FCC overhauls telephone subsidy for the poor, adding broadband

Changes to the Lifeline program include a broadband pilot program and efforts to reduce fraud

The U.S. Federal Communications Commission has approved an overhaul to its Lifeline program, which subsidizes telephone service for poor people, with the goals of saving money and allowing the subsidy to go toward broadband service.

The FCC on Tuesday voted to make several changes to the program, including the launch of a US$25 million pilot program to use Lifeline for broadband. The pilot program will solicit proposals from broadband providers starting this year, the FCC said. Under the changes approved by the commission, recipients of Lifeline subsidies could use the money for bundled services, including voice and broadband packages.

In addition, the FCC set a 2012 savings target of $200 million for the program, which costs about $2.1 billion a year, and the commission will create a national Lifeline database to prevent multiple telecom carriers from receiving program support for the same consumer. Critics of the program have complained that there's significant abuse, with recipients getting subsidies for multiple phone and mobile lines.

The FCC will also create an eligible database, using government data, focused on verifying recipients' initial and ongoing eligibility for the program. The database should reduce the potential for fraud and cut red tape for both recipients and carriers, the FCC said.

Commissioners set a goal of saving up to $2 billion over the next three years, but Commissioner Robert McDowell, a Republican, said he doubted the FCC can achieve that goal. McDowell questioned the "assumptions and models" FCC staff used to predict the savings.

Nevertheless, McDowell voted to approve the changes. The changes will help Lifeline better fulfill its purpose of helping low-income U.S. residents stay connected, he said.

"Today the Federal Communications Commission is making the most fundamental, constructive and radical changes to the Lifeline program since its inception," he said. "We are infusing it with fiscal discipline for the first time."

Lifeline provides a subsidy of up to $10 per month. The program is funded through the Universal Service Fund tax on telephone and mobile carriers, which pass the costs on to customers.

U.S. Representative Anna Eshoo, a California Democrat, praised the FCC's changes to the program, including the efforts to cut costs. The FCC has also "recognized with these reforms that broadband is an essential communications tool for all Americans," she said in a statement.

Carrier CenturyLink and broadband advocacy group the Benton Foundation also applauded the changes. The changes will modernize Lifeline by adding broadband to the services covered, said Amina Fazlullah, Benton's policy counsel.

"At a time of nationwide economic stress, when a number of families are facing unemployment and homelessness, Lifeline ensures that these families are able to maintain a connection to potential employers, educational resources, government services and health care providers," she said.

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's e-mail address is grant_gross@idg.com.

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