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March 14 2016

"Obamaphone Lady" Will Soon Have the Option of Subsidized Internet

Patrice J. Lee

One of the charges you probably skim over in reading your telephone bill is one called a universal service fee. The service isn't for the person paying the bill.

It is there to provide low-income people with subsidies to help them pay for discounted phone service. The woman with the Obamaphone, who became famous as "Obamaphone Lady" in the 2012 presidential election was one of the people who obtained phone service through this program. Now she will be able to pick internet instead. (Despite the nickname, the program began under Republican administrations).

The FCC has just released a plan to change the decades-old monthly phone subsidy program so that recipients could instead spend their subsidy on discounted broadband for internet service instead of telephones. The campaign to extend the subsidy to broadband was introduced by Obama FCC appointee Tom Wheeler and opposed by Republican appointees.

The price tag would be about $2.25 billion – increasing the current spending on the LifeLine Program by fifty percent, according to a source quoted by the Washington Post.  

Internet providers would be required to deliver a minimum level of download and upload speeds and cellular service providers would give subscribers 500 MB of data to start but increase that over time to 2 GB by the end of 2018.

Enrollment will be easy. Applicants need only show that they fall below a certain income level or receive other public assistance benefits such as food stamps, disability, or Medicaid. The information collected would be cross-referenced against existing federal assistance records to avoid duplication. Since the phone program has been rife with fraud, critics of the expanded program expect more of the same.

A conservative FCC Commissioner Michael O’Reilly laid out these concerns:

Failing a major change in direction, the FCC is preparing to massively expand the size and scope of the Lifeline Program without the necessary inclusion of a hard budget or financial constraints.  Such irresponsible action will balloon a program plagued by waste, fraud, and abuse and result in higher phone bills for every American – including those already struggling in the current economy.  In sum, it’s a recipe for disaster, and I can’t and won’t be part of it.

The benefits of a firm budget are undeniable.  Setting a top line figure allows proper balancing of Lifeline with other USF programs, and limits the overall cost to consumers.  It is also the first line of defense against a rapid increase in the program’s size.  Moreover, it acts as a deterrent to providers and recipients to prevent oversubscription or abuse – it’s the difference between handing out candy at Halloween and leaving a candy dish at the door.   

While I agree that the Commission should move contribution reform, it is disingenuous to treat it as a solution to unrestrained Lifeline spending.  By incorporating new payers (people, devices or services) into the system, it merely masks the true increase in spending.  In other words, expanding the denominator to impose fees on more services, like Internet access, just dilutes the current contribution factor but it does nothing to address the growing numerator (i.e., overall spending).  And, it means that instead of one fee on voice services, as in today’s collection process, there would be smaller fees on multiple services that collectively will total more than consumers are currently paying.  That’s the hidden agenda.  Under this construct, families will pay more, possibly unknowingly, to the Federal government when all of the new services are subjected to the Commission’s fee mandates.

It’s likely that despite concerns, the plans will move forward. The Wall Street Journal reports on the politics of the vote:

An FCC vote on the plan is expected at the agency’s March 31 meeting. Details were announced on Tuesday by two Democrats on the commission, Chairman Tom Wheeler and Mignon Clyburn… It appears likely to attract support from the FCC’s Democrats, who hold a majority, although Commissioner Jessica Rosenworcel, the third Democrat, was still studying the proposal on Tuesday. FCC aides said changes to the draft plan were possible.

“Internet access has become a prerequisite for full participation in our economy and our society, but nearly one in five Americans is still not benefiting from the opportunities made possible by the most powerful and pervasive platform in history,” Mr. Wheeler and Ms. Clyburn said in a blog post on the FCC’s website. “By modernizing the FCC’s Lifeline program, we will do better.”

Commissioner O'Reilly makes a great point about the opportunity for abuse and the lack of restraint on the size of public assistance programs. Very rarely do we ever see them contract and nor is there enough accountability to ensure that programs target those who truly need the help (assuming in the first place that paying for someone else's internet is a taxpayer obligation).

Independent Women's Forum is an educational 501(c)(3) dedicated to developing and advancing policies that aren’t just well intended, but actually enhance people’s freedom, choices, and opportunities. IWF is the sister organization of the Independent Women’s Voice.​
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