InsideSources

One of the Federal Communications Commission’s three Democratic commissioners broke ranks from the majority Tuesday to side with its two Republican commissioners on possibly the hottest issue pending before the agency — set-top boxes.

During a congressional oversight hearing Tuesday FCC Commissioner Jessica Rosenworcel agreed there are flaws in Chairman Tom Wheeler’s proposal to mandate pay-TV providers make their content available on third-party set-top boxes.

“I’ll make it easy — yes,” Rosenworcel said in response to a yes or no question from Tennessee Republican Rep. Marsha Blackburn about whether the commissioners thought the initial proposal was flawed.

Though such bipartisan consensus has become increasingly rare at the FCC, Rosenworcel wasn’t the only Democrat to imply there are flaws with the pitch. Commissioner Mignon Clyburn declined to answer the question, while Wheeler said “everything is designed to seek improvement.”

“That’s what we’re trying to do right now,” Wheeler said when asked about taking a different approach from the original Notice of Proposed Rulemaking. “We’re working with the industry.”

All four fellow commissioners agreed on the need for another approach, and that the one recently pitched by Comcast, DirecTV, and the National Cable and Telecommunications Association to offer their content on apps shows promise.

“One page. It’s not a proposal, it’s a press release,” Wheeler said. “The great thing is that it lowered the temperature and we can talk together.”

While Wheeler and Clyburn disagreed the original plan rendered copyright worthless, Rosenworcel again diverged from her colleagues, and said after a meeting with the copyright office she agreed the original plan puts the content that pay-TV providers pay for at risk of manipulation or theft on third-party devices.

“I think that more work is necessary on our part,” Rosenworcel said.

Since the proposal was announced earlier this year content, providers have expressed concern the plan will make their property vulnerable to pirating both nationally and internationally.

“I think that you’ve got a long way to go on set-top boxes,” Blackburn said.

The bipartisan atmosphere didn’t last long. Questions aimed at Pai concerning his ongoing investigation into Lifeline fraud led to bickering between Republicans and Democrats on the Communications and Technology Subcommittee and at the witness table.

While Pai said he believes he’s “uncovered potential fraud,” California Democrat Rep. Anna Eshoo pressed Pai on whether he had any evidence, and warned the commissioner to “be very careful” in making such allegations.

“Just answer me yes or no, have you uncovered any fraud so far?” Eshoo asked.

“To date, I have not reached that conclusion,” Pai conceded.

Pai’s investigation into Lifeline has focused on providers overriding a database meant to flag and prevent multiple enrollments, a practice the agency has fined numerous providers over including the largest in history recently levied against Total Call Mobile.

As was the case with Total Call Mobile, Pai suspects the overrides — which presently account for 48 percent of enrollments — represent the latest trend in provider fraud, while Democrats allege the majority are legitimate overrides for independent subscribers sharing an address like a homeless shelter.

Wheeler said there are 2.2 million Lifeline subscribers today that live in 890,000 multiple resident addresses, and according to the U.S. Census Bureau, 20 to 50 percent of American households are “doubled up” households, putting the 16 percent of Lifeline subscribers on the low end.

“So you’re going to say there is no fraud then? Yes or no?” subcommittee chairman and Oregon Republican Rep. Greg Walden asked, coming to Pai’s defense.

“I’m going to say to you sir that we are vigilantly working, and the reason that we know this is because we have been out making these kinds of investigations,” Wheeler said. “As is the case with most of Commissioner Pai’s so-called statistics, he’s reading from yesterday’s newspaper. These things were shut down in 2015.”

Eshoo said the Lifeline fraud the FCC has taken action on was perpetrated by providers, not subscribers. Pennsylvania Democratic Rep. Michael Doyle said that while the program is assuredly not free of fraud, it’s likely “committed by companies, not the poor.”

Wheeler added his FCC inherited the problem of “the fox guarding the henhouse” from the Bush administration’s FCC, and the National Eligibility Verifier system included in his recent Lifeline expansion adding broadband internet will correct the issue when it goes live in 2019.

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The House of Representatives voted 207-143 against legislation Tuesday aimed at cutting off subsidies to help poor Americans buy mobile phone service under the Federal Communications Commission’s Lifeline program, otherwise known as the “Obama phone” program.

House Republicans failed to pass the End Taxpayer Funded Cell Phones Act under suspension of the rules, which requires two-thirds support.

The bill by Georgia Republican Rep. Austin Scott would have prevented the FCC from paying subsidies to wireless providers for voice and data services on behalf of poor Americans, who qualify for a $9.25 monthly subsidy to help cover the cost of service if they fall below a certain income level or qualify for other federal aid like food stamps.

“Waste, fraud and abuse” have been the most popular terms used to describe the program among Republicans in Congress and at the FCC since the early years of the Obama administration, when the program’s budget exploded from $819 million to $2.19 billion between 2008 and 2012 as a result of subscribers and wireless providers fraudulently enrolling multiple times.

The agency introduced reforms in 2012 and brought the budget down to $1.6 billion in 2014. Earlier this year FCC Chairman Tom Wheeler and his two fellow Democrats on the five-member commission voted to expand Lifeline to cover broadband internet and raise the program’s budget to an uncapped $2.25 billion.

Wheeler’s expansion was soon followed by the FCC’s largest fine ever leveled on a Lifeline provider of $51 million against Total Call Mobile for enrolling tens of thousands of duplicate and ineligible consumers. The provider did so by consistently overriding a database meant to flag and prevent duplicate enrollments.

Republican FCC Commissioner Ajit Pai’s office delved deeper into the tactic used by Total Call Mobile in May and found more than a dozen other Lifeline providers across the U.S. bypassed the National Lifeline Accountability Database (NLAD) to enroll subscribers flagged as duplicates in roughly one-third of all enrollments between October 2014 and February 2015.

Pai released the latest results of his investigation earlier this month, which revealed one-third of all enrollments — 4,291,647 people — between October 2014 and April 2016, or 35.3 percent, were enrolled by providers despite being flagged by the database.

According to the commissioner’s office, just one year of servicing duplicates costs taxpayers $476 million.

“We need to get to the bottom of it, and we need to route out the waste, fraud and abuse that’s persistent in the program for a long time after February 2015,” Pai said.

As part of the expansion, the FCC included the creation of a single database to act as a “National Eligibility Verifier,” comprised of income eligibility information from federal programs like SNAP and Medicaid. The subsidy is limited to one per household, and providers must ping the database to confirm a potential subscriber is eligible before enrollment.

Chairman Tom Wheeler previously characterized the current system of carriers certifying overrides as “the fox guarding the hen house,” and added he inherited the old system when he became chairman.

The plan calls for a proposal outlining the verifier system by December, and a deadline to have it up and running by 2019.

Pai pointed out during a congressional hearing in April the FCC’s last attempt at such a database failed to staunch the abuse, and added he wasn’t “all that much more optimistic” Wheeler’s new National Eligibility Verifier would be more successful.

“There is a database that currently carriers can override, and that’s part of the reason why we’re seeing some carriers now simply bypassing it, rejecting the no answer that they get from it, in order to sign up customers,” he said.

Tuesday’s defeat of the bill won’t mark the end of Republican efforts to reform the program — lawmakers in the Senate have already poked holes in Wheeler’s reform effort, and Austin himself has already proposed a separate bill to cap the program’s budget at $1.5 billion.

The wireless industry has also gotten onboard, lobbying against the budget cap in April and opposing Tuesday’s bill on the grounds wireless carriers shouldn’t be blocked from receiving the subsidy, since wireless customers help pay for the program via fees on their monthly phone bills to the FCC’s Universal Service Fund, which funds Lifeline.

“This approach is inequitable and if it is Congress’ desire to end wireless provider access to the USF programs, that effort should be matched with a dollar-for-dollar reduction in what wireless providers pay into the USF,” Meredith Attwell Baker, president of the wireless lobbying group CTIA, wrote to House leadership Tuesday.

“It also ignores America’s inexorable shift away from wireline and toward wireless service, and the reality that many of those the Lifeline program aims to help, like the homeless, simply cannot be served with wireline connections,” She wrote.

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Update: An FCC spokesman responded to the story.

Federal Communications Commissioner Ajit Pai revealed new details Wednesday about his office’s investigation into possible fraud in the agency’s Lifeline phone subsidy program for low income Americans, which found more than 35 percent of subscribers across the majority of states were enrolled using an unscrupulous override process meant to block duplicate enrollments.

During a briefing with reporters Wednesday, Pai explained how carriers have begun using an Independent Economic Household (IEH) override to enroll Lifeline subscribers after a database flags them as living at an address where a Lifeline subscriber already resides.

IEH overrides allow a carrier to certify a Lifeline enrollee is eligible for the $9.25 monthly subsidy simply by certifying they’re financially independent of another Lifeline subscriber who lives at the same address.

The override only requires customers to “check a box” according to FCC officials who briefed reporters Wednesday. Such enrollments accounted for one-third of all enrollments (4,291,647 people) between October 2014 and April 2016, or 35.3 percent.

“That’s more people than live in the state of Oregon,” Pai wrote in a letter to Universal Service Administrative Company (USAC) CEO Chris Henderson Wednesday. USAC administers the Lifeline program.

“And the price to the taxpayer is steep,” Pai continued, “just one year of service for these apparent duplicates costs taxpayers $476 million.”

In a letter to Henderson in May, Pai asked for more information about the override processes USAC has in place for carriers after they submit a Lifeline application to the National Lifeline Accountability Database. The database is designed to prevent duplicate enrollments in 44 participating states, and does not cover California — the state with the highest number of Lifeline subscribers.

Before enrolling subscribers, wireless providers — who essentially receive free business from the program — are supposed to submit the information of potential enrollees, including name, date of birth and Social Security numbers to the National Lifeline Accountability Database (NLAD) and verify they haven’t previously enrolled.

The request came after the FCC fined wireless provider Total Call Mobile more than $51 million in May for enrolling tens of thousands of duplicate and ineligible consumers — the largest fine the agency has ever issued a Lifeline provider. According to Pai’s letter, Total Call Mobile agents overrode the NLAD database for 99 percent of its new subscribers in the last quarter of 2014.

After the FCC ordered USAC to begin verifying overrides itself, carrier use of the previous override process — which essentially required carriers to simply press a button without further scrutiny from USAC — transitioned to three new override processes.

Pai highlighted two of those in his May letter to USAC, and the third — IEH overrides — Wednesday. According to data obtained by Pai’s office from USAC, after use of the previous override process dropped from over 260,000 to zero between October 2014 and February 2015 (when the changes were implemented), use of the other three overrides rose, with IEH overrides specifically rising from over 170,000 to 212,000 over the same period.

By April 2016, IEH overides rose to 280,559, or 42 percent of all Lifeline enrollments last month. Overrides in total among the 44 states participating in NLAD accounted for 5.8 million subscribers between October 2014 and April 2016.

“When 5.8 million out of 12 million — roughly 48 percent of the total number of enrollments — are the result of an override where the carrier essentially on its own say-so tells the FCC through USAC, ‘We pinky swear that this is a legitimate subscriber,’ it does make you wonder both as taxpayers and as people who are charged with administering this program what exactly is going on here,” Pai said Wednesday.

“We need to get to the bottom of it, and we need to route out the waste, fraud and abuse that’s persistent in the program for a long time after February 2015,” he added.

Total Call Mobile sales agents testified they made a practice of simply checking the boxes and even signing documents for potential subscribers after NLAD flagged them as duplicates — a practice Pai worries could still be happening.

“Given what happened in the Total Call Mobile case … it seems pretty clear to me that there are substantial problems with the way the program is being administered now, and that unscrupulous actors have no problem filling the vacuum, so to speak, when the enforcement mechanism isn’t robust,” Pai said.

An FCC spokesman responded to the details of the investigation in a Wednesday statement, pointing to the National Eligibility Verifier system included in this year’s Lifeline update as Chairman Tom Wheeler’s solution.

“The Lifeline program must be designed both to prevent abuses and to make sure that Lifeline is available to those that need it most, including the homeless population,” the spokesman told InsideSources, referencing the high number of Lifeline duplicate overrides naming homeless shelters as their addresses — a practice Total Call Mobile used often to push through overrides.

“A critical piece of the Lifeline reforms adopted by the majority of the commission in March included creation of an independent National Lifeline Eligibility Verifier, which will take the responsibility for verifying subscriber eligibility out of the hands of the provider and transfer it to a third party. Taking this determination away from the companies that stand to benefit financially will remove the program’s major remaining vulnerability to waste, fraud and abuse.”

Chairman Tom Wheeler previously characterized the current system of carriers certifying overrides as “the fox guarding the hen house,” and added he inherited the old system when he became chairman.

The plan calls for a proposal outlining the verifier system by December, and a deadline to have it up and running by 2019.

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A Federal Communications Commissioner highlighted ongoing fraud in the agency’s low-income phone subsidy program in a letter late Tuesday, months after the agency voted to expand the program’s spending and reach.

In a letter to the CEO of the Universal Service Administrative Company (USAC) — the organization charged with administering the program — FCC Commissioner Ajit Pai highlighted ongoing potential fraud by wireless providers when enrolling subscribers in Lifeline, which grants low-income Americans a $9.25 monthly subsidy to help pay for phone and broadband service.

According to Pai, roughly one-third of the 2.5 million Lifeline subscribers — 821,482 — enrolled between October 2014 and February 2015 were added by wireless providers who bypassed a database meant to flag consumers who have already enrolled with another company or by using different information, like a name abbreviation or alternate address.

Before enrolling subscribers, wireless providers — who essentially receive free business from the program — are supposed to submit the information of potential enrollees, including name, date of birth and Social Security numbers, to the National Lifeline Accountability Database (NLAD) and verify they haven’t previously enrolled.

Last month, the FCC announced its intention to fine wireless provider Total Call Mobile more than $51 million for enrolling tens of thousands of duplicate and ineligible consumers — the largest fine the agency has ever issued a Lifeline provider. According to Pai’s letter, Total Call Mobile agents overrode the NLAD database for 99 percent of its new subscribers in the last quarter of 2014.

“Even setting aside Total Call Mobile, the other 11 wireless resellers mentioned above were responsible for 616,937 of those enrollments,” Pai said of a list of redacted providers he named in the letter. “That’s outrageous.”

The FCC found that since 2014, Total Call Mobile received almost $10 million in improper payments from Lifeline fraud.

Though the USAC began reviewing overrides itself last February, Pai said he remains “concerned that existing safeguards still may let unscrupulous carriers exploit the program.”

Under the current override process, USAC staff doesn’t review eligibility documents from a potential subscriber before authorizing an override, but only a certification from the wireless carrier that the documents were reviewed.

“In other words,” Pai wrote, “the integrity of the process relies on the integrity of the carriers — the only ones who know if a subscriber’s identity is legitimate.”

Since the changes, many of the subscribers who used the process before have already enrolled tens of thousands of subscribers under the new override process, with another 494,921 enrolled without any address verification, which carriers can override in the case of rural or tribal addresses by simply pressing a button.

“There is apparently much work to be done before American taxpayers can know that the money they contribute each month to the fund is not wasted or put to fraudulent use,” the Republican commissioner’s letter reads.

In response to the continuing widespread use of the override process, Pai asked USAC to provide his office with any information on investigations, reviews, audits, USAC notices to carriers of duplicate enrollments, how many subscribers used food stamps for eligibility verification and how many used blank or temporary Supplemental Nutrition Assistance Program (SNAP) cards.

The commissioner additionally asked why the new process, meant to reduce fraud, doesn’t compel USAC to review documents itself in the case of overrides.

Pai recently raised the issue during a congressional hearing, where he and FCC Chairman Tom Wheeler were invited to testify on the FCC’s move earlier this year to expand the program to include broadband internet, and increase the program budget from $1.6 billion to an uncapped $2.25 billion.

“There is a database that currently carriers can override, and that’s part of the reason why we’re seeing some carriers now simply bypassing it, rejecting the no answer that they get from it, in order to sign up customers,” Pai said while discussing Wheeler’s inclusion of a new “national eligibility verifier” in the expansion.

The new plan’s database will be comprised of income eligibility information from federal programs like SNAP and Medicaid, which providers must ping to confirm a potential subscriber is eligible before enrollment.

Wheeler said the new system corrects the “fox guarding the hen house” scenario he inherited as commissioner.

“I’m afraid that this time around I wouldn’t be all that much more optimistic,” Pai said.

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House Republicans advanced a bill Tuesday to cap the Federal Communications Commission’s recently expanded Lifeline budget, a move they say will stymie fraud and abuse in the program, and one Democrats say will harm poor Americans.

Lawmakers on the Communications and Technology Subcommittee held markup on the Controlling the Unchecked and Reckless Ballooning of Lifeline Act of 2016 (CURB Act) Tuesday afternoon, voting 17-11 to approve changes to the bill. The CURB Act caps Lifeline spending at $1.5 billion, down from the FCC’s recently expanded $2.25 billion.

Originally put in place to provide low-income Americans with a monthly subsidy to pay for phone service, the FCC voted along partisan lines in March to expand its reach to include Internet, at the same time boosting its budget with a mechanism for commissioners to review when it reaches a certain threshold, but doesn’t put a hard cap in place.

Republicans on the commission and in Congress say the increased budget will expand the potential for fraud that was at one time endemic to the program.

“All we’re asking for is a dose of fiscal discipline,” Oregon Republican and subcommittee Chairman Greg Walden said. “If there’s a budget in place, the FCC will be forced to undergo a more serious examination of the problems plaguing this system.”

Democrats on the committee accused Republicans of trying to deprive low-income Americans of vital services needed to participate in a 21st century economy, and inhibiting their access to life-saving services like 9-1-1.

“Why are we hurting these people?” California Rep. Anna Eshoo, the subcommittee’s ranking Democrat, said during markup Tuesday, describing the legislation as “hurtful” and calling on her colleagues across the aisle to be “better than this.”

“You’re going to be taking away 9-1-1 services from them,” she continued. “Who wants to answer for that?”

Walden said he was offended Democrats would accuse Republicans of intentionally hurting the poor.

“I’ve done plenty for the poor,” Walden said. “I think the people paying the bill deserve protection too. Just like I think those that need help most among us need support. But I’m willing to do both.”

Walden and Georgia Republican Rep. Austin Scott, the bill’s author, say the legislation is aimed at protecting American consumers, who pay for Lifeline via fees on their monthly phone bills.

Louisiana Rep. Steve Scalise said those people include struggling consumers like single parents ineligible for the subsidy, who face increasing Universal Service Fees to pay for government proposals like the Lifeline expansion.

Shortly after Lifeline was expanded to include wireless service, the program’s budget rose more than 25 percent per year from $821 million in 2008 to $2.1 billion in 2012.

The rise in cost came in part from rampant fraud and abuse from consumers to wireless providers. The FCC reported 41 percent of the program’s more than six million subscribers in 2012 failed to provide eligibility documentation, with many subscribers enrolling multiple times across different carriers with falsified information to get a free cellphone along with the subsidy.

At the same time, several small wireless providers were caught enrolling the same customers multiple times for profit, prompting the FCC to implement reforms in 2012 including a database to prevent duplicate enrollees and fining cheating providers $96 million for negligence and fraud. The changes prompted a budget reduction in 2014 to its current $1.6 million.

The committee voted down a Democratic amendment to delay the cap until the FCC reports on the effect of a smaller budget, but approved an amendment from Kentucky Democrat Rep. John Yarmuth prompting the Government Accountability Office to study whether the cap is effective in reducing fraud and abuse.

As part of the expansion the FCC included the creation of a single database to act as a “national eligibility verifier,” comprised of income eligibility information from federal programs like SNAP and Medicaid. The subsidy is limited to one per household, and providers must ping the database to confirm a potential subscriber is eligible before enrollment.

The bill now moves to a final committee vote for passage before moving to the House floor.

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Two Federal Communications Commissioners urging Congress to cap the budget on the recently expanded “Obama phone” program slammed the wireless industry this week for lobbying against a cap commissioners say will limit their profits.

“[I]t is extremely disturbing to learn that the association representing America’s wireless carriers is now opposing the imposition of any spending limitation on the Lifeline program,” FCC Commissioners Ajit Pai and Michael O’Rielly wrote in a letter to Oregon Republican Rep. Greg Walden, who chairs the House subcommittee that oversees the FCC.

The letter, timed to coincide with a Communications and Technology Subcommittee hearing to discuss legislation to cap the program, implores the committee to be skeptical of testimony by the representative of a wireless trade group.

“This is an interesting position as a number of wireless carriers are either directly or indirectly responsible for some of the waste, fraud and abuse existing in the Lifeline program,” the commissioners wrote.

“It is not surprising that these carriers seek and enjoy federal government subsidies, but it seems that they are ignoring the financial impact on those Americans — and their subscribers — who are not program recipients, especially those who live on incomes just above program eligibility, and will see their wireless bills increase substantially.”

The FCC voted along partisan lines last month to expand the Lifeline program to include broadband, while at the same time upping the program’s budget to an uncapped $2.25 billion from its current $1.6 billion. According to Republicans Pai and O’Rielly, who dissented after a compromise with one of the commission’s Democrats fell through, the bigger budget will cost Americans who pay their monthly phone and Internet bills more via fees to support Lifeline.

Carriers in the past have used to program to enroll the same subscribers multiple times for profit, while failing to adequately vet enrollees to ensure they meet the requirements and haven’t enrolled with other providers.

Earlier this month, the FCC announced a $51 million fine against a wireless carrier for defrauding the program out of an estimated $9.7 million for over-riding a system meant to prevent multiple enrollments.

A rapid rise of fraud pushed the program’s budget up over $2 billion in 2012 before reforms were put in place.

“Capping the Lifeline program may be counterproductive to encouraging low-income consumers to adopt communications services that are essential to participation in today’s economy,” Scott Bergmann, vice president of regulatory affairs for CTIA, which represents AT&T, Verizon, Sprint, T-Mobile and others, told the committee Wednesday.

“A cap on the Lifeline program will inherently exclude an undetermined number of the eligible low-income consumers,” he added.

Seeking to circumvent the taxpayer argument, Bergmann suggested the government fund Lifeline with a “general revenues model and the appropriations process” instead of monthly fees on consumers’ bills.

The cap proposed via legislation by Georgia Republican Rep. Austin Scott would cap the budget at $1.5 billion.

“Until there are better, more effective guardrails in place there’s nothing to prevent the FCC from spending and spending and spending, placing an even greater burden on American household budgets that have to assume those costs,” Walden said Wednesday.

Under the proposal enacted by the FCC, commissioners would be notified when program spending reaches 90 percent of its threshold and have six months to take action after determining the cause.

“The FCC can basically blow right through its ‘budget’ by as much as it desires,” Walden said. “I don’t think this is the way government should be handling the American people’s dollars, with cavalier disregard for basic fiscal discipline.”

Democrats on the committee pushed back against Republican criticism, arguing Americans — including school students — are in more need than ever of Internet at home, with one suggesting a hard cap may actually incentivize more to apply for the subsidy in fear of the well running dry.

Kentucky Democratic Rep. Rep. John Yarmouth described the legislation as “cold hearted,” while New Jersey Democratic Rep. Frank Pallone said it would “rip phones out of the hands of millions of Americans.”

“[T]he bill to curb the Lifeline program would take essential lifesaving devices away from the people who need help the most,” Pallone said, adding without it, many Americans would be deprived of the ability to even dial 9-1-1.

“If Republicans truly want to control the costs in the Lifeline program, their blunt force bill is the wrong approach,” he said.

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A Republican senator sitting on a Federal Communications Commission appropriations panel this week uncovered a hole in the FCC’s proposal to curb fraud and abuse in its new Lifeline expansion plan.

While questioning FCC Chairman Tom Wheeler about new anti-fraud measures included in the plan, which raises the uncapped budget of the “Obama Phone” telephone subsidy program by $500 million and includes broadband Internet, Oklahoma Republican Sen. James Lankford outlined a scenario the FCC hadn’t covered.

Under the original program, providers themselves self-certified whether an individual was eligible for the $9.25 monthly subsidy — a system Wheeler described as “the fox guarding the hen house,” and one that led to multiple enrollments by subscribers and providers, both of whom could change a single letter or abbreviate a name to collect multiple subsidies per month across multiple providers.

The new plan establishes a single database to act as a “national eligibility verifier,” comprised of income eligibility information from federal programs like SNAP and Medicaid. The subsidy is limited to one per household, and providers must ping the database to confirm a potential subscriber is eligible before enrollment.

Individuals themselves can’t access the database and it prevents the “double dipping” that occurred under the previous system. However as Lankford pointed out, there’s nothing to stop providers from pinging existing customers eligible for the subsidy but paying for their own service, and offering them an additional service they could describe as free, but in reality would be paid for by Lifeline.

“How do providers not send out a notification to individual subscribers and say, ‘hey if you want an additional service, we can add XYZ service, and by the way, you also are eligible for this $9.25 additional and so it’ll really be free to you. If you sign up for this, we’ll also add this,’ and the provider gets an extra $9.25,” Lankford asked. “Because there are people that are not currently taking it that are paying their bill.”

“That is not the goal,” Wheeler said. “And I would look forward to coming back and to working with you to make sure that doesn’t happen.”

“I’m aware that’s not the goal,” Lankford said. “That’ll be something we’re going to have to work on long-term.”

Republican FCC Commissioner Ajit Pai, testifying alongside Wheeler, said the idea of the database was “old news,” and something the FCC originally intended to put in place by 2013, but “fell down on the job.”

“I’m afraid that this time around I wouldn’t be all that much more optimistic,” Pai said. “There is a database that currently carriers can override, and that’s part of the reason why we’re seeing some carriers now simply bypassing it, rejecting the no answer that they get from it, in order to sign up customers.”

Pai, who championed a “fiscally responsible” compromise proposal to update the program with Democratic FCC Commissioner Mignon Clyburn that was torpedoed at the last minute by congressional Democrats, said the proposal doesn’t technically support broadband adoption.

Lifeline’s minimum service requirements — 10 megabits-per-second download speeds for fixed and 3G for mobile — fall below the FCC’s own definition of broadband at 25 Mbps for fixed and 4G LTE for mobile. Democrats worry setting the bar too high could lead providers to set minimum prices too high and force Lifeline subscribers to pay out of pocket for service — a point where enrollment in the program drops off sharply.

“It seems to me that if, as the chairman said a year ago, ’25 Mbps connection has become table stakes in 21st century communication,’ poor Americans deserve just as much opportunity as anybody else,” Pai said.

Lankford pressed Wheeler on whether Lifeline was moving toward regulating a rate for free service from providers or acting as a partial subsidy, as the program was originally designed. In recent years, Lifeline adoption has tapered off in areas where the minimum service price exceeds the subsidy.

“We believe that the market will offer services in different types of equipment, different types of throughput, different types of data caps, etc., that will have multiple choices,” Wheeler said. “We have to walk away from the old Lifeline concept, which was a black dial telephone or a cellphone that we will dictate, and go to the concept of the market determining both what carriers will offer, and what consumers will choose.”

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House Republicans will take action on a bill to cap the Federal Communications Commission’s newly expanded Lifeline program in April, after a compromise between partisan commissioners fell through at the last minute Thursday.

The FCC’s March open meeting was pushed back several hours Thursday after Republican Commissioners Ajit Pai, Michael O’Rielly and Democratic Commissioner Mignon Clyburn spent Wednesday night hammering together a bipartisan proposal to update the Lifeline program.

Otherwise known as the “ObamaPhone” program, the update allows low-income Americans eligible to receive a $9.25 monthly subsidy for telephone service to apply it to fixed or mobile broadband Internet. The Democratic proposal dropped by Chairman Tom Wheeler‘s office in March raised the Lifeline budget from almost $1.6 billion to $2.25 billion in an effort to get more low-income Americans online.

Absent from the plan is a budget cap, traded instead for a budget mechanism to alert the FCC when Lifeline reaches 90 percent of its spending threshold. The alert would give commissioners six months to take action — opening the door to another expansion and more of the systemic fraud and abuse plaguing the program in recent years, according to Republicans.

That’s why Pai circulated a compromise plan to cap the budget at $1.75 billion along with other changes ahead of Thursday’s meeting — a cap he was willing to raise to $2 billion when Clyburn, a longtime advocate of modernization, offered to work with the frequently shunned Republicans on a compromise.

The compromise was still in place shortly before Thursday’s morning meeting, which was delayed well into the afternoon as Clyburn’s office received calls “from a wide range of individuals” urging her to support Wheeler’s original plan, Clyburn said.

“On further deliberation, I concluded such a mechanism does not fully achieve my vision of a 21st century Lifeline program,” Clyburn said on her decision to side with fellow Democrats in a 3-2 vote to pass the original proposal, plus a few changes including a minimum of 500 minutes for mobile voice plans and a five year phase-out of voice-only plans.

According to Republicans, the pressure on Clyburn to toe the party line also came from within the FCC itself.

“This agency in this proceeding represented the worst of government,” Pai said in his dissent, pointing the finger at Wheeler’s office. “Bipartisan agreements that would deliver digital opportunity to millions of Americans are thrown away and even Democratic commissioners are bulldozed simply because the chairman can get away with it.”

O’Rielly said he wouldn’t trust Clyburn’s office again, adding her last-minute abort “reminds me of an old phrase on Capitol Hill,” he continued. “Never count on a Dem to hold their vote.”

Democrats on the House Energy and Commerce Committee put additional pressure on the FCC Thursday in a letter rejecting “an artificial cap,” which they said would leave “many low-income consumers” without “any mechanism to bridge the digital divide.”

“Demand is expected to increase as the program transitions to include broadband service, and any cap would threaten the goals and purpose of Lifeline,” the letter read.

After Thursday’s meeting, a spokesman for Republicans on the same committee said they plan to move on a bill by Georgia Republican Rep. Austin Scott, introduced earlier this week to cap the budget at $1.5 billion.

“While the program’s original purpose had merit, the program in its current form is wrought with fraud and abuse, and its past time for Washington to respond to the calls of our constituents to rein this program in,” Scott said Monday. “American citizens, who are all too familiar with ‘ObamaPhones,’ understand this and can agree that it is simple good governance to ensure we are curbing wasteful spending while also promoting accountability across the federal government.”

Groups backing the plan including New America’s Open Technology Institute say it’s crucial to deploying broadband to more low-income Americans.

“The FCC’s decision to update its Lifeline program means that broadband may now be within reach for millions more broadband users,” OTI senior counsel and director Sarah Morris said Thursday. “For decades, the Lifeline program has provided critical support for phone service, and today’s order reflects the evolving communications needs of low-income households.”

Skeptics of the plan say a bigger budget doesn’t necessarily translate to more subscribers, and suggest more fraud is the likely result.

“The last time Lifeline expanded, to cover mobile services, it was beset by waste, fraud, and abuse,” TechFreedom policy counsel Tom Struble said after the meeting. “The program ballooned in size, forcing the contribution factor to spike. This lined the pockets of opportunistic middlemen but, as the GAO recently reported, produced no observable increase in adoption.”

Any legislation to cap the program would likely be dead on arrival at the White House.

In a separate item, the commission voted Thursday to advance a plan establishing new data privacy regulations over Internet service providers.

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One of the two Federal Communications Commissioners to vote against the agency’s plan to add Internet to Lifeline, the subsidized “ObamaPhone” program, is extending a “fiscally responsible” comprise to commissioners ahead of a final vote Thursday.

“Modernizing the FCC’s Lifeline program to support affordable, high-speed Internet access for our nation’s poorest families is a worthy goal,” FCC Commissioner Ajit Pai said Wednesday. “But failing to clean up the waste, fraud, and abuse in the program puts the entire enterprise in jeopardy.”

Earlier this month FCC Chairman Tom Wheeler dropped his plan to update Lifeline, which is designed to provide low-income Americans with a $9.25 monthly subsidy to help pay for the cost of telephone service. Under the new plan, consumers can apply the subsidy to broadband Internet service — a move the agency hopes will spur providers to offer bundled service plans for phone and Internet.

The proposal also ups the budget from $1.6 billion to $2.25 billion in an effort to reach more eligible enrollees, calls for the establishment of a “National Eligibility Verifier” to tackle the fraud and abuse that have plagued the program in recent years and puts in place a budget mechanism to notify the commission when it reaches a certain threshold.

According to Pai — who with lone Republican colleague Commissioner Michael O’Rielly voted against updating Lifeline last summer — those measures aren’t enough to protect American consumers, who pay for Lifeline with fees included on their monthly telephone bills, accumulating in the FCC’s Universal Service Fund.

“That’s why I’ve proposed to my colleagues a compromise to update the Lifeline program in a fiscally responsible way,” Pai said.

The Republican commissioner’s plan would reduce the Lifeline budget increase to $1.75 billion, enough to offer Internet access “to every single Lifeline-qualifying household” not online today, while maintaining landline voice service.

According to the FCC some 40 million Americans currently fall within the income threshold to apply for the subsidy, with only 32 percent — or about 13 million — currently enrolled.

It also establishes a budget mechanism of a different type, which instead of notifying the commission and promoting them to take action when it reaches 90 percent, reduces payments to carriers automatically when the estimated costs of the program would exceed the budget.

“As Senator Claire McCaskill recently wrote us, a mechanism must ‘prevent a repeat of the unchecked increase in spending that was seen the last time the program was expanded,'” Pai said. “My proposal would do just that without denying any eligible consumer a Lifeline subsidy.”

Shortly after Lifeline was expanded to include wireless service, the program’s budget rose an average of more than 25 percent per year from $821 million in 2008 to $2.1 billion in 2012.

Part of the rise in cost came from widespread fraud and abuse from consumers to wireless providers. The FCC reported 41 percent of the program’s six million-plus subscribers in 2012 failed to provide eligibility documentation, with many subscribers enrolling multiple times with falsified information to get a free cellphone along with the subsidy.

At the same time, several small wireless providers were caught enrolling the same customers multiple times for profit, prompting the FCC to implement reforms in 2012 including a database to prevent duplicate enrollees and fining cheating providers $96 million for negligence and fraud. As a result the budget was reduced in 2014 to its current $1.6 million.

Pai’s proposal also proposes to raise the minimum service standards in Wheeler’s plan from the minimum of 10 megabits-per-second download speeds to 25 Mbps for fixed broadband and from 3G to 4G LTE for mobile broadband.

“As Chairman Wheeler has put it, these speeds are ‘table stakes’ for digital consumers in the 21st century,” Pai said. “I believe low-income families and students deserve a seat at the table.”

Though Pai’s plan sets the bar more in line with the commission’s overall service standards, Democrats on the commission worry setting the standards higher could prompt providers to set higher minimum monthly payments, forcing subscribers to pay out-of-pocket to make up the difference.

The plan also does away with an enhanced $25 monthly subsidy in counties with more than 50 people per square mile, which Pai said “was intended to support the construction of facilities in Indian Country, but has instead encouraged abuse of the program in large cities … and suburban communities.”

Wheeler is unlikely to adopt the last-minute compromise ahead of the vote to implement the changes during the FCC’s March open meeting Thursday. During a congressional hearing last week Pai pointed out there have been twice as many party-line votes at the FCC since December 2013, one month after Wheeler became chairman, than during the previous four chairmanships combined.

The Republican commissioner testified during an earlier hearing the process at the FCC under Wheeler routinely leaves Pai and O’Rielly “in the dark,” while the remaining three Democratic commissioners develop proposals without Republican input.

Growing partisanship at the commission has not gone unnoticed by Congress, where lawmakers — including House Energy and Commerce Communications and Technology Subcommittee Chairman Greg Walden — have been seeking to update the commission’s rulemaking procedure and transparency.

“I believe true reforms require changes in law that can transcend any particular chairman or commission,” Walden said last week. “Unfortunately, sharp divisions within the commission are widely known.”

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