Cost of Lifeline Broadband Pilots Pegged at $20 Million
Broadband pilots, proposed by FCC Chairman Julius Genachowski as part of a revamped Lifeline program, have emerged as a likely bone of contention at the agency as work on the order continues prior to a vote Tuesday. The amount proposed by Genachowski is small -- in the $20 million range -- to be paid for by savings as the FCC clamps down on abuse, agency officials said. But some industry and FCC officials question the wisdom of looking at ways of expanding a program that is already getting bigger just paying for traditional phone service.
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"We were very concerned when the idea first came up,” an industry official said. “Don’t put broadband on this until you fix it.” At the FCC, Commissioner Mignon Clyburn has emerged as a strong supporter of moving forward on the Lifeline pilots, while Commissioner Robert McDowell has continuing concerns about further adding to the growth of the program. A second draft circulated Tuesday, McDowell said at a Minority Media and Telecom Council event Friday. (See story in this issue.)
The latest numbers circulated at the FCC raise concerns that the program may be seeing unexpectedly high growth, based on numbers from Q4 of 2011, as Lifeline funding hit $525 million for the final quarter of the calendar year. The Lifeline pilots are expected to be modeled on pilot programs for off-campus broadband use approved as part of an E-Rate overhaul order in September 2010 (CD Sept 24/10 p3), industry and FCC officials said. The FCC has calculated that it has already saved $35 million by clamping down on abuse in the Lifeline program, to offset the cost of the pilots.
Representatives of the Leadership Conference on Civil and Human Rights Media and Telecom Task Force met with Clyburn Tuesday to make their case for pilots and against placing a cap on the Lifeline program. The coalition said it originally asked that $50 million be dedicated to the pilots (http://xrl.us/bmpy7s). The commission should approve pilots “of sufficient scope ... to obtain adequate sample size” and pilot participants should be permitted “to utilize private funds in addition to Lifeline funds,” the filing said.
Also last week, USTelecom President Walter McCormick met with Clyburn to tout the advantages of a national Lifeline database that would “verify consumer eligibility, track verification, and check for duplicates.” McCormick urged the agency to move forward on broadband pilots, according to an ex parte filing on the meeting (http://xrl.us/bmpy8g). Pilots could help the FCC understand “barriers to adoption in low income communities,” McCormick said. “Pilot projects can provide key data and learnings as long as the projects are carefully constructed and aim to provide statistically meaningful data on adoption by relevant communities under different program scenarios."
Funding for the Lifeline broadband pilot program could come out of the federal USF money, a state official said. Although broadband is not a telecom service and therefore can’t be funded by the federal USF, the FCC would probably use the rationale in its USF order to justify its potential action, he said, noting funding then becomes the key issue. It’s necessary to expand the revenue contribution base, especially from the retail broadband services, if the FCC plans to make the Lifeline broadband program universal, he said. The need to address the contribution base is imperative, he said.
Funding for Lifeline broadband will “have to come out of the USF money,” which means that either the contribution base will have to go up or the amount of funding for each of the funds will have to go down, a state regulatory analyst said. The advent of prepaid cards was a primary reason that the Lifeline fund exploded with costs, said Commissioner Anne Boyle of the Nebraska Public Service Commission. She said there was little oversight over eligibility.
"My bottom line on Lifeline is that, while I want the commission to implement mechanisms to clamp down on waste and abuse, I don’t favor capping the program,” said Free State Foundation President Randolph May. “It is more important now that the agency maintain a program that is carefully targeted to enabling poor people to get connected than it is to maintain subsidies for highly inefficient telecom companies in rural areas that serve wealthy people, along with others.”