sec. 1 [47 U.S.C. 151] Purposes of Act, Creation of Federal Communications Commission, https://transition.fcc.gov/Reports/1934new.pdf.
[2] Opening Statement of Chairman John Thune (R-S.D.), Oversight Hearing Addressing the Risk of Waste, Fraud and Abuse in the Federal Communications Commission’s Lifeline Program, United States Senate Committee on Commerce, Science, & Transportation, September 6, 2017, https://www.commerce.senate.gov/public/index.cfm/hearings?Id=23A59347-5129-408F-B7A7-2F3340B7DDED&Statement_id=F0BE6F75-03A2-4592-B923-1722FF8FC955.
[3] In the Matter of Lifeline and Link Up Reform and Modernization (WC Docket No. 11-42), Lifeline and Link Up (WC Docket No. 03-109), Federal-State Joint Board on Universal Service (CC Docket No. 96-45), Advancing Broadband Availability Through Digital Literacy Training (WC Docket No. 12-23), Federal Communications Commission, Adopted January 31, 2012, Released February 6, 2012, https://apps.fcc.gov/edocs_public/attachmatch/FCC-12-11A1_Rcd.pdf.
[4] Third Report and Order, Further Report and Order, and Order on Reconsideration, In the Matter of Lifeline and Link Up Reform and Modernization (WC Docket No. 11-42), Telecommunications Carriers Eligible for Universal Service Support (WC Docket No. 09-197), and Connect America Fund (WC Docket No. 10-90), Adopted March 31, 2016, Released April 27, 2016, Federal Communications Commission, https://apps.fcc.gov/edocs_public/attachmatch/FCC-16-38A1.pdf.
[5] Giuseppe Macri, “FCC Commissioner Questions High Duplicate Enrollment Rate in Lifeline,” Inside Sources, June 8, 2016, http://www.insidesources.com/fcc-investigation-uncovers-new-fraud-in-lifeline-program/.
[6] Giuseppe Macri, “Dem Report On Lifeline Examines Only 1 of 5 Potential Forms of Fraud,” Inside Sources, July 28, 2016, http://www.insidesources.com/dem-report-on-lifeline-fraud-only-looks-at-one-of-five-overrides/.
[7] Giuseppe Macri, “FCC Commissioner Investigates Hundreds of Thousands of ‘Phantom’ Lifeline Subscribers,” Inside Sources, August 1, 2016, http://www.insidesources.com/fccs-pai-investigates-phantom-lifeline-subscribers/.
[8] Diana Goovaerts, “Total Call Mobile to Pay $30M Fine, Lose Lifeline Licenses in FCC Fraud Case,” Wireless Week, December 23, 2016, https://www.wirelessweek.com/news/2016/12/total-call-mobile-pay-30m-fine-lose-lifeline-licenses-fcc-fraud-case.
[9] “Telecommunications: Additional Action Needed to Address Significant Risks in FCC’s Lifeline Program,” U.S. Government Accountability Office, GAO-17-538, May 30, 2017, https://www.gao.gov/assets/690/684974.pdf.
[10] Ibid.
[11] Letter to the Universal Service Administrative Company from Federal Communications Commission Chairman Ajit Pai, July 11, 2017, http://transition.fcc.gov/Daily_Releases/Daily_Business/2017/db0711/DOC-345729A1.pdf.
[12] Testimony of Jeffrey A. Eisenach, Ph.D., before the Committee on Commerce, Science, and Transportation, United States Senate, September 6, 2017, https://www.commerce.senate.gov/public/_cache/files/79b60e24-1b86-4935-a88d-5dc594a2b806/8EEC0A109971FD2106D767E79290933D.eisenach-testimony.pdf.
[13] Seto Bagdoyan, “Telecommunications: Additional Action Needed to Address Significant Risks in FCC’s Lifeline Program,” Testimony before the Committee on Commerce, Science, and Transportation, United States Senate, September 6, 2017, https://www.commerce.senate.gov/public/_cache/files/b7cc2643-2e1c-4b24-8d92-02487f939a87/DD7342D74AB8D81A7CD07099117F1D85.bagdoyan-testimony.pdf.
[14] USAC Award Notice, Lifeline National Eligibility Verifier, USAC-LI-2016-10-021, Award Date: January 19, 2017, http://www.usac.org/_res/documents/about/pdf/rfp/AN-RFP-Lifeline-National-Eligibility-Verifier.pdf.
[15] Statement of Jessica Rosenworcel, Commissioner, Federal Communications Commission, Before the Subcommittee on Communications and Technology, Energy and Commerce Committee, United States House of Representatives, “Oversight of the Federal Communications Commission,” October 25, 2017, http://docs.house.gov/meetings/IF/IF16/20171025/106534/HHRG-115-IF16-Wstate-RosenworcelJ-20171025-U5000.pdf.
[16] Universal Service Monitoring Report 2016 (Data Received Through September 2016), Federal and State Staff for the Federal -State Joint Board on Universal Service, Federal Communications Commission, December 2016, pp. 22-30, https://apps.fcc.gov/edocs_public/attachmatch/DOC-343025A1.pdf.
[17] Other Universal Service Fund Actions – USFC, Federal Communications Commission, November 14, 2017, https://www.fcc.gov/enforcement/orders/1865.
[18] Aaron Smith, “U.S. Smartphone Use in 2015,” Pew Research Center, Internet and Technology, April 1, 2015, http://www.pewinternet.org/2015/04/01/us-smartphone-use-in-2015/.
[19] Monica Anderson, “Digital Divide Persists Even As Lower-income Americans Make Gains in Tech Adoption,” Pew Research Center, March 22, 2017, http://www.pewresearch.org/fact-tank/2017/03/22/digital-divide-persists-even-as-lower-income-americans-make-gains-in-tech-adoption/.
[20] Stephen J. Blumberg and Julian V. Luke, “Wireless Substitution: Early release of estimates from the National Health Interview Survey, July – December 2016,” National Center for Health Statistics, Center for Disease Control and Prevention, U.S. Department of Health and Human Services, May 2017, https://www.cdc.gov/nchs/data/nhis/earlyrelease/wireless201705.pdf.
[21] Ibid.
[22] Mike O’Rielly and Rep. Marsha Blackburn, “FCC’s Lifeline Program Ripe for Fraud, Abuse,” Politico, July 12, 2015, https://www.politico.com/magazine/story/2015/07/fccs-lifeline-program-expansion-without-reform-120008.
[23] Ibid.
[24] “Broadband: Intended Outcomes and Effectiveness of Efforts to Address Adoption Barriers Are Unclear,” U.S. Government Accountability Office, June 2, 2015, GAO-15-473, https://www.gao.gov/assets/680/670588.pdf.
[25] Bagdoyan, Testimony before the Senate Commerce, Science, and Transportation Committee, September 6, 2017.