Phone Subsidy for Poor Extended to Broadband in FCC Proposal

A $1.6 billion program to help poor people afford telephones would be extended to include Internet connections under a proposal by the chairman of the Federal Communications Commission

Tom Wheeler is asking his fellow commissioners to approve a change to the Lifeline program that has helped pay for telephone connections since 1985, the FCC said in a news release Thursday. The commission could vote on the matter at a June 18 meeting.

Low-income Americans disproportionately rely on smartphones for Internet access, and being unable to afford the devices puts them at a disadvantage for health care, banking and other services, the agency said.

In 2012, the FCC trimmed the subsidy that powered growth for TracFone Wireless Inc. amid concerns about waste and fraud as wireless companies distributed free handsets. At the time the agency said it was beginning to move toward subsidizing broadband connections.

The FCC should recognize that mobile connections can deliver affordable broadband, CTIA-The Wireless Association, a trade group with members including leading providers AT&T Inc. and Verizon Communications Inc., said in a May 26 filing.

Top recipients under the Lifeline program in 2013 were TracFone parent America Movil, which collected $430.3 million, followed by Sprint Corp. at $320 million and AT&T, which received $153.3 million, according to a 2014 report written for the FCC. Verizon was the ninth-biggest recipient with $59 million, according to the report.

Spending Dropped

Spending on the Lifeline program dropped to $1.6 billion in 2014 from a peak of $2.2 billion in 2012, according to the Universal Service Administrative Co. The Washington-based nonprofit works with states to oversee the subsidies, which are funded by fees on phone customers’ bills.

The number of Lifeline users dropped to 14.5 million in 2013 from 17.2 billion in the previous year, according to the 2014 FCC report. The number of participants is more than double that of a decade earlier, before mobile phones were made eligible for subsidies in 2005.

The program has continued to attract criticism. Lifeline has a “reputation as one of the most corrupt federal programs in recent memory,” Senator David Vitter, the Louisiana Republican who is chairman of Committee on Small Business and Entrepreneurship, said in a Feb. 25 letter to Wheeler. Vitter focused on false claims by mobile phone vendors and said the FCC must hold the companies accountable.

Abuses of the program have continued despite reforms such as screening for duplicate subsidies and requiring annual recertification to participate, FCC Commissioner Michael O’Rielly, a Republican, said in a February blog post.

“There is a legitimate debate whether the Lifeline program should be abolished or significantly scaled back rather than expanding,” O’Rielly said in the blog post.

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