Editor's Corner—FCC's Lifeline overhaul sets fire to a bridge over the digital divide

FCC Commissioner Ajit Pai (left) speaks at Mobile World Congress '17
FCC Chairman Ajit Pai, far left, speaks at Mobile World Congress earlier this year.
Colin Gibbs Editor's Corner

The FCC took its first major step on Thursday toward overhauling the controversial Lifeline program in a move that will punish not just low-income citizens but perhaps small, innovative service providers as well.

The commission voted 3-2 along party lines to roll back Lifeline, which offers subsidized devices and services for internet access to people at or below 135% of the poverty line and some other users. The program offers $9.25 a month per household to buy internet or phone service, and an extra $25 a month for those living in Tribal areas.

Lifeline was established under the Reagan administration and expanded in 2005 under George W. Bush to include wireless offerings. That expansion acknowledged the fact that for many poor people, the phone is the primary—perhaps even the only—personal device used to access the internet.

On Thursday, the FCC proposed a new spending cap, which could—among other things—conceivably prevent qualified citizens from using the program, and began to shift control of Lifeline away from federal authorities to the states. More importantly, though, it killed the $25 monthly subsidy for people who use MVNOs, and it moved one step closer to preventing resellers from offering Lifeline plans anywhere.

Those MVNOs have a history of offering poor service under the Lifeline program, Commissioner Ajit Pai said.

“Right now, some resellers are claiming to meet Lifeline’s minimum service standards through ‘premium Wi-Fi’—a service that might work at the local McDonald’s but won’t connect students who want to do their homework at home,” Pai said in a statement issued before the vote. “Low-income families deserve high-quality services, not cheap knock-offs. Today, we say second-class service isn’t good enough.”

MVNOs have also historically defrauded the Lifeline program, Pai said, taking advantage of a system that “allowed for self-certification of Tribal residency.” Pai, it must be noted, is a lawyer who once worked for Verizon.

Lifeline critics point to a report released in July by the Government Accountability Office that exposed rampant fraud in the system. Importantly, though, that report was based on data from 2014, and the FCC made multiple changes in 2015 and 2016 to address fraud within the program.

Meanwhile, more than 70% of Lifeline users receive service via an MVNO, Commissioner Mignon Clyburn noted in her statement. Barring them outright from the program would not only force all those users to find new service providers, but it would also limit their options to network operators. And in remote areas where only one or two operators offer service, that would stifle competition.

“From our experience, it’s doubtful whether other providers would step in to fill the gap,” Burton Eller, legislative director for the nonprofit group National Grange, said earlier this week. “Before resellers entered the Lifeline service market, there was very little wireless service in rural America that was available and affordable to low-income families. Other carriers demonstrated little interest in serving the rural Lifeline-eligible population.”

It’s no secret that the digital divide is a major problem in the United States, further isolating poor people and making it more difficult for them to do homework, find job opportunities and do many other things most of us take for granted. We should be working to build more bridges across that gap before we hastily tear down existing ones.

Yes, Lifeline was once teeming with fraud, waste and abuse. Yes, the program still has significant flaws. And yes, companies that fail to provide adequate services should be forever barred from Lifeline for preying on some of our most vulnerable citizens.

But the 2016 reforms may be working well—we won’t know until we see more updated data—and existing failings can be analyzed and addressed individually as necessary.

Instead, the FCC is opting to overhaul the system dramatically, slashing subsidies for some and moving to prevent the kinds of service providers—namely MVNOs—that are ideally suited to serve low-income consumers, often in remote areas. The commission is intent on burning a crucial bridge across the digital divide with no promise of building a new one. — Colin | @colin_gibbs