Is the Lifeline program effective? Should E-Rate be expanded to cover school-related connectivity outside of campuses? Would it make sense to fold the Affordable Connectivity Program (ACP) into the Universal Service Fund (USF)? These were some of the questions asked and answered Thursday as a newly formed Senate working group dedicated to assessing and reforming the USF held its first hearing.
The USF includes four programs targeting different vulnerable portions of the broadband market: the Connect America Fund, Lifeline, Schools and Libraries (E-Rate), and Rural Health Care. The USF and its programs are overseen by the Federal Communications Commission (FCC) and funded using a portion of revenues from certain telecom operators.
The need to reform the USF contribution base has long been a topic in telecom circles. In early 2022, for instance, more than 300 ISPs urged the FCC to revamp the USF funding mechanism, warning at the time that USF could otherwise face collapse.
Senators at the hearing, including ranking member John Thune, touched on this issue but also spent a good deal of time digging into perceived problems with each of the four USF programs. Lifeline and the ACP – which today is not part of USF – emerged as key discussion points.
Thune claimed the Lifeline program is “riddled with waste, fraud and abuse” and chided the FCC for failing to evaluate whether the program is functioning as intended. He said a fundamental review of Lifeline’s efficacy is “long overdue.”
Daniel Lyons, a non-resident Senior Fellow at the American Enterprise Institute and panelist at the hearing, pointed out the Government Accountability Office has repeatedly called on the FCC to conduct such an evaluation. He claimed that Pew Research data has shown that among families earning $35,000 or less, 57% have home broadband and 76% have mobile phones, suggesting that at least a portion of Lifeline money – or even ACP money – is going to individuals who are not at risk of losing their service absent the subsidies.
It appears Lyons was referring to a 2021 survey from Pew Research, which actually found that those statistics applied to consumers earning less than $30,000 per year. It was not clear whether that survey also measured how many respondents in that income bracket were receiving some sort of federal subsidy to facilitate their connections. Further, that survey found that 45% of all non-broadband users cited cost as the reason for not being connected.
INCOMPAS president Angie Kronenberg, another panelist, suggested the Lifeline program – while once useful in connecting consumers to voice service following its formation in 1985 – is now outdated and its subsidy amounts aren’t sufficient to connect consumers to a robust broadband service. She said this issue has been addressed by the ACP.
Lifeline offers a maximum subsidy of $9.25 per month, compared to the $30 provided to most ACP participants.
Responding to a question from Senator Gary Peters, Kronenberg said ACP could in theory be folded into the USF, but argued the USF contribution mechanism should be fixed before that happens to avoid a massive jump in contribution fees.
Though he wasn’t involved in the hearing, the Information Technology and Innovation Foundation’s Joe Kane argued Congress should work with the FCC to scrap the USF’s Lifeline and Connect America Fund programs to fund the ACP going forward.
“For individuals with difficulty paying for broadband, the Affordable Connectivity Program (ACP) is a more flexible and generous program than its USF equivalent, Lifeline,” he said in a statement.
However, Senator Thune argued that the efficacy of the ACP should be evaluated before potentially billions more in funding is poured into the program.