Lifeline Program – A Hot Political Topic

Obama phone
Lifeline subsidized cell phone service

Ever since the video of the “Obama Phone Lady” became viral, the Lifeline program has been a volatile subject among our politicians. It’s now being reviewed at a hearing by the Communications and Technology subcommittee scheduled for April 25, 2013. The committee is concerned that the size of the “fund” is growing out of control.

The Lifeline program has been seen as an embarrassment to the Obama administration, with the republicans taking full advantage of the “Obama Phone Lady” video. What most people don’t know is that the Republicans started the Lifeline program under the Raegan administration. It was originally set up to subsidize home phone service but was expanded to include cell phone service under the Bush administration. The program just became popular since Obama took office.

It has been criticized for its lack of oversight and control, resulting in waste. Last year, in 2012, it was reformed by the FCC and many controls were supposed to be put in place over the coming months to reduce the fraud and abuse that was going on. The problem is that the controls have been slow in coming. Much of the control is dependent on databases to be put in place to check for duplication and eligibility. It was put upon the individual states to implement these databases and that just hasn’t happened yet.

In the mean time, there has been a substantial reduction of the fraud. The FCC has imposed strict rules for qualifying a consumer, while not providing the databases needed to efficiently execute those mandates. As a result, it has become very difficult for the consumer to successfully apply for the program. The consumer needs documentation to prove their qualifications but most need to get a member of the Geek Squad to help them electronically deliver it the the provider. Live events seem to be the only way a consumer can apply because they can bring their paperwork and show it to a sales rep. Unfortunately, there are millions of qualified individuals that aren’t able to get to a live event.

So, we can only wait and see what comes out of the hearing. Those that are running the hearing want to see the program terminated. However, those that are in office see that a majority of their voters would be affected by that. Unfortunately, like so many other programs under the government’s control, it’s more about politics that what’s good for the people.

Has the FCC’s Reform of Lifeline Been a Success?

Here we are 9 months after the FCC issued their Lifeline reform order that was intended to  eliminate the waste and fraud in the program. The main focus of the reform was to be sure that only those who properly qualify get the subsidy and, to limit it to one subsidy per household. The other savings is in the elimination of the Linkup subsidy in non-Tribal applicants which was helping to defer the cost of activation.

The initial reports are showing some success. But, how much of that success is attributed to the elimination of Linkup? That seems like a “cheat”. Sure, eliminating the Linkup subsidy has to save money – the same way that eliminating the Lifeline subsidy would save even more. Is the reform saving any Lifeline funds by eliminating fraud? Well, it’s hard to say. There is some evidence in that the scrubs being done in some areas are identifying those households that are getting more that one subsidy. As more states create a database capable of identifying duplicates, there should be more success. However, this reform is not without flaws and could carry a cost to the consumer.

With the elimination of Linkup, many home phone providers have concluded that offering Lifeline service is costing them money. It has resulted in a number of CLECs shutting down or moving to wireless only. With the new rules imposed by the FCC, there is a much higher expense involved in activating a new customer. It takes more labor and better back office systems to ensure compliance. So, at the same time the FCC is increasing acquisition costs for an ETC, they are decreasing the compensation. The elimination of the Linkup was lobbied by the big wireless ETC players. They argued that it wasn’t necessary because they were currently doing it with wireless customers and not taking the Linkup. But what about wireline? Wireline seems more practical for a struggling low income family. Now it’s not as available. Instead of a low income family getting their lifeline home phone activated for free, they are having to pay $30 or more to get started. Since the wireless ETCs are providing the handset for free, those families are more likely to use their Lifeline subsidy for a mobile phone. Sounds like a win for companies like Safelink and Assurance Wireless.