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.

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