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Providers, White House, FCC Commissioners Voice Concerns on ‘ObamaPhone’ Changes

FCC Reform; FCC regulations

Mounting concerns about the Federal Communications Commission’s proposal to update the Lifeline program and include Internet could mean last minute changes to the subsidy for low-income Americans ahead of next week’s vote.

During a congressional oversight hearing Tuesday FCC Commissioner Mignon Clyburn — a supporter of the reforms who typically falls in line behind the agency’s Democratic majority — said her “office has been inundated with concerns about the call for minimum standards, particularly for mobile voice.”

Earlier this month the FCC released a fact sheet on its proposal to let low-income Americans apply the $9.25 monthly “ObamaPhone” subsidy set aside for landline and wireless telephone service to broadband Internet. According to the agency, the plan is designed to encourage service providers to offer bundled packages including broadband, cable and telephone.

However the plan also slowly phases out the subsidy for voice-only service until it no longer applies at all by December 2019, and establishes minimum service standards of 10 megabits-per-second download speeds, 1 Mbps upload and a 150 gigabytes monthly usage allowance for wireline broadband.

Mobile standards require 500 megabits at 3G, increasing to 2 gigabits-per-month by the end of 2018, unlimited minutes and voice-only support until the end of 2019, after which they’ll have to offer broadband as part of any supported device

The standards have providers, public interest groups, commissioners and staffers at the FCC itself concerned they could incur out-of-pocket costs for consumers that could leave many of them without service entirely — especially as phone-only is phased out over the next three years.

Providers themselves say the vast majority of Lifeline subscribers rely on the subsidy to cover all of their telephone expenses.

“Implementing an unlimited voice requirement as of December 2016 would effectively eliminate the free wireless Lifeline option – an outcome that would be hugely disruptive to millions of Lifeline subscribers,” Sprint wrote in comments to the FCC this week.

Though generally supportive of the move, the White House raised similar concerns in its own comments to the agency after the plan was announced.

“Rural and other areas with limited service options may fall further beyond the digital divide if providers are unwilling or unable to meet the commission’s minimum service levels,” the Obama administration wrote to the FCC. “Therefore, the commission should approach minimum broadband service standards with caution.”

Gigi Sohn, a counselor in FCC Chairman Tom Wheeler’s office and a former president of Public Knowledge — one of the public interest groups lobbying in support of the plan — acknowledged the concerns during an event to promote the plan at New America’s Open Technology Institute Wednesday.

“We believe that Americans must have access to broadband as well if they are to participate fully in today’s society,” Sohn said, adding the FCC will reexamine the market in three years and “preserve a subsidy for mobile voice if it is deemed necessary” with a “safety valve” built into the plan.

The former lobbyist said the agency is still confident the mobile market will meet or exceed the minimum standards by then.

“Finding the right balance between robust service and affordability is difficult, and we continue to talk to a variety of stakeholders on this issue,” Sohn said. “Our goal … is to allow low-income Americans to take full advantage of the myriad opportunities access to broadband brings while ensuring that service remains within their reach.”

“But that objective is unlikely to be fulfilled unless we provide incentives for carriers to offer meaningful broadband to low-income communities,” she added.

Clyburn, the only commissioner vocal about making changes and whose vote is key to passage given the Republicans dissent, said she’s open to making changes.

“But the strongest part of the FCC’s process, one that is the envy of regulators from across the globe, is that our process enables parties to give and receive feedback,” Clyburn said. “If parties believe that the current proposal doesn’t strike the right balance, I have been clear from the beginning that I am open to taking appropriate adjustments, and I plan to live up to that promise.”

The commissioner didn’t say whether she plans to offer any changes of her own ahead of the agency’s vote during its open meeting March 31.

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FCC Moves to Add Internet Access to Subsidized ‘ObamaPhone’ Program

Senior Federal Communications Officials on Tuesday announced the details of the agency’s plan to expand the Lifeline telephone subsidy program for low-income Americans to include fixed and mobile broadband Internet service.

On a conference call with reporters Tuesday, senior FCC officials said the agency will vote during its March 31 open meeting to expand Lifeline, also known as the “ObamaPhone” program, allowing low-income households eligible for the $9.25 monthly subsidy the option of applying it to mobile or fixed broadband Internet.

“The draft announced by Chairman Tom Wheeler and Commissioner Mignon Clyburn transforms the Lifeline program with a focus on broadband,” a senior FCC official told reporters. “That delivers new products and services to consumers including fixed and mobile standalone broadband, as well as fixed and mobile broadband and voice bundles.”

The FCC voted last June to develop new rules for the program, which previously applied only to mobile or landline telephone service. Under the new plan developed by Wheeler and Democratic Commissioner Clyburn, 13 million current lifeline subscribers can choose to apply their subsidy to telephone and/or broadband.

Some 40 million Americans currently fall within the income threshold to apply for the subsidy, with only 32 percent currently enrolled. The plan increases the Lifeline budget from $1.6 to $2.25 billion, which the FCC hopes will bring in another 5 million subscribers.

According to officials a major goal of the program is to bring in more providers beyond traditional telephone services, including cable companies like Comcast and Time Warner Cable, and incentivize them to offer low-cost bundled phone and Internet packages to subscriber households.

The plan also tackles years of evidence and criticism of fraud and abuse by both subscribers and providers by establishing a “National Eligibility Verifier” and a budget mechanism to reduce the cost to ratepayers, who pay for the program’s budget via fees included on their monthly telephone bills.

A neutral third party will act as the verifier and remove “the opportunity for providers to enroll ineligible subscribers” by paring down the list of federal programs used to determine eligibility to only those with electronic validation, including SNAP, SSI, Medicaid, Veterans Pension and Tribal. Applicants will also be verified via income eligibility.

Lifeline data will be “publicly available and understandable” under the new program, including the number of subscribers per provider and the disclosure of annual subscriber recertification data.

The FCC’s Wireline Competition Bureau must notify the the agency when Lifeline spending reaches 90 percent and determine the reasons for the growth in spending. Afterward the FCC has six months to take action.

Providers wishing to participate in the program will have to offer a minimum of 10 megabits-per-second download speeds, 1 Mbps and a 150 gigabytes monthly usage allowance for fixed. Mobile providers must offer 500 megabits at 3G, increasing to 2 gigabits-per-month by the end of 2018, unlimited minutes and support voice-only service until the end of 2019, after which they’ll have to offer broadband as part of any supported device.

The FCC will start winding down voice-only support to $7.25 in December 2017, $5.25 the following year and end after Dec. 1, 2019, to encourage broadband adoption.

The Lifeline program was enacted in 1985 to help low-income Americans get telephone service by providing them with a subsidy to help cover the cost. The program was expanded to include cell phone service in 2005, and grew exponentially in use and cost during the Great Recession. The Lifeline 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 across consumers and wireless providers. According to the FCC, 41 percent of the program’s more than six million subscribers in 2012 failed to provide eligibility documentation, with many subscribers enrolling multiple times with falsified information to obtain the free cellphone and $9.25 monthly subsidy. At the same time numerous wireless providers were found to be enrolling the same customers multiple times for profit.

The FCC implemented reforms in 2012, including a database to prevent duplicate enrollees and fining providers $96 million for negligence and fraud. The cost of the program came down to $1.6 billion in 2014. Lifeline is paid for by the FCC’s Universal Service Fund, made up in part by a “universal service fee” attached to Americans’ monthly phone bills — typically a few dollars based on a percentage of the total bill.

Republican FCC Commissioners Ajit Pai and Michel O’Rielly said during last year’s proposed rule-making vote they were against any reforms without a budget cap on the program and assurances in place to prevent fraud and abuse. All three Democratic commissioners are expected to support the plan.

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D.C. Schools Urge FCC to Expand ‘Obama Phone’ Subsidies to Cover Broadband

Schools in the Washington, D.C. area are pushing the Federal Communications Commission to expand the agency’s phone service subsidies program for low-income Americans to include broadband Internet.

“Lifeline support for broadband service, including wireline and wireless services, will create communities of lifelong learners and support systems that can further raise achievement and success throughout the country,” a letter from almost 200 local school district superintendents to the FCC reads.

Educators said expanding the Lifeline program is crucial to closing the “homework gap” facing students in low-income households unable to afford Internet access, a resource increasingly necessary to complete assignments outside of school.

According to another group’s recently submitted comments to the FCC, seven out of ten teachers assign homework that requires Internet access.

“Having access to broadband internet at home will increase connectivity and opportunities for those who play vital roles in the lives of students outside the classroom — parents, guardians, other relatives, and community members,” the letter, sent in September but released this week, said.

The Lifeline program currently provides subsidies to low-income Americans to help offset the price of telephone service. Democrats on the commission voted in June to begin the process of expanding the program to include subsidies for broadband Internet service, something they argue is a necessity in today tech-driven economy.

RELATED: FCC Votes to Add Internet to ‘Obama Phone’ Program

The Alliance for Excellent Education and the Leading Education by Advancing Digital Commission, the organizations responsible for drafting the letter, said access to technology outside the classroom is even more important than in.

“Sadly, many students do not have broadband access at home and cannot complete assignments and supplement their learning outside school,” the groups said. “If the nation wants to produce globally competitive graduates with twenty-first-century skills and competencies, this ‘homework gap’ must be addressed.”

The FCC’s E-Rate program already helps provide broadband to schools and libraries, but those are only two of the “three-legged stool, where all of the pieces need to be present for success: broadband in school, broadband in the library, and broadband at home,” Democratic FCC Commissioner Mignon Clyburn said earlier this year.

FCC Chairman Tom Wheeler agreed, and said those paying into the subsidy should “know that their support is going to go help students learn.”

“We all agree that we have entered the broadband era — except Lifeline has not,” Wheeler said in a recent statement. “The transformation from a voice-based service to a broadband-based service is key to Lifeline’s future.”

The two along with Democratic FCC Commissioner Jessica Rosenworcel, who recently noted 5 million out of the U.S.’s 29 million households with school-aged children lack access to broadband, voted to open a window to hear public comment on the proposal in June.

The Republicans including FCC Commissioner Ajit Pai don’t agree, and say the program, already rife with fraud and abuse, needs to be reformed and capped before it can be expanded.

“Today, Lifeline spending and enrollment are still almost double what they were at the end of 2008,” Pai said earlier this summer. “Waste, fraud, and abuse are still rampant. And in a report issued earlier this year, the nonpartisan Government Accountability Office (GAO) ‘concluded that the Lifeline program, as currently structured, may be a rather inefficient and costly mechanism to increase telephone subscribership among low-income households.’”

“Let me be clear. I am open to having a conversation about including broadband in the Lifeline program,” Pai said. “But any such change must go hand-in-hand with the reforms that are necessary to producing a fiscally responsible program. And this proposal fails that basic test.”

The Lifeline program was enacted in 1985 to help low-income Americans get telephone service by providing them with a subsidy to help cover the cost. The program was expanded to include cell phone service in 2005, and after the housing and financial crisis began in 2007, grew exponentially in use and cost. The Lifeline 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 across consumers and wireless providers. According to the FCC, 41 percent of the program’s more than six million subscribers in 2012 failed to provide eligibility documentation, with many subscribers enrolling multiple times with falsified information to obtain the free cellphone and $9.25 monthly subsidy. Meanwhile, wireless providers including Conexions Wireless, I-wireless and True Wireless were enrolling the same customers multiple times for profit.

The FCC implemented reforms in 2012, including a database to prevent duplicate enrollees and fining providers $96 million for negligence and fraud, and brought the cost of the program down to $1.6 billion in 2014. Lifeline is paid for by the FCC’s Universal Service Fund, made up in part by a “universal service fee” attached to Americans’ monthly phone bills — typically a few dollars based on a percentage of the total bill.

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FCC Votes to Add Internet to ‘Obama Phone’ Program

The Federal Communications Commission voted 3-2 Thursday in favor of a plan to expand the agency’s Lifeline phone subsidy program for low-income Americans to include broadband — the most contentious issue to divide Republicans and Democrats on the commission since net neutrality.

Chairman Tom Wheeler and Democratic Commissioners Mignon Clyburn and Jessica Rosenworcel voted to expand the program and give Lifeline subscribers the option to purchase broadband Internet service with the $9.25 monthly subsidy, currently used by low-income Americans to purchase landline or mobile phone service.

“At a time when America does business online, why should we continue to spend rate-payer funds only on 20th Century narrow-band service,” Wheeler said during Thursday’s open meeting at FCC headquarters in Washington.

“Why shouldn’t rate-payers — those hard-working Americans — know that their support is going to go help students learn, veterans to apply for benefits, job-seekers to apply for employment and a myriad of other modern challenges that increasingly can only be met online?”

Wheeler also pointed out that despite the political divide over the issue, Lifeline was both put in place and expanded under Republican presidents and past commission votes.

“Those who dissent on this notice today are against cleaning up the invitation to waste, fraud and abuse created by how the program was originally designed and managed,” Wheeler said.

Included in the expansion are reforms that would no longer let service providers determine the eligibility of enrollees for the subsidy — a measure Wheeler described as not only a conflict of interest, but akin to “letting the fox guard the hen house.” Under the expansion, providers would also be permitted to retain documents confirming enrollees’ eligibility, which they are currently barred from keeping.

Republican Commissioners Ajit Pai and Michael O’Rielly voted against expanding the program. Both argue Lifeline is inundated with fraud and abuse, and needs to be reformed before it can be expanded.

According to Pai, today’s Lifeline program, which came to be known as the “Obama Phone” program after it was amended to offer free instead of discounted phone service and a free phone, is far different from the iteration put in place 30 years ago under the Reagan administration.

“To equate the two is like saying that ‘The Godfather: Part II’ is the same as ‘Paul Blart: Mall Cop 2′ because both are movie sequels,” Pai told meeting attendees.

“My priorities for the Lifeline program, which I outlined almost a year ago, are clear. We must implement meaningful reforms to restore fiscal responsibility. We must root out waste, fraud, and abuse. We must target Lifeline spending on those who really need the help. And we must ensure that dollars coming from hard-working Americans’ phone bills each month are wisely spent.”

The Lifeline program was enacted in 1985 to help low-income Americans get telephone service by providing them with a subsidy to help cover the cost. The program was expanded to include cell phone service in 2005, and after the housing and financial crisis began in 2007, grew exponentially in use and cost. The Lifeline 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 across consumers and wireless providers. According to the FCC, 41 percent of the program’s more than six million subscribers in 2012 failed to provide eligibility documentation, with many subscribers enrolling multiple times with falsified information to obtain the free cellphone and $9.25 monthly subsidy. Meanwhile, wireless providers including Conexions Wireless, I-wireless and True Wireless were enrolling the same customers multiple times for profit.

The FCC implemented reforms in 2012, including a database to prevent duplicate enrollees and fining providers $96 million for negligence and fraud, and brought the cost of the program down to $1.6 billion in 2014. Lifeline is paid for by the FCC’s Universal Service Fund, made up in part by a “universal service fee” attached to Americans’ monthly phone bills — typically a few dollars based on a percentage of the total bill.

“Today, Lifeline spending and enrollment are still almost double what they were at the end of 2008,” Pai said. “Waste, fraud, and abuse are still rampant. And in a report issued earlier this year, the nonpartisan Government Accountability Office (GAO) ‘concluded that the Lifeline program, as currently structured, may be a rather inefficient and costly mechanism to increase telephone subscribership among low-income households.'”

The GAO report went on to note the “risk of significant costs to the program are even greater [with respect to broadband than voice] given that [the] FCC notes that a lesson learned from the broadband pilot program is that higher monthly subsidies have the highest participation rates.”

“Let me be clear. I am open to having a conversation about including broadband in the Lifeline program,” Pai said. “But any such change must go hand-in-hand with the reforms that are necessary to producing a fiscally responsible program. And this proposal fails that basic test.”

Pai and O’Rielly outlined a number of reforms they would have to see attached to any Lifeline expansion before they could vote for it, including a capped budget, a reduction in incentives to reduce fraud, a requirement for enrollees to make some contribution to their subsidized plans, and more aggressive enforcement from states and the FCC.

Following the vote Thursday, the agency will open a window to hear public comment on whether the program should be placed on a fixed budget, and what metrics should be used to grade its efficiency.

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Pai: Expanding ‘Obama Phone’ Program to Include Internet Will Mean More ‘Waste, Fraud, and Abuse’

Federal Communications Commissioner Ajit Pai cautioned Americans to be skeptical Wednesday of a forthcoming decision by the agency to consider expanding its Lifeline, or “Obama phone” program as it’s been called in recent years, to include broadband subsidies for low-income Americans.

The Lifeline program was instituted in 1985 to help low-income Americans get telephone service by providing them with a subsidy to help cover the cost of service. The program was expanded to include mobile phone service in 2005, and in 2008 with the onset of the Great Recession, grew quickly in both use and cost — with its budget rising an average of more than 25 percent per year from $819 million in 2008 to $2.19 billion in 2012.

A significant portion of the rise in cost came from widespread fraud and abuse from consumers and wireless providers. According to the FCC, 41 percent of the program’s more than six million subscribers in 2012 failed to provide eligibility documentation, with many subscribers enrolling multiple times with falsified information to obtain the free cellphone and $9.25 monthly subsidy. Meanwhile, wireless providers including Conexions Wireless, I-wireless and True Wireless were enrolling the same customers multiple times to profit from the subsidy.

After adopting reforms in 2012, including setting up a database to prevent duplicate enrollees and fining providers $96 million for negligence and fraud, the cost of the program came down to $1.6 billion in 2014. Lifeline is paid for by a “universal service fee” attached to Americans’ monthly phone bills — typically a few dollars based on a percentage of the total bill.

“So where does your hard-earned money go? Unfortunately, Lifeline, known in some circles as the ‘Obamaphone’ program, is plagued by waste, fraud, and abuse,” Pai wrote in a National Review op-ed Wednesday. “And ground zero for the program’s current woes is the state of Oklahoma.”

In Oklahoma’s tribal lands, Lifeline subscribers are eligible for $34.25 per month regardless of whether they are Native Americans or not. In 2014, Oklahoma cost the Lifeline program the second highest total — $128 million — despite the state ranking 28th in population. The vast majority of Oklahoma’s claimants — 99.5 percent — received the higher $34.25 subsidy.

On average, Lifeline costs $5 per person. In the Sooner State, the average is $33.01.

“So, for example, a non–Native American living in Tulsa is eligible for $300 more per year in phone subsidies than a low-income person in East Los Angeles or Appalachia,” Pai wrote. “Of the 307,434 Oklahomans receiving Lifeline support, only 339 do not qualify for the tribal subsidy, even though the vast majority of Oklahoma beneficiaries are not Native Americans.”

In the case of one former Oklahoma telephone company — Icon Telecom — the company defrauded the FCC out of more than $27 million with fake enrollees, which numbered 2,200 in 2011 and rose to 135,000 a year later.

“As a native of Parsons, Kansas, a small town near the Oklahoma border, I have a deep respect for tribal nations in Oklahoma,” Pai wrote. “But this federal spending in Oklahoma is outrageous. And excessive subsidies have made the state a playground for Lifeline fraud.”

On Thursday the commission is expected to advance and open up comment on the proposal by FCC Chairman Tom Wheeler to allow enrollees to purchase broadband service with the subsidy. The motion will likely be the most divisive vote since the agency adopted Wheeler’s net neutrality Open Internet Order earlier this year.

Before any expansion of the program, Pai argued Wednesday, the agency should reform the provisions still vulnerable to fraud and abuse.

“The FCC must act promptly to end this kind of swindle,” Pai wrote. “One option would be to provide the enhanced subsidy only in tribal lands with a low population density, where telephone services are less accessible and affordable.”

Pai said such reforms should also include a capped budget, a reduction in incentives to reduce fraud, a requirement for enrollees to make some contribution to their subsidized plans, and more aggressive enforcement from states and the FCC.

“These reforms — and others — must go hand in hand with any decision to begin providing broadband subsidies through Lifeline,” Pai wrote. “For the sake of all Americans who fund the program through taxes on their monthly phone bills, we cannot expand a broken program.”

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