FCC votes to give broadband subsidies to the poor

The Federal Communications Commission on Thursday advanced a proposal that will allow the government to subsidize broadband for low-income Americans.

The three Democrats on the five-member commission voted in favor of the proposal, while the two Republicans dissented.

The plan, proposed by FCC Chairman Tom Wheeler, would transform the $2-billion-a-year Lifeline program from a telephone-centric subsidy to one that also covers Internet service, if it is ultimately approved.

"I am befuddled at how this Republican-developed program has suddenly become so partisan, but I am proud to cast my vote with the majority," Wheeler said, speaking at the commission's monthly meeting.

Federal Communications Commission chairman Tom Wheeler speaks at INTX: The Internet & Television Expo in Chicago.
Daniel Acker | Bloomberg | Getty Images

Wheeler will release more details about the proposal in the coming days and public comments received later this year will factor into what the final rules look like.

Industry watchers are looking for the FCC to offer details on how it plans to fund the expansion and to convince the public that it's worth doing.

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The FCC's plan tentatively proposes keeping the subsidy at $9.25 a month, "which would not buy you very much broadband service," said Randolph May, president of the Free State Foundation, a nonpartisan think tank that promotes free market policies.

Critics of the program, including some Republicans in Congress, say the FCC should focus on fixing the issues within the existing program before it considers expanding it.

"Everyone is aware that there have been abuses in the current program," May said.

"The FCC has worked to address those issues, and it's had some success thus far, but almost everyone agrees that more needs to be done to put into place protections against so much abuse," May said.

Lifeline receivers must be at or below 135 percent of the federal poverty line, or be enrolled in some type of public assistance program. Users may use the subsidy for either wireline or mobile service, but not both. Only one Lifeline account is allowed per household.

The FCC adopted a number of reforms in 2012, such as establishing a database that sharply reduced the number of households receiving multiple subsidies.

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Since then, the cost of the program, which is funded by a universal service fund fee on consumer phone bills, has decreased to $1.7 billion from $2.2 billion in 2012. The number of enrolled users has fallen to 12 million, from 18 million in 2012.

Supporters of the expansion point to the reduction as proof that the reforms are working. Of the 11 primary reforms the FCC said it make in 2012, only four have yet to be implemented, according to consumer advocates.

"People are using old information to continue to attack the program," said Ken McEldowney, executive director of the Consumer Action advocacy group.

He said the program gives low income people access to essential services, and without it they would be completely isolated.

"Telephone companies don't really care about these customers. They want folks who can pay $100 a month for smartphones and huge data packages," McEldowney said.

"Nobody's really marketing to low-income people outside of offering the Lifeline program."

Daniel Lyons, an associate professor at Boston College Law School, said it's important to "narrow the digital divide," but he noted it could be expensive.

Net neutrality rules go into effect
Net neutrality rules go into effect

The FCC said it wants to provide poor consumers with the ability to do things like access e-mail and search job postings, which often requires high speed Internet. Lyons said the lurking question is "how much broadband are we going to subsidize."

"I would imagine that you're going to start seeing advocacy for something like 6 MBS, 10 MBS, 25 MBS—enough to be able get Netflix—and that would start to raise some questions," Lyons said.

"People would begin to wonder, why we should be subsidizing low-income household's Netflix access," he said, comparing it to the idea of subsidizing cable access.

Lyons, who specializes in telecommunication and Internet law, said most people agree there should be some type of social safety net for broadband, but there's concern about how the FCC plans to handle it.

"I don't think simply taking what we have now and expanding it is the right answer. I think we need to rethink the whole project," Lyons said.