Lifeline subsidy program would cover broadband under FCC chief’s plan

WASHINGTON—A $1.7 billion federal program that subsidizes phone service for low-income consumers would be overhauled to help expand access to high-speed Internet under a proposal Thursday by the head of the Federal Communications Commission.

About 12 million households participated last year in the Lifeline program, which began 30 years ago to ensure that all Americans had access to basic telecommunications services.

The program is funded by a small fee on consumers' monthly phone bills. Recipients get a $9.25 monthly subsidy on one phone line per household, either a land line or wireless, that is paid to the carrier.

“Since 1985, Lifeline has helped make phone service affordable for low-income Americans,” according to FCC Chairman Tom Wheeler's proposal. “But to continue to serve its statutory purpose, Lifeline must evolve to meet today's most pressing communications needs, including access to broadband.”

Wheeler wants to expand the options to include broadband service to help close the so-called digital divide.

Households would still be limited to one subsidy, so consumers would need to choose to apply it to voice or broadband service. Wheeler is not planning to increase the fees paid by consumers to fund the program.

If Wheeler's proposal is approved by commissioners at their June 18 meeting, the agency would seek public comment on establishing minimum standards for broadband and phone service “to ensure that both Lifeline subscribers and ratepayers are getting the best possible value from the service delivered.”

Republicans have criticized the program, dubbing it “Obamaphone” because of rapid growth in its costs in recent years under the Obama administration as it has expanded to also cover wireless phones.

The program's costs increased from about $809 million in 2005, when subsidies were allowed for wireless phones, to about $1.7 billion last year.

In 2012, the FCC enacted changes designed to eliminate waste, fraud and abuse in the program, including creating a database to prevent multiple phone companies from receiving subsidies for the same subscriber.

The 12 million Lifeline participants last year were up from 7 million in 2008, according to the Government Accountability Office. But the number is down from a peak of 18 million households in 2012, and spending has been reduced from $2.2 billion that year partly because of the reforms, the GAO said in a March report.

The same overhaul aimed to modernize the program and the FCC launched 14 pilot projects to determine how Lifeline could be used to expand access to high-speed Internet service.

On Thursday, Wheeler also proposed a major change in the way the program is operated.

Phone companies now determine if a household is eligible for a Lifeline subsidy, “a situation that invites waste and burdens providers,” the proposal said.

Wheeler wants to take the eligibility determination away from the companies and give it to an independent third-party administrator.