As anticipated, a divided FCC launched rulemaking proceedings at the agency’s monthly open meeting last Thursday to extend Universal Service Fund (USF) Lifeline support to broadband, while approving further reforms to the Lifeline program to combat fraud, waste and inefficiency. Adopted by a 3-2 margin, the second further notice of proposed rulemaking (FNPRM) and series of related orders enact or propose changes to the Lifeline program, which was established 30 years ago to provide eligible low income households with a monthly subsidy to offset the cost of fixed phone service. Wireless voice services were added to the Lifeline program seven years ago. Then in 2012 the FCC enacted various reforms that reduced Lifeline spending by 24% while prescribing remedies for abuses that included, among others, the award of multiple subsidies to the same household.

To improve program oversight, the order outlines new rules that require providers of Lifeline service to retain documentation of consumer eligibility. As part of the FNPRM, the FCC is requesting comment on further proposals to build upon the reforms enacted in 2012. Included among these proposals are (1) the creation of a third-party “national verifier” that would confirm consumer eligibility for Lifeline assistance and thus remove that function from the hands of carriers, (2) enabling direct subsidies to consumers through the use of vouchers, and (3) establishing a budget for the Lifeline program. With respect to broadband, the FNPRM requests stakeholder input on the question of whether Lifeline support should be extended to broadband and whether minimum Lifeline service standards should be adopted for both voice and broadband. In addition to seeking comment on ways to improve competition and state participation, the FNPRM also seeks comment on whether the current Lifeline subsidy of $9.25 per month should be maintained.

Explaining the need for the FNPRM, the FCC noted in a press release that 48% of households with annual incomes of less than $25,000 subscribe to broadband and that, while low-income consumers “disproportionately use smart phones for Internet access . . . nearly 50% of them have had to cancel or suspend smart phone service due to financial hardship.” While affirming his openness to “having a conversation about including broadband in the Lifeline program,” Commissioner Ajit Pai lamented in a dissenting statement that the orders and FNPRM lack discussions on a spending cap. Pai also complained about the absence of any proposal to require Lifeline recipients to pay toward the cost of their service, arguing that a minimum contribution of 25% would return Lifeline to its “original purpose of discounted service, rather than free service.” Countering, “we are unwilling to say that, for an as-yet undesigned program, we are going to put in a cap,” FCC Chairman Tom Wheeler replied: “let’s figure out what we are going to do, and then let’s figure out how to pay for it.”