Before the

**Federal Communications Commission**

**Washington, D.C. 20554**

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**REPORT AND ORDER AND FURTHER NOTICE OF PROPOSED RULEMAKING**

**Adopted:** April 2, 2004 **Released:** April 29, 2004

**Comment Date: 60 days after publication in the Federal Register**

**Reply Comment Date: 105 days after publication in the Federal
Register**

By the Commission: Chairman Powell and Commissioners Abernathy, Copps,
Martin, and Adelstein issuing separate statements.

Table of Contents

**[Paragraph]{.underline}** **[Number]{.underline}**

**I. introduction 1**

**II. BACKGROUND 3**

**III. REPORT AND ORDER 7**

**A. Eligibility 7**

**1. Background 7**

**2. Discussion 10**

**a. Income-based Criteria 10**

**b. Program-based Criteria 13**

**B. Duration of an Individual's Eligibility for Lifeline/Link-Up 19**

**1. Background 19**

**2. Discussion 20**

**C. Certification and Verification Procedures 23**

**1. Background 23**

**2. Discussion 25**

**a. Automatic Enrollment 25**

**b. Certification of Program-based Eligibility 27**

**c. Certification of Income-based Eligibility 28**

**d. Verification of Continued Eligibility Under Program-based and
Income-based Eligibility 33**

**D. Implementation and Recordkeeping 37**

**E. Outreach 41**

**1. Background 41**

**2. Discussion 44**

**F. Other Issues 51**

**1. Voluntary Survey 51**

**2. Unpaid Toll Charges 52**

**3. Vertical Services 53**

**4. Support for Non-ETCs 54**

**5. Minor Rule Changes 55**

**IV. FURTHER NOTICE OF PROPOSED RULEMAKING 56**

**A. Income-based Criterion 56**

**B. Lifeline Advertising Requirements 58**

**V. Procedural matters 59**

**A. Regulatory Flexibility Analysis 59**

**B. Paperwork Reduction Act Analysis 60**

**C. Filing Procedures 61**

**D. Further Information 69**

**VI. ORDERING CLAUSES 70**

**Appendix a: FINAL RULES**

**Appendix b: LIST OF PARTIES FILING COMMENTS IN RESPONSE TO THE**

**NOTICE OF PROPOSED RULEMAKING**

**APPENDIX C: LIFELINE/LINK-UP STATE SURVEY**

**APPENDIX D: ESTIMATED INCOME REQUIREMENTS FOR A HOUSEHOLD AT**

**OR BELOW 135% OF THE FEDERAL POVERTY GUIDELINES**

**APPENDIX E: LIFELINE/LINK-UP STATE PROCEDURES AS COMPILED BY THE
FEDERAL-STATE JOINT BOARD ON UNIVERSAL SERVICE**

**APPENDIX F: ESTIMATED INCOME REQUIREMENTS FOR A HOUSEHOLD AT**

**OR BELOW 150% OF THE FEDERAL POVERTY GUIDELINES**

**APPENDIX G: LIST OF CURRENT FEDERAL DEFAULT STATES**

**APPENDIX H: FINAL REGULATORY FLEXIBILITY ANALYSIS**

**APPENDIX I: INITIAL REGULATORY FLEXIBILITY ANALYSIS**

**APPENDIX J: STATISTICALLY VALID SAMPLE**

**APPENDIX K: LIFELINE STAFF ANALYSIS: Quantifying the effects of adding
an**

**income criterion to the Lifeline eligibility criteria**

**SEPARATE STATEMENT OF CHAIRMAN MICHAEL K. POWELL**

**SEPARATE STATEMENT OF COMMISSIONER KATHLEEN Q. ABERNATHY**

**SEPARATE STATEMENT OF COMMISSIONER MICHAEL J. COPPS**

**SEPARATE STATEMENT OF COMMISSIONER KEVIN J. MARTIN**

**SEPARATE STATEMENT OF COMMISSIONER JONATHAN S. ADELSTEIN**

# introduction

1.  In this *Report and Order and Further Notice of Proposed
    Rulemaking*, we modify our rules to improve the effectiveness of the
    low-income support mechanism, which ensures that quality
    telecommunications services are available to low-income consumers at
    just, reasonable, and affordable rates. Since its inception,
    Lifeline/Link-Up has provided support for telephone service to
    millions of low-income consumers.[^1] Nationally, the telephone
    penetration rate is 94.7%, in large part due to the success of the
    Lifeline/Link-Up program and our other universal service
    programs.[^2] Nevertheless, we believe there is more that we can do
    to make telephone service affordable for more low-income households.
    Only one-third of households currently eligible for Lifeline/Link-Up
    assistance actually subscribe to this program.[^3] We agree with the
    Federal-State Joint Board on Universal Service (Joint Board) that
    the current Lifeline/Link-Up program could be modified to serve the
    goals of universal service better.[^4]

2.  Consistent with the Joint Board's recommendation, we expand the
    federal default eligibility criteria to include an income-based
    criterion and additional means-tested programs. We adopt federal
    certification and verification procedures, and require states, under
    certain circumstances, to establish certification and verification
    procedures to minimize potential abuse of these programs. To target
    low-income consumers more effectively, we adopt outreach guidelines
    for the Lifeline/Link-Up program. We issue a voluntary survey to
    gather data and information from states regarding the administration
    of Lifeline/Link-Up programs. Finally, in the *Further Notice of
    Proposed Rulemaking*, we seek comment on whether the inclusion of a
    broader income-based criterion in the federal default eligibility
    criteria would further increase Lifeline/Link-Up subscription rates.
    The actions we take today will result in a more inclusive and robust
    Lifeline/Link-Up program, consistent with the statutory goals of
    maintaining affordability and access of low-income consumers to
    supported services, while ensuring that support is used for its
    intended purpose.[^5]

# BACKGROUND

3.  Section 254 of the Communications Act of 1934, as amended (the
    Act),[^6] codified the Commission's and the states' historical
    commitment to advancing the availability of telecommunications
    services for all Americans.[^7] Section 254(b) establishes
    principles upon which the Commission shall base policies for the
    preservation and advancement of universal service. Among other
    things, these principles state that consumers in all regions of the
    Nation, including low-income consumers, should have access to
    telecommunications and information services that are reasonably
    comparable to those services provided in urban areas and that are
    available at rates that are reasonably comparable to rates charged
    in urban areas.[^8] These principles also recognize that ensuring
    rates are affordable is a national priority.

4.  The Lifeline/Link-Up program is one of several universal service
    support mechanisms that further these goals.[^9] Lifeline provides
    low-income consumers with discounts of up to \$10.00 off of the
    monthly cost of telephone service for a single telephone line in
    their principal residence.[^10] Link-Up provides low-income
    consumers with discounts of up to \$30.00 off of the initial costs
    of installing telephone service.[^11] Recognizing the unique needs
    and characteristics of tribal communities, enhanced Lifeline and
    Link-Up provides qualifying low-income individuals living on tribal
    lands with up to \$25.00 in additional discounts off the monthly
    cost of telephone service and up to \$70.00 more off the initial
    costs of installing telephone service.[^12] Pursuant to section
    254(e), only eligible telecommunication carriers (ETCs) designated
    pursuant to section 214(e)[^13] are eligible to receive
    Lifeline/Link-Up support.[^14]

5.  Under the Commission's current rules, states and territories have
    the authority to establish their own Lifeline/Link-Up programs that
    provide additional support to low-income consumers that incorporate
    the unique characteristics of each state or territory.[^15] For
    example, in establishing eligibility criteria, states have the
    flexibility to consider federal and state-specific public assistance
    programs with high rates of participation among low-income consumers
    in the state. State certification procedures and outreach efforts
    can also take into account existing state laws and budgetary limits.
    Some states and territories, however, have elected to use the
    federal criteria as their default standard. These "federal default
    states" include not only states and territories with their own
    Lifeline/Link-Up programs that have adopted the federal default
    criteria, but also states and territories that have not adopted
    their own Lifeline/Link-Up program. The modifications to the federal
    default criteria that we adopt in this Order, unless specifically
    stated otherwise, will affect only federal default states.[^16] We
    request that states notify this Commission if their status as a
    federal default state changes.

6.  On December 21, 2000, the Commission requested that the Joint Board
    review the Lifeline/Link-Up program for all low-income customers,
    including a review of the income eligibility criteria.[^17] The
    Joint Board issued its *Recommended Decision* on April 2, 2003.[^18]
    In its *Recommended Decision*, the Joint Board recommended several
    changes, discussed in more detail below, to improve the
    effectiveness of the low-income support mechanism.[^19] The
    Commission sought comment on the Joint Board's *Recommended
    Decision* regarding modifications to the Lifeline/Link-Up program in
    a *Notice of Proposed Rulemaking* (*NPRM*) released on June 9,
    2003.[^20]

#  REPORT AND ORDER 

## Eligibility

### Background

7.  Currently, Lifeline/Link-Up eligibility is based on participation in
    means-tested programs. In order to be eligible for Lifeline/Link-Up
    assistance under the federal default eligibility criteria for
    federal default states, a consumer must certify, under penalty of
    perjury, that he/she participates in at least one of the following
    federal programs: Medicaid, Food Stamps, Supplemental Security
    Income (SSI), Federal Public Housing Assistance (Section 8) (FPHA),
    or the Low Income Home Energy Assistance Program (LIHEAP).[^21] In
    states that have their own Lifeline/Link-Up programs, the consumer
    must meet the eligibility criteria established by the state,
    consistent with sections 54.409 and 54.415 of the Commission's
    rules.[^22]

8.  In the *Twelfth Report and Order*,[^23] the Commission adopted more
    expansive Lifeline/Link-Up eligibility criteria for low-income
    consumers living on tribal lands.[^24] For those consumers, the
    Commission established an enhanced Lifeline/Link-Up program. In
    order to qualify for enhanced Lifeline/Link-Up under the federal
    default eligibility criteria, the consumer must certify, under
    penalty of perjury, that he/she participates in one of the five
    programs listed above or any of the following additional federal
    programs: Bureau of Indian Affairs General Assistance,
    Tribally-Administered Temporary Assistance for Needy Families
    (Tribal TANF), Head Start (only for those meeting its income
    qualifying standard), or the National School Lunch Program's free
    lunch program.[^25] In a state with its own enhanced
    Lifeline/Link-Up program, a consumer living on tribal lands may
    qualify for Lifeline/Link-Up support by meeting either the
    eligibility and verification criteria established by the state or
    the federal default eligibility criteria for the enhanced
    program.[^26]

9.  In the *NPRM*, the Commission sought comment on the Joint Board's
    recommendation that the Commission expand the federal default
    eligibility criteria to include an income-based criterion and
    additional means-tested programs.[^27] Specifically, the Joint Board
    recommended that a consumer be eligible for Lifeline/Link-Up when
    the consumer's income is at or below 135% of the Federal Poverty
    Guidelines (FPG), or if the consumer participates in Temporary
    Assistance for Needy Families (TANF) or the National School Lunch's
    free lunch program (NSL).

### Discussion

#### Income-based Criteria  {#income-based-criteria .Style-Heading-4-+-(Complex)-12-pt-Left}

10. We adopt the Joint Board's recommendation that a consumer be
    eligible to participate in Lifeline/Link-Up if the consumer's income
    is at or below 135% of the FPG.[^28] We agree with the Joint Board
    that adding an income-based criterion to the federal default
    eligibility criteria may increase participation in the
    Lifeline/Link-Up program.[^29] This will enable, for example, a
    family of four whose annual income is at or below \$24,840 to
    qualify for Lifeline/Link-Up support even if they do not participate
    in one of the current qualifying assistance programs.[^30] We have
    included, in Appendix D, estimated income requirements for various
    sizes of households at or below 135% of the FPG.[^31] Our staff
    analysis estimates that adding an income-based criterion of 135% of
    the FPG could result in approximately 1.17 million to 1.29 million
    new Lifeline/Link-Up subscribers.[^32] Of these new Lifeline/Link-Up
    subscribers, the analysis projects that approximately one in five
    likely would be new subscribers to telephone service.[^33]
    Therefore, in addition to ensuring that many low-income subscribers
    may be better able to afford to maintain their existing service,
    this criterion will enable many low-income subscribers to have
    service for the first time.[^34] Adding an income-based standard
    should thereby promote universal service by increasing
    subscribership and making rates more affordable for existing
    low-income subscribers.

11. We agree with the majority of commenters that support adding an
    income-based standard to the current program-based criteria.[^35] We
    also agree with the Joint Board and several commenters that adding
    an income-based standard likely will capture some low-income
    consumers who are not eligible for Lifeline/Link-Up because they no
    longer participate in the qualifying assistance programs.[^36] In
    1996, Congress passed "The Personal Responsibility and Work
    Opportunity Reconciliation Act,"[^37] also known by the acronym
    "PRWORA." PRWORA instituted sweeping changes to several federal
    public assistance programs, including time limits and work
    requirements backed by sanctions. In the *1997 Universal Service
    Order*, the Commission indicated it would monitor the impact of
    PRWORA on participation in Lifeline/Link-Up qualifying programs and
    revise eligibility criteria if the program-based criteria model
    "becomes an unworkable standard."[^38] In the *Twelfth Report and
    Order*, the Commission also noted it would consider adding an
    income-based criterion in the future because it might "reach more
    low-income consumers, including low-income tribal members, than the
    current method of conditioning eligibility on participation in
    particular low-income assistance programs."[^39] We understand that
    participation is decreasing in many public assistance programs,
    including at least one program used to determine eligibility for
    Lifeline/Link-Up.[^40] At the same time, poverty rates in the U.S.
    are increasing by the traditional measure. In 2002, 12.1% or 34.6
    million people fell below the poverty threshold, compared to 11.3%
    or 31.1 million people in 2000.[^41] At the same time, however, the
    Census Bureau has published six alternative measures of poverty,
    none of which appear to show a statistically significant increase in
    poverty rates between 2001 and 2002.[^42] Regardless of factual
    differences in the data, broadening eligibility criteria to include
    an income-based standard at this time should ensure continued
    participation in Lifeline/Link-Up among low-income households,
    which, in turn, should increase subscribership to the network.
    Several commenters also state that individuals who are no longer
    eligible to receive welfare or benefits under federal assistance
    programs may still be too poor to afford the cost of local telephone
    service.[^43] Adding an income-based standard could increase
    subscribership among low-income individuals affected by PRWORA.
    Thus, this action will further the goals of section 254.[^44]

12. Consistent with the Joint Board recommendation,[^45] we initially
    set the income-based standard at 135% of the FPG, while we further
    develop the record on the costs and benefits of adopting a 150% FPG
    standard.[^46] The Joint Board concluded that an income-based
    standard at 135% of the FPG struck an appropriate balance between
    increasing subscribership without significantly overburdening the
    universal service fund. It noted that most commenters supported
    adoption of an income-based standard ranging from 125% to 150% of
    the FPG, and that many other federal welfare programs, and state
    Lifeline programs, base eligibility on a standard within that
    range.[^47] We note that our staff analysis projects that if all
    states were to adopt an income-based standard at or below 135% of
    the FPG, federal Lifeline expenditures could increase by \$127 to
    \$140 million over current levels;[^48] in contrast, if we were to
    adopt an income-based standard at or below 150% of the FPG, federal
    Lifeline expenditures could increase by \$316 to \$348 million.[^49]
    We also note that while our staff analysis projects that adoption of
    an income-based standard at or below 135% of the FPG could result in
    more than 200,000 households newly subscribing to telephone service,
    that study also projects no net increase in new subscribers under an
    income-based standard at or below 150% of the FPG. We recognize that
    a few commenters are concerned about the potential financial burdens
    placed on the universal service fund due to increased participation
    in the Lifeline/Link-Up program,[^50] but we conclude that the
    benefits of adopting a 135% income-based standard now -- namely,
    adding new low-income subscribers and retaining existing low-income
    subscribers on the network -- outweigh the potential increased
    costs. In sum, we conclude that adopting a 135% income-based
    standard at this time represents a reasonable and cautious approach,
    while we explore further whether to adopt a 150% income
    standard.[^51]

#### Program-based Criteria  {#program-based-criteria .Style-Heading-4-+-(Complex)-12-pt-Left}

13. We also adopt the Joint Board's recommendation that the Temporary
    Assistance to Needy Families program (TANF)[^52] and the National
    School Lunch's free lunch program (NSL)[^53] be added to the federal
    default eligibility criteria.[^54] We believe adding these programs
    is likely to help improve participation in the Lifeline/Link-Up
    program, and in doing so, would increase telephone subscribership
    and/or make rates more affordable for low-income households.
    Additionally, low-income consumers that come into contact with state
    agencies while enrolling in one public assistance program are often
    made aware of their eligibility to participate in another public
    assistance program. Therefore, participation in Lifeline/Link-Up
    could be increased by adding these public assistance programs to the
    current program-based criteria because it increases the possibility
    that low-income consumers could be made aware of Lifeline/Link-Up
    when they enroll in TANF and NSL and thereby increases or maintains
    subscribership.[^55]

14. Under the Commission's current rules, Tribal TANF is an eligibility
    criterion for enhanced Lifeline/Link-Up.[^56] The Commission
    extended Lifeline/Link-Up eligibility criteria to include the Tribal
    TANF program, as well as Bureau of Indian Affairs General
    Assistance, Tribal National School Lunch's free lunch program, and
    Tribal Head Start program (income qualifying standard only)
    concluding that the "household income thresholds for these newly
    added programs range\[d\] from 100-130 percent of the \[FPG\]" and
    were therefore "consistent with the \[income thresholds of those\]
    programs included in our current federal default list."[^57] Adding
    TANF to the current list of eligibility criteria may permit more
    low-income individuals, not just those living on tribal lands, to
    qualify for Lifeline/Link-Up support, thereby potentially increasing
    telephone subscribership and making rates more affordable for
    existing low-income subscribers.[^58] Although 5.1 million
    recipients currently participate in TANF,[^59] like the Joint Board,
    we cannot project how many additional persons may become eligible
    for Lifeline/Link-Up under this new criterion because many
    low-income households participate in more than one assistance
    program.[^60] Nevertheless, we share the Joint Board's belief that
    extending Lifeline/Link-Up benefits to TANF participants will
    promote the goals of universal service.

15. We note that, in the *1997 Universal Service Order*, the Commission
    rejected a proposal to add TANF's predecessor, Aid to Families with
    Dependent Children (AFDC), to the list of qualifying
    Lifeline/Link-Up programs.[^61] At the time, the Commission was
    concerned about the impact of PRWORA on that particular
    program.[^62] Although TANF participation rates have decreased since
    fiscal year 1996 and the implementation of PRWORA, participation
    rates remain high.[^63] Accordingly, adding this particular program
    to the federal default eligibility criteria may still potentially
    affect significant numbers of low-income consumers.

16. We agree with the Joint Board that one benefit of adding TANF is the
    broad discretion that states are given to establish eligibility
    standards for each state's respective TANF program.[^64] This broad
    discretion enables states to tailor the TANF program to meet their
    constituents' needs. Therefore, we agree with the Joint Board and
    most commenters that adding TANF as an eligibility criterion for
    Lifeline/Link-Up will help target the program to appropriate
    low-income households.[^65] Another advantage of adding TANF is that
    verification of Lifeline/Link-Up eligibility would simply involve
    checking TANF program records. We agree with NASUCA that monitoring
    participation in TANF is no more difficult than other programs.[^66]

17. We agree with the Joint Board that adding NSL's free lunch program
    to the current list of federal default eligibility criteria may
    permit more low-income individuals, not just those living on tribal
    lands, to qualify for Lifeline/Link-Up support, thereby increasing
    subscribership and/or making rates more affordable for low-income
    households.[^67] Under the Commission's current rules, Tribal NSL is
    an eligibility criterion for enhanced Lifeline/Link-Up on tribal
    lands.[^68] In general, NSL's eligibility criteria are the same as
    for Tribal NSL.[^69] To be eligible for NSL's free lunch program,
    the household income must be at or below 130% of the FPG, which is
    \$23,920 for a family of four.[^70] Children are automatically
    eligible for free school meals if their household receives Food
    Stamps, benefits under the Food Distribution Program on Indian
    Reservations or, in most cases, benefits under the TANF
    program.[^71] There were approximately 13.7 million children
    enrolled in NSL's free lunch program in fiscal year 2003.[^72] As
    with TANF, however, it is difficult to project how many additional
    persons may become eligible for Lifeline/Link-Up by adopting NSL
    because many low-income households typically participate in more
    than one assistance program once they meet the qualifying
    criteria.[^73] We are not aware of any data on the total number of
    households in which NSL participants reside, because more than one
    NSL participant may reside in a single household. Nevertheless, we
    agree with the Joint Board that adding NSL as an eligibility
    criterion could increase telephone subscribership and/or make rates
    more affordable for low-income households.

18. There is significant support in the record for adding NSL's free
    lunch program to the federal default eligibility criteria.[^74] We
    agree with NCLC that adding NSL may improve telephone penetration
    among low-income subscribers because it may capture many low-income
    households that may not participate in other Lifeline/Link-Up
    qualifying public-assistance programs.[^75] According to NCLC, many
    households do not feel that children participating in NSL carries
    the same social stigma as participation in programs whose aim is
    assistance for adults.[^76] Also, adding NSL's free lunch program is
    consistent with the Commission's determination in the *Twelfth
    Report and Order* that eligibility for enhanced Lifeline/Link-Up
    should be limited to those qualifying for free lunch from NSL.[^77]
    We note that participation in the NSL program is increasing, unlike
    other assistance programs where PRWORA may have prompted decreased
    enrollment.[^78] It is also easy to verify eligibility under this
    criterion because it would simply involve checking NSL program
    records. We note that in the *1997 Universal Service Order*, the
    Commission found that "in the interest of administrative ease and
    avoiding fraud, waste, and abuse, the named subscriber to the local
    telecommunications service must participate in \[the\] program\[ \]
    to qualify for Lifeline."[^79] Although the child is the named
    participant in the NSL program, it is the household's income that
    qualifies the child for participation in the program. No commenters
    have brought to our attention any evidence of problems with its use
    in the enhanced Lifeline/Link-Up federal default eligibility
    criteria for those living on tribal lands. Accordingly, we believe
    that adding NSL will help to target Lifeline/Link-Up support to the
    appropriate low-income households.

## Duration of an Individual's Eligibility for Lifeline/Link-Up

### Background

19. Only qualifying low-income consumers may participate in the
    Lifeline/Link-Up program.[^80] Therefore, if a consumer ceases to
    meet any of the eligibility criteria, he or she may no longer
    receive the benefits of Lifeline/Link-Up. The Joint Board was
    concerned that an automatic termination process might result in
    erroneous disconnection of service for certain consumers.
    Accordingly, the Joint Board recommended that the Commission seek
    comment on establishing an appeals process for the termination of
    Lifeline benefits and determine whether 60 days is an appropriate
    time period for a consumer to appeal.[^81] In the *NPRM*, the
    Commission sought comment on this proposal and asked commenters to
    provide more information on how an appeals process could work.[^82]

### Discussion

20. We agree with the Joint Board and several commenters that consumers
    should be given a period of time in which to show continued
    eligibility for Lifeline.[^83] As described below, dispute
    resolution procedures are necessary to allow consumers to
    demonstrate continued eligibility. Moreover, such a timeframe will
    provide Lifeline customers, who may not be aware of a change to
    their eligibility status, a period of time in which to transition to
    the full cost of non-Lifeline service should they be found to be
    ineligible. This transitional period will reduce the likelihood that
    such customers would be subsequently disconnected from the network.
    Therefore, an appeal and transition period will promote the goals of
    section 254.[^84] Moreover, allowing Lifeline benefits to continue
    prior to a final decision to terminate enrollment should not burden
    the fund excessively, while providing administrative stability.

21. We recognize that some states may have existing dispute resolution
    procedures between telephone companies and consumers governing
    termination of telephone service that could apply to termination of
    Lifeline benefits. For example, the Pennsylvania Public Utility
    Commission (PaPUC) asserts that "Pennsylvania carriers would treat
    an appeal regarding termination of Lifeline service as a 'dispute'
    and would follow the PaPUC procedural rules regarding the resolution
    of disputes\[.\]"[^85] The PaPUC explains that termination of
    service would be stayed pending resolution of the dispute.[^86]
    Accordingly, in such a state, consumers would have an opportunity to
    dispute Lifeline termination, and there would be no need for the ETC
    to follow the federal default procedures, as described below.[^87]
    Therefore, where a state maintains its own procedures that would
    require, at a minimum, written customer notification of impending
    termination of Lifeline benefits, similar to the federal default
    requirements, that state will retain the flexibility to develop its
    own appeals process. Moreover, we agree with the PaPUC and the Joint
    Board that preempting a state's existing appeals process could
    result in customer confusion and unnecessary expense for the
    carrier. States should make their own determination as to whether
    the state's existing laws could apply to termination of Lifeline
    benefits.

22. In states that lack dispute resolution procedures applicable to
    Lifeline termination, we adopt the Joint Board's recommendation and
    require ETCs that have a reasonable basis to believe that consumers
    no longer qualify for Lifeline[^88] to notify consumers of their
    impending termination of Lifeline benefits and implement a 60-day
    period of time in which to demonstrate continued eligibility.[^89]
    For those states, we adopt the following federal default procedures.
    ETCs in such states will be required to notify consumers of their
    impending termination of Lifeline benefits by sending a termination
    of Lifeline benefits notice in a letter separate from the consumer's
    monthly bill. If a consumer receives such a termination notice, the
    consumer would have up to 60 days from the date of the termination
    letter in which to demonstrate his or her continued eligibility
    before Lifeline support is discontinued. For example, a consumer who
    enrolled in Lifeline because he or she participated in LIHEAP may
    nevertheless qualify for Lifeline after discontinuing participation
    in LIHEAP under a different program-based or income-based criterion.
    Consumers should be given a period of time in which to make such a
    showing of continued eligibility if they believe they have received
    a termination letter in error. The 60-day time period also should
    ensure that consumers have ample notice to make arrangements to pay
    the full cost of local service should they wish to continue
    telephone service after termination of Lifeline benefits.[^90] This
    60-day time period thus furthers the goal of section 254 to provide
    access to telecommunications services for low-income consumers.[^91]
    A consumer who appeals must present proof of continued eligibility
    to the carrier consistent with his or her state's verification
    requirements or federal verification requirements, if relevant, as
    modified in the Certification and Verification Procedures section
    below.[^92] This procedure is only required when the carrier has
    initiated termination of benefits. This 60-day period of time is not
    necessary when the Lifeline subscriber has notified the carrier that
    he or she is no longer eligible.[^93] Presumably such subscribers
    will be aware of their impending termination of benefits and will be
    able to budget their resources accordingly.

## Certification and Verification Procedures

### Background

23. Certification and verification are the processes by which eligible
    consumers establish their qualification for Lifeline/Link-Up.
    Certification occurs at the time an individual is applying to enroll
    in Lifeline/Link-Up, while verification occurs on a periodic basis
    after the subscriber has already been certified. Currently, in a
    state that has instituted its own Lifeline/Link-Up program, an
    individual must follow that state's certification and verification
    procedures, if any, in order to enroll and continue to participate
    in that state's Lifeline/Link-Up program.[^94] In federal default
    states, an individual must self-certify to his/her carrier, under
    penalty of perjury, that he/she is enrolled in a qualifying
    assistance program.[^95] Although there is currently no verification
    requirement for federal default states, Lifeline subscribers are
    required to notify their carriers when they cease to participate in
    a qualifying program.[^96]

24. In its *Recommended Decision*, the Joint Board recommended that the
    Commission encourage all states, including federal default states,
    to adopt automatic enrollment as a means of certifying that
    consumers are eligible for Lifeline/Link-Up.[^97] They also
    recommended that consumers eligible for Lifeline/Link-Up under an
    income-based criterion be required to present documentation of
    income eligibility prior to being enrolled in the program and to
    verify continued eligibility under any criterion. Finally, the Joint
    Board recommended adoption of a rule requiring Lifeline/Link-Up
    applicants who qualify under the income-based criterion to certify,
    under penalty of perjury, the number of individuals in their
    household.[^98]

### Discussion

#### Automatic Enrollment {#automatic-enrollment .Style-Heading-4-+-(Complex)-12-pt-Left}

25. We agree with the Joint Board and encourage all states, including
    federal default states, to adopt automatic enrollment as a means of
    certifying that consumers are eligible for Lifeline/Link-Up.[^99] In
    its *Recommended Decision*, the Joint Board observed that
    participation rates for Lifeline/Link-Up increased in states that
    employed automatic enrollment, aggressive outreach, and intrastate
    multi-agency cooperation.[^100] In particular, the Joint Board
    highlighted three states that have adopted some form of
    Lifeline/Link-Up automatic enrollment.[^101] In two states, an
    affirmative act by the participant, such as authorization to release
    qualifying information and submission of letter indicating
    participation in the qualifying program, is needed to secure
    enrollment in Lifeline/Link-Up.[^102] In a third state, the state
    automatically enrolls the consumer in Lifeline/Link-Up at the time
    of enrollment in a qualifying program, but offers the consumer an
    opt-out provision to cancel participation in Lifeline/Link-Up.[^103]
    Because we agree with the Joint Board that automatic enrollment may
    facilitate participation in Lifeline/Link-Up, we adopt the Joint
    Board's recommendation to encourage states to implement such
    measures.

26. We decline, however, to require states to adopt automatic enrollment
    at this time.[^104] Instead, we encourage those states that
    currently do not employ automatic enrollment to consider states that
    operate automatic enrollment as a model for future
    implementation.[^105] As the Joint Board noted, implementation of
    automatic enrollment could impose significant administrative,
    technological, and financial burdens on states and ETCs.[^106]
    Although we recognize the benefits of automatic enrollment, we agree
    with the Joint Board that we should not force states that may be
    unable to afford to implement automatic enrollment to do so.[^107]
    We also recognize arguments that requiring automatic enrollment may
    deter ETCs from participating in the Lifeline/Link-Up program
    because of the technical requirements associated with interfacing
    with government agencies or third party administrators.[^108]

#### Certification of Program-based Eligibility {#certification-of-program-based-eligibility .Style-Heading-4-+-(Complex)-12-pt-Left}

27. We agree with the Joint Board that the current certification
    procedures for program-based qualification are sufficient.[^109]
    Current rules require self-certification, under penalty of perjury,
    for the federal default states,[^110] and allow states operating
    their own Lifeline/Link-Up programs to devise more strict measures
    as they deem appropriate.[^111] We agree with the Joint Board that
    the ease of self-certification encourages eligible consumers to
    participate in Lifeline/Link-Up.[^112] In addition,
    self-certification imposes minimal burdens on consumers. Finally, we
    agree with the Joint Board that participation in need-based programs
    is easily verified.[^113] Accordingly, we conclude, consistent with
    the views of the Joint Board, that certification of qualified
    program participation, under penalty of perjury, serves as an
    effective disincentive to abuse the system at this time.[^114]

#### Certification of Income-based Eligibility {#certification-of-income-based-eligibility .Style-Heading-4-+-(Complex)-12-pt-Left}

28. We adopt the Joint Board's recommendation to require all states,
    including federal default states, to adopt certification procedures
    to document income-based eligibility for Lifeline/Link-Up
    enrollment.[^115] Because it is easier to verify qualifying program
    enrollment, we share the Joint Board's concerns that there may be a
    greater potential for fraud and abuse when an individual
    self-certifies his/her income eligibility.[^116] We agree with the
    many commenters that requiring documentation of income eligibility
    should protect against waste, fraud, and abuse and ensure that only
    qualified individuals receive Lifeline/Link-Up assistance.[^117]
    Some commenters, however, contend that self-certification of income,
    under penalty of perjury, at the enrollment stage is the most
    cost-effective method to deter abuse of the program.[^118] The
    Florida PSC, on the other hand, notes that California's Lifeline
    program, which utilizes self-certification of income-based
    eligibility, appears to have more households receiving the Lifeline
    discount than the Current Population Survey of Households data would
    indicate are eligible for the discount.[^119] We do not agree with
    these commenters that argue income certification from another
    means-tested program should be suitable documentation,[^120] because
    it could be difficult to verify that the means-tested program
    utilizes the same income eligibility threshold. Therefore, because
    self-certification of income presents additional vulnerabilities to
    the Lifeline/Link-Up program, we agree with the Joint Board and
    several commenters that certification of income-based eligibility
    must be accompanied by supporting documentation.[^121]

29. We agree with the Joint Board that states that operate their own
    Lifeline/Link-Up programs should maintain the flexibility to develop
    their own certification procedures other than self-certification,
    including acceptable documentation to certify consumer eligibility
    under an income-based criterion, and to determine the certifying
    entity, whether it is a state agency or an ETC.[^122] This
    flexibility will permit states to develop certification procedures
    that best accommodate their own Lifeline participants based on the
    available resources of ETCs and state commissions, each state's
    eligibility criteria, and local conditions. When developing their
    certification procedures, we remind states that eligible consumers
    living on tribal lands may qualify for Lifeline support even if they
    do not satisfy that state's eligibility criteria.[^123] In addition,
    ETCs must be able to document that they are complying with state
    regulations and recordkeeping requirements.

30. For federal default states, we adopt rules reflecting the Joint
    Board's recommendation that consumers must provide documentation of
    income eligibility at enrollment.[^124] Specifically, we agree with
    the Joint Board's recommendation that the prior year's state,
    federal, or tribal tax return, current income statement from an
    employer or paycheck stub, a Social Security statement of benefits,
    a Veterans Administration statement of benefits, a
    retirement/pension statement of benefits, an Unemployment/Workmen's
    Compensation statement of benefits, federal or tribal notice letter
    of participation in Bureau of Indian Affairs General Assistance, a
    divorce decree, or child support document serve as the types of
    documents acceptable for income verification.[^125] We conclude that
    if a consumer chooses to proffer any document other than a previous
    year's tribal, federal, or state income tax return as evidence of
    income, such as current pay stubs, the consumer must present three
    consecutive months worth of the same type of statements within that
    calendar year. Three consecutive months of income statements
    represent one quarter of the calendar year and better substantiate
    the yearly stated income, without overly burdening consumers.

31. For those states governed by the federal default Lifeline/Link-Up
    rules, we require an officer of the ETC enrolling the consumer in
    Lifeline/Link-Up to certify, under penalty of perjury, that the ETC
    has procedures in place to review income documentation and that, to
    the best of his or her knowledge, the company was presented with
    documentation that the consumer's household income is at or below
    135% of the FPG. Some commenters oppose certification procedures for
    income-based eligibility because, they insist, such procedures would
    be overly burdensome to ETCs.[^126] AT&T argues that ETC employees
    are not trained to review and interpret complex government forms,
    such as tax forms, W-2 statements, or pay stubs.[^127] The rules we
    adopt today, however, do not require difficult computations or
    interpretations; rather, they require the ETC to compare the annual
    income represented in the provided documentation and the number of
    individuals in the household to a FPG chart posted on the Universal
    Service Administrative Company's (USAC's) website.[^128] Moreover,
    our rules do not require ETCs to retain the consumer's corroborating
    documentation. ETCs need only retain records of their
    self-certifications and those made by the applicant.[^129] Where
    states operate their own Lifeline/Link-Up programs, an officer of
    the ETC must certify that the ETC is in compliance with state
    Lifeline/Link-Up income certification procedures and that, to the
    best of his or her knowledge, documentation of income was presented.

32. Finally, all consumers in all states qualifying under an
    income-based criterion must self-certify their eligibility to
    participate. Consumers must make this self-certification under
    penalty of perjury and must also present all required documentation.
    Specifically, consumers must self-certify, under penalty of perjury,
    that the presented documentation accurately represents their annual
    household income. Moreover, we adopt the Joint Board's
    recommendation that Lifeline/Link-Up applicants in all states
    qualifying under an income-based criterion should be required to
    self-certify, under penalty of perjury, the number of individuals in
    their households.[^130] Because the Federal Poverty Guidelines
    change depending upon the number of individuals in a household, this
    information is necessary to determine eligibility.

#### Verification of Continued Eligibility Under Program-based and Income-based Eligibility {#verification-of-continued-eligibility-under-program-based-and-income-based-eligibility .Style-Heading-4-+-(Complex)-12-pt-Left}

33. We adopt the Joint Board's recommendation that all states, including
    federal default states, be required to establish procedures to
    verify consumers' continued eligibility for the Lifeline/Link-Up
    program under both program and income-based eligibility
    criteria.[^131] Verification procedures could include random
    beneficiary audits, periodic submission of documents, or annual
    self-certification. We agree with those commenters that assert that
    verification of continued eligibility should ensure that the
    low-income support mechanism is updated, accurate, and carefully
    targeted to provide support only to eligible consumers.[^132] We
    disagree with other commenters that argue that these benefits do not
    outweigh the burden associated with a verification
    requirement.[^133] We agree with the Joint Board that verification
    is an effective way to prevent fraud and abuse and ensure that only
    eligible consumers receive benefits.

34. We also adopt the Joint Board's recommendation to allow states that
    administer their own Lifeline/Link-Up programs the flexibility to
    design and implement their own verification procedures to validate
    consumers' continued eligibility.[^134] We note that several states
    already engage in verification of continued eligibility for
    Lifeline/Link-Up. For example, in some states, the ETC is
    responsible for verifying the consumer's continued
    eligibility,[^135] while other states require their state agencies
    to devise procedures for eligibility verification.[^136] Another
    state establishes eligibility verification procedures that involve
    state agency and carrier participation.[^137] This flexibility will
    permit states to develop verification procedures that best
    accommodate their own Lifeline participants based on the available
    resources of ETCs and state commissions, each state's eligibility
    criteria, and local conditions. We also note that eligible consumers
    living on tribal lands may qualify for Lifeline support even if they
    do not satisfy that state's eligibility criteria.[^138] In addition,
    ETCs must be able to document that they are complying with state
    regulations and verification requirements.

35. With respect to federal default states, we adopt the Joint Board's
    recommendation to require ETCs to verify annually the continued
    eligibility of a statistically valid sample of their Lifeline
    subscribers.[^139] ETCs are free to verify directly with a state
    that particular subscribers continue to be eligible by virtue of
    participation in a qualifying program or income level.
    Alternatively, to the extent ETCs cannot obtain the necessary
    information from the state, they may survey the subscriber directly
    and provide the results of the sample to USAC.[^140] Subscribers who
    are subject to this verification and qualify under program-based
    eligibility criteria must prove their continued eligibility by
    presenting in person or sending a copy of their Medicaid card or
    other Lifeline-qualifying public assistance card and
    self-certifying, under penalty of perjury, that they continue to
    participate in the Lifeline-qualifying public assistance program.
    Subscribers who are subject to this verification and qualify under
    the income-based eligibility criteria must prove their continued
    eligibility by presenting current documentation consistent with the
    federal default certification process, as detailed above.[^141]
    These subscribers must also self-certify, under penalty of perjury,
    the number of individuals in their household and that the
    documentation presented accurately represents their annual household
    income. As with certification of income-based eligibility, ETCs need
    not retain documentation of income; however, an officer of the ETC
    must certify, under penalty of perjury, that the ETC has income
    verification procedures in place and that, to the best of his or her
    knowledge, the company was presented with corroborating
    documentation and retain these records.[^142]

36. In addition, we agree with the Joint Board that states should
    develop on-line verification systems.[^143] Several commenters
    highlight the effectiveness and efficiency of verifying eligibility
    via on-line databases.[^144] We agree with the Joint Board that an
    on-line verification process, where states can obtain and provide
    data to allow ETCs real-time access to a database of low-income
    assistance program participants or income reports, could be a quick,
    easy, and accurate solution. Nevertheless, we decline to require
    states to adopt on-line verification at this time. Despite the
    benefits of on-line verification, we recognize, as did the Joint
    Board, that current financial constraints may make it difficult for
    some states to implement on-line verification.

## Implementation and Recordkeeping

37. States and ETCs will be required to implement measures to certify
    income of consumers before enrollment in Lifeline/Link-Up when
    income is the consumer's basis for Lifeline/Link-Up eligibility, and
    to implement measures to verify continued eligibility for
    Lifeline/Link-Up under any criteria within one year from the
    publication of this Order in the Federal Register. Given the
    flexibility afforded states to develop certification and
    verification procedures, we conclude that one year should provide
    more than enough time to come into full compliance with the rules we
    adopt today. Indeed, we encourage states and ETCs to implement
    certification and verification measures as quickly as possible, but
    no later than one year. For federal default states, level of income
    will not be acceptable as a means of qualifying for Lifeline/Link-Up
    until certification procedures are in place.[^145]

38. In addition, we specify that ETCs in federal default states must
    retain certifications regarding a consumer's eligibility for
    Lifeline for as long as the consumer receives Lifeline service from
    that ETC or until the ETC is audited by the Administrator. Section
    54.409 of the Commission's rules requires ETCs to obtain a
    self-certification, under penalty of perjury, from a consumer that
    he or she receives benefits from one of the qualifying means-tested
    programs.[^146] However, this rule does not specify how long ETCs
    must retain consumer self-certifications regarding eligibility. In
    this Order, we clarify our rules to require ETCs in federal default
    states to retain consumers' self-certifications of eligibility,
    including self-certifications that income documentation accurately
    reflects household income,[^147] for as long as the consumer
    receives Lifeline service from that ETC or until the ETC is audited
    by the Administrator. This requirement will strengthen the
    Commission's ability to ensure program integrity without unduly
    burdening ETCs. For example, requiring an ETC to retain a single
    certification document per consumer will allow the Administrator to
    confirm in any audit that a consumer was properly enrolled in
    Lifeline, regardless of when he or she was enrolled.

39. Moreover, we codify the requirement that all ETCs must maintain
    records to document compliance with all Commission and state
    requirements governing the Lifeline/Link-Up programs and provide
    that documentation to the Commission or Administrator upon request.
    These records could include, for example, self-certifications
    verifying consumers' continued eligibility, documents demonstrating
    that ETCs have passed through the appropriate discounts to
    qualifying consumers, proof of advertising of Lifeline/Link-Up
    service, and billing records for Lifeline customers. All ETCs must
    retain such documentation for the three full preceding calendar
    years, *e.g.,* in December 2004, an ETC would maintain records for
    calendar years 2001-2003, but in January 2005, that ETC would only
    maintain records for calendar years 2002-2004.[^148]

40. Finally, we clarify the recordkeeping obligations of non-ETC
    resellers that purchase Lifeline-discounted wholesale services from
    ETCs to offer discounted services to low-income consumers. In such
    instances, the ETC would have no information regarding the
    eligibility of the low-income consumer. Accordingly, in these
    circumstances, ETCs must obtain certifications from the non-ETC
    reseller that it is complying with the Commission's Lifeline/Link-Up
    requirements.[^149] Moreover, non-ETC resellers providing discounted
    services to low-income customers must comply with the applicable
    federal or state Lifeline/Link-Up requirements, including
    certification and verification procedures. Thus, such non-ETC
    resellers would be required to retain the required documentation to
    demonstrate that they are providing discounted services only to
    qualifying low-income consumers for the above-specified periods.

## Outreach

### Background

41. In the *NPRM*, we sought comment on whether the Commission should
    provide outreach guidelines for the Lifeline/Link-Up program to
    target more effectively low-income consumers.[^150] Currently, there
    are no specific federal outreach guidelines. ETCs are, however,
    required to publicize the availability of Lifeline/Link-Up in a
    manner reasonably designed to reach those likely to qualify for the
    service.[^151]

42. Effective outreach programs have been shown to improve
    Lifeline/Link-Up participation. According to an August 2000 report
    by the Telecommunications Industries Analysis Project, the
    Lifeline/Link-Up take rate almost tripled from 13.1% to 39.6% when
    states implemented outreach initiatives designed to increase
    telephone penetration and participation.[^152] For example, Maine, a
    state with an aggressive outreach program, which includes
    coordinating with social service agencies and sending flyers and
    personal letters to eligible customers, reports that its penetration
    rate among low-income households increased from 90.5% in March 1997
    to 96.5% in March 2002.[^153]

43. In July 2002, the Commission's Consumer and Governmental Affairs
    Bureau (CGB) announced the kick-off of "Get
    Connected-Afford-A-Phone," a national campaign designed to educate
    consumers, including tribal consumers, about the Lifeline/Link-Up
    program.[^154] CGB also engages in targeted outreach to tribal
    populations for certain federal programs, such as the availability
    of discounts for obtaining wireless licenses on tribal lands, in
    addition to Lifeline/Link-Up benefits. In the *Recommended
    Decision*, the Joint Board recommended that the Commission provide
    outreach guidelines to states and carriers to improve
    Lifeline/Link-Up subscribership.[^155]

### Discussion

44. We agree with the Joint Board that more vigorous outreach efforts
    could improve Lifeline/Link-Up subscribership and adopt the Joint
    Board's recommendation to provide outreach guidelines to states and
    carriers.[^156] We agree that we should not require specific
    outreach procedures, but should instead provide guidelines for
    states and carriers so that they can adopt their own specific
    standards and engage in outreach as they see fit.[^157] Commenters
    were supportive of the proposed outreach guidelines, outlined in the
    *Recommended Decision* and detailed below.[^158] We believe that
    encouraging states to establish partnerships with other state
    agencies and telephone companies will maximize public awareness and
    participation in the Lifeline/Link-Up program. We do not believe it
    is necessary at this time to prescribe specific outreach
    procedures.[^159] Instead, we set forth these guidelines in order to
    provide states and carriers with examples of how to reach those
    likely to qualify. States and carriers will still have the
    flexibility to determine the most appropriate outreach mechanisms
    for their consumers, as long as they are reasonably designed to
    reach those likely to qualify for Lifeline/Link-Up.[^160]

45. Accordingly, we adopt the following outreach guidelines recommended
    by the Joint Board: (1) states and carriers should utilize outreach
    materials and methods designed to reach households that do not
    currently have telephone service; (2) states and carriers should
    develop outreach advertising that can be read or accessed by any
    sizeable non-English speaking populations within a carrier's service
    area; and (3) states and carriers should coordinate their outreach
    efforts with governmental agencies/tribes that administer any of the
    relevant government assistance programs. These guidelines are
    described in detail in the paragraphs below. An appendix compiling
    state practices was included in the *Recommended Decision* and is
    reproduced in this document.[^161] State practices include
    establishing marketing boards to devise outreach materials,
    providing multi-lingual customer support, and implementing
    innovative tribal outreach practices.

46. The first recommended guideline is that states and carriers should
    utilize outreach materials and methods designed to reach households
    that do not currently have telephone service.[^162] States or
    carriers may wish to send regular mailings to eligible households in
    the form of letters or brochures.[^163] Posters could be placed in
    locations where low-income individuals are likely to visit, such as
    shelters, soup kitchens, public assistance agencies, and on public
    transportation. Multi-media outreach approaches could be utilized
    such as newspaper advertisements, articles in consumer newsletters,
    press releases, radio commercials, and radio and television public
    service announcements.[^164] For low-income consumers that live in
    remote areas, including those living on tribal lands, traveling
    throughout an area or setting up an information booth at a central
    location may be more suitable outreach methods. States and carriers
    should ensure that outreach materials and methods accommodate
    low-income individuals with sight, hearing, and speech disabilities
    by producing brochures, mailings, and posters in Braille. We also
    encourage carriers to provide customer service to disabled program
    participants on an equal basis by using telecommunications relay
    services (TRS), text telephone (TTY), and speech-to-speech (STS)
    services.[^165] States and carriers should also take into
    consideration that some low-income consumers may be illiterate or
    functionally illiterate, and therefore should consider how to
    supplement outreach materials and methods to accommodate those
    individuals.[^166] States and carriers may post outreach material on
    the Internet to provide general information; however, the Internet
    should not be relied on as the sole or primary means of
    Lifeline/Link-Up outreach.[^167] Similarly, although advertising
    Lifeline/Link-Up in carriers' telephone books may be effective in
    reaching some low-income individuals, it will not be effective for
    those without established phone service because carriers only
    distribute telephone books after phone service is established.
    States and carriers should also not rely on hotlines as a primary
    outreach method because many low-income individuals may not have
    access to a telephone from which to initiate an inquiry on
    Lifeline/Link-Up benefits.

47. The second recommended guideline is that states and carriers should
    develop outreach advertising that can be read or accessed by any
    sizeable non-English speaking populations within the carrier's
    service area. For example, many of the suggestions in the above
    paragraph can be implemented in languages other than English,
    including mailings, print advertisements, radio and television
    commercials, and posters. States with a large ethnically diverse
    population should have a toll-free call center to answer questions
    about Lifeline/Link-Up in the low-income population's native
    languages.[^168] Similarly, enrollment applications should be made
    available in other languages.

48. The third recommended guideline is that states and carriers should
    coordinate their outreach efforts with governmental agencies that
    administer any of the relevant government assistance programs.[^169]
    Coordination should also include cooperative outreach efforts with
    state commissions, tribal organizations, carriers, social service
    agencies, community centers, nursing homes, public schools, and
    private organizations that may serve low-income individuals, such as
    American Association for Retired Persons and the United Way.[^170]
    Cooperative outreach among those most likely to have influential
    contact with low-income individuals will help to target messages
    about Lifeline/Link-Up to the low-income community. For example,
    state agencies that conduct outreach efforts for a state's "earned
    income tax credit," an income tax credit for low-income working
    individuals and families, could conduct simultaneous outreach
    efforts for Lifeline/Link-Up. Establishing a marketing or consumer
    advisory board with state, carrier, non-profit and consumer
    representatives may also be an effective way of developing outreach
    materials.[^171] States and carriers could also issue a joint report
    to the Commission as to their outreach practices.

49. We also encourage states to utilize USAC as a resource for outreach
    to states and carriers, similar to USAC's outreach efforts with
    regard to the Rural Health Care and Schools and Libraries programs.
    USAC currently engages in outreach for the Lifeline/Link-Up program
    through its website, \<www.lifelinesupport.org\>, which has
    information about state Lifeline/Link-Up programs, eligibility
    criteria, and information for carriers. USAC also speaks about
    Lifeline/Link-Up at public events such as the National Association
    of Regulatory Utility Commissioners (NARUC) conference and the
    National Congress of American Indians, where USAC staff also meets
    with tribal members and managers of tribally-owned telephone
    companies. USAC distributes letters and emails to consumer groups,
    tribal leaders, and social service organizations to publicize the
    availability of Lifeline/Link-Up and also sends letters to ETCs to
    remind them of their outreach obligations. USAC also frequently
    takes phone calls from consumers and others with questions about the
    Lifeline/Link-Up program. Finally, we agree with the Joint Board
    that in addition to USAC's current outreach efforts for
    Lifeline/Link-Up, USAC should assist in additional outreach efforts
    for Lifeline/Link-Up similar to what it currently does for the Rural
    Health Care and Schools and Libraries Programs.[^172]

## Other Issues

### Voluntary Survey

50. We agree with the Joint Board that gathering data and information
    about state Lifeline/Link-Up programs through a voluntary survey
    will enable the Commission to make more informed decisions in any
    future Lifeline/Link-Up orders.[^173] In the *NPRM*, we sought
    comment on the survey's format and questions to ask.[^174]

51. To obtain feedback on the success of the modified Lifeline/Link-Up
    program, we adopt a voluntary information collection from the
    states. This voluntary survey form, as contained in Appendix C, asks
    states to provide information about the eligibility criteria,
    certification and verification procedures, and outreach efforts
    implemented as a result of the changes we adopt in this Order.[^175]
    Collection of this survey will assist us in learning about the
    reasons for variations in participation rates between and among
    states, and as a result could help shape Commission policy in the
    future.[^176] We agree with commenters that submission of this
    survey should be voluntary for states with the first survey due one
    year following the effective date of this Order.[^177] We direct
    USAC to mail the voluntary survey form to states. We have expanded
    on some of the Joint Board's recommended questions and added a few
    questions to the survey, at the suggestion of NCLC.[^178]

### Unpaid Toll Charges

52. We adopt the Joint Board's recommendation to encourage states to
    consider implementing rules that require ETCs to offer Lifeline
    service to consumers who may have been previously disconnected for
    unpaid toll charges.[^179] We acknowledge that ETCs often prohibit
    consumers who have prior outstanding balances for local and/or long
    distance services, but who otherwise qualify for Lifeline/Link-Up,
    from signing up for local telephone service.[^180] As a result,
    these outstanding balances stand as a barrier to expanding
    subscribership among low-income consumers. However, the Fifth
    Circuit found that the Commission lacked jurisdiction to prohibit
    ETCs from disconnecting Lifeline customers for failure to pay toll
    charges.[^181] In light of the Fifth Circuit ruling, we adopt the
    Joint Board's recommendation and take no action on disconnection
    requirements at this time. We encourage states, however, to consider
    ways to address this issue.

### Vertical Services

53. We adopt the Joint Board's recommendation not to adopt rules
    prohibiting Lifeline/Link-Up customers from purchasing vertical
    services, such as Caller ID, Call Waiting, and Three-way
    Calling.[^182] Like the Joint Board, we believe any restriction on
    the purchase of vertical services may discourage qualified consumers
    from enrolling and may serve as a barrier to participation in the
    program.[^183] No commenter supported prohibiting Lifeline/Link-Up
    subscribers from purchasing vertical services. However, some
    expressed concern that ETCs may be marketing vertical services to
    low-income customers who may be unable to afford these
    features.[^184] While we understand these concerns, we do not
    prohibit the marketing of vertical services to Lifeline/Link-Up
    customers at this time.

### Support for Non-ETCs

54. We agree with the Joint Board that we should decline to establish
    rules that would provide Lifeline/Link-Up support directly to
    carriers that are not ETCs.[^185] Contrary to AT&T's assertion,
    establishing such rules would be inconsistent with section 254(e),
    which states that only ETCs may receive universal service
    support.[^186] Extending Lifeline/Link-Up universal service support
    to carriers that do not satisfy the requirements for designation as
    an ETC could also serve as a disincentive for other carriers to
    comply with their ETC obligations.

### Minor Rule Changes

55. In the *NPRM*, the Commission identified various proposals to
    clarify and streamline our rules. Specifically, the Commission
    proposed to modify Part 54 to reference a provision in section
    52.33(a)(1)(i)(C) of the Commission's rules that exempts Lifeline
    Assistance Program customers from monthly number-portability
    charges.[^187] The Commission also solicited comment on whether
    section 54.401(c) should be amended by replacing "toll blocking"
    with "toll limitation" to accurately reflect the Commission's
    determination in the *1997 Universal Service Order* that ETCs may
    not impose service deposit requirements on Lifeline customers who
    accept toll limitation services.[^188] Section 54.401(c) incorrectly
    limits the service deposit prohibition to customers who accept toll
    blocking.[^189] Finally, the Commission sought comment on whether to
    delete Subpart G of Part 36, which states that "\[t\]his subpart
    shall be effective through December 31, 1997. On January 1, 1998,
    Lifeline Connection Assistance shall be provided in accordance with
    part 54, subpart E of this chapter."[^190] We believe these changes
    will clarify and streamline our Lifeline/Link-Up rules. Therefore,
    we adopt these minor rule changes as proposed in the *NPRM*.

#  FURTHER NOTICE OF PROPOSED RULEMAKING

## Income-based Criterion

56. We seek comment on whether the income-based criterion in the federal
    default eligibility criteria should be increased to 150% of the FPG
    to make phone service affordable to more low-income individuals and
    families.[^191] Although most commenters supported adding an
    income-based criterion, a number of those commenters supported a
    higher income-based standard than the interim measure that we adopt
    above.[^192] Specifically, those commenters preferred that a
    consumer whose household income is at or below 150% of the FPG
    should be eligible for Lifeline/Link-Up support.[^193] Commenters
    argue that adding a higher FPG level would bring Lifeline/Link-Up
    support in line with LIHEAP, a current qualifying Lifeline/Link-Up
    program that uses an income-based standard of 150% as an eligibility
    criterion.[^194] Commenters also point out the inequity that
    currently exists between a hypothetical low-income consumer who does
    not participate in LIHEAP and therefore does not qualify for
    Lifeline, and another hypothetical low-income consumer with the same
    income who participates in LIHEAP and Lifeline.[^195] In particular,
    low-income consumers are not eligible for LIHEAP if they rent a
    house or apartment with utilities included, yet they may have
    essentially the same income as consumers who pay for utilities
    separately. It is possible that a non-trivial number of low-income
    consumers may fall into this category.[^196] Furthermore, adding a
    higher FPG level may also help to increase participation among
    low-income consumers who do not currently qualify for
    Lifeline/Link-Up because they are on waiting lists for Section 8
    housing, are not eligible for SSI because they are not elderly or
    disabled, have been cut off from Food Stamps because of work
    requirements, or do not qualify for Medicaid due to complex
    eligibility requirements.[^197] Adding a higher FPG level could also
    help respond to the decrease in participation rates prevalent in at
    least one current Lifeline/Link-Up qualifying program and one
    adopted in this Order, Food Stamps and TANF, respectively.[^198]

57. Applying the same methodology used to analyze the 135% of the FPG
    income-based criterion, our staff analysis estimates that broadening
    the income-based criterion to 150% of the FPG may only have a
    minimal impact on national telephone penetration rates, but could
    add many new Lifeline subscribers; potentially resulting in an
    additional \$200 million increase in Lifeline expenditures over the
    levels predicted for implementation of a 135% standard.[^199] We
    seek comment on this analysis. Commenters should discuss the staff
    analysis contained in Appendix K, the advantages and disadvantages
    of a broader income-based standard and the potential burden to the
    fund. When considering their response, commenters should refer to
    Appendix F for estimated income requirements for various sizes of
    households at or below 150% of the FPG.[^200]

## Lifeline Advertising Requirements

58. Although we adopt the Joint Board's recommendation to issue outreach
    *guidelines*, rather than specific *requirements*,[^201] on further
    reflection, we think it would be beneficial to explore whether
    adoption of rules governing the advertisement of the
    Lifeline/Link-Up program would strengthen the operation of these
    programs.[^202] For instance, we seek comment on whether the
    Commission should require ETCs to print and distribute posters,
    flyers, or other print media advertising Lifeline/Link-Up to state,
    federal, or tribal public assistance agencies in their service
    areas. If a percentage of the population in a given area speaks a
    language other than English, should ETCs be required to distribute
    materials in that language? If so, what should the benchmark
    percentage be?

# Procedural matters 

## Regulatory Flexibility Analysis

59. As required by the Regulatory Flexibility Act, 5 U.S.C. § 604, the
    Commission has prepared a Final Regulatory Flexibility Analysis
    (FRFA) for the *Report and Order*, set forth at Appendix H. The
    Commission has also prepared an Initial Regulatory Flexibility
    Analysis (IRFA) for the *Further Notice of Proposed Rulemaking*
    (*Further Notice*), set forth at Appendix I. Comments on the FRFA
    and IRFA should be labeled as IRFA or FRFA Comments, and should be
    submitted pursuant to the filing dates and procedures set forth in
    paragraphs 61-67, *infra*.

## Paperwork Reduction Act Analysis

60. The action contained herein has been analyzed with respect to the
    Paperwork Reduction Act of 1995 and found to impose new or modified
    reporting and recordkeeping requirements or burdens on the public.
    Implementation of these new or modified reporting and recordkeeping
    requirements will be subject to approval by the Office of Management
    and Budget (OMB) as prescribed by the Act, and will go into effect
    upon announcement in the Federal Register of OMB approval.

## Filing Procedures

61. Pursuant to sections 1.415 and 1.419 of the Commission's
    rules,[^203] interested parties may file comments not later than 60
    days after publication of the *Further Notice* in the Federal
    Register and may file reply comments not later than 105 days after
    publication of the *Further Notice* in the Federal Register. In
    order to facilitate review of comments and reply comments, parties
    should include the name of the filing party and the date of the
    filing on all pleadings. Comments may be filed using the
    Commission's Electronic Comment Filing System (ECFS) or by filing
    paper copies.[^204]

62. Comments filed through the ECFS can be sent as an electronic file
    via the Internet to \<http://www.fcc.gov/cgb/ecfs\>. Generally, only
    one copy of an electronic submission must be filed. In completing
    the transmittal screen, commenters should include their full name,
    U.S. Postal Service mailing address, and the applicable docket or
    rulemaking number. Parties may also submit an electronic comment by
    Internet e-mail. To get filing instructions for e-mail comments,
    commenters should send an e-mail to \<ecfs@fcc.gov\>, and should
    include the following words in the body of the message, "get form."
    A sample form and directions will be sent in reply. Or you may
    obtain a copy of the ASCII Electronic Transmittal Form (FORM-ET) at
    \<www.fcc.gov/e-file/email.html\>.

63. Parties that choose to file by paper must file an original and four
    copies of each filing. Filings can be sent by hand or messenger
    delivery, by commercial overnight courier, or by first-class or
    overnight U.S. Postal Service mail (although we continue to
    experience delays in receiving U.S. Postal Service mail). The
    Commission's contractor, Natek, Inc., will receive hand-delivered or
    messenger-delivered paper filings for the Commission's Secretary at
    a new location in downtown Washington, DC. The address is 236
    Massachusetts Avenue, NE, Suite 110, Washington, DC 20002. The
    filing hours at this location will be 8:00 a.m. to 7:00 p.m. All
    hand deliveries must be held together with rubber bands or
    fasteners. Any envelopes must be disposed of before entering the
    building.

64. Commercial overnight mail (other than U.S. Postal Service Express
    Mail and Priority Mail) must be sent to 9300 East Hampton Drive,
    Capitol Heights, MD 20743. U.S. Postal Service first-class mail,
    Express Mail, and Priority Mail should be addressed to 445 12th
    Street, SW, Washington, D.C. 20554. All filings must be addressed to
    the Commission\'s Secretary, Office of the Secretary, Federal
    Communications Commission.

+----------------------------------+-----------------------------------+
| If you are sending this type of  | It should be addressed for        |
| document or using this delivery  | delivery to...                    |
| method...                        |                                   |
+----------------------------------+-----------------------------------+
| Hand-delivered or                | 236 Massachusetts                 |
| messenger-delivered paper        |                                   |
| filings for the Commission's     | Avenue, NE, Suite 110,            |
| Secretary                        |                                   |
|                                  | Washington, DC 20002 (8:00 to     |
|                                  | 7:00 p.m.)                        |
+----------------------------------+-----------------------------------+
| Other messenger-delivered        | 9300 East Hampton Drive,          |
| documents, including documents   |                                   |
| sent by overnight mail (other    | Capitol Heights, MD 20743         |
| than United States Postal        |                                   |
| Service Express Mail and         | (8:00 a.m. to 5:30 p.m.)          |
| Priority Mail)                   |                                   |
+----------------------------------+-----------------------------------+
| United States Postal Service     | 445 12th Street, SW               |
| first-class mail, Express Mail,  |                                   |
| and Priority Mail                | Washington, DC 20554              |
+----------------------------------+-----------------------------------+

65. Parties who choose to file by paper should also submit their
    comments on diskette. These diskettes, plus one paper copy, should
    be submitted to: Sheryl Todd, Telecommunications Access Policy
    Division, Wireline Competition Bureau, Federal Communications, at
    the filing window at 236 Massachusetts Avenue, N.E., Suite 110,
    Washington, D.C. 20002. Such a submission should be on a 3.5-inch
    diskette formatted in an IBM compatible format using Word or
    compatible software. The diskette should be accompanied by a cover
    letter and should be submitted in "read only" mode. The diskette
    should be clearly labeled with the commenter's name, proceeding
    (including the docket number, in this case WC Docket No. 03-109,
    type of pleading (comment or reply comment), date of submission, and
    the name of the electronic file on the diskette. The label should
    also include the following phrase "Disk Copy - Not an Original."
    Each diskette should contain only one party's pleadings, preferably
    in a single electronic file. In addition, commenters must send
    diskette copies to the Commission's copy contractor, Qualex
    International, Portals II, 445 12th Street, S.W., Room CYB402,
    Washington, D.C. 20554 (see alternative addresses above for delivery
    by hand or messenger).

66. Regardless of whether parties choose to file electronically or by
    paper, parties should also file one copy of any documents filed in
    this docket with the Commission's copy contractor, Qualex
    International, Portals II, 445 12th Street S.W., CY-B402,
    Washington, D.C. 20554 (see alternative addresses above for delivery
    by hand or messenger) (telephone 202-863-2893; facsimile
    202-863-2898) or via e-mail at qualexint@aol.com.

67. The full text of this document is available for public inspection
    and copying during regular business hours at the FCC Reference
    Information Center, Portals II, 445 12th Street, SW, Room CY-A257,
    Washington, DC, 20554. This document may also be purchased from the
    Commission's duplicating contractor, Qualex International, Portals
    II, 445 12th Street, SW, Room CY-B402, Washington, DC, 20554,
    telephone (202) 863-2893, facsimile (202) 863-2898, or via e-mail
    qualexint@aol.com.

## Further Information

68. Alternative formats (computer diskette, large print, audio
    recording, and Braille) are available to persons with disabilities
    by contacting Brian Millin at (202) 418-7426 voice, (202) 418-7365
    TTY, or bmillin@fcc.gov. This *Report and Order* can also be
    downloaded in Microsoft Word and ASCII formats at
    \<http://www.fcc.gov/wcb/universal_service/lowincome.html\>.

69. For further information, contact Shannon Lipp or Karen Franklin
    at (202) 418-7400 in the Telecommunications Access Policy Division,
    Wireline Competition Bureau.

#  ORDERING CLAUSES

70. Accordingly, IT IS ORDERED that, pursuant to the authority contained
    in sections 1, 4(i), 201-205, 214, 254, and 403 of the
    Communications Act of 1934, as amended, 47 U.S.C. §§ 1, 4(i),
    201-205, 214, 254, 403, this Order IS ADOPTED.

71. IT IS FURTHER ORDERED that Part 54 of the Commission's rules, 47
    C.F.R. Part 54, IS AMENDED as set forth in Appendix A attached
    hereto, effective thirty (30) days after publication of this Order
    in the Federal Register, unless otherwise indicated herein.

72. IT IS FURTHER ORDERED that, pursuant to the authority contained in
    sections 1, 4(i), 201-205, 214, 254, and 403 of the Communications
    Act of 1934, as amended, 47 U.S.C. §§ 1, 4(i), 201-205, 214, 254,
    403, this *Further Notice of Proposed Rulemaking* IS ADOPTED.

> FEDERAL COMMUNICATIONS COMMISSION
>
> Marlene H. Dortch
>
> Secretary

**APPENDIX A**

**FINAL RULES**

For the reasons discussed in the preamble, the Federal Communications
Commission amends 47 C.F.R. Parts 36 and 54 as follows:

**[PART 36 -- JURISDICTIONAL SEPARATIONS PROCEDURES;]{.underline}**

**[STANDARD PROCEDURES FOR SEPARATING TELECOMMUNICATIONS PROPERTY COSTS,
REVENUES, EXPENSES, TAXES AND RESERVES FOR TELECOMMUNICATIONS
COMPANIES]{.underline}**

1.  Delete §§ 36.701-36.741.

**[PART 54 - UNIVERSAL SERVICE]{.underline}**

73. The authority citation for Part 54 continues to read as follows:

Authority: 47 U.S.C. §§ 1, 4(i), 201, 205, 214, and 254 unless otherwise
noted.

74. Amend § 54.400 by adding paragraph (f) to read as follows:

**[§ 54.400 Terms and definitions.]{.underline}**

\* \* \*

\(f\) *Income*. "Income" is all income actually received by all members
of the household. This includes salary before deductions for taxes,
public assistance benefits, social security payments, pensions,
unemployment compensation, veteran's benefits, inheritances, alimony,
child support payments, worker's compensation benefits, gifts, lottery
winnings, and the like. The only exceptions are student financial aid,
military housing and cost-of-living allowances, irregular income from
occasional small jobs such as baby-sitting or lawn mowing, and the like.

75. Amend § 54.401 by amending paragraph (c) and adding paragraph (e) to
    read as follows:

**[§ 54.401 Lifeline defined.]{.underline}**

\* \* \*

\(c\) Eligible telecommunications carriers may not collect a service
deposit in order to initiate Lifeline service, if the qualifying
low-income consumer voluntarily elects toll limitation service from the
carrier, where available. If toll limitation services are unavailable,
the carrier may charge a service deposit.

\* \* \*

\(e\) Consistent with § 52.33(a)(1)(i)(C), eligible telecommunications
carriers may not charge Lifeline customers a monthly number-portability
charge.

76. Amend § 54.405 by adding paragraphs (c) and (d) to read as follows:

**[§ 54.405 Carrier obligation to offer Lifeline.]{.underline}**

All eligible telecommunications carriers shall:

\(a\) \* \* \*

\(b\) \* \* \*

\(c\) Notify Lifeline subscribers of impending termination of Lifeline
service if the carrier has a reasonable basis to believe that the
subscriber no longer meets the Lifeline-qualifying criteria, as
described in § 54.409. Notification of impending termination shall be in
the form of a letter separate from the subscriber's monthly bill. A
carrier providing Lifeline service in a state that has dispute
resolution procedures applicable to Lifeline termination, that requires,
at a minimum, written notification of impending termination, must comply
with the applicable state requirements.

\(d\) Allow subscribers 60 days following the date of the impending
termination letter required in paragraph (c) in which to demonstrate
continued eligibility. Subscribers making such a demonstration must
present proof of continued eligibility to the carrier consistent with
applicable state or federal verification requirements, as described in §
54.410(c). Carriers must terminate subscribers who fail to demonstrate
continued eligibility within the 60-day time period. A carrier providing
Lifeline service in a state that has dispute resolution procedures
applicable to Lifeline termination must comply with the applicable state
requirements.

77. Amend § 54.409 by amending paragraphs (b) and (c) and adding
    paragraph (d) to read as follows:

**[§ 54.409 Consumer qualification for Lifeline.]{.underline}**

> \(a\) \* \* \*

\(b\) To qualify to receive Lifeline service in a state that does not
mandate state Lifeline support, a consumer's income, as defined in §
54.400(f), must be at or below 135% of the Federal Poverty Guidelines or
a consumer must participate in one of the following federal assistance
programs: Medicaid; Food Stamps; Supplemental Security Income; Federal
Public Housing Assistance (Section 8); Low-Income Home Energy Assistance
Program; National School Lunch Program's free lunch program; or
Temporary Assistance for Needy Families.

\(c\) \* \* \* Such qualifying low-income consumer shall also qualify
for Tier-Three Lifeline support, if the carrier offering the Lifeline
service is not subject to the regulation of the state and provides
carrier-matching funds, as described in § 54.403(a)(3).

\(d\) In a state that does not mandate state Lifeline support, each
eligible telecommunications carrier providing Lifeline service to a
qualifying low-income consumer pursuant to paragraphs (b) or (c) must
obtain that consumer's signature on a document certifying under penalty
of perjury that:

> \(i\) the consumer receives benefits from one of the programs listed
> in paragraphs (b) or (c), and identifying the program or programs from
> which that consumer receives benefits, or
>
> \(ii\) the consumer's household meets the income requirement of
> paragraph (b), and that the presented documentation of income, as
> described in §§ 54.400(f), 54.410(a)(ii), accurately represents the
> consumer's household income; and
>
> \(iii\) the consumer will notify the carrier if that consumer ceases
> to participate in the program or programs or if the consumer's income
> exceeds 135% of the Federal Poverty Guidelines.

78. Create new § 54.410 to read as follows:

**[§54.410 Certification and Verification of Consumer Qualification for
Lifeline.]{.underline}**

\(a\) *Certification of Income*. Consumers qualifying under an
income-based criterion must present documentation of their household
income prior to enrollment in Lifeline.

\(i\) By one year from the effective date of these rules, eligible
telecommunications carriers in states that mandate state Lifeline
support must comply with state certification procedures to document
consumer income-based eligibility for Lifeline prior to that consumer's
enrollment if the consumer is qualifying under an income-based
criterion.

\(ii\) By one year from the effective date of these rules, eligible
telecommunications carriers in states that do not mandate state Lifeline
support must implement certification procedures to document
consumer-income-based eligibility for Lifeline prior to that consumer's
enrollment if the consumer is qualifying under the income-based
criterion specified in § 54.409(b). Acceptable documentation of income
eligibility includes the prior year's state, federal, or tribal tax
return, current income statement from an employer or paycheck stub, a
Social Security statement of benefits, a Veterans Administration
statement of benefits, a retirement/pension statement of benefits, an
Unemployment/Workmen's Compensation statement of benefits, federal or
tribal notice letter of participation in General Assistance, a divorce
decree, child support, or other official document. If the consumer
presents documentation of income that does not cover a full year, such
as current pay stubs, the consumer must present three consecutive months
worth of the same types of document within that calendar year.

\(b\) *Self-Certifications*. After income certification procedures are
implemented, eligible telecommunications carriers and consumers are
required to make certain self-certifications, under penalty of perjury,
relating to the Lifeline program.

\(i\) An officer of the eligible telecommunications carrier in a state
that mandates state Lifeline support must certify that the eligible
telecommunications carrier is in compliance with state Lifeline income
certification procedures and that, to the best of his/her knowledge,
documentation of income was presented.

\(ii\) An officer of the eligible telecommunications carrier in a state
that does not mandate state Lifeline support must certify that the
eligible telecommunications carrier has procedures in place to review
income documentation and that, to the best of his/her knowledge, the
carrier was presented with documentation of the consumer's household
income.

\(iii\) Consumers qualifying for Lifeline under an income-based
criterion must certify the number of individuals in their households on
the document required in § 54.409(d).

\(c\) *Verification of Continued Eligibility*. Consumers qualifying for
Lifeline may be required to verify continued eligibility on an annual
basis.

\(i\) By one year from the effective date of these rules, eligible
telecommunications carriers in states that mandate state Lifeline
support must comply with state verification procedures to validate
consumers' continued eligibility for Lifeline.

\(ii\) By one year from the effective date of these rules, eligible
telecommunications carriers in states that do not mandate state Lifeline
support must implement procedures to verify the continued eligibility of
a statistically valid random sample of their Lifeline consumers to
verify continued eligibility and provide the results of the sample to
the Administrator. If verifying income, an officer of the eligible
telecommunications carrier must certify, under penalty of perjury, that
the eligible telecommunications carrier has income verification
procedures in place and that, to the best of his/her knowledge, the
carrier was presented with corroborating income documentation. In
addition, the consumer must certify, under penalty of perjury, that the
consumer continues to participate in the Lifeline qualifying program or
that the presented documentation accurately represents the consumer's
household income and the number of individuals in the household.

79. Create new § 54.416 to read as follows:

**[§ 54.416 Certification of Consumer Qualification for Link
Up.]{.underline}**

Consumers qualifying under an income-based criterion must present
documentation of their household income prior to enrollment in Link Up
consistent with requirements set forth in §§ 54.410(a) and (b).

80. Create new § 54.417 to read as follows:

**[§ 54.417 Recordkeeping Requirements.]{.underline}**

\(a\) Eligible telecommunications carriers must maintain records to
document compliance with all Commission and state requirements governing
the Lifeline/Link Up programs for the three full preceding calendar
years and provide that documentation to the Commission or Administrator
upon request. Notwithstanding the preceding sentence, eligible
telecommunications carriers must maintain the documentation required in
§§ 54.409(d) and 54.410(b)(iii) for as long as the consumer receives
Lifeline service from that eligible telecommunications carrier or until
audited by the Administrator. If an eligible telecommunications carrier
provides Lifeline discounted wholesale services to a reseller, it must
obtain a certification from that reseller that it is complying with all
Commission requirements governing the Lifeline/Link Up programs.

\(b\) Non-eligible-telecommunications-carrier resellers that purchase
Lifeline discounted wholesale services to offer discounted services to
low-income consumers must maintain records to document compliance with
all Commission requirements governing the Lifeline/Link Up programs for
the three full preceding calendar years and provide that documentation
to the Commission or Administrator upon request. To the extent such a
reseller provides discounted services to low-income consumers, it
constitutes the eligible telecommunications carrier referenced in §§
54.405(c), 54.405(d), 54.409(d), 54.410, and 54.416.

**APPENDIX B**

**LIST OF PARTIES FILING COMMENTS IN RESPONSE TO**

**THE NOTICE OF PROPOSED RULEMAKING**

[Comments]{.underline}

1\. ACORN

2\. AT&T Corp. (AT&T)

3\. BellSouth Corporation (BellSouth)

4\. Empowerment Center of Greater Cleveland Consumers for Fair Utility
Rates (Consumer's Coalition)

5\. Dobson Communications Corporation (Dobson)

6\. Florida Public Service Commission (Florida PSC)

7\. National Association of State Utility Consumer Advocates (NASUCA)

8\. National Consumer Law Center on behalf of Massachusetts Union of
Public Housing Tenants (NCLC)

9\. National Fuel Funds Network (NFFN)

10\. New York Department of Public Service (New York DPS)

11\. Ohio Public Utilities Commission (Ohio PUC)

12\. Oklahoma Corporation Commission (OCC)

13\. WorldCom, Inc., d/b/a MCI (MCI)

14\. Pennsylvania Utility Law Project (PULP)

15\. People of the State of California and the California Public
Utilities Commission (California PUC)

16\. Texas Legal Services Center

17\. Texas Office of Public Utility Counsel (Texas OPC)

18\. Tribal Telecom Outreach

19\. United States Conference of Catholic Bishops, Alliance for
Community Media, Appalachian People's Action Coalition, Center for
Digital Democracy, Consumer Action, Consumer Federal of America,
Edgemont Neighborhood Coalition, and Migrant Legal Action Program
(USCCB)

20\. United Utilities, Inc. (UUI)

21\. Verizon

[Reply Comments]{.underline}

1\. AT&T Corp. (AT&T)

2\. BellSouth Corporation (BellSouth)

3\. National Association of State Utility Consumer Advocates (NASUCA)

4\. National Consumer Law Center on behalf of Massachusetts Union of
Public Housing Tenants (NCLC)

5\. Pennsylvania Public Utility Commission (PaPUC)

6\. Commissioner Aaron Wilson Jr. of the Pennsylvania Public Utility
Commission (Commissioner Wilson, PaPUC)

7\. Rural Iowa Independent Telephone Association (RIITA)

8\. Verizon

**APPENDIX C**

**LIFELINE/LINK-UP STATE SURVEY**

1.  What changes, if any, has the state implemented in its
    Lifeline/Link-Up program due to changes in the federal
    Lifeline/Link-Up program? Of those changes, which have been most
    effective in increasing the state's telephone penetration rate?

2.  Please provide any additional information the state wishes to submit
    regarding positive or negative results experienced due to adoption
    of new Lifeline/Link-Up procedures during the past 12 months.

3.  Please provide any additional information the state wishes to submit
    regarding any administrative burdens or inefficiencies that the
    state has experienced due to adoption of new Lifeline/Link-Up
    procedures during the past 12 months.

4.  What is the current level of Lifeline support in the state, and are
    any changes scheduled to be made in the future?

5.  Describe the state's Lifeline/Link-Up eligibility requirements.

6.  Describe the state's Lifeline/Link-Up procedures for enrollment and
    certification, including documentation requirements. Do any state
    agencies qualify applicants for the Lifeline/Link-Up program?

7.  Describe the state's Lifeline/Link-Up procedures for verification,
    including documentation requirements. If the state plans to
    implement a verification program, please describe.

8.  Does the state now use, or is it considering implementing an
    electronic database to identify income-eligible households or
    facilitate verification or enrollment? If yes, please describe.

9.  Describe the state's outreach efforts. Which outreach efforts in
    particular have been the most successful in increasing
    participation?

10. List suggestions for improvements to the federal Lifeline/Link-Up
    program.

11. Does the state require all incumbent LECs to provide
    Lifeline/Link-Up Service to eligible subscribers?

12. Does the state require all competitive LECs to provide
    Lifeline/Link-Up Service to eligible subscribers?

13. Does the state sponsor any other low-income assistance programs that
    may provide alternative means for low-income consumers to access the
    public switched telephone network?

**APPENDIX D**

**ESTIMATED INCOME REQUIREMENTS FOR A HOUSEHOLD AT OR BELOW 135% OF THE
FEDERAL POVERTY GUIDELINES**

+-----------------------+---------------------+------------+----------+
| **Size of**           | **48 Contiguous     | **Alaska** | **       |
|                       | States and D.C.**   |            | Hawaii** |
| **Family Unit**       |                     |            |          |
+-----------------------+---------------------+------------+----------+
| 1                     | \$ 12,123           | \$15,134   | \$13,946 |
+-----------------------+---------------------+------------+----------+
| 2                     | 16,362              | 20,439     | 18,819   |
+-----------------------+---------------------+------------+----------+
| 3                     | 20,601              | 25,745     | 23,693   |
+-----------------------+---------------------+------------+----------+
| 4                     | 24,840              | 31,050     | 28,566   |
+-----------------------+---------------------+------------+----------+
| 5                     | 29,079              | 36,356     | 33,440   |
+-----------------------+---------------------+------------+----------+
| 6                     | 33,318              | 41,661     | 38,313   |
+-----------------------+---------------------+------------+----------+
| 7                     | 37,557              | 46,967     | 43,187   |
+-----------------------+---------------------+------------+----------+
| 8                     | 41,796              | 52,272     | 48,060   |
+-----------------------+---------------------+------------+----------+
| For each additional   | 4,239               | 5,306      | 4,874    |
| person, add           |                     |            |          |
+-----------------------+---------------------+------------+----------+

**APPENDIX E**

**LIFELINE/LINK-UP STATE PROCEDURES AS COMPILED BY**

**THE FEDERAL-STATE JOINT BOARD ON UNIVERSAL SERVICE**[^205]

# ELIGIBILITY

## Self-Certification of Eligibility for Enrollment

### California[^206]

> In California, telephone companies must "immediately enroll" a
> customer who verbally certifies that he or she is eligible to
> participate in the Lifeline program. The company then sends the
> customer a self-certification form on which the customer affirms in
> writing that he or she is eligible for Lifeline and agrees that the
> company may verify his or her income. If the customer does not return
> the form within 30 days or if the company determines that the customer
> is not in fact eligible, the customer is removed from the program.

## Paperless Enrollment Application

### Colorado[^207]

> Colorado has implemented a paperless application process that allows
> potential recipients, after being notified of eligibility, to call
> their local telephone company to receive the discounts. There is no
> written application. This paperless application process makes it
> easier for the consumer to get the needed assistance and also enables
> low-income consumers to choose a competitive LEC that offers the
> assistance to eligible subscribers using the same paperless
> application process as the incumbent LEC. There is no paper
> application to keep track of and transfer from company to company.

## Automatic Enrollment 

### Massachusetts[^208]

In Massachusetts, households that qualify for LIHEAP can voluntarily
give their permission, at the time of application, for the
LIHEAP-administering agency to disclose information to Verizon that
allows the household to be enrolled in Lifeline. Thus, enrollment is not
"automatic" in the sense of being done without the household's
permission, but it is done electronically in most cases. This
facilitates enrollment, and the results are evident in the relatively
high Lifeline subscription rate in Massachusetts.

### New York[^209]

In New York State, the Public Utility Law Project (PULP) has spent
several years working to increase participation rates in the
Lifeline/Link-Up programs. PULP represents low-income and rural
consumers in utility, telephone and energy related matters. PULP worked
with the New York Public Service Commission (NYPSC), the New York
Department of Family Assistance (NYFDA), and NYNEX (now Verizon) to
create an automatic enrollment database. The data transferred between
the NYDFA and Verizon is confidential and cannot be used by Verizon or
the state for any reason other than Lifeline assistance. Anytime an
individual enrolls for a program administered by NYDFA they are
automatically enrolled in Lifeline/Link-Up, but are also given the
option to opt-out of the Lifeline/Link-Up program. Individuals who are
not Verizon customers but have been identified by NYDFA as being
eligible because of enrollment in a program administered by NYDFA are
notified of their eligibility and given the opportunity to request
Lifeline service by returning a pre-printed form. This system increased
the number of people participating in Lifeline from 197,339 in 1987 to
703,001 in 1998. Lifeline consumers who have ceased receiving other
assistance through NYDFA for four consecutive months are removed from
Lifeline.

### North Dakota[^210]

In North Dakota, when consumers go to the county office of the North
Dakota Department of Human Services (NDHS) and are determined eligible
for any of the qualifying programs in the North Dakota Lifeline and
Link-Up program, they receive an information sheet about
Lifeline/Link-Up or enhanced Lifeline/Link-Up. Each qualifying
individual receives a certificate of eligibility in the mail from NDHS
which states that the individual must return this certificate to the
telephone company in order to receive Lifeline/Link-Up. Once a year, all
eligible North Dakotans receive a new qualifying certificate from the
NDHS. The annual mailing of this certificate to eligible parties helps
increase participation in Lifeline and Link-Up programs by providing an
additional opportunity to sign up with the local telephone company.
Qwest and some other North Dakota companies use a different method of
verification. Through arrangements with NDHS, these companies receive an
annual list of eligible participants to verify against their current
participation list and delete unqualified participants based on this
list. Participants with these companies do not need to send in a
qualifying certificate annually.

## Paper-Proof Verification of Continued Eligibility

### Tennessee[^211]

The process used in Tennessee initially requires the applicant
requesting Link-Up and Lifeline to provide proof of the public
assistance program they receive. Proof of benefits may be demonstrated
by providing a copy of the approval letter to receive Food Stamps,
Medicaid or TANF from the Tennessee Department of Human Services (TDHS)
or a copy of the SSI benefit letter from the Social Security
Administration.

## On-Line Verification of Continued Eligibility

### Illinois[^212]

In Illinois, ETCs can perform on-line verification of a consumer's
eligibility by obtaining real-time access to a database of state
low-income assistance program participants. The result is a streamlined
process for both consumers and ETCs.

### Minnesota[^213]

Minnesota verifies the income and/or disability of all applicants. An
enrollee's continued participation in the program is also verified on an
annual basis. Minnesota verifies 85% of its Telephone Assistance Program
participants by the use of computer interfaces with the Minnesota
Department of Revenue, public assistance databases, and LIHEAP
databases. The remainder are contacted by mail and asked to provide
proof of continuing eligibility. Due to these verification procedures,
Minnesota is not aware of problems with ineligible or fraudulent
individuals being enrolled in the Telephone Assistance Program.

### Tennessee[^214]

In Tennessee, Lifeline applicants are required to certify eligibility by
presenting documentation to their carrier of their participation in Food
Stamps, Medicaid, TANF, or SSI. Documentation can be demonstrated by a
copy of their approval letter to receive benefits through one of those
programs. Self-certification is not permitted. Once the documentation is
received by the carrier, the carrier then verifies the accuracy of the
documentation with the Tennessee Department of Human Services (TDHS)
client database. Verification of continued eligibility is also
accomplished utilizing this electronic system. This has been the most
efficient and effective way in which to verify and re-verify that a
consumer is receiving public assistance. Tennessee requires
re-verification of consumers on Lifeline no less than twice a year or
every six months.

# OUTREACH

##  Multi-Lingual Assistance

###  California[^215]

On December 11, 2001, the California PUC approved a one-year, \$5
million contract to design and implement a competitively neutral public
awareness and outreach program in order to increase universal Lifeline
telephone service subscribership. On the same date, the California PUC
approved a three-year, \$1.5 million contract for a multi-lingual
toll-free call center that provides customer service information about
Lifeline in Spanish, Korean, Laotian, Cambodian, Vietnamese, Tagalog,
and Hmong, as well as English. As a result of California's outreach
efforts, Lifeline participation rates have increased from 1,467,859 in
1989 to 3,196,661 in 2000.

### Florida[^216]

The Florida Public Service Commission sends eligible Florida consumers a
postcard-size flier about the Lifeline/Link-Up program. Approximately
35,000 of the fliers, which were written in English on one side and
Spanish on the other, were mailed to consumers in 2000.

### Minnesota[^217]

To accommodate the state's increasingly diverse community, the Minnesota
Department of Human Services currently makes Lifeline/Link-Up
applications available in Arabic, Hmong, Cambodian, Lao, Russian,
Somali, Spanish and Vietnamese.

###  Tennessee[^218]

The Tennessee Regulatory Authority (TRA) has created four color posters
in English and Spanish and posted them in locations frequented by
low-income individuals, such as health care facilities, legal offices,
churches, charitable organizations, and Human Services offices. To
support this campaign, the TRA has established a toll-free hotline. The
TRA has produced public service announcements for radio and television.

## Tribal Outreach

###  Arizona and New Mexico[^219] 

In Arizona and New Mexico, Smith Bagley, a wireless carrier, conducts
intensive advertising campaigns on tribal reservations in service areas
where they are designated as an ETC. One of its most successful forms of
outreach is its day-long event. Smith Bagley moves its storefront into
town for a day and hosts a sign-up event where customers can learn about
wireless service, determine their eligibility for Lifeline/Link-Up, sign
up for service, have car installations done, obtain training on using a
cell phone, and ask Smith Bagley's staff any questions they may have
about Lifeline/Link-Up or wireless service. This unique outreach event
has led to an increase of 14,000 new Lifeline subscribers.

##  Agreement with ETC

###  Florida[^220]

The Florida Public Service Commission (Florida PSC) has recently
approved a joint stipulation between the Florida Office of Public
Counsel and BellSouth that established a Community Service Fund for use
in educating customers and promoting BellSouth's Lifeline/Link-Up
services. As part of the stipulation, BellSouth agreed to contribute
\$250,000 in 2002 and \$150,000 in 2003.

##  "Warm Transfer Line"

###  Florida[^221]

The Florida PSC has made consumer education about Lifeline a priority.
The Florida PSC operates an innovative "warm transfer line" which allows
consumers who call the agency with Lifeline/Link-Up questions to be
automatically transferred to the appropriate eligible telecommunications
carrier providing phone service in their service area. The warm transfer
line assures consumers that they will be in touch directly with the
company who can initiate the service.

## Coordination with Organizations and Other Agencies

###  Florida[^222]

The Florida PSC also works closely with key state agencies, such as the
Florida Department of Children and Families (DCF) and Department of
Community Affairs, to ensure that the materials are received by the
target population. For example, the Florida PSC created a postcard-sized
flier to be sent to eligible Florida consumers using the DCF's mailing
lists and mail system. Approximately 35,000 of the fliers, which were
written in English on one side and Spanish on the other, were mailed to
consumers in 2000. Finally, the Florida PSC is partnering with the
American Association of Retired Persons (AARP), the Florida Association
of Counties, and the Florida League of Cities to further promote
Lifeline/Link-Up.

## Lifeline/Link-Up Seminars 

###  Rhode Island[^223]

In Rhode Island, consumer advocates hold annual forums and conferences,
often consisting of panels in which local telephone company
representatives speak about Lifeline and distribute brochures.

###  Tennessee[^224]

The TRA has implemented several methods to promote Lifeline and Link-Up.
It has created a Manager of Consumer Outreach position that concentrates
on providing consumer information. This Manager conducts three or four
Lifeline/Link-Up seminars per month at nursing homes across Tennessee.
At the seminar, brochures and applications are distributed, leading to
numerous applications for Lifeline/Link-Up. Brochures are also
distributed at various public affairs events.

##  Direct Mailings

###  Connecticut[^225]

The Connecticut Department of Social Services works in conjunction with
ETCs to target eligible low-income consumers through the mail.

###  Idaho[^226]

The State of Idaho sends flyers and brochures printed by the Idaho
Public Utilities Commission to eligible state residents.

###  Maine[^227]

In late 1999, the Maine State Housing Authority and the Maine Community
Action Programs jointly carried out two major mass mailings to all
eligible LIHEAP recipients notifying those consumers that they were also
eligible for Lifeline. An estimated 134,000 letters and flyers were
mailed, paid for by the Maine Telecommunications Education Fund.

###  New York[^228]

The Public Utility Law Project of New York sends annual personalized
letters to all persons eligible for Lifeline, informing them about the
program.

###  North Carolina[^229] 

In North Carolina, an ad hoc committee comprised of staff members from
the North Carolina Utilities Commission, the Attorney General's Office,
major telecommunications industries, and social services organizations
have made major strides since 1998 in their Lifeline/Link-Up outreach
efforts with direct mailings and other forms of outreach. Since the
committee's first meeting, 200,000 brochures have been printed and
distributed to various organizations across the state that works with
low-income families. The North Carolina Public Service Commission sent
notices to everyone in North Carolina who was eligible for the programs.

### Tennessee[^230]

The TRA works with the TDHS database to determine eligible individuals
and then mails Lifeline/Link-Up information to those people.

## Lifeline/Link-Up Notification on Every Call

###  Maine[^231]

Maine's public assistance agencies explain the Lifeline/Link-Up program
whenever a household applies for public assistance and the state's
telephone companies mention Lifeline/Link-Up whenever a customer applies
for telephone service. This way, a household can apply for
Lifeline/Link-Up by phone by simply stating that they receive one of the
listed public benefits and providing either a social security number or
welfare identification number. Maine credits its high penetration rates
to this combination of innovative outreach and easy application methods.

##  Tax Break for Lifeline/Link-Up Telephone Companies

###  North Carolina[^232]

North Carolina provides for a tax break to Lifeline/Link-Up telephone
companies equal to the amount of money they are required to contribute
for Lifeline/Link-Up. According to FCC data, Lifeline enrollment in
North Carolina increased from 29,640 in 1998 to 62,475 in 2000.

## Lifeline/Link-Up Marketing Board 

### California[^233]

California created a Lifeline Marketing Board which promotes the
Lifeline program beyond the typical telephone company policy of
including information in their telephone bills.

**APPENDIX F**

**ESTIMATED INCOME REQUIREMENTS FOR A HOUSEHOLD AT OR BELOW 150% OF THE
FEDERAL POVERTY GUIDELINES**

+----------------------+--------------------+-------------+-----------+
| **Size of**          | **48 Contiguous    | **Alaska**  | *         |
|                      | States and D.C.**  |             | *Hawaii** |
| **Family Unit**      |                    |             |           |
+----------------------+--------------------+-------------+-----------+
| 1                    | \$13,470           | \$16,815    | \$15,495  |
+----------------------+--------------------+-------------+-----------+
| 2                    | 18,180             | 22,710      | 20,910    |
+----------------------+--------------------+-------------+-----------+
| 3                    | 22,890             | 28,605      | 26,325    |
+----------------------+--------------------+-------------+-----------+
| 4                    | 27,600             | 34,500      | 31,740    |
+----------------------+--------------------+-------------+-----------+
| 5                    | 32,310             | 40,395      | 37,155    |
+----------------------+--------------------+-------------+-----------+
| 6                    | 37,020             | 46,290      | 42,570    |
+----------------------+--------------------+-------------+-----------+
| 7                    | 41,730             | 52,185      | 47,985    |
+----------------------+--------------------+-------------+-----------+
| 8                    | 46,440             | 58,080      | 53,400    |
+----------------------+--------------------+-------------+-----------+
| For each additional  | 4,710              | 5,895       | 5,415     |
| person, add          |                    |             |           |
+----------------------+--------------------+-------------+-----------+

**APPENDIX G**

**LIST OF CURRENT FEDERAL DEFAULT STATES**

Based on available information, the following states currently are
"federal default states":

**[Seven States and/or Territories with their own Lifeline/Link-Up
programs]{.underline}**

**[have adopted the federal default criteria]{.underline}**

Iowa

Illinois

Kentucky

Minnesota

Nebraska

Nevada

Puerto Rico

**[Nine States and/or Territories have not adopted their own
Lifeline/Link-Up Program]{.underline}**

American Samoa

Delaware

Guam

Hawaii

Indiana

Louisiana

New Hampshire

Northern Mariana Islands

U.S. Virgin Islands

**APPENDIX H**

**FINAL REGULATORY FLEXIBILITY ANALYSIS**

**(*REPORT AND ORDER*)**

1.  As required by the Regulatory Flexibility Act of 1980, as amended
    (RFA)[^234] an Initial Regulatory Flexibility Analysis (IRFA) was
    incorporated in the *NPRM*.[^235] The Commission sought comment on
    the proposals in the *NPRM*, including comment on the IRFA. The
    present Final Regulatory Flexibility Analysis (FRFA) conforms to the
    RFA.[^236]

## Need for, and Objectives of, the Order

81. In this *Order*, we adopt rules that expand the federal default
    eligibility criteria for Lifeline/Link-Up to include an income-based
    criterion of 135% of the Federal Poverty Guidelines and additional
    means-tested programs. We also adopt rules requiring certification
    and verification procedures for eligibility under certain
    circumstances. In addition, we provide outreach guidelines for
    carriers and states and a voluntary Lifeline/Link-Up administrative
    survey to better target low-income consumers and improve program
    operation. Collectively, these rules will improve the effectiveness
    of the low-income support mechanism and ensure quality
    telecommunications services are available to low-income consumers at
    just, reasonable, and affordable rates.

## Summary of Significant Issues Raised by Public Comments in Response to the IRFA

82. There were no comments filed specifically in response to the IRFA.
    Nevertheless, the agency has considered the potential impact of the
    rules proposed in the IRFA on small entities. Adding two
    means-tested programs, Temporary Assistance to Needy Families (TANF)
    and National School Lunch's free lunch program (NSL), and household
    income as a basis for Lifeline/Link-Up eligibility does not raise
    significant issues for small business entities. Some commenters were
    concerned that certification and verification procedures might pose
    significant costs on small entities. However, the rules we adopt
    today strike a balance between minimizing compliance burdens and
    costs and preserving the integrity of the Lifeline/Link-Up program.

## Description and Estimate of the Number of Small Entities To Which Rules Will Apply

83. The RFA directs agencies to provide a description of, and where
    feasible, an estimate of the number of small entities that may be
    affected by the proposed rules, if adopted.[^237] The RFA generally
    defines the term "small entity" as having the same meaning as the
    terms "small business," "small organization," and "small
    governmental jurisdiction."[^238] In addition, the term "small
    business" has the same meaning as the term "small business concern"
    under the Small Business Act.[^239] A "small business concern" is
    one which: (1) is independently owned and operated; (2) is not
    dominant in its field of operation; and (3) satisfies any additional
    criteria established by the Small Business Administration
    (SBA).[^240]

84. The Commission's decision to adopt certification and verification
    requirements would apply to service providers that provide services
    to qualifying low-income consumers who receive Lifeline/Link-Up
    support. According to the Universal Service Administrative Company's
    (USAC) 2002 Annual Report, only local exchange carriers,
    cellular/personal communications services (PCS) providers, and
    competitive access providers would be subject to these
    requirements.[^241] Because many of these service providers could
    include small entities, we expect that the proposal in this
    proceeding could have a significant economic impact on local
    exchange carriers, small incumbent local exchange carriers,
    cellular/PCS providers, and competitive access providers that are
    small entities.[^242]

85. We have included small incumbent local exchange carriers in this
    present RFA analysis. As noted above, a "small business" under the
    RFA is on that, *inter alia*, meets the pertinent small business
    size standard (e.g., a telephone communications business having
    1,500 or fewer employees), and "is not dominant in its field of
    operation."[^243] The SBA's Office of Advocacy contends that, for
    RFA purposes, small incumbent local exchange carriers are not
    dominant in their field of operation because any such dominance is
    not "national" in scope.[^244] We have therefore included small
    incumbent local exchange carriers in this RFA analysis, although we
    emphasize that this RFA action has no effect on Commission analyses
    and determinations in other, non-RFA contexts.

86. *Incumbent Local Exchange Carrier*. Neither the Commission nor the
    SBA has developed a size standard specifically for small providers
    of local exchange services. The closest applicable size standard
    under the SBA rules is for wired telecommunications carriers.[^245]
    This provides that a wired telecommunications carrier is a small
    entity if it employs no more than 1,500 employees.[^246] According
    to Commission data, 1,337 incumbent carriers reported that they were
    engaged in the provision of local exchange services. Of these 1, 337
    carriers, an estimated 1,032 have 1,500 or fewer employees and 305
    carriers have more than 1,500 employees. Consequently, the
    Commission estimates that most providers of incumbent local exchange
    service are small businesses that may b affected by the rules and
    policies adopted herein. According to Commission data, 1,337
    incumbent carriers reported that they were engaged in the provision
    of local exchange services. Of these 1, 337 carriers, an estimated
    1032 have 1500 or fewer employees and 305 carriers have more than
    1500 employees. Consequently, the Commission estimates that most
    providers of incumbent local exchange service are small businesses
    that may b affected by the rules and policies adopted herein.

87. *Competitive Local Exchange Carriers*, *Competitive Access
    Providers*, and *Other Local Exchange Carriers*. Neither the
    Commission nor the SBA has developed a size standard specifically
    for small providers of local exchange services. The closest
    applicable size standard under the SBA rules is for wired
    telecommunications carriers.[^247] This provides that a wired
    telecommunications carrier is a small entity if it employs no more
    than 1,500 employees.[^248] According to the most recent Commission
    data,[^249] 609 companies reported that they were engaged in the
    provision of either competitive access provider services or
    competitive local exchange carrier services. Of these 609 companies,
    an estimated 458 have 1,500 or fewer employees and 151 have more
    than 1,500 employees.[^250] In addition, 35 carriers reported that
    they were "Other Local Exchange Carriers." Of the 35 "Other Local
    Exchange Carriers," an estimated 34 have 1,500 or fewer employees
    and one has more than 1,500 employees.[^251] Consequently, the
    Commission estimates that most providers of competitive local
    exchange service, competitive access providers, and "Other Local
    Exchange Carriers" are small entities that may be affected by the
    rules and policies adopted herein.

88. *Cellular and Other Wireless Telecommunications*. The SBA has
    developed a small business size standard for Cellular and Other
    Wireless Telecommunications, which consists of all such firms having
    1,500 or fewer employees.[^252] According to data for 1997, a total
    of 977 such firms operated for the entire year.[^253] Of those, 965
    firms employed 999 or fewer persons for the year, and 12 firms
    employed of 1,000 or more. Therefore, nearly all such firms were
    small businesses. In addition, we note that there are 1,807 cellular
    licenses; however, a cellular licensee may own several
    licenses.[^254] According to Commission data, 858 carriers reported
    that they were engaged in the provision of cellular service,
    Personal Communications Service (PCS), or Specialized Mobile Radio
    telephony service, which are placed together in the data.[^255] We
    have estimated that 291 of these are small under the SBA small
    business size standard.[^256]

89. *Broadband Personal Communications Service (PCS)*. The broadband PCS
    spectrum is divided into six frequencies designated A through F, and
    the Commission has held auctions for each block. The Commission
    defined "small entity" for Blocks C and F as an entity that has
    average gross revenues of less than \$40 million in the three
    previous calendar years.[^257] For Block F, an additional
    classification for "very small business" was added and is defined as
    an entity that, together with their affiliates, has average gross
    revenues of not more than \$15 million for the preceding three
    calendar years.[^258] These regulations defining "small entity" in
    the context of broadband PCS auctions have been approved by the
    SBA.[^259] No small businesses within the SBA-approved definition
    bid successfully for licenses in Blocks A and B. There were 90
    winning bidders that qualified as small entities in the Block C
    auctions. A total of 93 small and very small business bidders won
    approximately 40% of the 1,479 licenses for Blocks D, E, and
    F.[^260] On March 23, 1999, the Commission re-auctioned 347 C, D, E,
    and F Block licenses; there were 48 small business winning bidders.
    Based on this information, we conclude that the number of small
    broadband PCS licensees will include the 90 winning C Block bidders
    and the 93 qualifying bidders in the D, E, and F blocks, plus the 48
    winning bidders in the re-auction, for a total of 231 small entity
    PCS providers as defined by the SBA and the Commission\'s auction
    rules. On January 26, 2001, the Commission completed the auction of
    422 C and F Broadband PCS licenses in Auction No. 35. Of the 35
    winning bidders in this auction, 29 qualified as small or very small
    businesses.

## Description of Projected Reporting, Recordkeeping, and Other Compliance Requirements for Small Entities

90. Expanding the eligibility criteria will not create additional
    reporting, recordkeeping, or other compliance requirements.

91. Several other requirements adopted in this Order, however, affect
    recordkeeping requirements. First, ETCs will be required to maintain
    records to document compliance with all Commission requirements
    governing the Lifeline/Link-Up programs, including numerous
    self-certifications, and provide that documentation to the
    Commission or Administrator upon request for the full three
    preceding calendar years.[^261] Specifically, ETCs in federal
    default states must retain certifications that documentation of
    income eligibility was presented when the customer was initially
    enrolled in Lifeline and when the customer was subject to
    verification of continued eligibility.[^262] ETCs in states
    operating their own Lifeline/Link-Up program must document
    compliance with state Lifeline regulations and recordkeeping
    requirements, including state certification and verification
    procedures.[^263] Second, non-ETC resellers must retain
    documentation to demonstrate that they are providing discounted
    services only to qualifying low-income customers.[^264] Records of
    customer eligibility must be maintained for as long as the customer
    receives Lifeline service from that ETC or until that ETC is audited
    by the Administrator.[^265]

## Steps Taken to Minimize the Significant Economic Impact on Small Entities, and Significant Alternatives Considered

92. Although self-certification of income may be easily administered, we
    conclude that self-certification of income could invite abuse of the
    Lifeline/Link-Up program, because it is difficult to verify
    income.[^266] Accordingly, to address concerns of potential waste,
    fraud, and abuse, we will require consumers qualifying under the
    income-based criterion to present documentation of income.[^267] To
    minimize burdens on carriers, however, we do not require ETCs in
    federal default states to maintain this documentation of
    income.[^268] Rather, an officer of the ETC need only self-certify,
    under penalty of perjury, that the carrier has procedures in place
    to review income documentation and that, to the best of his or her
    knowledge, income documentation was presented.[^269] In addition, to
    ensure that only eligible consumers receive Lifeline/Link-Up
    benefits, we require ETCs in federal default states to verify
    directly with a state that particular subscribers continue to be
    eligible or survey subscribers directly by sending annual
    verification forms to a statistically valid sample of Lifeline
    subscribers, providing the results of the sample to USAC.[^270]

93. We allow states operating their own Lifeline/Link-Up programs
    flexibility to develop their own certification of income and
    verification procedures.[^271] We note that resources of the
    carrier, among other things, should be taken into consideration when
    devising state certification and verification procedures.[^272] In
    addition, an officer of an ETC in states that operate their own
    Lifeline/Link-Up programs must certify, under of penalty of perjury,
    that the ETC complies with state certification procedures and that,
    to the best of his or her knowledge, documentation of income for
    consumers applying under an income-based criterion was presented.

94. Finally, we provide carriers options regarding retaining records of
    consumer eligibility. Carriers may either retain such records for as
    long as the carrier provides Lifeline service to that consumer or
    until it is audited by the Administrator. These requirements are
    necessary to ensure program integrity. However, we provide carriers
    flexibility to choose the more appropriate recordkeeping method.

## Report to Congress

95. The Commission will send a copy of the Order, including this FRFA,
    in a report to be sent to Congress pursuant to the Congressional
    Review Act, *see* 5 U.S.C. § 801(a)(1)(A). In addition, the
    Commission will send a copy of the Order, including the FRFA, to the
    Chief Counsel for Advocacy of the Small Business Administration. A
    copy of the Order and FRFA (or summaries thereof) will also be
    published in the Federal Register.

**APPENDIX I**

**INITIAL REGULATORY FLEXIBILITY ANALYSIS**

**(*FURTHER NOTICE OF PROPOSED RULEMAKING*)**

1.  As required by the Regulatory Flexibility Act of 1980, as amended
    (RFA),[^273] the Commission has prepared the present Initial
    Regulatory Flexibility Analysis (IRFA) of the possible significant
    economic impact on a substantial number of small entities by the
    policies and rules proposed in this *Further Notice*. Written public
    comments are requested on this IRFA. Comments must be identified as
    responses to the IRFA and must be filed by the deadlines for
    comments on the *Further Notice* as provided above in Section V(C).
    The Commission will send a copy of the *Further Notice*, including
    this IRFA, to the Chief Counsel for Advocacy of the Small Business
    Administration.[^274] In addition, the *Further Notice* and IRFA (or
    summaries thereof) will be published in the Federal Register.[^275]

## Need for, and Objectives of, the Proposed Rules

96. The Commission is required by section 254 of the Act to promulgate
    rules to implement the universal service provisions of section
    254.[^276] On May 8, 1997, the Commission adopted rules that
    reformed its system of universal service support mechanisms so that
    universal service is preserved and advanced as markets move toward
    competition.[^277] Among other things, the Commission adopted a
    mechanism to provide discounted monthly telephone service and
    installation charges to low-income households.[^278] Over the last
    few years, important changes in the low-income community and the
    Joint Board's *Recommended Decision* prompt us to review the
    low-income universal service support mechanism.[^279]

97. In this *Further Notice*, we seek comment on whether the
    income-based criterion in the federal default eligibility criteria
    should be increased to 150% of the FPG to make phone service more
    affordable to more low-income individuals and families.[^280]
    Applying the same methodology used to analyze the 135% of the FPG
    income-based criterion, the Commission staff analysis estimates that
    broadening the income-based criterion to 150% of the FPG may only
    have a minimal impact on national telephone penetration rates, but
    could add many new Lifeline subscribers.[^281] Therefore, we seek
    comment on whether a broader income-based criterion should be added
    even when there could be only a minimal impact to the national
    telephone penetration rate.[^282]

## Legal Basis

98. This *Further Notice* is adopted pursuant to sections 1, 4(i), (4j),
    201-205, 251, 252, and 303 of the Communications Act of 1934, as
    amended, 47 U.S.C. §§ 151, 154(i), (j), 201-205, 251, 252, and 303.

## Description and Estimate of the Number of Small Entities To Which Rules Will Apply

99. The RFA directs agencies to provide a description of, and, where
    feasible, an estimate of the number of small entities that may be
    affected by the rules adopted herein.[^283] The RFA generally
    defines the term "small entity" as having the same meaning as the
    terms "small business," "small organization," and "small
    governmental jurisdiction."[^284] In addition, the term "small
    business" has the same meaning as the term "small business concern"
    under the Small Business Act, unless the Commission has developed
    one or more definitions that are appropriate to its
    activities.[^285] Under the Small Business Act, a "small business
    concern" is one that: (1) is independently owned and operated; (2)
    is not dominant in its field of operation; and (3) meets any
    additional criteria established by the Small Business Administration
    (SBA).[^286]

100. We have described in detail, *supra*, in the FRFA, the categories
     of entities that may be directly affected by any rules or proposals
     adopted in our efforts to reform the universal service low-income
     support mechanism.[^287] For this IRFA, we hereby incorporate those
     entity descriptions by reference.

## Description of Projected Reporting, Recordkeeping, and Other Compliance Requirements

101. The *Further Notice* seeks comment on potential changes to the
     federal default income-based eligibility criterion for the
     low-income support mechanism. This potential change will not impact
     reporting or recordkeeping requirements, however, it could impact
     the overall pool of eligible applicants.

## Steps Taken to Minimize Significant Economic Impact on Small Entities, and Significant Alternatives Considered

102. The RFA requires an agency to describe any significant alternatives
     that it has considered in reaching its proposed approach impacting
     small business, which may include the following four alternatives
     (among others): (1) the establishment of differing compliance and
     reporting requirements or timetables that take into account the
     resources available to small entities; (2) the clarification,
     consolidation, or simplification of compliance or reporting
     requirements under the rule for small entities; (3) the use of
     performance, rather than design, standards; and (4) an exemption
     from coverage of the rule, or part thereof, for small
     entities.[^288]

103. In this *Further Notice*, we seek comment on whether the Commission
     should adopt a broader income-based criterion. If a broader
     income-based criterion is adopted, this could change the size of
     the overall pool of eligible applicants for universal service
     support for low-income subscribers.

## Federal Rules that May Duplicate, Overlap, or Conflict with the Proposed Rules

104. None.

**APPENDIX J**

**STATISTICALLY VALID SAMPLE**

Eligible Telecommunications Carriers (ETCs) subject to the federal
default criterion will be required to verify the continued eligibility
of a statistically valid sample of their Lifeline customers. The size of
a statistically valid sample, however, varies based upon many factors,
including the number of Lifeline subscribers (N) and the previously
estimated proportion of Lifeline subscribers inappropriately taking
Lifeline service (P).

For the first year that ETCs verify subscribers' continued eligibility,
all ETCs should assume that the proportion P of subscribers
inappropriately taking Lifeline service is .01, if there is no evidence
to assume a different proportion. In subsequent years, ETCs should use
the results of samples from previous years to determine this estimated
proportion. In all instances, the estimated proportion P should never be
less than .01 or more than .06.

For ETCs with large numbers of Lifeline subscribers (more than 400,000),
a statistically valid sample size must be calculated pursuant to the
following formula:[^289]

Sample Size = 2.706 \* P\*(1 -- P) / .000625.

For ETCs with 400,000 Lifeline subscribers or less, the above formula
could yield a sample size that is larger than needed to be statistically
valid.[^290] To simplify the calculation of a statistically valid
sample, a table of sample sizes based on two variables N (number of
Lifeline subscribers) and P (previously estimated proportion of Lifeline
subscribers inappropriately taking Lifeline service) is provided below.
Various numbers of Lifeline subscribers N are listed in the left-most
column. Various previously estimated proportions P are listed on the
first row. To determine the sample size, find the box that matches your
number of Lifeline subscribers N and proportion P.

If the number of Lifeline subscribers is not listed and/or the
proportion is not listed, ETCs should use the next higher number for N
and/or P that is in the table, *i.e.* always round up to the next higher
value for N and/or P. For example, if 3.8 percent of 9,500 Lifeline
subscribers inappropriately took Lifeline service, the ETC would use a
sample size of 164 (value using 10,000 customers and proportion .04).
Because the adjustment for the number of Lifeline subscribers is *de
minimus* above 400,000 Lifeline subscribers, ETCs with more than 400,000
Lifeline subscribers must use the above formula to calculate the sample
size.

All ETCs must provide the estimated proportion for their samples to the
Administrator, *i.e.*, the proportion of sampled subscribers
inappropriately taking Lifeline service.

**Sample Size Table**

> **Previously Estimated Proportion of Subscribers Inappropriately
> Taking Lifeline Service (P)**[^291]

<table style="width:100%;">
<colgroup>
<col style="width: 11%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
</colgroup>
<tbody>
<tr class="odd">
<td><p>(N) Number of Lifeline</p>
<p><strong>Subscribers</strong></p></td>
<td><strong>0.01</strong></td>
<td><strong>0.015</strong></td>
<td><strong>0.02</strong></td>
<td><strong>0.025</strong></td>
<td><strong>0.03</strong></td>
<td><strong>0.035</strong></td>
<td><strong>0.04</strong></td>
<td><strong>0.045</strong></td>
<td><strong>0.05</strong></td>
<td><strong>0.055</strong></td>
<td><strong>0.06</strong></td>
</tr>
<tr class="even">
<td><strong>400,000</strong></td>
<td>43</td>
<td>64</td>
<td>85</td>
<td>106</td>
<td>126</td>
<td>146</td>
<td>166</td>
<td>186</td>
<td>206</td>
<td>225</td>
<td>244</td>
</tr>
<tr class="odd">
<td><strong>100,000</strong><a href="#fn1" class="footnote-ref"
id="fnref1" role="doc-noteref"><sup>1</sup></a></td>
<td>43</td>
<td>64</td>
<td>85</td>
<td>105</td>
<td>126</td>
<td>146</td>
<td>166</td>
<td>186</td>
<td>206</td>
<td>225</td>
<td>244</td>
</tr>
<tr class="even">
<td><strong>90,000</strong></td>
<td>43</td>
<td>64</td>
<td>85</td>
<td>105</td>
<td>126</td>
<td>146</td>
<td>166</td>
<td>186</td>
<td>205</td>
<td>224</td>
<td>244</td>
</tr>
<tr class="odd">
<td><strong>70,000</strong></td>
<td>43</td>
<td>64</td>
<td>85</td>
<td>105</td>
<td>126</td>
<td>146</td>
<td>166</td>
<td>186</td>
<td>205</td>
<td>224</td>
<td>243</td>
</tr>
<tr class="even">
<td><strong>60,000</strong></td>
<td>43</td>
<td>64</td>
<td>85</td>
<td>105</td>
<td>126</td>
<td>146</td>
<td>166</td>
<td>185</td>
<td>205</td>
<td>224</td>
<td>243</td>
</tr>
<tr class="odd">
<td><strong>30,000</strong></td>
<td>43</td>
<td>64</td>
<td>85</td>
<td>105</td>
<td>125</td>
<td>146</td>
<td>165</td>
<td>185</td>
<td>204</td>
<td>223</td>
<td>242</td>
</tr>
<tr class="even">
<td><strong>20,000</strong></td>
<td>43</td>
<td>64</td>
<td>85</td>
<td>105</td>
<td>125</td>
<td>145</td>
<td>165</td>
<td>184</td>
<td>204</td>
<td>223</td>
<td>241</td>
</tr>
<tr class="odd">
<td><strong>15,000</strong></td>
<td>43</td>
<td>64</td>
<td>84</td>
<td>105</td>
<td>125</td>
<td>145</td>
<td>164</td>
<td>184</td>
<td>203</td>
<td>222</td>
<td>240</td>
</tr>
<tr class="even">
<td><strong>10,000</strong></td>
<td>43</td>
<td>64</td>
<td>84</td>
<td>104</td>
<td>124</td>
<td>144</td>
<td>164</td>
<td>183</td>
<td>202</td>
<td>220</td>
<td>238</td>
</tr>
<tr class="odd">
<td><strong>9,000</strong></td>
<td>43</td>
<td>64</td>
<td>84</td>
<td>104</td>
<td>124</td>
<td>144</td>
<td>163</td>
<td>182</td>
<td>201</td>
<td>220</td>
<td>238</td>
</tr>
<tr class="even">
<td><strong>8,000</strong></td>
<td>43</td>
<td>63</td>
<td>84</td>
<td>104</td>
<td>124</td>
<td>144</td>
<td>163</td>
<td>182</td>
<td>201</td>
<td>219</td>
<td>237</td>
</tr>
<tr class="odd">
<td><strong>7,000</strong></td>
<td>43</td>
<td>63</td>
<td>84</td>
<td>104</td>
<td>124</td>
<td>143</td>
<td>162</td>
<td>181</td>
<td>200</td>
<td>218</td>
<td>236</td>
</tr>
<tr class="even">
<td><strong>6,000</strong></td>
<td>43</td>
<td>63</td>
<td>84</td>
<td>104</td>
<td>123</td>
<td>143</td>
<td>162</td>
<td>180</td>
<td>199</td>
<td>217</td>
<td>235</td>
</tr>
<tr class="odd">
<td><strong>5,000</strong></td>
<td>43</td>
<td>63</td>
<td>83</td>
<td>103</td>
<td>123</td>
<td>142</td>
<td>161</td>
<td>179</td>
<td>198</td>
<td>215</td>
<td>233</td>
</tr>
<tr class="even">
<td><strong>4,000</strong></td>
<td>42</td>
<td>63</td>
<td>83</td>
<td>103</td>
<td>122</td>
<td>141</td>
<td>160</td>
<td>178</td>
<td>196</td>
<td>213</td>
<td>230</td>
</tr>
<tr class="odd">
<td><strong>3,000</strong></td>
<td>42</td>
<td>63</td>
<td>83</td>
<td>102</td>
<td>121</td>
<td>139</td>
<td>158</td>
<td>175</td>
<td>193</td>
<td>209</td>
<td>226</td>
</tr>
<tr class="even">
<td><strong>2,000</strong></td>
<td>42</td>
<td>62</td>
<td>81</td>
<td>100</td>
<td>119</td>
<td>136</td>
<td>154</td>
<td>170</td>
<td>187</td>
<td>202</td>
<td>218</td>
</tr>
</tbody>
</table>
<aside id="footnotes" class="footnotes footnotes-end-of-document"
role="doc-endnotes">
<hr />
<ol>
<li id="fn1"><p>Sample sizes for ETCs with less than 400,000 Lifeline
subscribers are calculated pursuant to the following formula: sample
size = N/(1+{[N-1]/n}). N is the number of Lifeline subscribers. n is
(2.706 * P*(1 – P)) / .000625, where P is the estimated percentage of
Lifeline subscribers inappropriately taking Lifeline service. ETCs may
choose to calculate their sample sizes using these formulas.<a
href="#fnref1" class="footnote-back" role="doc-backlink">↩︎</a></p></li>
</ol>
</aside>

**Sample Size Table**

**Previously Estimated Proportion of Subscribers Inappropriately Taking
Lifeline Service (P)**

<table>
<colgroup>
<col style="width: 11%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 7%" />
<col style="width: 0%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
</colgroup>
<tbody>
<tr class="odd">
<td><p>(N) Number of Lifeline</p>
<p><strong>Subscribers</strong></p></td>
<td><strong>0.01</strong></td>
<td><strong>0.015</strong></td>
<td><strong>0.02</strong></td>
<td><strong>0.025</strong></td>
<td colspan="2"><strong>0.03</strong></td>
<td><strong>0.04</strong></td>
<td><strong>0.04</strong></td>
<td><strong>0.045</strong></td>
<td><strong>0.05</strong></td>
<td><strong>0.06</strong></td>
<td><strong>0.06</strong></td>
</tr>
<tr class="even">
<td><strong>1,500</strong></td>
<td>42</td>
<td>61</td>
<td>80</td>
<td>99</td>
<td colspan="2">116</td>
<td>133</td>
<td>150</td>
<td>166</td>
<td>181</td>
<td>196</td>
<td>210</td>
</tr>
<tr class="odd">
<td><strong>1,000</strong></td>
<td>41</td>
<td>60</td>
<td>78</td>
<td>96</td>
<td colspan="2">112</td>
<td>128</td>
<td>142</td>
<td>157</td>
<td>171</td>
<td>184</td>
<td>196</td>
</tr>
<tr class="even">
<td><strong>900</strong></td>
<td>41</td>
<td>60</td>
<td>78</td>
<td>95</td>
<td colspan="2">111</td>
<td>126</td>
<td>140</td>
<td>154</td>
<td>168</td>
<td>180</td>
<td>192</td>
</tr>
<tr class="odd">
<td><strong>800</strong></td>
<td>41</td>
<td>59</td>
<td>77</td>
<td>94</td>
<td colspan="2">109</td>
<td>124</td>
<td>138</td>
<td>151</td>
<td>164</td>
<td>176</td>
<td>187</td>
</tr>
<tr class="even">
<td><strong>700</strong></td>
<td>41</td>
<td>59</td>
<td>76</td>
<td>92</td>
<td colspan="2">107</td>
<td>121</td>
<td>134</td>
<td>147</td>
<td>159</td>
<td>170</td>
<td>181</td>
</tr>
<tr class="odd">
<td><strong>600</strong></td>
<td>40</td>
<td>58</td>
<td>74</td>
<td>90</td>
<td colspan="2">104</td>
<td>118</td>
<td>130</td>
<td>142</td>
<td>154</td>
<td>164</td>
<td>174</td>
</tr>
<tr class="even">
<td><strong>500</strong></td>
<td>40</td>
<td>57</td>
<td>73</td>
<td>88</td>
<td colspan="2">101</td>
<td>113</td>
<td>125</td>
<td>136</td>
<td>146</td>
<td>155</td>
<td>164</td>
</tr>
<tr class="odd">
<td><strong>400</strong></td>
<td>39</td>
<td>55</td>
<td>70</td>
<td>84</td>
<td colspan="2">96</td>
<td>107</td>
<td>118</td>
<td>127</td>
<td>136</td>
<td>144</td>
<td>152</td>
</tr>
<tr class="even">
<td><strong>300</strong></td>
<td>38</td>
<td>53</td>
<td>66</td>
<td>79</td>
<td colspan="2">89</td>
<td>98</td>
<td>107</td>
<td>115</td>
<td>122</td>
<td>129</td>
<td>135</td>
</tr>
<tr class="odd">
<td><strong>200</strong></td>
<td>36</td>
<td>49</td>
<td>60</td>
<td>70</td>
<td colspan="2">78</td>
<td>85</td>
<td>91</td>
<td>97</td>
<td>102</td>
<td>106</td>
<td>110</td>
</tr>
<tr class="even">
<td><strong>150</strong></td>
<td>34</td>
<td>45</td>
<td>54</td>
<td>62</td>
<td colspan="2">69</td>
<td>74</td>
<td>79</td>
<td>83</td>
<td>87</td>
<td>90</td>
<td>93</td>
</tr>
<tr class="odd">
<td><strong>120</strong></td>
<td>32</td>
<td>42</td>
<td>50</td>
<td>57</td>
<td colspan="2">62</td>
<td>66</td>
<td>70</td>
<td>73</td>
<td>76</td>
<td>78</td>
<td>81</td>
</tr>
<tr class="even">
<td><strong>100</strong></td>
<td>30</td>
<td>39</td>
<td>46</td>
<td>52</td>
<td colspan="2">56</td>
<td>60</td>
<td>63</td>
<td>65</td>
<td>68</td>
<td>69</td>
<td>71</td>
</tr>
<tr class="odd">
<td><strong>90</strong></td>
<td>29</td>
<td>38</td>
<td>44</td>
<td>49</td>
<td colspan="2">53</td>
<td>56</td>
<td>59</td>
<td>61</td>
<td>63</td>
<td>64</td>
<td>66</td>
</tr>
<tr class="even">
<td><strong>80</strong></td>
<td>28</td>
<td>36</td>
<td>41</td>
<td>46</td>
<td colspan="2">49</td>
<td>52</td>
<td>54</td>
<td>56</td>
<td>58</td>
<td>59</td>
<td>60</td>
</tr>
<tr class="odd">
<td><strong>70</strong></td>
<td>27</td>
<td>34</td>
<td>39</td>
<td>42</td>
<td colspan="2">45</td>
<td>48</td>
<td>49</td>
<td>51</td>
<td>52</td>
<td>54</td>
<td>55</td>
</tr>
<tr class="even">
<td><strong>60</strong></td>
<td>25</td>
<td>31</td>
<td>35</td>
<td>39</td>
<td colspan="2">41</td>
<td>43</td>
<td>44</td>
<td>46</td>
<td>47</td>
<td>48</td>
<td>48</td>
</tr>
<tr class="odd">
<td><strong>50</strong></td>
<td>23</td>
<td>28</td>
<td>32</td>
<td>34</td>
<td colspan="2">36</td>
<td>37</td>
<td>39</td>
<td>40</td>
<td>40</td>
<td>41</td>
<td>42</td>
</tr>
<tr class="even">
<td><strong>40</strong></td>
<td>21</td>
<td>25</td>
<td>27</td>
<td>29</td>
<td>31</td>
<td colspan="2">32</td>
<td>32</td>
<td>33</td>
<td>34</td>
<td>34</td>
<td>34</td>
</tr>
<tr class="odd">
<td><strong>35</strong></td>
<td>20</td>
<td>23</td>
<td>25</td>
<td>27</td>
<td>28</td>
<td colspan="2">28</td>
<td>29</td>
<td>30</td>
<td>30</td>
<td>30</td>
<td>31</td>
</tr>
<tr class="even">
<td><strong>30</strong></td>
<td>18</td>
<td>21</td>
<td>22</td>
<td>24</td>
<td>24</td>
<td colspan="2">25</td>
<td>26</td>
<td>26</td>
<td>26</td>
<td>27</td>
<td>27</td>
</tr>
<tr class="odd">
<td><strong>25</strong></td>
<td>16</td>
<td>18</td>
<td>19</td>
<td>20</td>
<td>21</td>
<td colspan="2">21</td>
<td>22</td>
<td>22</td>
<td>22</td>
<td>23</td>
<td>23</td>
</tr>
<tr class="even">
<td><strong>20</strong></td>
<td>14</td>
<td>15</td>
<td>16</td>
<td>17</td>
<td>17</td>
<td colspan="2">18</td>
<td>18</td>
<td>18</td>
<td>18</td>
<td>18</td>
<td>19</td>
</tr>
</tbody>
</table>

**Sample Size Table**

**Previously Estimated Proportion of Subscribers Inappropriately Taking
Lifeline Service (P)**

<table>
<colgroup>
<col style="width: 11%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 7%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
</colgroup>
<tbody>
<tr class="odd">
<td><p><strong>(N) Number of Lifeline</strong></p>
<p><strong>Subscribers</strong></p></td>
<td><strong>0.01</strong></td>
<td><strong>0.015</strong></td>
<td><strong>0.02</strong></td>
<td><strong>0.025</strong></td>
<td><strong>0.03</strong></td>
<td><strong>0.04</strong></td>
<td><strong>0.04</strong></td>
<td><strong>0.045</strong></td>
<td><strong>0.05</strong></td>
<td><strong>0.06</strong></td>
<td><strong>0.06</strong></td>
</tr>
<tr class="even">
<td><strong>17</strong></td>
<td>12</td>
<td>14</td>
<td>14</td>
<td>15</td>
<td>15</td>
<td>15</td>
<td>16</td>
<td>16</td>
<td>16</td>
<td>16</td>
<td>16</td>
</tr>
<tr class="odd">
<td><strong>15</strong></td>
<td>11</td>
<td>12</td>
<td>13</td>
<td>13</td>
<td>13</td>
<td>14</td>
<td>14</td>
<td>14</td>
<td>14</td>
<td>14</td>
<td>14</td>
</tr>
<tr class="even">
<td><strong>13</strong></td>
<td>10</td>
<td>11</td>
<td>11</td>
<td>12</td>
<td>12</td>
<td>12</td>
<td>12</td>
<td>12</td>
<td>12</td>
<td>12</td>
<td>12</td>
</tr>
<tr class="odd">
<td><strong>11</strong></td>
<td>9</td>
<td>10</td>
<td>10</td>
<td>10</td>
<td>10</td>
<td>10</td>
<td>10</td>
<td>10</td>
<td>10</td>
<td>11</td>
<td>11</td>
</tr>
<tr class="even">
<td><strong>10</strong></td>
<td>8</td>
<td>9</td>
<td>9</td>
<td>9</td>
<td>9</td>
<td>9</td>
<td>9</td>
<td>10</td>
<td>10</td>
<td>10</td>
<td>10</td>
</tr>
<tr class="odd">
<td><strong>9</strong></td>
<td>8</td>
<td>8</td>
<td>8</td>
<td>8</td>
<td>8</td>
<td>9</td>
<td>9</td>
<td>9</td>
<td>9</td>
<td>9</td>
<td>9</td>
</tr>
<tr class="even">
<td><strong>8</strong></td>
<td>7</td>
<td>7</td>
<td>7</td>
<td>8</td>
<td>8</td>
<td>8</td>
<td>8</td>
<td>8</td>
<td>8</td>
<td>8</td>
<td>8</td>
</tr>
<tr class="odd">
<td><strong>7</strong></td>
<td>6</td>
<td>6</td>
<td>7</td>
<td>7</td>
<td>7</td>
<td>7</td>
<td>7</td>
<td>7</td>
<td>7</td>
<td>7</td>
<td>7</td>
</tr>
<tr class="even">
<td><strong>6</strong></td>
<td>5</td>
<td>6</td>
<td>6</td>
<td>6</td>
<td>6</td>
<td>6</td>
<td>6</td>
<td>6</td>
<td>6</td>
<td>6</td>
<td>6</td>
</tr>
<tr class="odd">
<td><strong>5</strong></td>
<td>5</td>
<td>5</td>
<td>5</td>
<td>5</td>
<td>5</td>
<td>5</td>
<td>5</td>
<td>5</td>
<td>5</td>
<td>5</td>
<td>5</td>
</tr>
<tr class="even">
<td><strong>4</strong></td>
<td>4</td>
<td>4</td>
<td>4</td>
<td>4</td>
<td>4</td>
<td>4</td>
<td>4</td>
<td>4</td>
<td>4</td>
<td>4</td>
<td>4</td>
</tr>
<tr class="odd">
<td><strong>3</strong></td>
<td>3</td>
<td>3</td>
<td>3</td>
<td>3</td>
<td>3</td>
<td>3</td>
<td>3</td>
<td>3</td>
<td>3</td>
<td>3</td>
<td>3</td>
</tr>
<tr class="even">
<td><strong>2</strong></td>
<td>2</td>
<td>2</td>
<td>2</td>
<td>2</td>
<td>2</td>
<td>2</td>
<td>2</td>
<td>2</td>
<td>2</td>
<td>2</td>
<td>2</td>
</tr>
<tr class="odd">
<td><strong>1</strong></td>
<td>1</td>
<td>1</td>
<td>1</td>
<td>1</td>
<td>1</td>
<td>1</td>
<td>1</td>
<td>1</td>
<td>1</td>
<td>1</td>
<td>1</td>
</tr>
</tbody>
</table>

Appendix K

Lifeline Staff Analysis

Quantifying the effects of adding an income criterion to the Lifeline
eligibility criteria

A Study for the Federal-State Joint Board on Universal Service

Prepared by Craig Stroup

Industry Analysis & Technology Division

Wireline Competition Bureau

# ![](media/image1.wmf){width="6.477083333333334in" height="8.586805555555555in"}

# 

# Executive Summary

# Lifeline Staff Analysis

# March 2004

# Introduction

This analysis updates the staff analysis presented in the *Recommended
Decision* of the Federal-State Joint Board on Universal Service
regarding the Lifeline/Link-Up program.[^292] The Joint Board
recommended the Federal Communications Commission (FCC) add a federal
default income-based criterion of at least 1.35 times the Federal
Poverty Guidelines (FPG). This study analyzes the impact of a 1.35 FPG
Criterion (FPGC).[^293] To simplify charts and other materials, the
staff analysis also refers to the 1.35 FPGC as a 1.35 Poverty Guidelines
Criterion (PGC). The staff analysis in the *Recommended Decision* found
that a 1.35 PGC would allow many additional low-income households in
those states that utilize the federal default criteria to subscribe to
the Lifeline program. This analysis updates the previous analysis by
incorporating Year 2002 Current Population Survey of Households (CPSH)
data. The regression and logit regression analyses were performed with
the new data, with results similar to the previous study's results. In
addition, this study also examines the effects of a 1.50 PGC.

# Methodology 

There is a benefit to increasing the number of Lifeline participants,
and also a cost. The obvious benefit would be that some of those added
Lifeline subscribers would newly receive telephone service. The cost at
the federal level would be the additional federal dollars spent on the
additional Lifeline enrollees. This study uses economic methodologies to
forecast the baselines, changes due to the new policy, and program
levels after the implementation of the new policy. This means that first
we estimate the number of Lifeline subscribers and the associated costs
of the program to form the baseline, also known as the status quo.
Second, we estimate the changes that would result from a nationwide
implementation of a 1.35 PGC, assuming that all states adopt this
criterion.[^294] Third, we add (or apply) the changes to the baselines
to the time period when the policy is expected to be implemented. This
step provides an estimate of the number of Lifeline subscribers and
costs that would result from the new policy. The same analysis also is
presented for 1.50 PGC. This study examines only the effects of
implementing an income criterion, and assumes that states do not
otherwise alter their eligibility criteria.

This study uses a combination of statistical regression analysis and
simple math in a series of spreadsheet tables. The following equations
form the basic structure of the spreadsheet model.

> New Lifeline households = New Lifeline-eligible households times
> predicted Lifeline subscription rate among newly-eligible households.
>
> Additional federal Lifeline expenditures = number of additional
> households that would take Lifeline times the amount of federal
> expenditures per household that takes Lifeline.

In sum, the results of two regression models are used to predict the
impact of a policy change, and these predictions are applied to the
baseline to calculate the new level of Lifeline subscription and federal
Lifeline expenditures.

[Results]{.underline}

The results are summarized below:

**[Summary information for Year 2005 if all states adopt a 1.35
PGC]{.underline}:**

**Additional households that would take Lifeline:** 1,167,000 to
1,292,000

Of the additional Lifeline subscribers, the number that

would newly subscribe to telephone service because of the 1.35 PGC:
247,000

Of the additional Lifeline subscribers, the number that

would already have telephone service: 920,000 to 1,045,000

**Additional federal expenditures in 2005:**

Amount that federal expenditures would increase: \$127,000,000 to
\$140,000,000

Additional federal expenditures per new telephone subscriber: \$514 to
\$567

# Lifeline Staff Analysis

# Introduction

Lifeline provides low-income consumers with discounts of up to \$10.00
off of the monthly cost of telephone service for a single telephone line
in their principal residence. States use different criteria for
determining whether a household qualifies for Lifeline. Some states use
the federal default eligibility criteria (set by the FCC), which enable
households receiving Federal Public Housing Assistance (Section 8), Food
Stamps, Low-Income Home Energy Assistance Program (LIHEAP), Medicaid, or
Supplemental Security Income to receive Lifeline. Other states have set
their own criteria. States setting their own criteria often use one or
more of the programs from the federal criteria and sometimes include one
or more of their own state-wide programs. Some states also use an
income-based criterion, which is based on some multiple of the Federal
Poverty Guidelines. In all cases, a household need meet only one of a
state's criteria to be eligible for Lifeline.

The Joint Board recommended that the FCC add an income-based criterion
to the federal eligibility criteria for Lifeline. The Joint Board also
recommended that the income-based criterion be set at 1.35 times the
Federal Poverty Guidelines. Thus, households with incomes at or below
1.35 times the Federal Poverty Guidelines would be eligible for
Lifeline.

Some commenters suggest raising the criterion to 1.50 times the Federal
Poverty Guidelines (FPG), based on the observation that the LIHEAP uses
a criterion of 1.50 times the FPG. The commenters argue that it would be
logically inconsistent to use a multiple of 1.35 for Lifeline directly,
but 1.50 indirectly, through LIHEAP.[^295] This study examines the
effect of using the 1.35 and the 1.50 mutiple.

This study assumes that all states (not just those that currently
utilize the federal default criteria) add an income-based criterion
using a multiple of the Federal Poverty Guidelines. This analysis calls
this income-based criterion a Poverty Guidelines Criterion (PGC). A
nationwide implementation of a 1.35 PGC would increase the overall
number of households eligible for Lifeline.[^296] This would enable
additional low-income households in many states to take the Lifeline
program. (Households meeting at least one eligibility criterion are
eligible for Lifeline, so adding an additional eligibility criterion
increases the number of households that are eligible for Lifeline.)

There is a benefit to increasing the number of participants, and also a
cost. The obvious benefit would be the increase in the number of
low-income households newly subscribing to telephone service. The cost
at a federal level would be the additional federal dollars spent on the
additional Lifeline enrollees. Because the study assumes that all states
choose to adopt the recommended federal income-based eligibility
criterion, the estimates presented are likely to represent the upper
limit of both the potential new Lifeline subscribers and the potential
number of new telephone subscribers, as well as the corresponding impact
on the fund as a result of a 1.35 PGC. If some states choose not to
adopt the federal income-based standard, the number of new Lifeline and
telephone subscribers, and additional cost would be correspondingly
lower.

The relationship between Lifeline eligibility, Lifeline subscribership,
and telephone subscribership is as follows. A PGC would make many
households eligible for Lifeline. A portion of those newly-eligible
households will take Lifeline. Of those households that subscribe to
Lifeline because of the new PGC, a portion will be new to telephone
service because of the lower price. The other portion would already have
telephone service, and would be taking the Lifeline just because they
are newly-eligible. See the graphs on the next page.

![](media/image2.png){width="5.684027777777778in"
height="4.258333333333334in"}

![](media/image3.png){width="5.992361111111111in"
height="2.558333333333333in"}

# 

# Methodology Summary 

This study uses economic methodologies to forecast baselines, changes to
the baselines, and program levels after the implementation of the new
policy. This means that first we estimate the number of Lifeline
subscribers and the associated federal expenditures of the program to
form the baseline numbers. Second, we estimate the changes that would
result from a nationwide implementation of a 1.35 PGC. Third, we add (or
apply) the changes to the baseline in the time period when the policy is
expected to be implemented. This step provides an estimate of the number
of Lifeline subscribers and costs under the new policy.

In order to make projections for Year 2005, we examine data for Year
2002, and apply those inferences to our projections for 2005. We first
estimate the percentage of households that were eligible for Lifeline in
2002, and compare that to the number of households that took Lifeline in
2002. This allows us to calculate a "Lifeline take rate" which can then
be applied to 2005 data. We have chosen to estimate the baseline and
changes for 2005 because that is the timeframe in which the proposed
changes would be implemented.

The second step uses demographic data available from 2002 data to model
the effects that a 1.35 PGC would have had on Lifeline subscribership
and telephone penetration in 2002. That increase (in percentage form) is
then applied to 2005 data. For Lifeline subscribership, a regression
model is constructed that predicts the increase in Lifeline
subscribership as a function of increasing multiples of the Federal
Poverty Guidelines. For instance, this model indicates that if
Texas---which has a 1.25 PGC---had had a 1.35 PGC in 2002, it would have
had 23,231 to 25,715 more households on Lifeline in 2002 (*See* Table
2.E). That increase (in percentage form) is used to predict the
additional Lifeline subscribers Texas would have in 2005 (*See* Table
2.F).

For telephone subscribership, a logistic regression is constructed that
predicts the increase in telephone subscribership as a function of
increasing multiples of the Federal Poverty Guidelines and other
important factors, such as income and home ownership. The model predicts
that if all states had had a 1.35 (or higher) PGC for Lifeline in 2002,
then 229,000 additional households would have taken telephone service
(*See* Table 2.I). Table 2.I also applies this increase (in percentage
form) to 2005.

In the third step, the estimated additional number of Lifeline
subscribers is added to the baseline in 2005 to get the forecasted
number of Lifeline subscribers that would exist in 2005 under a
nationwide implementation of the new policy. The same is done for
Lifeline expenditures in 2005.

These steps are exhibited in the following graphs. The first graph shows
the steps for predicting the number of Lifeline subscribers, and the
second graph shows the amount of federal Lifeline expenditures.

![](media/image4.wmf){width="5.908333333333333in" height="4.25in"}

![](media/image5.wmf){width="5.908333333333333in" height="4.25in"}

# Modeling Process

The modeling process is outlined below. The word "produce" is used below
when the FCC did not have the actual data, and so the quantities were
estimated. The word "forecast" is used when data are predicted for a
future time period.

-   Create baselines

    -   Produce baseline Lifeline subscription rates for 2002.

    -   Forecast baseline Lifeline subscription rates for 2005.

    -   Forecast baseline federal Lifeline expenditures for 2005.

-   Estimate change due to new policy

    -   Produce change to Lifeline eligibility resulting from a 1.35
        PGC.

    -   Produce change to Lifeline subscribers in 2002 resulting from a
        1.35 PGC.

    -   Forecast change to Lifeline subscribers for 2005.

    -   Forecast change to federal Lifeline expenditures for 2005.

    -   Forecast for Years 2002 and 2005, change to telephone
        subscribership resulting from a 1.35 PGC.

-   Apply changes to baselines to compute new program levels

    -   Apply forecasted changes to forecasted baseline to determine the
        new number of Lifeline subscribers in 2005.

    -   Apply forecasted changes to forecasted baseline to determine the
        new federal Lifeline expenditures in 2005.

# Methodology Detail

The above steps will now be discussed in more detail. A series of tables
is constructed that show the computations for the three steps outlined
above.

This study combines data from four sources: 1) Current Population Survey
of Households (CPSH) provided by the Bureau of Labor Statistics; 2) The
FCC's *Universal Service* *Monitoring Report*;[^297] 3) the website
\<www.lifelinesupport.org\>; and 4) Universal Service Administrative
Company (USAC). The CPSH data contain the results from over 70,000
households that were surveyed around January 2002. The Monitoring Report
lists the amount of federal support that Lifeline households in each
state received in 2002. The website www.lifelinesupport.org provides the
Lifeline eligibility requirements for each state, and USAC provided the
number of Lifeline subscribers in 2002.

This study uses a combination of statistical regression analysis and
simple math in a series of spreadsheet tables. Two regression models are
constructed.

-   Lifeline Subscribership Regression Model - A regression analysis
    model is constructed that correlates higher Lifeline subscription
    rates to the use of higher multiples of the Federal Poverty
    Guidelines for income criteria. Many states already have
    income-based Lifeline eligibility criteria, and in general, the
    states with a higher multiple of the Federal Poverty Guidelines have
    higher Lifeline subscription rates. The results from this model are
    then used to predict the number of households that would have taken
    Lifeline in 2002 if all states had a 1.35 PGC. Those results are
    then used to forecast the number of households that would take
    Lifeline in 2005 if all states had a 1.35 PGC.

-   Telephone Subscribership Regression Model - Another regression
    model, this time using a logistic regression, is used to predict
    increased telephone participation that would have resulted in 2002
    had a 1.35 PGC been in effect nationwide. This model incorporates
    several factors, including the 1.35 PGC, income, and other
    demographic information. Many states have income-based Lifeline
    eligibility criteria, and in general, the states with a higher
    multiple of the Federal Poverty Guidelines have higher telephone
    subscription rates. The results from this model are then used to
    determine the number of households that would take telephone service
    in 2005 as a result of a nationwide implementation of a 1.35 PGC.

The spreadsheet tables use a series of equations which simply add or
multiply the contents of various columns in the table to produce a final
column (to the right) which is of the most interest. The results of the
regression analysis are incorporated into several columns in the tables.
The following equations are used in the tables:

-   Number of additional households taking Lifeline = number of
    newly-eligible households times the Lifeline subscription rate (the
    percentage of those households that would take Lifeline, which is
    determined by the Lifeline Regression Model).

-   Additional federal Lifeline expenditures = number of additional
    households that would take Lifeline times the amount of federal
    expenditures per household that would take Lifeline.

In sum, the results of two regression models are used to predict the
impact of a policy change, and these predictions are applied to the
baseline to calculate the new level. The data and analysis are discussed
in more detail below.

[Step 1: Create Baselines]{.underline}

The tables in this section examine the number of Lifeline subscribers,
the number of households that are eligible for Lifeline and the Lifeline
subscription rate. Each table reflects data for a different year.

*Baseline Lifeline subscription rates for Year 2002.* Nationally, 17.8%
of households are estimated to have been eligible for Lifeline. Of these
eligible households, an estimated 33.7% subscribed to Lifeline.

The CPSH data contain demographic data from which the eligibility for
each household in the sample can be determined. For example, if a state
uses Food Stamps as an eligibility criterion, then those households in
that state that received Food Stamps are considered to be eligible for
Lifeline. Each household is analyzed according to its state's
eligibility criteria, as reported by \<www.lifelinesupport.org\>.[^298]
Only those households that meet at least one of the eligibility criteria
are deemed eligible for Lifeline, the rest are deemed ineligible.[^299]
From these data, statewide estimates for the number of Lifeline eligible
households are created. USAC data are then used to create the Lifeline
subscription rate, which is the percentage of eligible households that
subscribe to Lifeline. (*See* Table 1.A).

*Forecasted Baseline Lifeline subscription rates for 2005.* We estimate
that 118.0 million households will exist in 2005, and 6.8 million of
those households are expected to take Lifeline under existing rules.

The results from the previous table are used to forecast the number of
households, the number of Lifeline-eligible households, and the number
of Lifeline subscribers in 2005. The number of households in 2005 is
calculated by examining the growth rate of households between 2000 and
2002. The number of households qualifying for Lifeline in 2005 (July 1,
2005, to be exact) is simply calculated by multiplying the percentage of
all households that are eligible for Lifeline in 2002 by the forecasted
number of households in 2005. This calculation assumes that the same
percentage of households will qualify for Lifeline in 2005 as did in
2002. The number of households that would take Lifeline in 2005 is
calculated by multiplying the percentage of eligible households that
took Lifeline in 2002 by the forecasted number of eligible households in
2005. This calculation assumes that the same percentage of
Lifeline-eligible households will take Lifeline in 2005 as did in 2002.
These predictions make two implicit assumptions: the number of
households in each state increases at a constant rate, and the economy
continues to grow at the same rate it did in 2002. (*See* Table 1.B).

*Forecasted Baseline federal Lifeline expenditures for 2005.* Forecasted
federal Lifeline expenditures under existing rules in 2005 are \$706
million.

The forecasted federal Lifeline expenditures are calculated by
multiplying the forecasted number of Lifeline subscribers in each state
times the expected federal expenditures per line in that state. The sum
of state-by-state federal expenditures forms the national total. (*See*
Table 1.C).

[Step 2: Estimate Changes due to New Policy]{.underline}

This section quantifies the number of additional households that would
become eligible for Lifeline, the number of additional households that
would subscribe to Lifeline, and the number of households that would
newly subscribe to telephone service due to the implementation of a 1.35
PGC. (This analysis assumes that states without a PGC for Lifeline and
states with a PGC below 1.35 adopt a 1.35 PGC. This analysis also
assumes that states with a 1.50 PGC keep it, and that states don't alter
their other Lifeline criteria.) This section then calculates the
increased federal Lifeline expenditures resulting from the increased
number of households taking Lifeline due to the 1.35 PGC. CPSH data are
used to determine the number of additional households that would become
eligible for Lifeline. Two regression analyses are used to determine the
number of additional households that would subscribe to Lifeline and the
number of households that would take telephone service due to a 1.35
PGC.

*Change to Lifeline eligibility in 2002 and 2005 resulting from a 1.35
PGC*. We predict that an additional 6.7 percent of total households
would qualify for Lifeline under the 1.35 PGC. This translates into 7.4
million households in Year 2002 and 8.1 million households in 2005.

The demographic data from each household in the CPSH data are examined
to determine whether it was eligible for Lifeline in 2002 under existing
rules, and whether it would have become eligible for Lifeline with a
1.35 PGC. This allows us to estimate the increase in Lifeline
eligibility that results from a 1.35 PGC for 2002, which in turn, allows
us to estimate the effects for 2005. Table 2.A presents the information
for 2002 and 2.B presents the information for 2005.

*Change to Lifeline subscribership in 2002 and 2005 resulting from a
1.35 PGC*. We predict that if states without a PGC (and states with PGCs
at 1.25 or lower) adopted a 1.35 PGC, there would be a significant
increase in the number of low-income households that would take
Lifeline. Nationwide, for 2002, the number of additional Lifeline takers
would be between 1.07 million and 1.18 million. For 2005, the number of
additional Lifeline subscribers would be between 1.17 million and 1.29
million.

Different states have different Lifeline eligibility criteria, so
regression analysis can be employed to quantify the correlation between
the use of a higher multiple of the poverty guidelines (i.e., a higher
PGC) and the resulting higher Lifeline subscription rate. The Lifeline
Regression Model predicts increased Lifeline subscribership that would
have resulted from a nationwide 1.35 PGC in 2002. (*See* Tables 2.C and
2.D.) (At the end of this study is a technical appendix that more
thoroughly discusses the regression analysis used for this model.)
Tables 2.E and 2.F apply these results and show the number of additional
Lifeline subscribers on a state-by-state basis for 2002 and 2005.

*Change to federal Lifeline expenditures for 2005 is forecasted*. We
predict that federal Lifeline expenditures would increase \$127 million
to \$140 million if all states implemented a 1.35 PGC.

The forecasted change to federal Lifeline expenditures is calculated by
multiplying the forecasted change to the number of Lifeline subscribers
in each state times the expected federal expenditures per Lifeline
subscribers in that state. The state-by-state change in the amount of
federal expenditures is then summed to form the national total. (*See*
Table 2.G).

*Forecasted change to telephone subscribership for 2005.* We predict
that if all states adopted a 1.35 PGC, 247,000 households that do not
have telephone service would take telephone service.

The Telephone Subscribership Regression Model uses logistic regression
to predict the increased telephone subscribership that would have
resulted from a nationwide 1.35 PGC in 2002. (*See* Tables 2.H and 2.I).
(At the end of this study is a technical appendix that more thoroughly
discusses the logistic regression analysis used for this model.) Table
2.I also uses these results to quantify the number of households that
would have newly taken telephone service in 2002 and that would newly
take telephone service in 2005 because of a 1.35 PGC.

For 2002 and 2005 respectively, Tables 2.J and 2.K break down the number
of new Lifeline subscribers into two groups: those that would be new to
telephone service, and those that already had telephone service, and who
would subscribe to Lifeline simply because they would be newly eligible.

[Step 3: Apply Changes to Baselines to Compute New Program
Levels]{.underline}

The new levels of Lifeline subscribership and federal expenditures are
shown in two tables. First, the new total of Lifeline subscribers is
calculated, and then the increased federal Lifeline expenditures are
calculated.

*Forecasted New Policy Levels for Lifeline subscribership in 2005.* We
predict that if all states implement a 1.35 PGC for Lifeline, an
estimated 8 million households would subscribe to Lifeline.

Here the forecasted increase in Lifeline subscribers is added to the
forecasted baseline number of subscribers to create the new forecasted
number of Lifeline subscribers in 2005 with the 1.35 PGC. (*See* Table
3.A).

*Forecasted New Policy Levels for federal Lifeline expenditures*. We
predict that if all states implement a 1.35 PGC for Lifeline, federal
Lifeline expenditures are forecasted to be in the range of \$833 million
to \$846 million.

Here, the forecasted increase in federal Lifeline expenditures is added
to the forecasted baseline federal Lifeline expenditures to create the
new forecasted federal Lifeline expenditures in 2005 with the 1.35 PGC.
(*See* Table 3.B).

[Other Factors]{.underline}

This study cannot take several important factors into consideration,
such as economic conditions and state outreach programs because there
are not enough data to do so. Properly accounting for a fluctuating
economy would require five or more decades of data. The Lifeline program
started in 1984, so an analysis incorporating a fluctuating economy is
not attempted in this study. Further, there are no comprehensive
estimates quantifying state spending on outreach programs, or the
effects the outreach programs have on Lifeline subscribership.

By not accounting for these factors explicitly, this study assumes that
these factors will remain constant between 2002 and 2005. Although
changes in these factors can affect the forecasted baseline number of
Lifeline subscribers (and therefore, baseline federal expenditures),
those factors should have a relatively smaller effect on the forecasted
number of households that will take Lifeline as a result of a 1.35 PGC.
The number of households that would take Lifeline because of a 1.35 PGC
is about 1/6^th^ of those that already take Lifeline. So, as the economy
fluctuates, and more or less households take Lifeline, the number of
households that would take Lifeline due to a 1.35 PGC will go up and
down by 1/6^th^ as much as the number of households that would take
Lifeline based on other eligibility criteria. Thus, the number of
households taking Lifeline due to a 1.35 PGC will have 1/36^th^ the
variance that the number of households taking Lifeline will have.[^300]

[Additional Assumptions]{.underline}

In addition to the factors discussed above, this study makes several
assumptions that are needed to estimate the impact of the program:

1\) All other Lifeline/LinkUp eligibility criteria (and the
qualifications for the underlying programs) stay constant over time.
Aside from the addition of a 1.35 PGC, this model assumes that between
2002 and 2005, no other changes are made to the Lifeline/LinkUp programs
or to the programs that are frequently used as qualifying criteria for
Lifeline between 2002 and 2005;

2\) Data can be substituted. Several states have a 1.33 PGC in effect.
This study treats states that have a 1.33 PGC as having a 1.35 PGC. This
assumption is reasonable because the effects of a 1.33 PGC are
statistically indistinguishable from a 1.35 PGC.

3\) Rapid adoption and continuity. This model assumes that all states
rapidly adopt a 1.35 PGC (and that states with a 1.50 PGC keep it). The
model also assumes that households rapidly learn of the changes to the
Lifeline program and expeditiously act on this new information.

[Results]{.underline}

The results are summarized below:

**Summary information for 2005:**

**Household information:**

Forecasted households on Lifeline without 1.35 PGC: 6,775,000

Forecasted additional households on Lifeline with 1.35 PGC: 1,167,000 to
1,292,000

Forecasted households on Lifeline with 1.35 PGC: 7,942,000 to 8,067,000

**Lifeline subscriber information:**

Households that would newly take telephone service due to the 1.35 PGC:
247,000

Households taking Lifeline that already have telephone service: 920,000
to 1,045,000

**Federal Lifeline expenditures:**

Forecasted federal Lifeline expenditures without 1.35 PGC: \$706,000,000

Forecasted amount federal expenditures would increase: \$127,000,000 to
\$140,000,000

Forecasted federal Lifeline expenditures with 1.35 PGC: \$833,000,000 to
\$846,000,000

**Additional federal expenditures per new telephone subscriber**: \$514
to \$567

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Analysis II:

Examination of a 1.50 PGC

# Introduction

The Joint Board recommended the FCC add an income-based criterion to the
federal eligibility criteria for Lifeline. The Joint Board also
recommended that the income-based criterion be set at 1.35 times the
Federal Poverty Guidelines. Thus, households with incomes at or below
1.35 times the Federal Poverty Guidelines would be eligible for
Lifeline.

Some commenters suggest raising the criterion to 1.50 times the Federal
Poverty Guidelines (FPG), based on the observation that LIHEAP uses a
criterion of 1.50 times the FPG. The commenters argue that it would be
logically inconsistent to use 1.35 for Lifeline directly, but 1.50
indirectly, through LIHEAP.[^301] This analysis examines the costs and
benefits of a nationwide implementation of a 1.50 PGC. This study uses
the same steps as the analysis of a 1.35 PGC.

It is possible to calculate the number of additional Lifeline
subscribers resulting from a 1.50 FPG with just a few tables, but this
analysis includes the same tables as the preceding study on the effects
of a 1.35 PGC so that the two analyses can be more easily compared. The
nature of the telephone subscribership model is such that it must be
rerun to examine whether a 1.50 FPG would increase telephone
subscribership over a 1.35 FPG. The methodology used to examine the
effects of a 1.50 FPG criterion for Lifeline remains the same.

[Step 1: Create Baselines]{.underline}

The tables in this section examine the number of Lifeline subscribers,
the number of households that are eligible for Lifeline, and the
Lifeline subscription rate. These tables in Step 1 are the same as the
tables in the main staff analysis.

*Baseline Lifeline subscription rates for Year 2002.* Nationally, 17.8%
of households are estimated to have been eligible for Lifeline. Of these
eligible households, an estimated 33.7% subscribed to Lifeline. (*See*
Table 1.A).

*Forecasted Baseline Lifeline subscription rates for 2005.* There will
be an estimated 118.0 million households in 2005, and 6.8 million of
those households are expected to take Lifeline under existing rules.
(*See* Table 1.B).

*Forecasted Baseline federal Lifeline expenditures for 2005.* Forecasted
federal Lifeline expenditures under existing rules in 2005 are \$706
million. (*See* Table 1.C).

[Step 2: Estimate Changes due to New Policy]{.underline}

This section quantifies the number of additional households that would
become eligible for Lifeline, the number of households that would
subscribe to Lifeline, and the number of additional households that
would subscribe to telephone service due to the nationwide
implementation of a 1.50 PGC. (This analysis assumes that states without
a PGC for Lifeline and states with a PGC below 1.50 adopt a 1.50 PGC.)
This section then calculates the increased federal Lifeline expenditures
resulting from the increased number of households taking Lifeline due to
the 1.50 PGC. CPSH data are used to determine the number of additional
households that would become eligible for Lifeline. Two regression
analyses are used to determine the number of additional households that
would subscribe to Lifeline and the number of households that would take
telephone service due to a 1.50 PGC.

*Change to Lifeline eligibility in 2002 and 2005 resulting from a 1.50
PGC*. We predict that an additional 8.7 percent of total households
would qualify for Lifeline under the 1.50 PGC, and this would qualify an
additional 10.4 million households in 2005.

The demographic data from each household in 2002 CPSH data are examined
to determine eligibility with and without a 1.50 PGC. For 2002, the
number of households that would have become eligible with a 1.50 PGC is
calculated. These estimates are then used to determine the number of
households that would become eligible for Lifeline with a 1.50 PGC in
2005. Table 2.A presents the information for 2002 and 2.B presents the
information for the Year 2005.

*Change to Lifeline eligibility in 2002 and 2005 resulting from a 1.50
PGC*. We predict that an additional 6.7 percent of total households
would qualify for Lifeline under the 1.50 PGC. This translates into 7.4
million households in 2002 and 8.1 million households in 2005.

The demographic data from each household in the CPSH data are examined
to determine whether it was eligible for Lifeline in 2002 under existing
rules, and whether it would have become eligible for Lifeline with a
1.50 PGC. This allows us to estimate the increase in Lifeline
eligibility that results from a 1.50 PGC for 2002, which in turn, allows
us to estimate the effects for 2005. Table 2.A presents the information
for 2002 and 2.B presents the information for 2005.

*Change to Lifeline subscribership in 2002 and 2005 resulting from a
1.50 PGC*. We predict that if states without a PGC (and states with PGCs
at 1.33 or lower) adopted a 1.50 PGC, there would be a significant
increase in the number of low-income households that would take
Lifeline. Nationwide, for 2002, the number of additional Lifeline takers
would be between 2.67 million and 2.94 million. For 2005, the number of
additional Lifeline subscribers would be between 2.91 million and 3.22
million.

*Change to federal Lifeline expenditures for 2005 is forecasted*. We
predict that federal Lifeline expenditures would increase by \$316
million to \$348 million if all states implemented a 1.50 PGC.

The forecasted change to federal Lifeline expenditures is calculated by
multiplying the forecasted increase in the number of Lifeline
subscribers in each state by the expected federal expenditures per
Lifeline subscriber in that state. The sum of state-by-state changes in
the amount of federal expenditures forms the national total. (*See*
Table 2.G).

*Forecasted change to telephone subscribership for 2005.* Unlike the
regression model predicting the increase in Lifeline subscribership, the
results from the model predicting the increase in telephone
subscribership cannot be directly used to estimate increased telephone
subscribership with a 1.50 PGC. The model must be rerun with slightly
different variables.

If a 1.50 PGC will increase telephone subscribership more than a 1.35
PGC, then it must do so for those households with incomes between 1.35
and 1.50 times the FPG. This study therefore examines whether households
in that income range are more likely to take telephone service if they
are in a state with a 1.50 PGC. This study uses the same methodology as
is used in the preceding section. There are only three differences
between this model and the one in the preceding section. First, the
sample for this study is those households with incomes between 1.35 and
1.50 times the FPG.[^302] Second, the variable "State has 1.50 poverty
guidelines criterion" was used in lieu of "state has 1.33 or higher
poverty guidelines criterion for Lifeline." Third, some variables were
excluded from this model. The eligibility variables were excluded
because, as a whole, they were not statistically significant. The
California variable was also excluded because the variable of interest,
"State has 1.50 poverty guidelines criterion," was negative when the
variable "California" was included. As that result is implausible, the
variable "California" was omitted.[^303]

Table 2.H shows the results of the model. The variable "State has 1.50
poverty guidelines criterion for Lifeline" is not significant. This
suggests that raising the PGC criterion from 1.35 to 1.50 would not
result in a statistically significant increase in the number of
households that take telephone service. This result is somewhat
surprising. A 1.50 FPG lowers the cost of telephone service to these
households, so logically, more of these households should take telephone
service. The result suggests that the number of these households with
incomes between 1.35 and 1.50 times the FPG that would newly take
telephone service because of the new availability of Lifeline is too
small to be measured.

Because the logit-regression model indicates that no additional
households would newly take telephone service due to a wide-spread
adoption of a 1.50 PGC, Tables 2.I and 2.J, which would calculate the
number of additional households taking telephone service due to the
change, were not computed.

[Step 3: Apply Changes to Baselines to Compute New Program
Levels]{.underline}

The new levels of Lifeline subscribership and federal expenditures are
shown in two tables. First, the new total of Lifeline subscribers is
calculated, and then the increased federal Lifeline expenditures are
calculated.

*Forecasted New Policy Levels for Lifeline subscribership in 2005.* We
predict that if all states implement a 1.50 PGC for Lifeline, an
estimated 10 million households would subscribe to Lifeline.

Here the forecasted increase in Lifeline subscribers is added to the
forecasted baseline number of subscribers to create the new forecasted
number of Lifeline subscribers in 2005 with the 1.35 PGC. (*See* Table
3.A).

*Forecasted New Policy Levels for federal Lifeline expenditures*. We
predict that if all states implement a 1.50 PGC for Lifeline, federal
Lifeline expenditures are forecasted to be in the range of \$1.02
billion to \$1.05 billion.

Here the forecasted increase in federal Lifeline expenditures is added
to the forecasted baseline federal Lifeline expenditures to create the
new forecasted federal Lifeline expenditures in 2005 with the 1.50 PGC.
(*See* Table 3.B).

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**Technical Appendix 1**

# 

**Background information for Table 2.C (Would Lifeline take rates
increase due to a nationwide implementation of a 1.35 PGC?)**

Below are the two regression results that are used to determine the
effect that a nationwide implementation of a 1.35 poverty guideline
criterion would have on Lifeline subscribership.

**Regression 1 -- Lifeline specification 1.**

The regression model calculated from the data is

%HHBelow15OnLL=

0.08 + 0.55 x IncElgAbv125 + 0.99 x California + 0.01 x TotSup.

*Explanation of variables for Lifeline regression specification 1.*

The dependent variable is the number of households taking Lifeline
divided by the number of households that are at or below 1.50 times the
federal poverty guidelines.[^304] This variable is abbreviated as
"%HHBelow15OnLL" in the regressions below. For example, Texas had
429,970 Lifeline subscribers in 2002, and 1,789,726 households at or
below 1.50 times the poverty line. The dependent variable data point for
Texas therefore equals 0.24 (=429,970/1,789,726).

The first Independent Variable is IncEligAbv125. For each state,
IncEligAbv125 equals that state's income eligibility level (if it has
one) minus 1.25. So, for California, which has an income eligibility
criterion of 1.50 times the poverty guidelines, IncEligAbv125 equals
0.25 (= 1.5 -- 1.25). For states with an income eligibility criterion at
or below 1.25 times the poverty guidelines, or for states without an
income criterion, IncEligAbv125 equals 0. So, for Texas, which has an
income eligibility criterion of 1.25 times the poverty guidelines,
IncEligAbv125 equals 0. The coefficient on this variable allows us to
predict the percentage increase in the number of households that would
take Lifeline if a 1.35 PGC were adopted.

So for Texas, and other states with a 1.25 PGC (and for states without
an income-based criterion), the new policy would increase the
independent variable from 0.25 to 0.35, or by 0.1, and the dependent
variable would increase 5.5 percentage points. The percentage point
increase in percentage of households at or below 1.50 times the poverty
guidelines that take Lifeline because of a 1.35 PGC were implemented
would be 5.5%.

= 0.55 \* 0.1 = 0.055 or 5.5%. [^305]

The second Independent Variable is "California". In statistical terms,
this is called a "dummy" variable, and equals 1 if the state is
California, and is 0 otherwise. A dummy variable is often used in
regression analysis to quantify specific effects. California is the only
state using self-certification with an income-based criterion, and it
appears to have more households taking Lifeline than the CPSH data would
indicate are eligible for it. Therefore, singling out California with a
dummy variable to measure a California-specific effect is warranted.

The variable "TotSup" is the amount of monthly telephone service support
that Lifeline subscribers in each state receive (TotSup). The amount of
total support that households receive varies with the local telephone
carrier. For each state, TotSup is the amount of support from the
largest carrier in that state. For example, in Texas, Lifeline
subscribers pay \$11.35 per month less for telephone service than
regular telephone subscribers. Therefore, the TotSup datapoint for Texas
is \$11.35. The more support that eligible households can receive, the
more incentive they have to take Lifeline.

**Regression 2 -- Lifeline specification 2.**

%HHBelow15OnLL =

0.17 + 0.61 x IncElgAbv125 + 0.99 x California

When comparing the two specifications, this one suggests that more
households would take Lifeline because the coefficient 0.61 is greater
than the 0.55 coefficient in Regression 1. So for Texas, and other
states with a 1.25 PGC, and for states without an income criterion, the
percentage point increase in the percentage of households at or below
1.50 times the poverty guidelines that would take Lifeline because of a
1.35 PGC is 6.1%.

= 0.61 \*x 0.1 = 0.061 or 6.1%.

**Additional information about Lifeline regression specifications 1 and
2:**

*Data sources.*

The data are from the Current Population Survey of Households (CPSH)
(March 2002 data), USAC, *Universal Service Monitoring Report* (October
2002), and \<www.lifelinesupport.org\>. The CPSH data are used to
determine demographic data about households and whether they have
telephone service. USAC provided data on the number of Lifeline
subscribers in each state for 2002. The *Universal Service Monitoring
Report* was used to determine the total support (number of dollars) that
Lifeline subscribers received in each state. USAC's website
\<www.lifelinesupport.org\> was used to determine which states had
income criteria for Lifeline in 2002, and the multiple of the Federal
Poverty Guidelines that was required to be eligible for Lifeline in
those states.

*Data are aggregated to the state level.*

CPSH has data for thousands of households, including whether the
household has telephone service or not. If it were possible to do so, it
would be best to conduct the analysis at the household level to maximize
the number of observations and to account for several demographic
factors. Unfortunately, CPSH data do not report whether the household is
receiving the Lifeline subsidy. Therefore, individual data observations
could not directly be used for the estimation. The number of Lifeline
subscribers for each state is available from the USAC, so the CPSH data
are aggregated to the state level to match the USAC data. Thus, there is
a single data point constructed for each state. The number of households
that are at or below 1.50 times the poverty guidelines in a particular
state is determined by summing the statistical weight of each household
at or below 1.50 times the poverty guidelines (the statistical weight
for each household is determined by the Bureau of Labor Statistics), and
dividing by 100. (The statistical weights add up to 100 times the number
of households in the state, so dividing by 100 is a necessary step.)

**[Additional information on regression specification]{.underline}**

*The dependent variable:**% HHBelow15OnLL**.*

As mentioned above, the dependent variable is the number of households
taking Lifeline divided by the number of households that are at or below
1.50 times the poverty guidelines. The dependent variable should be a
measure of participation rate, and this requires a measure of takers and
a measure of eligibility. An ideal measure would have been the number of
households taking Lifeline divided by the total number of households
that are eligible. Obtaining a precise measure of number of eligible
households in each state is not possible, as will be explained below, so
a surrogate measure "number of households that are at or below 1.50
times the poverty guidelines" is used in its place. As long as the
resulting surrogate participation rate is consistent across states, and
used properly, the resulting analysis is correct.

The surrogate is necessary because of a measurement problem. There are
several states where it is difficult to measure the number of households
that are eligible for Lifeline. This happens most often when states use
state-specific programs as eligibility criteria. Because the CPSH survey
does not ask about every possible welfare program, the CPSH data cannot
always be used to determine if a household is eligible for Lifeline or
not.

Therefore, an alternative dependent variable was needed. The number of
households below 1.50 times the poverty guidelines is a reasonable
proximate measure of support need. So, instead of dividing the number of
households taking Lifeline by the number of households eligible for
Lifeline, the dependent variable in this analysis is the number of
households taking Lifeline divided by the number of households that are
at or below 1.50 times the federal poverty guidelines. The 1.50 multiple
was chosen because it was the highest poverty guideline criterion used
by any state, and it was used by several states.

*The principal independent variable:* **IncEligAbv125.**

As mentioned above, IncEligAbv125 equals that state's income eligibility
level (if it has one) minus 1.25. If the state has no income eligibility
criterion, or if it has one that is less than 1.25 times the poverty
guidelines, then the datapoint equals zero for that state.

The main objective of the regression analysis is to quantify the number
of additional households that will subscribe to Lifeline with the
implementation of an income-based eligibility criterion. Generally,
states using higher multiples of the poverty guidelines as an
eligibility criterion have higher Lifeline participation rates than
states using lower multiples of the poverty guidelines criteria (or
states using no income based criterion at all). The coefficient on
IncEligAbv125 is used to predict the number of households that would
take Lifeline due to a 1.35 PGC.

Preliminary modeling indicated that a nationwide implementation of an
income criterion set at or below 1.25 times the poverty guidelines would
not increase the number of households taking Lifeline by a statistically
significant amount. Because some states use lower multiples of the
poverty guidelines to determine Lifeline eligibility, one would expect
that using a higher multiple of the poverty guidelines would increase
the number of households eligible for Lifeline in those states. However,
basing this independent variable on lower multiples of the poverty
guidelines did not produce statistically significant results.

**Discussion**

*Discussion of independent variables:*

The variable "California" is significant in both regressions (indeed, it
was significant for all regression specifications in which it is
included).

"TotSup" is positive, but is not significant. It has a t-statistic
greater than one, however, indicating that it still increases the
adjusted R squared. Further, there is strong economic reason to include
it, because it measures a household's incentive to take Lifeline, so it
should not be eliminated from the model without good reason.

"IncEligAbv125" is significant in both regressions, but the size of the
coefficient varies somewhat, and its significance drops somewhat when
TotSup is included. Other specifications of the model were run that
included whether each state had a particular program as an eligibility
criteria. Throughout most of the trial specifications, the coefficient
of IncEligAbv125 ranged between the two values presented in this report
and remained significant. Therefore, the analyses presented in this
report are very robust.

Low-income Home Energy Assistance Program (LIHEAP)

Other regression models using trial variables were tested, but for the
reasons listed below, these models are not adopted. However, when the
regression included whether the state had LIHEAP as a method for
qualifying for Lifeline, the coefficient on IncEligAbv125 dropped 30%
and was not significant. This trial regression model is unsound for two
reasons.

First, if the results were accurate, it would indicate that there would
be no significant additional Lifeline subscribership with the
implementation of a 1.35 PGC. This is not plausible, because the
logistic regression analysis (see Appendix 2) indicates that a 1.35 PGC
would significantly increase the number of households taking telephone
service. Because we find strong evidence that a 1.35 PGC would increase
telephone subscribership, a similar impact on Lifeline subscribership is
also expected.

Second, if the coefficient on IncEligAbv125 from the Lifeline Regression
were inserted into the model, it would indicate that just 10% of those
households that would become eligible would take Lifeline service, which
seems far too low. Currently, well over 30% of eligible households take
Lifeline service. While the percentage of eligible households that would
take Lifeline would surely decrease as eligibility requirements were
eased, there is no reason to believe that it would drop by more than
2/3. Thus, adding a variable quantifying whether the state has LIHEAP as
an eligibility requirement leads to irrational results. That trial
regression is therefore not used.[^306]

Given that the coefficient on IncEligAbv125 ranges between 0.554 and
0.612 in most trial regressions without the LIHEAP variable, that range
is used in this study. Table 2.D uses the results from the regression
analysis to quantify the number of households that would take Lifeline
as a result of a 1.35 PGC.

The statistical computer program Stata 8.0 was used to run the OLS
regressions. The regression outputs (below) show the significance of
each coefficient.

reg HHBelow15onLL totsup california incelgabv125

Source \| SS df MS Number of obs = 51

\-\-\-\-\-\-\-\-\-\-\-\--+\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\--
F( 3, 47) = 20.24

Model \| 1.36519991 3 .455066636 Prob \> F = 0.0000

Residual \| 1.05697291 47 .022488785 R-squared = 0.5636

\-\-\-\-\-\-\-\-\-\-\-\--+\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\--
Adj R-squared = 0.5358

Total \| 2.42217282 50 .048443456 Root MSE = .14996

\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\--
Variables \| Coef. Std. Err. t P\>\|t\| \[95% Conf. Interval\]

\-\-\-\-\-\-\-\-\-\-\-\--+\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\--

constant \| .0818321 .092501 0.88 0.381 -.1042558 .26792

incelgabv125 \| .5543479 .3122355 1.78 0.082 -.0737889 1.182485

california \| .9900143 .1665154 5.95 0.000 .6550286 1.325

totsup \| .0095577 .0093566 1.02 0.312 -.0092652 .0283807

\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\--

reg %hhbelow15onll california incelgabv125

Source \| SS df MS Number of obs = 51

\-\-\-\-\-\-\-\-\-\-\-\--+\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\--
F( 2, 48) = 29.80

Model \| 1.34173373 2 .670866866 Prob \> F = 0.0000

Residual \| 1.08043909 48 .022509148 R-squared = 0.5539

\-\-\-\-\-\-\-\-\-\-\-\--+\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\--
Adj R-squared = 0.5354

Total \| 2.42217282 50 .048443456 Root MSE = .15003

\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\--

Variables \| Coef. Std. Err. t P\>\|t\| \[95% Conf. Interval\]

\-\-\-\-\-\-\-\-\-\-\-\--+\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\--

constant \| .1734751 .0225442 7.69 0.000 .1281469 .2188033

incelgabv125 \| .6119323 .3072435 1.99 0.052 -.0058221 1.229687

california \| .9924552 .1665736 5.96 0.000 .6575366 1.327374

\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\--

**Technical Appendix 2**

**Background information for Table 2.G**

**(Would a 1.35 PGC for Lifeline increase telephone penetration?)**

Below are the results of two logistic regressions. They show the effects
that a 1.35 PGC for Lifeline has on telephone subscribership. Logistic
regression 1 was used for the study. Logistic regression 2 was used to
test whether the Lifeline eligibility variables were necessary.

**Logistic regression 1 --- Telephone Specification 1:**

**Y = 1 / (1 + e
^--\ \[1.24\ +\ 0.179\*X1\ +\ 0.035\*\ X2\ -0.575\*\ X3\ +\ 0.975\*\ X4\ +\ 0.463\*\ X5\ -\ 0.245\*X6\ -0.269\*X7\ -0.101\*\ X8\ +0.105\*\ X9\ +\ 0.160\*\ X10\ -\ 0.070\*\ X11\ +\ 0.019\*X12+0.060\*\ X13\ +\ 0.495\*X14\]^)**

***Explanation of variables for Telephone Specification 1.***

**Dependent variable:**

*Does the household have telephone service? (Y = H_TELHHD)*

The dependent variable is whether the low-income household has telephone
service. The data point for a household equals one if the household has
telephone service, and equals zero otherwise. The dataset is comprised
of data from only those households with incomes at or below 1.50 times
the poverty guidelines.

**Independent variables:**

*Is the household in a state with a 1.35 or less restrictive poverty
guideline criterion? (X~1~ = SH135ORB)*

If the household is in a state that uses a 1.35 PGC for Lifeline (or if
the state uses a higher multiple of the poverty guidelines), then
SH135ORB equals one for that data point; otherwise, it equals zero.
Because the sample is restricted to only those households that are at or
below 1.35 times the poverty guidelines, all data points for this
variable will be either a "0" or "1". Of these low-income households, 18
percent live in a state with a 1.35 to 1.50 PGC, and the independent
variable SH135ORB equals 1 for these households. For the other 82
percent, the independent variable SH135ORB value equals 0.

This is the only independent variable used in the cost/benefit analysis,
and therefore the accuracy of its coefficient is of most concern. The
coefficient on this variable (0.179) is later used to quantify the
increased probability that a low-income household will take telephone
service (or fraction of) as the result of a 1.35 PGC.[^307]

This quantification is accomplished as follows: When X~1~ is changed, Y
will change. For an individual household, the change of X~1~ from 0 to 1
models the effect of implementing a 1.35 PGC for that particular
household. When modeling the change nationally, X~1~ is changed from .18
(18%, which reflects the fact that 18 percent of the sample households
already live in a state with a 1.35 PGC) to 1.[^308] As a result, Y
changes according to Logistic regression 1 above (Y is interpreted as a
percentage---or probability---of households with telephone
subscribership, and ranges from 0 to 1). When we change the "baseline"
18 percent of low-income households (living in a state with a 1.35 PGC)
to the "new policy" 100 percent, then predicted telephone subscribership
among sample households increases from 90.5 percent to 91.7 percent.

*Total value of household income (**X~2~ =** HTOTVAL)*

The data points for each household equal the household's entire annual
income, including any cash payments.

*Is the household a mobile home? (X~3~ = MOBILEH)*

If the household is a mobile home, then the MOBHOME equals one for that
datapoint; otherwise, it equals zero.

*Is the household owned by the householders? (X~4~ = OWNHOME)*

If the householders own the home themselves, then OWNHOME for that data
point equals 1; otherwise, it equals zero.

*Percentage of households who lived at that address for at least one
year. (**X**~5~ **=** PCTONEYEAR)*

The data points for PCTONEYEAR equal the percentage of the adults in
that household that have lived at that address for at least one year.

*Is someone in the household on Food Stamps? (**X**~6~ **=** HFOODSP)*

If someone in the household is on Food Stamps, then HFOODSP equals one
for that data point; otherwise, it equals zero.

Variables X~7~ through X~13~:

X~7~ = State has Medicaid criterion

X~8~ = State has Food Stamp criterion

X~9~ = State has TANF criterion

X~10~ = State has LIHEAP criterion

X~11~ = State has FRHA (Section 8)

X~12~ = State has National free lunch program criterion

X~13~ = State has SSI criterion

These variables indicate whether the household is in a state that uses a
particular Lifeline eligibility criterion. If the state uses that
criterion, then the data point equals 1; otherwise, it equals zero. For
example, if a household is in a state that allows households in the
LIHEAP program to qualify for Lifeline, then the data point for variable
X~10~ equals 1. If the state does not use LIHEAP as a criterion, then
the data point equals 0.

*Is the household in California (**X~14~ =**CALIFORNI)*

If the household is in California, then California equals one for that
data point; otherwise, it equals zero.

For the results of this specification, see page XX, below.

**Logistic regression 2 --- Telephone Specification 2:**

Telephone Specification 2 includes all the variables from specification
1, except for the variables tracking state Lifeline eligibility
requirements. This specification was run to determine if these
variables, as a group, were significant. They are.[^309]

For the results of this specification, see page XX, below.

**Additional information about specifications 1 and 2**

*Price*

None of the logistic regression specifications include the price of
telephone service. This is because the price that each household faces
is unknown. Different carriers offer service at different prices, and
even within the same carrier, the price of telephone service varies from
city to city. Because the carrier that would serve each household is
unknown, price cannot be included in the logistic regressions. Earlier
research has shown that omitting the price of telephone service does not
affect the coefficients of the other variables in this logistic
regression. This is because the coefficient on price would be tiny, so
any "missing variable" bias would also be tiny.[^310]

*Data sources*

The data in this analysis are from the Current Population Survey of
Households (CPSH) from March 2002. CPSH data contain information on over
70,000 households. From these data, the relevant demographic information
are extracted for analysis, including: 1) whether the household has
telephone service, 2) household's total income (including the value of
transfer payments), 3) the state the household lives in, 4) whether the
household dwelling is owned or rented, 5) whether the household is a
mobile home, 6) the number of adult members that live in the household
for at least one year, 7) the number of adults living in the household,
and 8) the list of subsidies the household receives, which included
Federal Public Housing Assistance (Section 8), Food Stamps, LIHEAP,
Medicaid, and Supplemental Security Income.

*Household-level data are used*

All the information is available for each household, so the analysis is
conducted at the household level; aggregating to the state level is
unnecessary.

*Logistic regression preferred to "standard" OLS regression*

Because the dependent variable is binary (a household either has
telephone service and is thereby assigned a values of one (1), or it
does not and is thereby assigned a value of 0 (zero), logistic
regression analysis is preferred to a Linear Probability model using
Ordinary Least Squares (OLS). With binary dependent variables, linear
regressions can produce erroneous results, such as a household having
more than a 100% probability of taking telephone service, or a household
having a negative probability of taking telephone service. Both of these
situations are impossible. Logistic regression analysis avoids this
problem, and is appropriate for measuring saturation concepts such as
telephone penetration. The following graph illustrates the difference
between the two approaches. In the following graph (taken from the
Internet), "linear probability model" refers to OLS regression results,
and Y (ranging from 0 to 1) refers to probability. [^311]

![](media/image34.png){width="4.858333333333333in"
height="3.645138888888889in"}

Unfortunately, logistic regressions produce coefficients that are more
difficult to interpret than the coefficients that OLS produces. A few
additional computations are needed to use the coefficients in the
cost-benefit analysis. Therefore, Table 2.H is created, which uses the
coefficients from the logistic regression to determine the number of
households that would have taken phone service in 2002 and 2005 if a
1.35 poverty guideline criterion were instituted nationally. The number
of households that would take telephone service because of a 1.35 PGC is
then compared to the number of households that would take Lifeline in
Table 2.I.

*Quantifying logistic regression coefficients*

In a standard regression analysis, the effect that a change in the
independent variable has on the dependent variable is relatively easy to
measure because it is linear. When using standard linear regression, a
model is often expressed as follows: Y = a + b\*X. In this equation, Y
represents the dependent variable, "a" represents a constant, and "b" is
the coefficient from the regression which is multiplied by the size of
the independent variable X. The symbol Δ is often used to represent the
change in a variable.

The change in Y caused by a change in X is then represented like this:

ΔY = b\*ΔX. Thus, the change in Y for a change in an independent
variable is simply the coefficient on the independent variable times the
amount of the change in that independent variable.

Because logistic regression analysis is not linear, however, the above
calculation cannot be made directly. Instead, two intermediate
calculations must be made. The first calculation quantifies the
dependent variable using the mean values of the independent variables.
The second calculation quantifies the dependent variable using the same
means as in the first calculation, except that one of the independent
variables is set to the new policy level. The second calculation
replaces the mean of the independent of the variable in question (e.g.,
a policy variable) with an appropriate value representing the change in
the variable. If all states adopted a 1.35 PGC, then the percentage of
low income households living in a state with a 1.35 PGC would move from
18% to 100%. So, in this case, the mean of SH135ORB (which equals 0.180)
would be replaced with 1.00.

For both calculations, Y is calculated by the following equation:

**Y = 1 / (1 + e
^--\ \[1.24\ +\ 0.179\*X1\ +\ 0.035\*\ X2\ -0.757\*\ X3\ +\ 0.975\*\ X4\ +\ 0.463\*\ X5\ -\ 0.245\*X6\ -0.269\*X7\ -0.101\*\ X8\ +0.105\*\ X9\ +\ 0.160\*\ X10\ -\ 0.070\*\ X11\ +\ 0.019\*X12+0.060\*\ X13\ +\ 0.495\*X14\]^)**

Table 2.H explains the calculations. The coefficient values from the
logistic regression are in column a. The means of the independent
variables are in column b. Column c multiplies columns a and b. These
products are often called the "partial effects". The partial effects are
then summed to create a Z score. The Z score is simply a shorthand way
of representing a +b1\*x1 + b2\*x2 + .... When evaluating the
independent variables at their mean values, the Z score equals 2.250. Y
(the probability that a household will take telephone service) is then
calculated: Y = 1/(1+e^-z^), which equals 90.5%. This means that,
nationwide, households with incomes below 1.35 times the poverty
guidelines have an 90.5% chance of having telephone service.

The second calculation is identical to the first, with one exception.
Instead of using the mean value of SH135ORB, the mean is replaced by
a 1. As discussed above, this would be the case if all states have a
1.35 PGC. Just as before, the coefficients (column a) are multiplied by
the means (column d) to produce the new partial effect. Notice that for
SH135ORB, the mean value of 0.18 was replaced with 1.00. The new partial
effects are listed in column E. These partial effects are then summed to
form the new Z score, which equals 2.396. This new Z score is then used
in the calculation as before: Y= =1/(1+e^-z^). The new value for Y is
91.7%. This means that if all states adopted a 1.35 PGC, then 91.7% of
households with incomes at or below 1.35 times the poverty guidelines
would have telephone service. This represents a 1.2 percentage point
increase (91.7% - 90.5%) in telephone subscription rates.

To determine the number of households in 2005 that would take phone
service due to a 1.35 PGC, the difference in the Y's (1.2%) is
multiplied by the number of households that are at or below 1.35 times
the poverty guidelines. Projections made using the CPSH data indicate
that in 2005, there will be 20,710,000 households at or below 1.35 times
the poverty guidelines. Thus, multiplying 1.2% (which equals 0.012)
times 20,710,000 households equals 249,000 households. Thus, the model
indicates that 249,000 households would take telephone service due to a
1.35 PGC in 2005.

*Restricted use of observations and variables*

The logistic regression analyses uses only selected observations and
variables for good reason. One reason is to address a specific policy
proposal from the Joint Board. The Joint Board is recommending using a
1.35 PGC. In order to determine how such a plan would affect households
at or below 1.35 times the poverty guidelines, only those households
with incomes at or below 1.35 times the poverty guidelines are included
in this analysis.[^312] There are 13,828 usable observations.

The number of state specific variables that can be included in the
analysis is limited because only 8 states have SH135ORB equal to one.
Therefore, including additional state specific variables reduces the
accuracy of the coefficient SH135ORB, the important policy variable used
to quantify costs and benefits.

**Discussion of variables in the specifications**

*Assumption that effects of a 1.33 PGC are indistinguishable from a 1.35
PGC*

As mentioned earlier, this study assumes that the effects of a 1.33 PGC
are statistically indistinguishable from a 1.35 PGC. Therefore, SH135ORB
equals one for the states that have 1.33 or 1.50 PGCs. There is no
alternative to measuring the effect of a 1.35 PGC because no states use
a 1.35 PGC.

Further, the fact that this analysis treats states with a 1.50 PGC the
same as states with a 1.33 PGC is not problematic. This is because the
households in the sample are restricted to those that are at or below
1.35 times the poverty guidelines. Thus, all the households in the
sample will make the same economic choice whether the state in which
they live has a 1.33 (or 1.35) or 1.50 PGC, because the households
qualify for Lifeline under either criterion.

*Inclusion of independent variables*

As was done in the first staff study, HFOODSP was included because it
captures the concept of "poverty" in a way that income alone does not.
Participation in the Food Stamps Program is an indicator of special
household needs.

CALIFORNIA-Unique Effects.

The CALIFORNI (California) variable was included as a separate variable
in the regression model because it was included in the Lifeline Model.
The results indicate that a household in California is more likely to
take telephone service. The same variable was not significant when the
analysis was performed on year 2000 data, so it is unclear why it is
significant when using 2002 data.

The logistic regressions were run using the statistical computer program
SPSS version 10. The regression analysis computer printouts are
displayed below:

**Logistic Regression**

![](media/image35.wmf){width="4.266666666666667in" height="1.9in"}

![](media/image36.wmf){width="3.65in" height="1.1833333333333333in"}

![](media/image37.wmf){width="3.341666666666667in"
height="0.9666666666666667in"}

![](media/image38.wmf){width="5.816666666666666in" height="1.9in"}

![](media/image39.wmf){width="6.141666666666667in" height="3.85in"}

![](media/image40.wmf){width="4.266666666666667in" height="1.9in"}

![](media/image41.wmf){width="3.65in" height="1.175in"}

![](media/image42.wmf){width="3.341666666666667in"
height="0.9666666666666667in"}

![](media/image43.wmf){width="5.816666666666666in" height="1.9in"}

![](media/image44.wmf){width="6.108333333333333in"
height="2.441666666666667in"}

STATEMENT OF

CHAIRMAN MICHAEL K. POWELL

Today's Order will help improve the ability of low-income consumers to
make and receive basic telephone calls from their homes. If estimates
prove correct, the expanded eligibility criteria we adopt today should
make telephone service more affordable for approximately 1.17 to 1.29
million Americans -- roughly 234,000 of whom will have never had basic
telephone service before in their lives.

Since its inception, our Lifeline/Link-Up programs have made basic
telephone service affordable to millions of low-income consumers. These
support measures -- though often extremely modest on an individual level
-- have improved people's lives by making everything from jobs, to
healthcare to emergency services available to program participants. And
while overall telephone penetration in the United States remains
extremely high, too many people, particularly on tribal lands and in
rural areas, forgo this essential connection.

By expanding federal default eligibility criteria and encouraging
greater community outreach, today's Order improves the administration of
the program. While this is an important step, we must remain vigilant to
ensure that our statutory goals are met and that states utilize
appropriate certification and verification requirements. In the future,
the Commission must remain watchful for abuses of the self-certification
rule and require underlying documentation where such abuse is
demonstrated.

This item could not have been possible but for the diligence and insight
of the federal and state members of the Joint Board. I am confident that
we will soon see the fruits of your efforts in the form of greater
access to basic telephone service across America.

STATEMENT OF

COMMISSIONER KATHLEEN Q. ABERNATHY

The Lifeline/Link-Up program, together with the Commission's other
universal service support mechanisms, has helped ensure that the vast
majority of Americans ― nearly 95 percent ― have access to
telecommunications services at affordable rates. As successful as this
program has been, however, there is room for improvement. Congress
expressly directed the Commission to facilitate network access for
low-income consumers, and an obvious way to promote that goal is to
allow consumers to qualify for Lifeline and Link-Up support based on
proof of low income. Our program-based eligibility standards remain
useful, but the addition of an income-based standard should
significantly improve our ability to target support to needy recipients.

While I support expansion of the eligibility criteria, I have also been
a strong proponent of measures to prevent waste, fraud, and abuse. In
particular, we must balance the desire to boost enrollment against the
need to impose appropriate certification and verification requirements.
Especially with respect to income-based eligibility, where
self-certification can lend itself to abuse, we must require supporting
documentation. I am confident that the requirements we impose in this
Order will protect the integrity of the program, yet are sufficiently
flexible to avoid placing undue burdens on program participants. We have
also taken steps to ensure that consumers are removed from the Lifeline
rolls once they are no longer eligible, while establishing safeguards to
prevent benefits from being denied erroneously.

I appreciate the hard work of the Joint Board on Universal Service,
which laid the groundwork for this Order.

**STATEMENT OF**

**COMMISSIONER MICHAEL J. COPPS**

Congress defined universal service as an "evolving level of
telecommunications services." As times change, so must the Commission's
efforts to ensure that all Americans have access to services at just,
reasonable and affordable rates. True to statutory intent, today we
adjust and recalibrate some of our policies to improve the effectiveness
of our low-income support mechanism.

I support this action. I am pleased that for the first time we expand
the federal default eligibility criteria to include income-based
criterion. This should make it easier for households that no longer
participate in qualifying assistance programs to participate in Lifeline
and Link-Up. It also should make it simpler for households that are
subject to the time limits associated with several federal public
assistance programs under the Personal Responsibility and Work
Opportunity Reconciliation Act.

The potential of our Lifeline and Link-Up programs is bound closely to
the combined outreach efforts of carriers, states and the Commission.
Only one-third of the households currently eligible for Lifeline and
Link-Up assistance subscribe to these programs. Although we enjoy a
national telephone penetration rate of just below 95 percent, some areas
of this country---especially tribal lands---have penetration rates that
are inexcusably lower. And we must never forget that there are
households in this country without access to basic telephone service. We
are bound by the statute to do more. The enhanced guidelines for
outreach provided by the Order are a good first step. And I am pleased
that the Further Notice of Proposed Rulemaking seeks comment on the need
for additional outreach requirements that would further strengthen the
Lifeline and Link-Up programs. At present, the Commission's rules
require carriers to publicize the availability of these programs "in a
manner reasonably designed to reach those likely to qualify for the
service." I worry that such a broad requirement is difficult to monitor,
hard to enforce and puts beyond the reach of publicity those who would
benefit most from these programs.

The Joint Board's Recommendation underlies the critical changes we make
today. I thank them for their hard work and valuable efforts to ensure
that Lifeline and Link-Up continue to play a role in keeping America
connected.

**STATEMENT OF**

COMMISSIONER Kevin J. Martin

Today the Commission takes steps to update and improve the effectiveness
of its low-income support mechanism. The Commission's statutory charge
is to ensure that all Americans have access to quality services at just,
reasonable and affordable rates. Because of policies like the Lifeline
and Link-Up programs, today more than 95% of all U.S. households have
basic telephone services. By expanding the Federal default eligibility
criteria today, we make it easier for many households to participate and
make support more easily available for thousands of Americans in need.

STATEMENT OF

COMMISSIONER Jonathan S. Adelstein

I am pleased to support this Order because it strengthens and enhances
the Commission's Lifeline and Link-Up programs. Together, the Lifeline
and Link-Up programs form the backbone of our efforts to promote
universal telephone service for low-income consumers. By providing
discounts on telephone installation and monthly telephone service to
low-income consumers, the Lifeline and Link-Up programs have been
instrumental in helping us achieve extraordinarily high levels of
telephone penetration in the U.S. Overall, more than 95 percent of
households in the U.S. have telephone service.

Indeed, for most of us, living without telephone service is almost
unimaginable. Telephone service is considered a necessity for daily
modern life. It is a link to our jobs, to commerce, to healthcare and
emergency services, not to mention friends and family. Increasingly,
telephone service is a baseline, upon which we are building a national
communications infrastructure capable of supporting services that are
transforming our economy and way of life.

Despite our progress, consumers in over 5 million U.S. households lack
even the most basic connectivity. For many of these consumers, the cost
of activating and maintaining telephone service is prohibitively
expensive, keeping even the most basic connections out of reach. This is
particularly so for low income consumers, who are much less likely to
have access to telephone service. So, I am pleased that this order
strikes at that gap by introducing for the first time federal
income-based criteria for the Lifeline and Link-Up programs. This Order
recognizes that poverty rates are increasing, while participation in
many public assistance programs is decreasing. I hope that the
income-based criteria that we adopt in this Order will allow our
valuable programs to reach more of the consumers who truly need this
assistance, and I look forward to exploring the broader criteria
proposed in the attached Notice.

> I am also pleased that this Order encourages states and carriers to do
> more to increase participation by eligible consumers. With less than
> half of all eligible households participating in these programs, it
> appears that many low income consumers are unaware that assistance is
> available to them. One significant step in this Order is the
> conclusion that we must do more to reach out to non-English speaking
> consumers. Through this approach, we recognize and foster the
> diversity of our communities.

I would like to thank the members of the Federal-State Joint Board on
Universal Service for their contributions on this issue. Their
recommendations form the basis for this decision. I would also like to
recognize our colleagues in the state public utility commissions who
continue to work hard to implement these programs as efficiently and
effectively as possible. All of us benefit from their efforts and
success.

[^1]: *See* Wireline Competition Bureau, Federal Communications
    Commission, *Trends in Telephone Service Report*, Tables 20.2, 20.4
    (August 2003) (*2003 Trends Report*) (estimating that 6.6 million
    people paid reduced rates under the Lifeline program in 2002 and
    13.7 million people paid reduced charges under Link-Up since 1991).

[^2]: *See* Wireline Competition Bureau, Federal Communications
    Commission, *Telephone Subscribership in theUnited States Report*,
    Table 1 (rel. May 14, 2004) (*Telephone Subscribership Report*)
    (data through Nov. 2003).

[^3]: *See* Commission Staff Analysis set forth in Appendix K at Table
    1.B. These projections were based on March 2000 and March 2002
    Current Population Survey of Household data (CPSH data), and
    adjusted for growth.

[^4]: 47 U.S.C. § 254(b); *Federal-State Joint Board on Universal
    Service*, CC Docket No. 96-45, Recommended Decision, 18 FCC Rcd
    6589, 6591, para. 1 (2003) (*Recommended Decision*).

[^5]: 47 U.S.C. § 254(b).

[^6]: Pub. L. No. 104-104, 110 Stat. 56. The Telecommunications Act of
    1996 (the 1996 Act) amended the Communications Act of 1934 (the
    Act).

[^7]: 47 U.S.C. § 254.

[^8]: 47 U.S.C. § 254(b).

[^9]: The Commission adopted Lifeline/Link-Up prior to passage of the
    1996 Act pursuant to its general authority under sections 1, 4(i),
    201, and 205 of the Act. *See* *Federal-State Joint Board on
    Universal Service,* CC Docket No. 96-45, Report and Order, 12 FCC
    Rcd 8776, 8952-53, para. 329 (1997) (*1997 Universal Service
    Order*); 47 U.S.C. §§ 151, 154(i), 201, 205.

[^10]: *See* 47 C.F.R. § 54.401(a)(2); *1997 Universal Service Order*,
    12 FCC Rcd at 8957, para. 341.

[^11]: *See* 47 C.F.R. § 54.411(a)(1).

[^12]: *See* 47 C.F.R. §§ 54.405(a)(4), 54.411(a)(3). Under the
    Commission's rules, there are four tiers of federal Lifeline
    support. All eligible subscribers receive Tier 1 support which
    provides a discount equal to the ETC's subscriber line charge. Tier
    2 support provides an additional \$1.75 per month in federal
    support, available if all relevant state regulatory authorities
    approve such a reduction. (All fifty states have approved.) Tier 3
    of federal support provides one half of the subscriber's state
    Lifeline support, up to a maximum of \$1.75. Only subscribers
    residing in a state that has established its own Lifeline/Link-Up
    program may receive Tier 3 support, assuming that the ETC has all
    necessary approvals to pass on the full amount of this total support
    in discounts to subscribers. Tier 4 support provides eligible
    subscribers living on tribal lands up to an additional \$25 per
    month towards reducing basic local service rates, but this discount
    cannot bring the subscriber's cost for basic local service to less
    than \$1. *See* 47 C.F.R. § 54.403.

[^13]: 47 U.S.C. § 214(e) (setting forth the requirements for ETC
    designation).

[^14]: 47 U.S.C. § 254(e).

[^15]: *See* 47 C.F.R. §§ 54.409(a), 54.415(a). *See also* 47 U.S.C. §
    254(j) (giving the Commission the authority to maintain pre-1996 Act
    Lifeline/Link-Up framework).

[^16]: *See* Appendix G for a list of current federal default states.
    Except as otherwise specifically provided, the term "State" means
    the States, the District of Columbia, Territories, and possessions
    of the United States of America.

[^17]: *See* Federal-State Joint Board on Universal Service, CC Docket
    No. 96-45, Order, 15 FCC Rcd 25257 (2000) (*Referral Order*).

[^18]: *See* *generally Recommended Decision*.

[^19]: *See generally Recommended Decision*.

[^20]: *See* *Lifeline and Link-Up,* WC Docket No. 03-109, Notice of
    Proposed Rulemaking, 18 FCC Rcd 11628 (2003), modified by
    *Federal-State Board on Universal Service Lifeline and Link-Up*, WC
    Docket No. 03-109, Erratum, 18 FCC Rcd 16694 (2003) (collectively
    *NPRM*).

[^21]: *See* 47 C.F.R. §§ 54.409(b), 54.415(b).

[^22]: *See* 47 C.F.R. §§ 54.409(a), 54.415(a).

[^23]: *Federal-State Joint Board on Universal Service; Promoting
    Deployment and Subscribership in Unserved and Underserved Areas,
    Including Tribal and Insular Areas*, CC Docket No. 96-45, Twelfth
    Report and Order, Memorandum Opinion and Order, and Further Notice
    of Proposed Rulemaking, 15 FCC Rcd 12208 (2000) (*Twelfth Report and
    Order*).

[^24]: *See Twelfth Report and Order*, 15 FCC Rcd at 12245-48, paras.
    68-74.

[^25]: *See* 47 C.F.R. §§ 54.409(c), 54.415(c); *Twelfth Report and
    Order*, 15 FCC Rcd at 12245, para. 68.

[^26]: *See* 47 C.F.R. §§ 54.409(c), 54.415(c). *See Twelfth Report and
    Order*, 15 FCC Rcd at 12247-48, paras. 73-74.

[^27]: *See NPRM*, 18 FCC Rcd at 11628, para. 1.

[^28]: *See Recommended Decision*, 18 FCC Rcd at 6597, para. 15.

[^29]: *See Recommended Decision*, 18 FCC Rcd at 6597, para. 15.

[^30]: *See* 2003 Poverty Guidelines for the 48 Contiguous States and
    the District of Columbia, 68 Fed. Reg. 6456-58 (2003) (*2003 FPG*).

[^31]: *See* Appendix D. In order to qualify under this income-based
    criterion, all income actually received by all members of the
    household will be counted. This includes salary before deductions
    for taxes, public assistance benefits, social security payments,
    pensions, unemployment compensation, veteran's benefits,
    inheritances, alimony, child support payments, worker's compensation
    benefits, gifts, lottery winnings, and the like. The only exceptions
    are student financial aid, military housing and cost-of-living
    allowances, irregular income from occasional small jobs such as
    baby-sitting or lawn mowing, and the like. States with their own
    Lifeline/Link-Up programs may adopt their own definition of income
    if they have not already done so. *See* Appendix A (defining
    "income").

[^32]: *See* Appendix K at Table 2.F. The staff analysis assumes that
    all states without an existing income criterion or an income
    criterion at or below 135% of the FPG adopt the new federal default
    income-based standard. Accordingly, the estimates presented are
    likely to represent the upper limit of potential new Lifeline and
    telephone subscribers and estimated impact on the fund. If some
    states choose not to adopt the federal income-based criteria, the
    number of subscribers would be correspondingly lower. This analysis
    also assumes the following: states that already have an income
    criterion of 150% of the FPG or higher keep it; there are no other
    changes to the Lifeline/Link-Up program or the qualifying
    Lifeline/Link-Up eligibility programs; and states, ETCs, and
    consumers quickly learn of the program change and rapidly act on
    that information. *See* Appendix K at 3, 13.

[^33]: *See* Appendix K at Table 2.H.

[^34]: *See* Appendix K at Table 2.F.

[^35]: *See* Acorn Comments at 4; BellSouth Comments at 3, Reply
    Comments at 3; Consumer Coalition Comments at 1; Florida PSC
    Comments at 3; NASUCA Reply Comments at 5, 9; NCLC Comments at 3,
    Reply Comments at 4; NFFN Comments at 7; NY Dep't of Public Service
    Comments at 1-2; OH PUC Comments at 4; Commissioner Wilson PaPUC at
    Reply Comments 2-3; PULP Comments at 1-2; TX Legal Services Center
    Comments at 1; TOPC Comments at 5-6; Tribal Telecom Outreach
    Comments at 1; USCCB Comments at 3-4, 6; UUI Comments at 4.

[^36]: *See* NASUCA Reply Comments at 12; NCLC Comments at 5-6; NFFN
    Comments at 7; PULP Comments at 1-2; TX Legal Services Center
    Comments at 1.

[^37]: Pub.L.No. 104-193, 110 Stat. 2105 (Aug. 22, 1996).

[^38]: *1997 Universal Service Order*, 12 FCC Rcd at 8974, para. 374.

[^39]: *Twelfth Report and Order*, 15 FCC Rcd at 12247, para. 72.

[^40]: Food Stamps enrollment fell from 25.5 million recipients in FY
    1996 to 21.3 million recipients in FY 2003. *See*
    \<http://www.fns.usda.gov/pd/fssummar.htm\>.

[^41]: *See* U.S. Census Bureau, Current Population Survey, 2002 and
    2003, Annual Social and Economic Supplements; U.S. Census Bureau,
    Current Population Survey, 2001 to 2002, Annual Demographic
    Supplements; U.S. Census Bureau, Current Population Survey, March
    2000 and 2001; *see also*
    \<http://www.census.gov/hhes/income/income02/prs03asc.html\> (2003
    press briefing);
    \<http://www.census.gov/hhes/income/income01/prs02asc.html\> (2002
    press briefing);
    \<http://www.census.gov/hhes/income/income00/prs01asc.html\> (2001
    press briefing). According to the U.S. Census Bureau, the poverty
    threshold for a family of four was \$18,392 in 2002, and \$17,603 in
    2000. *See id*. Poverty thresholds, updated each year by the Census
    Bureau, are used mainly for statistical purposes. In contrast,
    poverty guidelines, issued each year by the Department of Health and
    Human Services, are a simplification of the poverty thresholds, used
    for administrative purposes such as determining financial
    eligibility for certain federal programs. Therefore, Census Bureau
    poverty thresholds, including those for years 2002 and 2000, differ
    from the Department of Health and Human Service's Federal Poverty
    Guidelines. *See generally*
    \<http://aspe.hhs.gov/poverty/02poverty.htm\>,
    \<http://aspe.hhs.gov/poverty/00poverty.htm\>.

[^42]: *See* U.S. Census Bureau, Press Briefing (Sept. 26, 2003), Chart
    12, available at
    \<http://www.census.gov/hhes/income/income02/prs03asc.html\> (last
    visited, Mar. 12, 2004).

[^43]: BellSouth Comments at 3; NASUCA Reply Comments at 12; NCLC
    Comments at 5-6, Reply Comments at 4; OH PUC Comments at 4; PULP
    Comments at 1-2; TX Legal Services Center Comments at 1.

[^44]: 47 U.S.C. § 254.

[^45]: *See Recommended Decision*, 18 FCC Rcd at 6599, para. 17.

[^46]: *See infra* para. 56.

[^47]: *See Recommended Decision*, 18 FCC Rcd at 6599, para. 17. For
    example, the following federal programs use an income-based standard
    as an eligibility criterion: Medicaid (income at or below 133% of
    the FPG), Food Stamps (gross income at or below 130% of the FPG, net
    income at or below 100% of the FPG), Low Income Home Energy
    Assistance Program (LIHEAP) (income at or below 150% of the FPG but
    not lower than 110% of the FPG or 60% of state median income),
    National School Lunch program's free lunch program (income at or
    below 130% of the FPG). We note that these programs may also use
    other eligibility criteria. States with their own Lifeline/Link-Up
    programs may establish their own eligibility criteria or may allow
    carriers to define eligibility. For example, BellSouth Florida,
    Sprint Tennessee, ALLTEL Texas, and Southwestern Bell Texas have an
    income-based eligibility criterion of 125% of the FPG. Qwest Idaho,
    Oregon, and Utah have an income-based eligibility criterion of 133%
    of the FPG. Verizon Oregon has an income-based eligibility criterion
    of 135% of the FPG. Pacific Bell California, Verizon Michigan,
    Sprint Minnesota, Missouri, Nebraska, Nevada, Moapa Valley Nevada,
    Verizon Nevada, Sprint Pennsylvania, and Verizon Vermont have an
    income-based eligibility criterion of 150% of the FPG. *See*
    \<http://www.lifelinesupport.org\>. We note these programs may also
    use other eligibility criteria.

[^48]: *See* Appendix K at Table 2.G. As recognized in the staff study,
    this amount represents the upper bound of the potential increase in
    funding as it assumes that all states that do not already have an
    income criterion of at least 135% of the FPG will choose to
    implement the new federal default standard. Moreover, we recognize
    that it is difficult to predict with certainty how consumers may
    behave if program requirements change. *See* Appendix K at 13.

[^49]: *See* Appendix K at Table 2.G.

[^50]: *See* AT&T Reply Comments at 4; CPUC Comments at 6; Florida PSC
    Comments at 3; MCI Comments at 2.

[^51]: *See infra* paras. 56-57.

[^52]: TANF replaced the Aid to Families with Dependent Children program
    (AFDC). TANF is codified at 42 U.S.C. §§ 600 *et seq*.

[^53]: NSL is codified at 42 U.S.C. §§ 1751 *et seq*.

[^54]: *See Recommended Decision*, 18 FCC Rcd at 6601, para. 20.

[^55]: *See* Consumer Coalition Comments at 2.

[^56]: In Tribal TANF, participation is only open to those living on
    tribal lands, and tribes implement their own TANF programs with
    eligibility criteria and benefits that vary by tribe rather than by
    state. *See* \<http://www.acf.hhs.gov/programs/dts/guidettf01.htm\>.

[^57]: *Twelfth Report and Order*, 15 FCC Rcd at 12245, para. 68. We
    note that: (1) income eligibility criteria in the programs listed
    may have changed in the four years since the *Twelfth Report and
    Order* was released and (2) because Tribal TANF eligibility criteria
    varies by tribe, income eligibility criteria in certain Tribal TANF
    programs may not range from 100-130% of the FPG.

[^58]: *See* NCLC Comments at 3-4.

[^59]: In fiscal year 2002, there were approximately 5.1 million
    recipients receiving TANF support. *See* HHS/ACF/Office of Family
    Assistance/Division of Data Collection and Analysis, ACF-3637,
    Statistical Report on Recipients under Public Assistance (OMB
    Approval No. 0970-008), ACF-198, Emergency TANF Data Report
    (0970-0164), ACF-199, TANF Data Report (0970-0199);
    \<http://www.acf.dhhs.gov/news/stats/2002tanfrecipients.htm\>.

[^60]: *See Recommended Decision*, 18 FCC Rcd at 6601, para. 21.

[^61]: *See 1997 Universal Service Order*, 12 FCC Rcd at 8974, para.
    374.

[^62]: *See id*.

[^63]: *See infra* note Error: Reference source not found.

[^64]: *See Recommended Decision*, 18 FCC Rcd at 6601, para. 22. We note
    that each state's TANF program is subject to modification, as are
    all the means-tested programs that comprise Lifeline/Link-Up's
    program-based criteria.

[^65]: *See* Consumer Coalition Comments at 1-2; Florida PSC Comments at
    4; NCLC Comments at 3-4; NASUCA Reply Comments at 16; NY Dep't of
    Public Service Comments at 1-2; PaPUC Reply Comments at 3;
    Commissioner Wilson PaPUC Reply Comments at 4-5; Tribal Telecom
    Outreach Comments at 1; USCCB Comments at 8-9.

[^66]: *See* NASUCA Reply Comments at 16.

[^67]: *See Recommended Decision*, 18 FCC Rcd at 6602, para. 23.

[^68]: *See* 47 C.F.R. § 54.409(c).

[^69]: In Tribal NSL, participation is only open to children living on
    tribal lands, and children living on tribal lands are automatically
    eligible if they or their household receives assistance under the
    Food Distribution Program on Indian Reservations. *See* *generally*
    \<http://www.fns.usda.gov/cnd/lunch/default.htm\>.

[^70]: *See 2003 FPG*, 68 Fed.Reg. at 6456-58. We note that the NSL
    program is subject to modification, as are all the means-tested
    programs that comprise Lifeline/Link-Up's program-based criteria.

[^71]: *See* \<http://www.fns.usda.gov/cnd/About/faqs.htm\>.

[^72]: *See* \<http://www.fns.usda.gov/pd/slsummar.htm\>.

[^73]: *See Recommended Decision*, 18 FCC Rcd at 6602, para. 23.

[^74]: These commenters supported adding NSL to the federal default
    eligibility criteria. *See* Consumer Coalition Comments at 2;
    Florida PSC Comments at 4; NCLC Comments at 3-5; NASUCA Reply
    Comments at 16-17; NY Dep't of Public Service Comments at 1-2; OK
    Corporation Commission Comments at 3; Commissioner Wilson PaPUC
    Reply Comments at 4-5; Tribal Telecom Outreach Comments at 1; USCCB
    Comments at 8-9.

[^75]: *See* NCLC Comments at 3-5.

[^76]: *See* NCLC Comments at 5.

[^77]: *See Twelfth Report and Order*, 15 FCC Rcd at 12245, para. 68.

[^78]: For example, in 1996, there were 12.7 million children enrolled
    in NSL's free lunch program. In 2003, there were 13.7 million
    children enrolled in NSL's free lunch program. *See*
    \<http://www.fns.usda.gov/pd/slsummar.htm\>.

[^79]: *See 1997 Universal Service Order*, 12 FCC Rcd at 8974, para.
    374.

[^80]: *See* 47 C.F.R. § 54.409(b).

[^81]: *See Recommended Decision*, 18 FCC Rcd at 6605, paras. 29, 30.

[^82]: *See NPRM*, 18 FCC Rcd at 11629, para. 2.

[^83]: *See Recommended Decision*, 18 FCC Rcd at 6604, para. 29; NASUCA
    Reply Comments at 30; NCLC Comments at 13-15; OH PUC Comments at 8.

[^84]: *See* 47 U.S.C. §§ 254(b)(1), 254(b)(3).

[^85]: *See* PaPUC Reply Comments at 4 (citing 52 Pa. Code §§
    64.131-134, 64.141-142). *See also* Commissioner Wilson PaPUC Reply
    Comments at 5-6.

[^86]: *See* PaPUC Reply Comments at 4 (citing 52 Pa. Code § 64.133).
    *See also* Commissioner Wilson PaPUC Reply Comments at 5-6.

[^87]: *See infra* para. 22.

[^88]: An ETC may have a reasonable basis to believe that a consumer no
    longer qualifies for Lifeline if, for example, the state alerts the
    ETC that a particular consumer no longer participates in a
    Lifeline-qualifying program or the consumer fails to provide
    information in response to a request for documentation by the ETC.

[^89]: Where ETCs provide wholesale Lifeline rates to non-ETC resellers
    that provide discounted service to low-income consumers in states
    that lack dispute resolution procedures, the non-ETC reseller must
    comply with these requirements.

[^90]: Commenters also agreed that 60 days is a reasonable amount of
    time. *See* NASUCA Reply Comments at 30; NCLC Comments at 14; OH PUC
    Comments at 8.

[^91]: *See generally* 47 U.S.C. § 254.

[^92]: *See infra* paras. 28-35.

[^93]: *See* 47 C.F.R. § 54.409(b).

[^94]: 47 C.F.R. § 54.409(a).

[^95]: 47 C.F.R. § 54.409(b).

[^96]: *Id*.

[^97]: The definition of automatic enrollment in the Lifeline/Link-Up
    context is an "electronic interface between a state agency and the
    carrier that allows low-income individuals to automatically enroll
    in Lifeline/Link-Up following enrollment in a qualifying public
    assistance program." *Recommended Decision*, 18 FCC Rcd at 6608,
    para. 38.

[^98]: *Recommended Decision*, 18 FCC Rcd at 6610, para. 44.

[^99]: *Id*. at 6607-08, para. 38.

[^100]: *Id*. at 6608, para. 39.

[^101]: *See id*. at 6608, 6625-26, paras. 39-40, Appendix E.

[^102]: *Recommended Decision*, 18 FCC Rcd at 6625-26, Appendix E.
    Massachusetts and North Dakota require an affirmative action by the
    enrollee. *Id*.

[^103]: *Id*. at 6626, Appendix E. New York employed a confidentiality
    agreement between the state agency and the carrier to facilitate the
    release of qualifying information and safeguard consumer privacy
    rights.

[^104]: *See, e.g.,* ACORN Comments at 4; NASUCA Comments at 17-20; NCLC
    Comments at 8; NCLC Reply Comments at 4-5; NFFN Comments at 8, OK
    Corporation Commission Comments at 4; USCCB Comments at 9.

[^105]: For example, in Texas, plans are underway to implement the state
    legislature's determination that all utility discount plans should
    be administered by a third party, the Low Income Discount
    Administrator (LIDA). *See* NASUCA Reply Comments at 18-19; *see
    also*
    \<http://www.puc.state.tx.us/openmeet/openmeetarc/2003/121803.pdf\>.
    It is proposed that the LIDA will interface with state agencies and
    automatically enroll consumers that are eligible for utility
    discounts in various assistance programs, including Lifeline.

[^106]: *See Recommended Decision*, 18 FCC Rcd 6608, para. 40.

[^107]: Massachusetts, Texas, New York, New Jersey, Nevada, and Ohio are
    examples of states utilizing automatic enrollment in their
    Lifeline/Link-Up programs.

[^108]: *See e.g.*, AT&T Reply Comments at 4; BellSouth Comments at 4-5;
    Verizon Comments at 8-10.

[^109]: *See Recommended Decision*, 18 FCC Rcd at 6606, para. 32. *See
    also* Consumer Coalition Comments at 1-3.

[^110]: 47 C.F.R. § 54.409(b).

[^111]: 47 C.F.R. § 54.409(a).

[^112]: *See Recommended Decision*, 18 FCC Rcd at 6606, paras. 32-33.

[^113]: *See id*. at 6606, para. 33.

[^114]: *See id*.; *see also* 47 C.F.R. § 54.409(b).

[^115]: *See Recommended Decision*, 18 FCC Rcd at 6606-07, para. 34.

[^116]: *See id.*at 6606, para. 33; *see also* BellSouth Comments at 6;
    MCI Comments at 3; NCLC Comments at 4, Reply Comments at 4.

[^117]: *See* BellSouth Comments at 6; FPSC Comments at 2, 4; MCI
    Comments at 3; NCLC Comments at 4, Reply Comments at 4.

[^118]: *See, e.g.* ACORN Comments at 5; Consumer Coalition Comments at
    2-3; NASUCA Reply Comments at 21; USCCB Comments at 7; TX OPUC
    Comments at 3-4, Reply Comments at 4-5.

[^119]: *See* Florida PCS Comments at 4-5. *See also Recommended
    Decision*, 18 FCC Rcd at 6650, 6668, Table 1.A, Appendix F. The
    Current Population Survey of Households is a monthly survey of
    households conducted by the Bureau of Census for the Bureau of Labor
    Statistics. It provides a comprehensive body of data on the labor
    force, employment, unemployment, and persons not in the labor force.
    *See* \<http://www.bls.gov/cps\>.

[^120]: *See* NFFN Comments at 4; PULP Comments at 2.

[^121]: *See Recommended Decision*, 18 FCC Rcd at 6606-07, para. 34;
    Bell South Comments at 5-6; MCI Comments at 3-4; FPSC Comments at 4;
    NY Department of Public Service Comments at 1-2.

[^122]: *See Recommended Decision*, 18 FCC Rcd at 6606-07, para. 34.

[^123]: 47 C.F.R. § 54.409(c) (consumers living on a reservation may
    qualify for Tiers One, Two and Four of Lifeline support if they
    satisfy the criteria in 54.409(c) or (d) even if they do not satisfy
    state eligibility criteria); *see also Federal-State Joint Board on
    Universal Service; Promoting Deployment and Subscribership in
    Unserved And Underserved Areas, Including Tribal and Insular Areas;
    Commonwealth of Northern Mariana Islands*, CC Docket No. 96-45,
    Twenty-Fifth Order On Reconsideration, Report and Order, Order, and
    Further Notice Of Proposed Rulemaking, 18 FCC Rcd 10958, 10970-71,
    para. 24 (2003).

[^124]: *See Recommended Decision*, 18 FCC Rcd at 6607, para. 35.

[^125]: *Id*. at 6607, paras. 35-36. We note that if a consumer only
    provides one form of documentation, as we require here, that may not
    represent the household's complete income as defined in our rules.
    *See infra* Appendix A, 47 C.F.R. § 54.400(f). Accordingly, we
    require that the consumer self-certify that the documentation
    accurately represents the consumer's total household income. *See
    infra* para. 32.

[^126]: *See* AT&T Reply Comments at 5; OK Corporation Commission
    Comments at 3.

[^127]: AT&T Reply Comments at 5.

[^128]: If an applicant presents three months of payment statements, the
    carrier enrolling the consumer will have to multiply by four, the
    sum of the payments received in three months, to determine the
    applicant's annual income. *See* *infra* Appendix D for estimated
    income requirements for various sizes of households at or below 135%
    of the FPG.

[^129]: *See* 47 C.F.R. §§ 54.407(c), 54.413(c). *See also infra* paras.
    37-38.

[^130]: *See Recommended Decision*, 18 FCC Rcd at 6607, para. 37.

[^131]: *Recommended Decision*, 18 FCC Rcd at 6609, para. 41.

[^132]: *See, e.g.* MCI Comments at 3-4; Florida PSC Comments at 5;
    NASCUA Reply Comments at 17.

[^133]: *See, e.g.* AT&T Comments at 7, Reply Comments at 5; Verizon
    Comments at 6-7.

[^134]: *See Recommended Decision*, 18 FCC Rcd at 6609, para. 41.

[^135]: In Ohio, carriers perform verification audits to substantiate
    consumers' continued eligibility. *See* Ohio PUC Comments at 7. In
    addition, the Ohio PUC provides that carriers may use W-2s,
    pay-stubs, or employer verification as means of income verification.
    *See* *Elective Alternative Regulatory Framework for Incumbent Local
    Exchange Companies*, Entry on Rehearing, Case No. 00-1532-TP-ALT,
    2002WL1058559 (Ohio PUC) (April 25, 2002).

[^136]: For program-based verification of continued eligibility, the
    North Dakota Department of Human Services sends an annual,
    qualifying certificate for Lifeline/Link-Up support to consumers,
    which must be returned to the local telephone company. *See
    Recommended Decision*, 18 FCC Rcd at 6626, Appendix E.

[^137]: In Pennsylvania, most ETCs use the Pennsylvania Department of
    Revenue database to verify income. *See* PaPUC Reply Comments at
    5-6. Another form of verification of continued eligibility used in
    North Dakota involves an annual list sent to the telephone companies
    by North Dakota Department of Human Services identifying eligible
    participants, which the company uses to update its eligible
    subscribers. *See Recommended Decision*, 18 FCC Rcd at 6626,
    Appendix E.

[^138]: 47 C.F.R. § 54.409(c); *see also Federal-State Joint Board on
    Universal Service; Promoting Deployment and Subscribership in
    Unserved And Underserved Areas, Including Tribal and Insular Areas;
    Commonwealth of Northern Mariana Islands*, CC Docket No. 96-45,
    Twenty-Fifth Order On Reconsideration, Report and Order, Order, and
    Further Notice Of Proposed Rulemaking, 18 FCC Rcd 10958, 10970-71,
    para. 24 (2003).

[^139]: *See Recommended Decision*, 18 FCC Rcd at 6610, para. 43. *See*
    Appendix J for a description of how ETCs may draw a statistically
    valid random sample.

[^140]: *See infra* Appendix J.

[^141]: *See supra* paras. 30-31. ETCs should make arrangements to allow
    consumers to present their income documentation at local ETC stores
    or offices.

[^142]: *See* 47 C.F.R. §§ 54.407(c), 54.413(c). *See also infra* paras.
    37-38.

[^143]: *See Recommended Decision*, 18 FCC Rcd at 6609, para. 42.

[^144]: *See,* *e.g.* BellSouth Comments at 5-6; NCLC Reply Comments at
    4; Commissioner Wilson PaPUC Reply Comments at 8; Rural Iowa
    Independent Telephone Association at 1-2.

[^145]: *See supra* paras. 29-31, 32.

[^146]: *See* 47 C.F.R. § 54.409(d), as modified herein.

[^147]: *See supra* para. 32.

[^148]: As described in *supra* para. 38, however, self-certifications
    of eligibility must be retained for as long as the consumer receives
    Lifeline service from the ETC or until the ETC is audited by the
    Administrator.

[^149]: In the event the Commission or Administrator finds an
    irregularity in the non-ETC reseller's records, the Administrator
    may adjust the ETC's low-income support payments.

[^150]: *See NPRM*, 18 FCC Rcd at 11628, para. 1.

[^151]: *See* 47 C.F.R. §§ 54.405(b), 54.411(d). *See also Twelfth
    Report and Order*, 15 FCC Rcd at 12250, para. 78 (amending sections
    54.405 and 54.411 of the Commission's rules).

[^152]: Carol Weinhus, Tom Wilson, Gordon Calaway, et al.,
    Telecommunications Industries Analysis Project, *Calculations and
    Sources for Closing the Gap: Universal Service for Low-Income
    Households,* August 1, 2000. 

[^153]: *Telephone Penetration Report* at table 4 (Ind. Anal. and Tech.
    Div. rel. May 2003), available at
    \<http://www.fcc.gov/Bureaus/Common_Carrier/Reports/FCC-State_Link/IAD/pntris02.pdf\>.

[^154]: *FCC Kicks Off Campaign To Educate Consumers About Phone Service
    Programs For Low-Income Consumers*,

    Lifeline and Link-Up Programs Provide Discounted Phone Service To
    Eligible Consumers, News Release, July 22, 2002.

[^155]: *See Recommended Decision*, 18 FCC Rcd at 6612, para. 50.

[^156]: *See Recommended Decision*, 18 FCC Rcd at 6611, para. 50.

[^157]: *See Recommended Decision*, 18 FCC Rcd at 6611, para. 50.

[^158]: *See* Bell South Comments at 7-9, Reply Comments at 3; Consumer
    Coalition Comments at 1-3; Florida PSC Comments at 7; NASUCA Reply
    Comments at 25-27; OH PUC Comments at 2-3, 7; OK Corporation
    Commission Comments at 4-5; PaPUC Reply Comments at 9-10;
    Commissioner Wilson PaPUC Reply Comments at 12; Tribal Telecom
    Outreach Comments at 1; USCCB Comments at 10-11; Verizon Reply
    Comments at 11-12.

[^159]: *But see* NCLC Comments at 8-10; TX Legal Services Center
    Comments at 1.

[^160]: *See* 47 C.F.R. § 54.405(b).

[^161]: *See infra* Appendix E; *see generally Recommended Decision*,
    Appendix E.

[^162]: *Accord* Florida PSC Comments at 7; OH PUC Comments at 2-3.

[^163]: Bell South states that as part of the CALLS group, it has
    developed a brochure, available through the Federal Consumer
    Information Center entitled "A Smart Consumer's Guide to Telephone
    Service" that includes information for consumers on how to obtain
    Lifeline information on a state and telephone company-specific basis
    (*e.g.*, amount of discount, eligibility, program restrictions,
    application process). *See* Bell South Comments at 8-9.

[^164]: *Accord* OK Corporation Commission Comments at 4.

[^165]: TRS are "telephone transmission services" that enable
    individuals with a hearing or speech disability to communicate "by
    wire or radio with a hearing individual in a manner that is
    functionally equivalent to the ability of an individual" without a
    hearing or speech disability to communicate over wire or radio.
    Examples of TRS include TTY and STS services. 47 C.F.R. § 64.601(7).
    TTY is "a machine that employs graphic communication in the
    transmission of coded signals through a wire or radio communication
    system." 47 C.F.R. § 64.601(8). STS "allows people with speech
    disabilities to communicate with voice telephone users through the
    use of specially trained \[communications assistants (CAs)\] who
    understand the speech patterns of persons with disabilities and can
    repeat the words spoken by that person." 47 C.F.R. § 64.601(10).

[^166]: *Accord* OK Corporation Commission Comments at 5.

[^167]: Useful website information may include the amount a consumer can
    save on their telephone bill, eligibility requirements, program
    restrictions, and instructions on how to apply for Lifeline/Link-Up.
    We note that a lot of this information is currently available at
    \<http://www.lifelinesupport.org\>.

[^168]: *See Recommended Decision*, 18 FCC Rcd at 6628, Appendix E.

[^169]: *Accord* Bell South Comments at 7; Florida PSC Comments at 7.

[^170]: *Accord* Consumer Coalition Comments at 1 (citing as an example
    SBC's partnership with community organizations that includes monthly
    meetings, Lifeline training sessions, and a system of collecting and
    receiving applications including grants to cover expenses); Tribal
    Telecom Outreach Comments at 1 (supporting coordination with tribal
    organizations that are conducting similar efforts).

[^171]: *Accord* OH PUC Comments at 7.

[^172]: *See Recommended Decision*, 18 FCC Rcd at 6615, para. 56; *see
    also* BellSouth Reply Comments at 3 (supporting additional USAC
    involvement in Lifeline/Link-Up outreach).

[^173]: *See Recommended Decision*, 18 FCC Rcd at 6595, para. 10.

[^174]: *See NPRM*, 18 FCC Rcd at 11628-29, para. 2.

[^175]: *See infra* Appendix C. We note that some of the questions
    contained in the survey may refer to information that we may already
    have access to. For example, state-specific eligibility criteria are
    available on USAC's website. We believe, however, that responses to
    the survey's questions will assist us in developing a complete
    picture of a state's Lifeline/Link-Up program.

[^176]: *See* NCLC Comments at 11.

[^177]: *See* BellSouth Comments at 10; NCLC Comments at 10. We disagree
    with NASUCA that submission should be required for states. *See*
    NASUCA Reply Comments at 7.

[^178]: *See* NCLC Comments at 12-13; Appendix C.

[^179]: In its *Recommended Decision*, the Joint Board noted that
    Florida's Lifeline/Link-Up program prohibits disconnection of
    Lifeline service when the subscriber has not paid toll charges. *See
    Recommended Decision*, 18 FCC Rcd at 6616, para. 59. We note that
    consumers who have been disconnected from Lifeline service due to
    unpaid toll charges would not be able to receive Link-Up support
    again unless the consumer has moved to another residence. *See* 47
    C.F.R. § 54.411(c).

[^180]: *See,* *e.g.,* NASUCA Reply Comments at 27; USCCB Comments at
    11-13; *see also* *1997 Universal Service Order*, 12 FCC Rcd at
    8793, para. 28 (stating that studies indicate that disconnection for
    non-payment of toll charges is a significant cause of low
    subscribership among low-income consumers).

[^181]: *TOPUC v. FCC*, 183 F.3d 393, 421-25 (5^th^ Cir. 1999).

[^182]: *Recommended Decision*, 18 FCC Rcd at 6618, para. 62

[^183]: *See id*.

[^184]: *See, e.g.,* NASUCA Reply Comments at 29-30.

[^185]: *See Recommended Decision*, 18 FCC Rcd at 6617-18, para. 61.

[^186]: 47 U.S.C. § 254(e). We note that section 254(h) provides
    exceptions to that requirement under the schools and libraries and
    rural health care programs. *See* 47 U.S.C. § 254(h).

[^187]: *See NPRM*, 18 FCC Rcd at 11629, para. 3. BellSouth specifically
    supported the proposal to add the exemption from the
    number-portability charge, currently codified in section
    52.33(a)(1)(i)(C), to Part 54. *See* BellSouth Comments at 10.

[^188]: *See NPRM*, 18 FCC Rcd at 11629, para. 3.

[^189]: *See* 47 C.F.R. § 54.401(c).

[^190]: *NPRM*, 18 FCC Rcd at 11629, para. 3.

[^191]: *See infra* Appendix F.

[^192]: *See* Acorn Comments at 4; Consumer Coalition Comments at 4;
    NASUCA Reply Comments at 5, 9; OH PUC Comments at 9; Commissioner
    Wilson PaPUC Reply Comments at 2-3; TOPC Comments at 5-6; USCCB
    Comments at 3-4, 6.

[^193]: *See id*.

[^194]: *See* \<http://www.acf.hhs.gov/programs/liheap/eligible.htm\>
    (explaining that states may not set income level below 110% of FPG);
    Consumer Coalition Comments at 2; Commissioner Wilson PaPUC Reply
    Comments at 2-3; TOPC Comments at 5-6; USCCB Comments at 4-5.

[^195]: *See, e.g.,* NCLC Comments at 6.

[^196]: Our staff analysis estimates that there could be up to 150,000
    households that have incomes at 1.50 of the FPG, but are not
    eligible for LIHEAP. This estimate assumes that all states will
    implement the federal default criteria. According to the CPSH data,
    in 2002, there were about 685,000 households that met the following
    three conditions: 1) they rented, not owned their dwelling; 2) they
    were between 1.35 and 1.50 of the FPG; and 3) they were not
    otherwise eligible for Lifeline under the default rules established
    in this Order. Presumably, these households would be eligible for
    LIHEAP, except for those in apartments where utilities are included
    in the rent. According to Consumer Expenditure Survey data, about
    20% of all renting households pay nothing for electricity. *See*
    Table 1701 of the Consumer Expenditure Interview Survey, 2002.
    Presumably, most of these households have electricity included in
    their rent. Multiplying 685,000 households by .20 yields 137,000
    households. This amount is then multiplied by 1.077 to adjust for
    household formation between 2002 and 2005 (*see* Table 1.B of
    Appendix K). Multiplying 137,000 \* 1.077 = 147,549. This number
    rounds to 150,000 households.

[^197]: *See* NCLC Comments at 6. In addition, one commenter notes that
    this expanded income-based criterion might allow low-income legal
    immigrants who may no longer be eligible to participate in certain
    Lifeline/Link-Up qualifying programs due to restrictions imposed by
    PROWRA, to participate in Lifeline/Link-Up. *See* NFFN Comments at
    7, 14.

[^198]: Food Stamps enrollment fell from 25.5 million recipients in FY
    1996 to 21.3 million recipients in FY 2003. *See*
    \<http://www.fns.usda.gov/pd/fssummar.htm\>. TANF enrollment fell
    from 12.6 million recipients in FY 1996 to 5.1 million recipients in
    FY 2002. *See* HHS/ACF/Office of Family Assistance/Division of Data
    Collection and Analysis, ACF-3637, Statistical Report on Recipients
    under Public Assistance (OMB Approval No. 0970-008), ACF-198,
    Emergency TANF Data Report (0970-0164), ACF-199, TANF Data Report
    (0970-0199);
    \<http://www.acf.dhhs.gov/news/stats/2002tanfrecipients.htm\>. *See
    also supra* paras. 14-15.

[^199]: *See* *infra* Appendix K at Table 3.B for 1.50 PGC and Table 3.B
    for 1.35 PGC.; *see also* Table 2.H (estimating no increased
    telephone penetration rate with a 1.50 PGC).

[^200]: *See infra* Appendix F.

[^201]: *See infra* at para. 45.

[^202]: Currently, sections 54.405 and 54.411 of the Commission's rules
    require all ETCs to publicize the availability of Lifeline and
    Link-Up in a manner reasonably designed to reach those likely to
    qualify for the service. 47 C.F.R. §§ 54.405(b), 54.411(d).

[^203]: 47 C.F.R. §§ 1.415, 1.419.

[^204]: *See Electronic Filing of Documents in Rulemaking Proceedings*,
    13 FCC Rcd 11322, 11326 (1998).

[^205]: This is a reproduction of Appendix E to the *Recommended
    Decision*. *See generally* *Recommended Decision*, Appendix E. This
    information was compiled by the Joint Board from assertions of
    commenters in response to the Joint Board's *Public Notice*.
    *Federal-State Joint Board on Universal Service Seeks Comment on
    Review of Lifeline and Link-Up Service for All Low-Income
    Consumers*, CC Docket 96-45, Public Notice, 16 FCC Rcd 18407 (2001)
    (*Public Notice*). The Commission reproduces this appendix for
    illustrative purposes only and takes no position on any of the
    practices described herein.

[^206]: *See* NCLC Comments at 5-6.

[^207]: *See* Colorado DHS/OCC Comments at 4.

[^208]: *See* NCLC Comments at 6.

[^209]: *See* Civil Rights Forum Comments at 3.

[^210]: *See* North Dakota Public Service Commissioner Comments at 1.

[^211]: *See* Tennessee Regulatory Authority Comments at 11-12.

[^212]: *See* SBC Comments at 2.

[^213]: *See* Minnesota DOC Comments at 4.

[^214]: *See* Tennessee Regulatory Authority Comments at 11-12.

[^215]: *See* Civil Rights Forum Comments at 4; NCLC Comments at 5.

[^216]: *See* Florida PSC Comments at 7.

[^217]: *See* Minnesota DOC Comments at 5.

[^218]: *See* Civil Rights Forum Comments at 5.

[^219]: *See* Smith Bagley Reply Comments at 2, 7-8.

[^220]: *See* Florida PSC Comments at 4.

[^221]: *See* Florida PSC Comments at 7.

[^222]: *See* Florida PSC Comments at 7.

[^223]: *See* Universal Service Administrative Company Comments at 10
    (USAC).

[^224]: *See* Civil Rights Forum Comments at 5.

[^225]: *See* USAC Comments at 14.

[^226]: *See* USAC Comments at 14.

[^227]: *See* USAC Comments at 9.

[^228]: *See* USAC Comments at 12.

[^229]: *See* Civil Rights Forum Comments at 4-5.

[^230]: *See* Civil Rights Forum Comments at 5.

[^231]: *See* NCLC Comments at 7.

[^232]: *See* North Carolina Utilities Commission Comments at 4-5.

[^233]: *See* Civil Rights Forum Comments at 4-5.

[^234]: *See* 5 U.S.C. § 603. The RFA, *see* 5 U.S.C. §§ 601-612, has
    been amended by the Small Business Regulatory Enforcement Fairness
    Act of 1996 (SBREFA), Pub. L. No. 104-121, Title II, 110 Stat. 857
    (1996).

[^235]: *NPRM*, 18 FCC Rcd at 11630-36, paras. 6-22.

[^236]: *See* 5 U.S.C. § 604.

[^237]: 5 U.S.C. § 603(b)(3).

[^238]: 5 U.S.C. § 601(6).

[^239]: 5 U.S.C. § 601(3) (incorporating by reference the definition of
    "small-business concern" in the Small Business Act, 15 U.S.C. §
    632). Pursuant to 5 U.S.C. §601(3), the statutory definition of a
    small business applies "unless an agency, after consultation with
    the Office of Advocacy of the Small Business Administration and
    after opportunity for public comment, establishes one or more
    definitions of such term which are appropriate to the activities of
    the agency and publishes such definition(s) in the Federal
    Register." 5 U.S.C. § 601(3).

[^240]: 15 U.S.C. § 632.

[^241]: *See* USAC Annual Report 2002, Appendix B (2002).

[^242]: The most reliable source of information regarding the total
    numbers of common carrier and related providers nationwide,
    including the numbers of commercial wireless entities, appears to be
    data the Commission publishes annually in its *Trends in Telephone
    Service* report. *See Trends Report* at Table 16.3.

[^243]: 15 U.S.C. § 632.

[^244]: Letter from Jere W. Glover, Chief Counsel for Advocacy, SBA, to
    William E. Kennard, Chairman, FCC (May 27, 1999). The Small Business
    Act contains a definition of "small-business concern," which the RFA
    incorporates into its own definition of "small business." *See* 15
    U.S.C. § 632(a) (Small Business Act); 5 U.S.C. § 601(3) (RFA). SBA
    regulations interpret "small business concern" to include the
    concept of dominance on a national basis. 13 C.F.R. § 121.102(b).

[^245]: 13 C.F.R. § 121.201, NAICS Code 517110.

[^246]: *Id*.

[^247]: 13 C.F.R. § 121.201, NAICS Code 517110.

[^248]: *Id*.

[^249]: FCC, Wireline Competition Bureau, Industry Analysis and
    Technology Division, "Trends in Telephones Service" at Table 5.3,
    Pate 5-5 (Aug. 2003).

[^250]: *Id*.

[^251]: *Id*.

[^252]: 13 C.F.R. § 121.201, NAICS code 517212*.*

[^253]: U.S. Census Bureau, 1997 Economic Census, Subject Series;
    Information, Table 5, "Employment Size of Firms Subject to Federal
    Income Tax: 1997," NAICS code 513322 (October 2000).

[^254]: *See* Federal Communications Commission, Universal Licensing
    System, \<http://wireless.fcc.gov/uls/\>.

[^255]: *See Trends Report*, Table 5.3 - Number of Telecommunications
    Service Providers that are Small Businesses.

[^256]: *Id.*

[^257]: *See* *Amendment of Parts 20 and 24 of the Commission's Rules --
    Broadband PCS Competitive Bidding and the Commercial Mobile Radio
    Service Spectrum Cap*, FCC 96-278, WT Docket No. 96-59, Report and
    Order, Sections 57-60 (released June 24, 1996), 61 FR 33859 (July 1,
    1996) (*Broadband PCS Order*); *see also* 47 C.F.R. § 24.720(b).

[^258]: *See Broadband PCS Order* at Section 60.

[^259]: *See, e.g., Implementation of Section 309(j) of the
    Communications Act -- Competitive Bidding*, PP Docket No. 93-253,
    Fifth Report and Order, 9 FCC Rcd 5532, 5581-84 (1994).

[^260]: FCC News, *Broadband PCS, D, E and F Block Auction Closes,* No.
    71744 (released January 14, 1997).

[^261]: *See supra* para. 39.

[^262]: *See supra* paras. 31, 35, 38, 39.

[^263]: *See supra* paras. 29, 34, 39.

[^264]: *See supra* para. 40.

[^265]: *See supra* para. 38.

[^266]: *See supra* para. 28.

[^267]: *Id*.

[^268]: *See supra* para. 31.

[^269]: *Id*.

[^270]: *See supra* para. 35.

[^271]: *See supra* paras. 29, 34.

[^272]: *See supra* para. 29, 34.

[^273]: *See* 5 U.S.C. § 603*.* The IRFA, *see* 5 U.S.C. §§ 601-12, has
    been amended by the Small Business Regulatory Enforcement Fairness
    Act of 1996 (SBREFA) Pub. L. No. 104-121, Title II, 110 Stat 857
    (1996).

[^274]: *See* 5 U.S.C. § 603(a).

[^275]: *See id*.

[^276]: 47 U.S.C. § 254.

[^277]: *See generally 1997 Universal Service Order*.

[^278]: *See generally 1997 Universal Service Order*, 12 FCC Rcd at
    8973-76, paras. 373-78.

[^279]: *See supra* para. 6.

[^280]: *See supra* paras. 56-57; Appendix F.

[^281]: *See generally* Appendix K.

[^282]: *See supra* para. 57.

[^283]: 5 U.S.C. § 604(a)(3).

[^284]: 5 U.S.C. § 601(6).

[^285]: 5 U.S.C. § 601(3) (incorporating by reference the definition of
    "small business concern" in 5 U.S.C. § 632). Pursuant to 5 U.S.C. §
    601(3), the statutory definition of a small business applies "unless
    an agency after consultation with the Office of Advocacy of the
    Small Business Administration and after opportunity for public
    comment, establishes one or more definitions of such term which are
    appropriate to the activities of the agency and publishes such
    definition in the Federal Register."

[^286]: 15 U.S.C. § 632.

[^287]: *See supra* Appendix H, paras. 5-10.

[^288]: *See* 5 U.S.C. §§ 603(c)(1)-(4).

[^289]: The values 2.706 and .000625 in this formula are mandated by
    OMB. *See* Office of Management and Budget, Memorandum M-03-13 (May
    21, 2003).

[^290]: Sample sizes for ETCs with 400,000 Lifeline subscribers or less
    are calculated pursuant to the following formula: sample size =
    N/(1+{\[N-1\]/n}). N is the number of Lifeline subscribers and n =
    2.706 \* P\*(1 -- P) / .000625, where P is the previously estimated
    proportion of Lifeline subscribers inappropriately taking Lifeline
    service. ETCs may choose to calculate their sample sizes using these
    formulas.

[^291]: For the first year of verification, ETCs should assume that this
    percentage is .01, if there is no evidence to assume a different
    percentage. In subsequent years, ETCs should use the results of
    samples from previous years to determine this estimated percentage.

[^292]: *See Recommended Decision*, 18 FCC Rcd at 6633, Appendix F.

[^293]: *But see supra* note Error: Reference source not found.

[^294]: We recognize that our analysis could change significantly if not
    all states adopt a 1.35 PGC. Also, some states have a 1.50 PGC. This
    study assumes that those states with a 1.50 PGC keep it.

[^295]: Consumer Coalition Comments at 2; Commissioner Wilson Pa PUC
    Reply Comments at 2-3; TOPC Comments at 5-6; USCCB Comments at 4-5.

[^296]: This study assumes throughout that states with a 1.50 PGC
    continue to use a 1.50 PGC.

[^297]: Industry Analysis and Technology Division, Wireline Competition
    Bureau, October 2002 Monitoring Report (October 2002).

[^298]: The website was viewed in early 2002.

[^299]: This is accomplished electronically using Visual Basic for
    Applications for Microsoft Access.

[^300]: *See* Henry Scheffe, [The Analysis of Variance]{.underline}, at
    8 (1959).

[^301]: Consumer Coalition Comments at 2; Commissioner Wilson Pa PUC
    Reply Comments at 2-3; TOPC Comments at 5-6; USCCB Comments at 4-5.

[^302]: The model in the preceding section used households with incomes
    below 1.35 times the FPG.

[^303]: The variable "California" was significant, however, so a strong
    case could be made not to drop it. Because neither specification
    produced a positive and statistically significant result on the
    variable "State has a 1.50 PGC", the issue is essentially moot. The
    only reason it is not entirely moot is that some might be inclined
    to attempt to use the coefficient on "State has a 1.50 PGC" as a
    best guess to calculate the number of additional households that
    might take telephone service with a 1.50 PGC. This would be
    incorrect, because when the variable "California" is included the
    coefficient on "State has a 1.50 PGC" is negative, another
    indication that there is no benefit to a 1.50 PGC over a 1.35 PGC.

[^304]: The Department of Health and Human Services establishes the
    federal poverty guidelines, which is based on the number of people
    living in the household, and whether the household is in the
    mainland United States, Alaska, or Hawaii.

[^305]: The coefficient 0.58 is used to calculate the number of
    additional households that would take Lifeline with a 1.35 PGC. It
    is multiplied by the number of households at or below 1.50 times the
    poverty guidelines (i.e., from 0.0 to 1.50 times the poverty
    guidelines). Even though those households between 1.35 and 1.50
    times the poverty guidelines would not actually qualify for
    Lifeline, the model coefficient is estimated in such a way that a
    correct prediction is made.

[^306]: We note that there is some multicollinearity between the LIHEAP
    variable and TotSup. As a practical matter, if energy assistance is
    included in the regression and TotSup is removed, then the
    coefficient on IncElgAbv125 returns to normal levels and is
    significant.

[^307]: The numbers used in actual calculations are carried out to 6
    significant digits. For ease of viewing, however, the data in Table
    2.H are displayed to only 3 significant digits.

[^308]: This number represents the portion of low income households that
    live in a state with a 1.33 or 1.50 PGC for Lifeline. It should not
    be confused with the logistic regression coefficient of .179. The
    similarity of numbers is purely coincidental.

[^309]: The significance of the eligibility requirements variables was
    determined using a chi squared test. The test is performed as
    follows. The logistic regression is run with the eligibility
    variables, and then without. The "-2\*log likelihood" for both
    models are then compared. If the difference is greater than the chi
    squared critical value, then the variables are significant. The
    difference in the "-2\*log likelihood" is 15.92. The critical value
    for a chi squared test at the 5% level for 7 degrees of freedom (the
    number of eligibility variables) is 14.07. The difference is greater
    than the critical value, so we conclude that the eligibility
    variables are significant.

[^310]: The formula for calculating the missing variable bias can be
    found in many textbooks, including William H. Greene, [Econometric
    Analysis]{.underline}, at 402 (3^rd^ ed. 1997). Observation of the
    equation shows that if the missing variable is uncorrelated with an
    independent variable, then the coefficient on that independent
    variable is unbiased. A regression was run to see if telephone
    prices are correlated with the variable SH135ORB. The weighted
    average price for each of the 41 states for which price data are
    available was created. The variable price was then regressed on the
    variable SH135ORB. There was no correlation. (*See* Industry
    Analysis and Technology Division, Wireline Competition Bureau,
    Federal Communications Commission, *Reference Book,* at 7-8 (2002).

[^311]: For more information on logistic regression analysis, *see*
    Damodar Gujarati, [Basic Econometrics]{.underline} at 481-491 (2^nd^
    ed. 1998).

[^312]: Alternatively, the sample could be restricted to households at
    or below 1.33 times the FPG because there are three states that have
    a 1.33 PGC. By including households at 1.34 and 1.35 times the FPG,
    we are implicitly assuming that those households are eligible for
    Lifeline even though they just miss qualifying for it. On the other
    hand, restricting the sample to households at or below 1.33 times
    the poverty line would exclude many more households from the sample
    in other states with a 1.50 PGC. It is not clear whether a 1.33 FPG
    restriction is better than a 1.35 FPG. Fortunately, the results are
    the same in either case. For both models, the coefficient on
    SH135ORB is virtually identical with either sample restriction.