II. The Past Four Years: The Trump FCC’s War on Lifeline

The FCC’s commitment to the Lifeline program took a dramatic turn in January 2017, when Trump appointed Ajit Pai as the agency’s new chairman. Pai, a frequent critic of the program under his predecessor, wasted little time in launching an administrative and regulatory assault on Lifeline. The litany of capricious orders, proposals, and actions to undermine the program spanned four years, reflecting a “death by a thousand cuts” strategy that amounted to a war on Lifeline.¹

Within weeks of the change in leadership, the FCC banned nine broadband providers from the Lifeline program, reversing the agency’s 2016 decision to allow the providers to participate.² Chairman Pai emphasized that the decision only impacted nine out of 900 providers, but the impact was broader than the proportion of companies banned.³ The action sent a signal that the FCC was uninterested in supporting the modernization of the program, as the nine providers had been the inaugural recipients of FCC approval to offer Lifeline-supported broadband service.⁴ The FCC’s decision to revoke these providers’ participation heralded the beginning of an era of hostility toward Lifeline.

Later in the year, the FCC took aim at undercutting Lifeline even further. In November 2017, the FCC initiated a rulemaking that encompassed many proposals to severely weaken Lifeline.⁵ Consumer advocates and industry reacted with overwhelming opposition. The sheer number of harmful policies in this item, which remains an active proceeding at the agency, was so numerous that it will take a few paragraphs to break them all down.

Banning wireless resellers. First, the FCC proposed eliminating wireless resellers from the program and restricting participation to facilities-based providers. This would mean that only providers that built and owned their network facilities could offer Lifeline service; carriers that purchase network capacity from legacy companies and resell that service to consumers would be banned. This action would eliminate Lifeline’s biggest providers, as the majority of participating companies are wireless resellers.⁶ Moreover, the facilities-based providers that would be allowed, such as Verizon and AT&T, have historically shown little interest in participating in Lifeline. Banning resellers would wreak havoc on the program, resulting in millions of low-income consumers losing service. The FCC has yet to formally adopt this proposal, but it has also not closed the proceeding (as long as a proceeding is open, the FCC can vote to approve it at any time).

Lifetime limits and government monitoring. The FCC also proposed lifetime benefit limits that would restrict the length of time recipients could participate in Lifeline. To execute this policy, the FCC would need to create a system to track individuals throughout their lives. This system would likely collect sensitive data, including home addresses, phone numbers, Social Security numbers, and income histories. Such an expansive system jeopardizes consumer privacy and could deter participation. Furthermore, the FCC did not contemplate what this system would mean for historically marginalized communities that are already disproportionately surveilled and wary of government monitoring.⁷

Requiring co-pays. The FCC also proposed a mandatory co-pay, referred to as a “maximum discount level” that would eliminate the free prepaid wireless services that many providers offer without the risks of late fees, credit checks, or deposits.⁸ Taking away these services would eliminate the most sought-after Lifeline plans and decimate consumer choice. Further, requiring co-pays would also create significant administrative and compliance costs for providers, USAC, and the FCC.⁹

A draconian budget cap. One of the most punitive proposals was a hard annual cap on Lifeline expenditures. The FCC suggested the cap would be well below a $2.25 billion soft budget mechanism that is already imposed on Lifeline. An even lower “hard,” or self-executing, limit would be draconian, causing the program to run out of funds mid-year and disconnecting millions of low-income Americans from phone and internet service.¹⁰ The FCC did not explain why a budget cap is needed for a program that has been historically underutilized and is experiencing falling expenditures. As OTI argued at the time, “This budget proposal is the quintessential solution in a search of a problem.”¹¹

Adding red tape for broadband providers. The FCC proposed eliminating the Lifeline Broadband Provider designation, which was created in 2016 to streamline the approval process for broadband-only providers to participate in the program.¹² Without the designation, providers might decline to participate in Lifeline due to burdensome state designation procedures.¹³ The FCC offered no evidence to justify this proposal, which OTI argued “would explicitly countermand the Congressional directive to ensure quality, affordable services are available in all regions of the U.S.”¹⁴ This proposal reflected a common tactic in the Trump FCC’s war on Lifeline: float an idea that solves no apparent problem, but disincentivizes participation in the program.

Eliminating hotspot and tethering support. The FCC also requested comment on whether it should eliminate a rule that requires any Lifeline-supported devices to have hotspot and tethering capabilities. This equipment rule exists to ensure that Lifeline—which limits households to one Lifeline-supported device—can support households with multiple members, such as children who are sharing a device to complete homework assignments. As OTI argued at the time, asking a group of children to complete schoolwork with a device that is not hotspot-enabled is like asking them to complete their schoolwork with a single shared pencil or textbook. This proposal was misguided in 2017 and is even more dangerous today, when the COVID-19 pandemic has exacerbated the need for children to share a single device or connection to participate in remote learning.¹⁵

At the same time the FCC opened the “death by a thousand cuts” proceeding in November 2017, it also moved to immediately weaken the Lifeline program in Tribal communities.¹⁶ In a three to two vote, the FCC approved an order that (1) eliminated the enhanced $25 Tribal benefit for urban residents and (2) banned wireless resellers from offering Lifeline-supported service in all Tribal areas.

The effect of this action on Tribal communities was significant. Eliminating the enhanced subsidy immediately cut off support to Tribal residents and the wireless reseller ban kicked out the majority of Lifeline’s Tribal providers—a crippling move for the Tribal Lifeline market and the consumers who rely on it.¹⁷

Thankfully, the FCC’s order was so poorly conceived that the D.C. Circuit Court of Appeals struck it down in 2019.¹⁸ In a sweeping rebuke of the agency, the court ruled that the FCC was “arbitrary and capricious,” offered no evidence to justify its actions, and “ignored that its decision is a fundamental change that adversely affects the access and affordability of service for residents of Tribal lands.”¹⁹ The court also concluded that the FCC rushed the order without giving the public adequate notice or the opportunity to comment on the proposal, and may have lulled potential commenters into complacency.²⁰ Importantly, the court also rejected the FCC’s argument that the order was needed to promote infrastructure deployment. As OTI and many others argued at the time, Lifeline is not an infrastructure program. The FCC has many mechanisms to catalyze telecommunications infrastructure, but Lifeline is its only program dedicated solely to the cost of telecommunications service.

The FCC’s legal authority to add broadband service to Lifeline in 2016 relied heavily on a 2015 decision to classify broadband as a telecommunications service under Title II of the Communications Act. This decision reflected common sense and the modern-day reality of the internet. Regrettably, in December 2017, the FCC reversed this decision and abdicated its legal authority over internet service providers. This action—misleadingly titled the “Restoring Internet Freedom Order”—was misguided for many reasons, including the fact that the FCC failed to consider how this decision would impact the Lifeline program. The D.C. Circuit Court of Appeals agreed, ruling in 2019 that the FCC’s decision was “unhinged from the realities of modern broadband service.”²¹ The court specifically rebuked the FCC’s glib answers to questions about Lifeline, noting the FCC’s response “does not work” and “completely fails to explain” how the agency’s Lifeline authority can still extend to broadband. The court concluded that the FCC had “proven unable to explain itself.”²²

The FCC was ordered to fix the issue, but the court did not prescribe a specific remedy. The best way to fix these problems and restore legal certainty is to reclassify broadband under Title II—but the FCC has ignored this solution. Instead, the FCC haphazardly threw together a remand order, rushed it through the rulemaking process in the spring of 2020, and approved it in October 2020. But questions about the agency’s authority remain. The Trump FCC’s lackadaisical attitude toward Lifeline in the context of its legal authority underscored its outlook on the program and the people it is intended to help.

In May 2019, the FCC opened up yet another attack on Lifeline: proposing a single budget cap for all four programs that are housed within the Universal Service Fund (USF), including Lifeline, E-Rate (for educational purposes through schools and libraries), the Connect America Fund (subsidies for carriers to deploy to high-cost areas), and the Rural Health Care Program.²³ Lifeline already has a budget cap tailored to the program’s specific needs. A budget cap across the entire USF would force the four programs, all of which historically rely on program-specific funding, to fight against each other in order to secure funding from the same pot of money. Commissioner Jessica Rosenworcel likened this proposal to the resource scarcity and needless combat of “The Hunger Games.”²⁴

Restricting funds for all four programs would limit the strength of Lifeline and create serious uncertainty about the program’s year-to-year fiscal outlook. This uncertainty was expressed loudly by the telecommunications industry, which voiced near-unanimous opposition to the FCC’s proposal. Providers explained that the unpredictability unleashed by a budget cap would make it impossible for them to project consumer demand from one year to the next and plan their investments accordingly. CTIA, a trade association that represents some of the biggest Lifeline providers, argued that the cap would raise “significant questions for providers who participate in the various USF programs” and create a “potential new link between one program’s funding and another program’s performance.”²⁵ Other industry commenters raised similar warnings, citing Lifeline’s dwindling participation rates as reason to reinvigorate the program rather than constrain its budget.²⁶ The proposal remains pending at the agency.

The FCC opened yet another proceeding that would significantly undermine Lifeline in November 2019.²⁷ Much like the aforementioned 2017 proceeding, this item targeted many of the program’s core functionalities with hobbling reforms and counterproductive red tape. The FCC has not voted on final approval for this item, and it remains an open proceeding.

Creating intrusive red tape for applicants. The FCC proposed subjecting Lifeline applicants to a series of unnecessary and counterproductive questions, such as whether applicants “already subscribe to voice or broadband service, and whether they would be able to afford their Lifeline-supported service without the Lifeline discount.”²⁸ This question is immaterial to the FCC’s congressionally-mandated duty and a disturbing force of indignity on applicants. The only issue that matters in the context of applying for Lifeline is if the person qualifies for the service as set by the rules of the program. Asking an applicant for a social benefit if they really, truly need it is likely to deter participation in the program and produce misleading data.²⁹ This intrusive proposal served no legitimate purpose, but spoke volumes about how the FCC under Chairman Pai regarded Lifeline and the people it is designed to help.

Renewed attacks on subscribers’ privacy. The FCC also suggested monitoring and verifying consumers’ use of Lifeline service.³⁰ This proposal would discourage participation in the program and create privacy risks for the people who do choose to participate. In a convoluted set-up, the FCC argued that the government should monitor users’ consumption of voice minutes and data allowances to verify that people are actually using the service. The FCC offered no substantive rationale for this burdensome new system, no serious plan for enforcing it, and no answers to questions about how this policy would protect privacy.

Banning free handsets. One of the most arbitrary and capricious ideas in the November 2019 item was the requirement that Lifeline providers charge consumers for any devices the companies might otherwise have offered for free.³¹ Devices are cost-prohibitive for many Lifeline subscribers, so providers often include free handsets as an incentive to participate in the program. Many Lifeline-supported plans are covered entirely by the $9.25 monthly subsidy and, therefore, free of charge to qualifying consumers. Paying for a handset would turn this free service into an unaffordable one for many households, resulting in people leaving Lifeline or never subscribing in the first place. This would have dual-facing consequences on low-income consumers, who would lose communications service, and the providers, who would lose customers. Commissioner Geoffrey Starks highlighted the problem in his dissenting vote: “With regard to a fee, I heard firsthand from subscribers at the Larkin Street Youth Services center in San Francisco, California that they see the device alongside the voice and broadband service as inextricably linked. We shouldn’t even articulate the possibility of placing yet another barrier to participation in front of these communities.”³²

Moreover, the FCC failed to provide any rationale for why it should interfere with the decisions of private businesses that voluntarily elect to offer free handsets. These companies pay for the free handsets, not taxpayers, and they did not ask the FCC to restrict their freedom to make their own business decisions about how to invest their resources.

For many years, Lifeline providers were tasked with verifying the eligibility of Lifeline applicants—a structure that former FCC Chairman Tom Wheeler likened to “the fox guarding the henhouse.”³³ This changed in 2016, when the FCC removed providers from the process and put it in the hands of a new third-party entity called the National Eligibility Verifier. The FCC created the National Verifier to (1) reduce vulnerability to fraud by eliminating the “fox guarding the henhouse” structure, (2) make it easier for people to apply for Lifeline, and (3) streamline the application process by leveraging the databases for Medicaid, SNAP, and other government programs.

The National Verifier was a long-overdue and welcome reform, but the FCC under Chairman Pai slow-walked the implementation. Nearly five years after it was created, the National Verifier still hasn’t been activated in all 50 states. Congress and consumer advocates have repeatedly criticized the sluggish rollout—most recently in August 2020, when a group of 25 senators, including now-Vice President Kamala Harris, urged the FCC to finish the system.³⁴ USAC was tasked with administering the National Verifier and has struggled to establish data-sharing agreements with other government databases—but the FCC bears the ultimate responsibility for implementing the system. Instead of focusing on getting the National Verifier up and running and addressing obstacles, the FCC has spent the past four years preoccupied with never-ending proposals to undermine the program at practically every level imaginable.

The consequences of the National Verifier’s sluggish rollout sharpened in December 2020, when Congress passed a long-awaited pandemic relief bill that included $3.2 billion for a new program called the Emergency Broadband Benefit. This program will offer a $50 monthly subsidy to cover broadband costs for qualifying low-income people. The law requires the FCC to launch the new program within a matter of months, in order to get relief to the millions of people who are suffering through the pandemic without access to the internet.³⁵ Congress expects the FCC to rely on the National Verifier to manage the program’s application process. However, the Verifier’s incomplete status raises concerns about the extent to which it can support the Emergency Broadband Benefit.