Only Congress Can Bring Sanity to the Program

WASHINGTON D.C. —­­ Today, the Federal Communications Commission (FCC) voted to expand Lifeline subsidies to cover broadband as well as telephone service. Created in 1985 as part of the FCC’s Universal Service Fund (USF), Lifeline currently provides a $9.25 monthly subsidy for low-income Americans below 135% of the local poverty line or on other Federal welfare programs. Going forward, consumers could use that subsidy for broadband service, too. All four USF programs are funded by a flat surcharge applied to all American’s phone bills that is recalculated annually to meet demand for USF subsidies. Lifeline is currently the only one without an annual budget.

History suggests the FCC’s talk of fiscal discipline is hollow,” warned Tom Struble, Policy Counsel at TechFreedom. “The last time Lifeline expanded, to cover mobile services, it was beset by waste, fraud, and abuse. The program ballooned in size, forcing the contribution factor to spike. This lined the pockets of opportunistic middlemen but, as the GAO recently reported, produced no observable increase in adoption. The FCC has taken some responsible steps in trying to avoid similar problems this time — finally putting the program on a budget and closing a loophole that allowed for triple subsidies in some urban areas that still qualified as tribal lands. But only time will tell whether these reforms will be enough.”

The FCC hasn’t fixed the fundamental problem with Lifeline,” lamented Berin Szoka, President of TechFreedom. “It’s insane to try to encourage adoption of something by subsidizing it for some using taxes paid by everyone else at the same rate. A family struggling at 135% of the AMI may get $10/month towards broadband, but if their income rises at all, they’ll be ineligible for the program and suddenly have to pay not just the cost of the service, but a whopping 18% tax, too. That’s crazy!”

The USF ‘contribution’ is the most regressive tax in America — one that will inevitably rise as the FCC further bloats USF spending,” continued Szoka. “The obvious next step is for the FCC to impose USF taxes on broadband. Reclassifying broadband under Title II last year made that inevitable, but the FCC has delayed making it official simply because they calculated that it would be politically easier to increase spending before also expanding their tax base. It’s high time Congress reasserted control, funding a clear annual budget for USF subsidies out of the general Treasury, paid for by taxes that are progressive and democratically accountable, and directed to areas where they will do the most good. The FCC can’t be bothered to do basic economic analysis of how to spend Lifeline subsidies most effectively — and it certainly can’t be trusted to arbitrarily expand USF programs by raising taxes willy-nilly.”


See more of our work on Lifeline, including:

  • “FCC Must Fix Broken Lifeline Program before Expanding It,” a statement from TechFreedom
  • Tech Policy Podcast Episode #44: A Lifeline For Broadband
  • Infographic illustrating the problems with Lifeline