By F.J. Pollak
Federal regulators recently announced a move that could deprive millions of low-income Americans of one of modern life’s necessities—the telephone.
Officials at the Federal Communications Commission (FCC) are considering a series of reforms to the “Lifeline/Link Up” program, which provides discounted phone service to the needy. If they’re not careful, they could cut the phone cord for folks who need it most.
The federal government has maintained two programs that subsidize phone service for low-income Americans since 1985. Lifeline discounts a consumer’s phone bill by up to $10 each month, and Link Up offers consumers up to $30 off connection charges. Both programs are administered through the Universal Service Fund (USF), which helps make phone service available to all Americans, including government entities like schools and libraries as well as those who live in rural areas.
Originally, Lifeline was intended to help consumers pay for conventional landline phones. But as mobile phones have become commonplace, the FCC has allowed low-income folks to use Lifeline funds for wireless service, too.
Carriers who partner with Lifeline can offer eligible participants prepaid cell phones with 250 minutes of use per month. The service continues unless the recipient doesn’t use it for several months, and additional minutes are available for purchase if necessary.
The availability of wireless phones through Lifeline has proved a boon for the poor, as they can choose the type of service that best suits their needs. The mobile option can help unemployed folks find work more easily, for instance, as they won’t miss that all-important call from a potential employer because they’re not at home. They can also stay connected with their children while they’re at work, should an emergency arise at school.
Lifeline can even help some of the most marginalized members of our society—the homeless. Shelters have reported that the program has been instrumental in helping their clients apply for jobs and get on their feet. Social services agencies can keep tabs on homeless folks with medical conditions to make sure they’re getting the care they need.
By offering consumers a choice, mobile phones have also introduced competition into the Lifeline marketplace. That’s improved service and reduced prices for consumers.
Expanded access to mobile phones can even help the broader economy. One study found Canada’s average GDP per capita would have grown by 1 percent if it had a mobile-phone penetration rate similar to that of Sweden, which has the highest such rate in the world.
Make no mistake. Lifeline is one of the few supported services that has the ability to create wealth and make a significant impact on low-income families to improve their quality of life.
Earlier this year, the FCC expressed concerns over the growth of Lifeline. The agency floated the idea of capping the fund and earmarking any savings for pilot initiatives to expand broadband access.
Such a move makes little sense. Capping the fund could cut off the phone service of scores of Americans when they need it most. After all, the recession has increased the population of folks who might turn to Lifeline for help. Between 2007 and 2009, almost 5 million more people dropped below the poverty line.
The agency has also explored the idea of charging customers for Lifeline service. Such a move would further burden low-income families laid low by the recession.
Lifeline was designed to help low-income families stay connected. Erecting additional enrollment barriers defeats the purpose of the program.
Lifeline represents a small portion of the Universal Service Fund—just 11 percent. By contrast, the “High-Cost” portion of the USF, which subsidizes phone service in rural areas, comprises nearly two-thirds of the fund. Undoubtedly, portions of the High-Cost fund are subsidizing phone service for comparatively wealthy individuals who have chosen to live in remote areas—or who don’t need help paying their bills.
The High-Cost budget has also grown in recent years, from $4.3 billion in 2007 to $4.5 billion in 2008. Meanwhile, low-income support through Lifeline and Link Up actually declined between 2007 and 2008.
Make no mistake—in today’s era of tight budgets, the FCC and the carriers who participate in programs like Lifeline must weed out fraud and waste, both to spend taxpayer dollars wisely and preserve access for those who truly need it. To further these goals, the Commission has rightly proposed creating a database at either the federal or state level to help minimize the risks of fraud that understandably concern the FCC, telecommunications providers and state regulators.
But officials must also ensure that Lifeline can continue to expand access to phone service for the needy. Particularly in these uncertain economic times, they must tread carefully.
F.J. Pollak is president, CEO, and co-founder of TracFone Wireless.
From the June 15-21, 2011 issue