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 Federal  Communications  Commission  FCC  04-  87 
 Before  the  Federal  Communications  Commission 
 Washington,  D.  C.  20554 

 In  the  Matter  of 

 Lifeline  and  Link-  Up 
 )  ) 
 )  ) 
 )  ) 
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 WC  Docket  No.  03-  109 

 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  Number 
 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  Individuals  Eligibility  for  Lifeline/  Link-  Up.......................................  19  1.  Background  ................................................................................................................  19 
 2.  Discussion....................................................................................................................  20 
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 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 
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 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 
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 I.  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  Boards  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 
 II.  BACKGROUND 
 3.  Section  254  of  the  Communications  Act  of  1934,  as  amended  (the  Act),  6  codified  the  Commissions  and  the  states  historical  commitment  to  advancing  the  availability  of 

 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). 
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 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  Commissions  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 
 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  Commissions  rules,  there  are  four  tiers  of  federal  Lifeline  support.  All  eligible  subscribers  receive  Tier  1  support  which  provides  a  discount  equal  to  the  ETCs 

 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  subscribers  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  subscribers  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). 
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 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  Boards  Recommended  Decision  regarding  modifications  to  the 
 Lifeline/  Link-  Up  program  in  a  Notice  of  Proposed  Rulemaking  (NPRM)  released  on  June  9,  2003.  20 

 III.  REPORT  AND  ORDER 
 A.  Eligibility 
 1.  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 

 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). 
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 state,  consistent  with  sections  54.409  and  54.415  of  the  Commissions  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 
 Programs  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  Boards  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  consumers  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  Lunchs  free  lunch  program 
 (NSL). 
 2.  Discussion 
 a.  Income-  based  Criteria 
 10.  We  adopt  the  Joint  Boards  recommendation  that  a  consumer  be  eligible  to  participate  in  Lifeline/  Link-  Up  if  the  consumers  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 

 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. 
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 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 
 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,  veterans  benefits,  inheritances,  alimony,  child  support  payments,  workers  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  Dept  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). 
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 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 

 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  Services  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. 
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 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 

 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  programs  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. 
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 b.  Program-  based  Criteria 
 13.  We  also  adopt  the  Joint  Boards  recommendation  that  the  Temporary  Assistance  to  Needy  Families  program  (TANF)  52  and  the  National  School  Lunchs  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  Commissions  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  Lunchs  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 
 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>. 
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 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  Boards  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  TANFs  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  states  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  NSLs  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  Commissions 
 current  rules,  Tribal  NSL  is  an  eligibility  criterion  for  enhanced  Lifeline/  Link-  Up  on  tribal  lands.  68  In  general,  NSLs  eligibility  criteria  are  the  same  as  for  Tribal  NSL.  69  To  be  eligible  for 

 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  198. 
 64  See  Recommended  Decision,  18  FCC  Rcd  at  6601,  para.  22.  We  note  that  each  states  TANF  program  is  subject 
 to  modification,  as  are  all  the  means-  tested  programs  that  comprise  Lifeline/  Link-  Ups  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  Dept  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>. 
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 NSLs  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  NSLs  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  NSLs  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  NSLs  free  lunch  program  is  consistent  with  the  Commissions  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 
 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-  Ups  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 

 Dept  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  NSLs  free  lunch  program.  In  2003,  there  were 
 13.  7  million  children  enrolled  in  NSLs  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. 
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 participant  in  the  NSL  program,  it  is  the  households  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. 
 B.  Duration  of  an  Individuals  Eligibility  for  Lifeline/  Link-  Up 
 1.  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 
 2.  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 

 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). 
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 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  states  existing  appeals  process  could  result  in  customer  confusion 
 and  unnecessary  expense  for  the  carrier.  States  should  make  their  own  determination  as  to  whether  the  states  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  Boards  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  consumers  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  states 
 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. 
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 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. 

 C.  Certification  and  Verification  Procedures 
 1.  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  states  certification  and  verification  procedures,  if  any,  in  order  to  enroll  and  continue  to  participate  in  that  states  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 

 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. 
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 2.  Discussion 
 a.  Automatic  Enrollment 
 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  Boards  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 

 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  legislatures  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. 
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 program  because  of  the  technical  requirements  associated  with  interfacing  with  government  agencies  or  third  party  administrators.  108 
 b.  Certification  of  Program-  based  Eligibility 
 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 

 c.  Certification  of  Income-  based  Eligibility 
 28.  We  adopt  the  Joint  Boards  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  Boards  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  Californias  Lifeline  program,  which  utilizes  self-  certification 
 of  income-  based  eligibility,  appears  to  have  more  households  receiving  the  Lifeline  discount 
 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. 
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 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  states  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  states  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  Boards  recommendation  that  consumers  must  provide  documentation  of  income  eligibility  at  enrollment.  124  Specifically, 

 we  agree  with  the  Joint  Boards  recommendation  that  the  prior  years  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/  Workmens  Compensation  statement  of  benefits,  federal  or  tribal 
 notice  letter  of  participation  in  Bureau  of  Indian  Affairs  General  Assistance,  a  divorce  decree,  or 

 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. 
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 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  years 
 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 
 consumers  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  Companys  (USACs)  website.  128  Moreover,  our  rules  do  not 
 require  ETCs  to  retain  the  consumers  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  Boards  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 

 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  households  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  consumers  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  applicants  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. 
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 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. 
 d.  Verification  of  Continued  Eligibility  Under  Program-  based  and  Income-  based  Eligibility 
 33.  We  adopt  the  Joint  Boards  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  Boards  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  consumers  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 

 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. 
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 commissions,  each  states  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 
 states  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  Boards  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, 

 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. 
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 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. 

 D.  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  consumers  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  consumers  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  Commissions  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  Commissions  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- 

 145  See  supra  paras.  29-  31,  32. 
 146  See  47  C.  F.  R.    54.  409(  d),  as  modified  herein. 
 147  See  supra  para.  32. 
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 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  Commissions  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. 

 E.  Outreach 
 1.  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  Commissions  Consumer  and  Governmental  Affairs  Bureau  (CGB) 
 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  resellers  records,  the  Administrator  may  adjust  the  ETCs  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  Commissions  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>. 
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 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 
 2.  Discussion 
 44.  We  agree  with  the  Joint  Board  that  more  vigorous  outreach  efforts  could  improve  Lifeline/  Link-  Up  subscribership  and  adopt  the  Joint  Boards  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  carriers  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 

 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). 
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 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 
 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  Consumers  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>. 
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 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  carriers  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  populations  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  states  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  USACs  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 

 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  SBCs  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. 
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 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  USACs  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 
 F.  Other  Issues 
 1.  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  surveys  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  Boards  recommended  questions  and  added  a  few  questions  to  the 
 survey,  at  the  suggestion  of  NCLC.  178 
 2.  Unpaid  Toll  Charges 
 52.  We  adopt  the  Joint  Boards  recommendation  to  encourage  states  to  consider  implementing  rules  that  require  ETCs  to  offer  Lifeline  service  to  consumers  who  may  have  been 

 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  USACs  website.  We 

 believe,  however,  that  responses  to  the  surveys  questions  will  assist  us  in  developing  a  complete  picture  of  a  states  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. 
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 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  Boards  recommendation  and  take  no  action  on  disconnection  requirements  at  this  time.  We  encourage  states,  however,  to  consider  ways  to 
 address  this  issue. 
 3.  Vertical  Services 
 53.  We  adopt  the  Joint  Boards  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. 
 4.  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&  Ts 

 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 
 179  In  its  Recommended  Decision,  the  Joint  Board  noted  that  Floridas  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). 
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 also  serve  as  a  disincentive  for  other  carriers  to  comply  with  their  ETC  obligations. 
 5.  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  Commissions  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  Commissions  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. 

 IV.  FURTHER  NOTICE  OF  PROPOSED  RULEMAKING 
 A.  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- 

 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. 
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 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 

 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. 
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 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 

 B.  Lifeline  Advertising  Requirements 
 58.  Although  we  adopt  the  Joint  Boards  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? 
 V.  PROCEDURAL  MATTERS 
 A.  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. 

 B.  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. 

 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  Commissions  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). 
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 C.  Filing  Procedures 
 61.  Pursuant  to  sections  1.415  and  1.419  of  the  Commissions  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  Commissions  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  Commissions  contractor,  Natek,  Inc.,  will  receive 
 hand-  delivered  or  messenger-  delivered  paper  filings  for  the  Commissions  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  document  or  using  this  delivery  method  It  should  be  addressed  for  delivery  to 
 Hand-  delivered  or  messenger-  delivered  paper  filings  for  the  Commissions  236  Massachusetts  Avenue,  NE,  Suite  110, 

 203  47  C.  F.  R.    1.415,  1.  419. 
 204  See  Electronic  Filing  of  Documents  in  Rulemaking  Proceedings,  13  FCC  Rcd  11322,  11326  (1998). 
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 Secretary  Washington,  DC  20002  (8:  00  to  7:  00  p.  m.)  Other  messenger-  delivered  documents, 
 including  documents  sent  by  overnight  mail  (other  than  United  States  Postal 
 Service  Express  Mail  and  Priority  Mail) 

 9300  East  Hampton  Drive,  Capitol  Heights,  MD  20743 
 (8:  00  a.  m.  to  5:  30  p.  m.) 
 United  States  Postal  Service  first-  class  mail,  Express  Mail,  and  Priority  Mail  445  12th  Street,  SW  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  commenters  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  partys  pleadings,  preferably  in  a  single  electronic  file.  In  addition,  commenters  must  send  diskette  copies  to  the  Commissions  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  Commissions  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  Commissions  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. 

 D.  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. 
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 VI.  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  Commissions  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 
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 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; 
 STANDARD  PROCEDURES  FOR  SEPARATING  TELECOMMUNICATIONS 
 PROPERTY  COSTS,  REVENUES,  EXPENSES,  TAXES  AND  RESERVES  FOR 
 TELECOMMUNICATIONS  COMPANIES 
 1.  Delete    36.701-  36.741. 
 PART  54  -  UNIVERSAL  SERVICE 

 2.  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. 

 3.  Amend    54.400  by  adding  paragraph  (f)  to  read  as  follows: 
   54.400  Terms  and  definitions. 
 *  *  *  (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,  veterans  benefits,  inheritances,  alimony,  child  support 
 payments,  workers  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. 
 4.  Amend    54.401  by  amending  paragraph  (c)  and  adding  paragraph  (e)  to  read  as  follows: 

   54.401  Lifeline  defined. 
 *  *  *  (c)  Eligible  telecommunications  carriers  may  not  collect  a  service  deposit  in  order  to  initiate 
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 Federal  Communications  Commission  FCC  04-  87 
 A-  2 
 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. 
 5.  Amend    54.405  by  adding  paragraphs  (c)  and  (d)  to  read  as  follows: 
   54.405  Carrier  obligation  to  offer  Lifeline. 
 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  subscribers  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 
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 A-  3 
 Lifeline  termination  must  comply  with  the  applicable  state  requirements. 
 6.  Amend    54.409  by  amending  paragraphs  (b)  and  (c)  and  adding  paragraph  (d)  to  read  as  follows: 

   54.409  Consumer  qualification  for  Lifeline. 
 (a)  *  *  * 
 (b)  To  qualify  to  receive  Lifeline  service  in  a  state  that  does  not  mandate  state  Lifeline  support,  a 
 consumers  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  Programs 
 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  consumers  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  consumers  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  consumers  household  income;  and 
 (iii)  the  consumer  will  notify  the  carrier  if  that  consumer  ceases  to  participate  in  the 
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 A-  4 
 program  or  programs  or  if  the  consumers  income  exceeds  135%  of  the  Federal  Poverty 
 Guidelines. 
 7.  Create  new    54.410  to  read  as  follows: 
 54.410  Certification  and  Verification  of  Consumer  Qualification  for  Lifeline. 

 (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  consumers 
 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  consumers 
 enrollment  if  the  consumer  is  qualifying  under  the  income-  based  criterion  specified  in   
 54.409(  b).  Acceptable  documentation  of  income  eligibility  includes  the  prior  years  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/  Workmens  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 
39
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 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  consumers  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 
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 Federal  Communications  Commission  FCC  04-  87 
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 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  consumers  household  income  and  the 
 number  of  individuals  in  the  household. 
 8.  Create  new    54.416  to  read  as  follows: 
   54.416  Certification  of  Consumer  Qualification  for  Link  Up. 

 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). 
 9.  Create  new    54.417  to  read  as  follows: 
   54.417  Recordkeeping  Requirements. 

 (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 
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 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. 
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 Federal  Communications  Commission  FCC  04-  87 
 B-  1 
 APPENDIX  B 
 LIST  OF  PARTIES  FILING  COMMENTS  IN  RESPONSE  TO  THE  NOTICE  OF  PROPOSED  RULEMAKING 

 Comments 
 1.  ACORN  2.  AT&  T  Corp.  (AT&  T) 
 3.  BellSouth  Corporation  (BellSouth)  4.  Empowerment  Center  of  Greater  Cleveland  Consumers  for  Fair  Utility  Rates  (Consumers 
 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 
 Peoples  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 
 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 
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 C-  1 
 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  states  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  states  Lifeline/  Link-  Up  eligibility  requirements. 
 6.  Describe  the  states  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  states  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  states  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? 
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 APPENDIX  D 
 ESTIMATED  INCOME  REQUIREMENTS  FOR  A  HOUSEHOLD  AT  OR  BELOW  135%  OF  THE  FEDERAL  POVERTY  GUIDELINES 

 Size  of  Family  Unit  48  Contiguous  States  and  D.  C.  Alaska  Hawaii 
 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  person,  add  4,239  5,306  4,874 
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 APPENDIX  E 
 LIFELINE/  LINK-  UP  STATE  PROCEDURES  AS  COMPILED  BY  THE  FEDERAL-  STATE  JOINT  BOARD  ON  UNIVERSAL  SERVICE  1 

 I.  ELIGIBILITY 
 A.  Self-  Certification  of  Eligibility  for  Enrollment 
 1.  California  2 
 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. 

 B.  Paperless  Enrollment  Application 
 1.  Colorado  3 
 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. 
 C.  Automatic  Enrollment 
 1.  Massachusetts  4 
 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  households  permission,  but  it  is  done 

 1  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  Boards  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.  2 
 See  NCLC  Comments  at  5-  6.  3 
 See  Colorado  DHS/  OCC  Comments  at  4.  4 
 See  NCLC  Comments  at  6. 
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 electronically  in  most  cases.  This  facilitates  enrollment,  and  the  results  are  evident  in  the  relatively  high  Lifeline  subscription  rate  in  Massachusetts. 
 2.  New  York  5 
 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. 
 3.  North  Dakota  6 
 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. 
 D.  Paper-  Proof  Verification  of  Continued  Eligibility 
 1.  Tennessee  7 
 The  process  used  in  Tennessee  initially  requires  the  applicant  requesting  Link-  Up  and 

 5  See  Civil  Rights  Forum  Comments  at  3. 
 6  See  North  Dakota  Public  Service  Commissioner  Comments  at  1. 
 7  See  Tennessee  Regulatory  Authority  Comments  at  11-  12. 
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 Federal  Communications  Commission  FCC  04-  87 
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 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. 

 E.  On-  Line  Verification  of  Continued  Eligibility 
 1.  Illinois  8 
 In  Illinois,  ETCs  can  perform  on-  line  verification  of  a  consumers  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. 
 2.  Minnesota  9 
 Minnesota  verifies  the  income  and/  or  disability  of  all  applicants.  An  enrollees  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. 
 3.  Tennessee  10 
 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. 
 II.  OUTREACH 
 A.  Multi-  Lingual  Assistance 
 1.  California  11 
 On  December  11,  2001,  the  California  PUC  approved  a  one-  year,  $5  million  contract  to 
 8  See  SBC  Comments  at  2. 
 9  See  Minnesota  DOC  Comments  at  4. 
 10  See  Tennessee  Regulatory  Authority  Comments  at  11-  12. 
 11  See  Civil  Rights  Forum  Comments  at  4;  NCLC  Comments  at  5. 
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 Federal  Communications  Commission  FCC  04-  87 
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 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  Californias  outreach  efforts,  Lifeline  participation  rates  have  increased  from  1,467,859  in  1989  to  3,196,661  in  2000. 

 2.  Florida  12 
 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. 
 3.  Minnesota  13 
 To  accommodate  the  states  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. 
 4.  Tennessee  14 
 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. 
 B.  Tribal  Outreach 
 1.  Arizona  and  New  Mexico  15 
 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  Bagleys  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. 

 12  See  Florida  PSC  Comments  at  7. 
 13  See  Minnesota  DOC  Comments  at  5. 
 14  See  Civil  Rights  Forum  Comments  at  5. 
 15  See  Smith  Bagley  Reply  Comments  at  2,  7-  8. 
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 C.  Agreement  with  ETC 
 1.  Florida  16 
 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  BellSouths  Lifeline/  Link-  Up  services.  As  part  of  the  stipulation,  BellSouth  agreed  to  contribute  $250,000  in 
 2002  and  $150,000  in  2003. 
 D.  Warm  Transfer  Line 
 1.  Florida  17 
 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. 

 E.  Coordination  with  Organizations  and  Other  Agencies 
 1.  Florida  18 
 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  DCFs  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. 

 F.  Lifeline/  Link-  Up  Seminars 
 1.  Rhode  Island  19 
 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. 

 16  See  Florida  PSC  Comments  at  4. 
 17  See  Florida  PSC  Comments  at  7. 
 18  See  Florida  PSC  Comments  at  7. 
 19  See  Universal  Service  Administrative  Company  Comments  at  10  (USAC). 
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 2.  Tennessee  20 
 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. 

 G.  Direct  Mailings 
 1.  Connecticut  21 
 The  Connecticut  Department  of  Social  Services  works  in  conjunction  with  ETCs  to  target  eligible  low-  income  consumers  through  the  mail. 

 2.  Idaho  22 
 The  State  of  Idaho  sends  flyers  and  brochures  printed  by  the  Idaho  Public  Utilities  Commission  to  eligible  state  residents. 

 3.  Maine  23 
 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. 

 4.  New  York  24 
 The  Public  Utility  Law  Project  of  New  York  sends  annual  personalized  letters  to  all  persons  eligible  for  Lifeline,  informing  them  about  the  program. 

 5.  North  Carolina  25 
 In  North  Carolina,  an  ad  hoc  committee  comprised  of  staff  members  from  the  North  Carolina  Utilities  Commission,  the  Attorney  Generals  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 

 20  See  Civil  Rights  Forum  Comments  at  5. 
 21  See  USAC  Comments  at  14. 
 22  See  USAC  Comments  at  14. 
 23  See  USAC  Comments  at  9. 
 24  See  USAC  Comments  at  12. 
 25  See  Civil  Rights  Forum  Comments  at  4-  5. 
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 committees  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. 

 6.  Tennessee  26 
 The  TRA  works  with  the  TDHS  database  to  determine  eligible  individuals  and  then  mails  Lifeline/  Link-  Up  information  to  those  people. 

 H.  Lifeline/  Link-  Up  Notification  on  Every  Call 
 1.  Maine  27 
 Maines  public  assistance  agencies  explain  the  Lifeline/  Link-  Up  program  whenever  a  household  applies  for  public  assistance  and  the  states  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. 
 I.  Tax  Break  for  Lifeline/  Link-  Up  Telephone  Companies 
 1.  North  Carolina  28 
 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. 
 J.  Lifeline/  Link-  Up  Marketing  Board 
 1.  California  29 
 California  created  a  Lifeline  Marketing  Board  which  promotes  the  Lifeline  program  beyond  the  typical  telephone  company  policy  of  including  information  in  their  telephone  bills. 

 26  See  Civil  Rights  Forum  Comments  at  5. 
 27  See  NCLC  Comments  at  7. 
 28  See  North  Carolina  Utilities  Commission  Comments  at  4-  5. 
 29  See  Civil  Rights  Forum  Comments  at  4-  5. 
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 APPENDIX  F 
 ESTIMATED  INCOME  REQUIREMENTS  FOR  A  HOUSEHOLD  AT  OR  BELOW  150%  OF  THE  FEDERAL  POVERTY  GUIDELINES 

 Size  of  Family  Unit  48  Contiguous  States  and  D.  C.  Alaska  Hawaii 
 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  person,  add  4,710  5,895  5,415 
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 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  have  adopted  the  federal  default  criteria 

 Iowa  Illinois 
 Kentucky  Minnesota 
 Nebraska  Nevada 
 Puerto  Rico 
 Nine  States  and/  or  Territories  have  not  adopted  their  own  Lifeline/  Link-  Up  Program 
 American  Samoa  Delaware 
 Guam  Hawaii 
 Indiana  Louisiana 
 New  Hampshire  Northern  Mariana  Islands 
 U.  S.  Virgin  Islands 
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 APPENDIX  H 
 FINAL  REGULATORY  FLEXIBILITY  ANALYSIS 
 (REPORT  AND  ORDER) 
 1.  As  required  by  the  Regulatory  Flexibility  Act  of  1980,  as  amended  (RFA)  1  an  Initial  Regulatory  Flexibility  Analysis  (IRFA)  was  incorporated  in  the  NPRM.  2  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.  3 

 A.  Need  for,  and  Objectives  of,  the  Order 
 2.  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. 
 B.  Summary  of  Significant  Issues  Raised  by  Public  Comments  in  Response  to  the  IRFA 

 3.  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  Lunchs  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. 

 C.  Description  and  Estimate  of  the  Number  of  Small  Entities  To  Which  Rules  Will  Apply 
 4.  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.  4  The  RFA 
 generally  defines  the  term  small  entity  as  having  the  same  meaning  as  the  terms  small 
 1  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).  2 
 NPRM,  18  FCC  Rcd  at  11630-  36,  paras.  6-  22.  3 
 See  5  U.  S.  C.    604.  4 
 5  U.  S.  C.    603(  b)(  3). 
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 business,  small  organization,  and  small  governmental  jurisdiction.  5  In  addition,  the  term  small  business  has  the  same  meaning  as  the  term  small  business  concern  under  the  Small 
 Business  Act.  6  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).  7 
 5.  The  Commissions  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  Companys  (USAC)  2002  Annual  Report,  only  local  exchange  carriers,  cellular/  personal 
 communications  services  (PCS)  providers,  and  competitive  access  providers  would  be  subject  to  these  requirements.  8  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.  9 
 6.  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.  10  The  SBAs  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.  11 
 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. 
 7.  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 

 5  5  U.  S.  C.    601(  6). 
 6  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). 
 7  15  U.  S.  C.    632. 
 8  See  USAC  Annual  Report  2002,  Appendix  B  (2002). 
 9  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. 

 10  15  U.  S.  C.    632. 
 11  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). 
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 applicable  size  standard  under  the  SBA  rules  is  for  wired  telecommunications  carriers.  12  This  provides  that  a  wired  telecommunications  carrier  is  a  small  entity  if  it  employs  no  more  than 
 1,500  employees.  13  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. 

 8.  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.  14  This  provides  that  a  wired 
 telecommunications  carrier  is  a  small  entity  if  it  employs  no  more  than  1,500  employees.  15  According  to  the  most  recent  Commission  data,  16  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.  17  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.  18  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. 

 9.  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.  19  According  to  data  for  1997,  a  total  of  977  such  firms  operated  for  the  entire  year.  20  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 
 12  13  C.  F.  R.    121.  201,  NAICS  Code  517110. 
 13  Id. 
 14  13  C.  F.  R.    121.  201,  NAICS  Code  517110. 
 15  Id. 
 16  FCC,  Wireline  Competition  Bureau,  Industry  Analysis  and  Technology  Division,  Trends  in  Telephones  Service 
 at  Table  5.3,  Pate  5-  5  (Aug.  2003).  17 
 Id.  18 
 Id.  19 
 13  C.  F.  R.    121.  201,  NAICS  code  517212.  20 
 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). 
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 businesses.  In  addition,  we  note  that  there  are  1,807  cellular  licenses;  however,  a  cellular  licensee  may  own  several  licenses.  21  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.  22  We  have 
 estimated  that  291  of  these  are  small  under  the  SBA  small  business  size  standard.  23 
 10.  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.  24  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.  25  These  regulations  defining  small  entity  in  the  context  of  broadband  PCS  auctions  have  been  approved  by  the  SBA.  26  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.  27  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. 
 D.  Description  of  Projected  Reporting,  Recordkeeping,  and  Other  Compliance  Requirements  for  Small  Entities 

 11.  Expanding  the  eligibility  criteria  will  not  create  additional  reporting,  recordkeeping,  or  other  compliance  requirements. 
 12.  Several  other  requirements  adopted  in  this  Order,  however,  affect  recordkeeping  requirements.  First,  ETCs  will  be  required  to  maintain  records  to  document  compliance  with  all 
 21  See  Federal  Communications  Commission,  Universal  Licensing  System,  <http://  wireless.  fcc.  gov/  uls/>. 
 22  See  Trends  Report,  Table  5.3  -  Number  of  Telecommunications  Service  Providers  that  are  Small  Businesses. 
 23  Id. 
 24  See  Amendment  of  Parts  20  and  24  of  the  Commissions  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).  25 
 See  Broadband  PCS  Order  at  Section  60.  26 
 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). 

 27  FCC  News,  Broadband  PCS,  D,  E  and  F  Block  Auction  Closes,  No.  71744  (released  January  14,  1997). 
58
 Federal  Communications  Commission  FCC  04-  87 
 H-  5 
 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.  28  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.  29  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.  30  Second,  non-  ETC  resellers  must  retain 
 documentation  to  demonstrate  that  they  are  providing  discounted  services  only  to  qualifying  low-income  customers.  31  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.  32 

 E.  Steps  Taken  to  Minimize  the  Significant  Economic  Impact  on  Small  Entities,  and  Significant  Alternatives  Considered 
 13.  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.  33  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.  34  To  minimize  burdens  on  carriers,  however,  we  do  not  require  ETCs  in  federal  default  states  to  maintain  this  documentation  of  income.  35  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.  36  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.  37 
 14.  We  allow  states  operating  their  own  Lifeline/  Link-  Up  programs  flexibility  to  develop  their  own  certification  of  income  and  verification  procedures.  38  We  note  that  resources  of  the 

 28  See  supra  para.  39. 
 29  See  supra  paras.  31,  35,  38,  39. 
 30  See  supra  paras.  29,  34,  39. 
 31  See  supra  para.  40. 
 32  See  supra  para.  38. 
 33  See  supra  para.  28. 
 34  Id. 
 35  See  supra  para.  31. 
 36  Id. 
 37  See  supra  para.  35. 
 38  See  supra  paras.  29,  34. 
59
 Federal  Communications  Commission  FCC  04-  87 
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 carrier,  among  other  things,  should  be  taken  into  consideration  when  devising  state  certification  and  verification  procedures.  39  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. 
 15.  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. 
 F.  Report  to  Congress 
 16.  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. 

 39  See  supra  para.  29,  34. 
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 Federal  Communications  Commission  FCC  04-  87 
 I-  1 
 APPENDIX  I 
 INITIAL  REGULATORY  FLEXIBILITY  ANALYSIS 
 (FURTHER  NOTICE  OF  PROPOSED  RULEMAKING) 
 1.  As  required  by  the  Regulatory  Flexibility  Act  of  1980,  as  amended  (RFA),  1  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.  2  In  addition,  the  Further  Notice  and  IRFA 
 (or  summaries  thereof)  will  be  published  in  the  Federal  Register.  3 
 A.  Need  for,  and  Objectives  of,  the  Proposed  Rules 
 2.  The  Commission  is  required  by  section  254  of  the  Act  to  promulgate  rules  to  implement  the  universal  service  provisions  of  section  254.  4  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.  5  Among  other  things, 
 the  Commission  adopted  a  mechanism  to  provide  discounted  monthly  telephone  service  and  installation  charges  to  low-  income  households.  6  Over  the  last  few  years,  important  changes  in 
 the  low-  income  community  and  the  Joint  Boards  Recommended  Decision  prompt  us  to  review  the  low-  income  universal  service  support  mechanism.  7 

 3.  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.  8  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.  9  Therefore,  we  seek  comment  on  whether  a  broader  income-  based  criterion  should 
 1  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).  2 
 See  5  U.  S.  C.    603(  a).  3 
 See  id.  4 
 47  U.  S.  C.    254.  5 
 See  generally  1997  Universal  Service  Order.  6 
 See  generally  1997  Universal  Service  Order,  12  FCC  Rcd  at  8973-  76,  paras.  373-  78.  7 
 See  supra  para.  6.  8 
 See  supra  paras.  56-  57;  Appendix  F.  9 
 See  generally  Appendix  K. 
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 be  added  even  when  there  could  be  only  a  minimal  impact  to  the  national  telephone  penetration  rate.  10 
 B.  Legal  Basis 
 4.  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. 
 C.  Description  and  Estimate  of  the  Number  of  Small  Entities  To  Which  Rules  Will  Apply 

 5.  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.  11  The  RFA 
 generally  defines  the  term  small  entity  as  having  the  same  meaning  as  the  terms  small  business,  small  organization,  and  small  governmental  jurisdiction.  12  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.  13  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).  14 
 6.  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.  15  For  this  IRFA,  we  hereby  incorporate  those  entity  descriptions  by  reference. 

 D.  Description  of  Projected  Reporting,  Recordkeeping,  and  Other  Compliance  Requirements 
 7.  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. 

 E.  Steps  Taken  to  Minimize  Significant  Economic  Impact  on  Small  Entities,  and 
 10  See  supra  para.  57. 
 11  5  U.  S.  C.    604(  a)(  3). 
 12  5  U.  S.  C.    601(  6). 
 13  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. 
 14  15  U.  S.  C.    632. 
 15  See  supra  Appendix  H,  paras.  5-  10. 
62
 Federal  Communications  Commission  FCC  04-  87 
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 Significant  Alternatives  Considered 
 8.  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.  16 
 9.  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. 

 F.  Federal  Rules  that  May  Duplicate,  Overlap,  or  Conflict  with  the  Proposed  Rules 
 10.  None. 

 16  See  5  U.  S.  C.    603(  c)(  1)-(  4). 
63
 Federal  Communications  Commission  FCC  04-  87 
 J-  1 
 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:  1 

 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.  2  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. 

 1  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).  2 
 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. 
64
 Federal 
 Communications 

 Commission 

 FCC 
 04- 
 87 

 J- 
 2 

 Sample 
 Size 
 Table 

 Previously 
 Estimated 
 Proportion 

 of 
 Subscribers 

 Inappropriately 

 Taking 
 Lifeline 
 Service 
 (P) 
 1 

 (N) 
 Number  of  Lifeline  Subscribers 

 0.01 
 0.015 

 0.02 
 0.025 

 0. 
 03 

 0. 
 035 

 0.04 
 0.045 

 0. 
 05 

 0. 
 055 

 0.06 

 400,000 
 43 
 64 
 85 
 106 

 126 
 146 
 166 
 186 
 206 
 225 
 244 

 100,000  2 
 43 
 64 
 85 
 105 

 126 
 146 
 166 
 186 
 206 
 225 
 244 

 90,000 
 43 
 64 
 85 
 105 

 126 
 146 
 166 
 186 
 205 
 224 
 244 

 70,000 
 43 
 64 
 85 
 105 

 126 
 146 
 166 
 186 
 205 
 224 
 243 

 60,000 
 43 
 64 
 85 
 105 

 126 
 146 
 166 
 185 
 205 
 224 
 243 

 30,000 
 43 
 64 
 85 
 105 

 125 
 146 
 165 
 185 
 204 
 223 
 242 

 20,000 
 43 
 64 
 85 
 105 

 125 
 145 
 165 
 184 
 204 
 223 
 241 

 15,000 
 43 
 64 
 84 
 105 

 125 
 145 
 164 
 184 
 203 
 222 
 240 

 10,000 
 43 
 64 
 84 
 104 

 124 
 144 
 164 
 183 
 202 
 220 
 238 

 9,000 
 43 
 64 
 84 
 104 

 124 
 144 
 163 
 182 
 201 
 220 
 238 

 8,000 
 43 
 63 
 84 
 104 

 124 
 144 
 163 
 182 
 201 
 219 
 237 

 7,000 
 43 
 63 
 84 
 104 

 124 
 143 
 162 
 181 
 200 
 218 
 236 

 6,000 
 43 
 63 
 84 
 104 

 123 
 143 
 162 
 180 
 199 
 217 
 235 

 5,000 
 43 
 63 
 83 
 103 

 123 
 142 
 161 
 179 
 198 
 215 
 233 

 4,000 
 42 
 63 
 83 
 103 

 122 
 141 
 160 
 178 
 196 
 213 
 230 

 3,000 
 42 
 63 
 83 
 102 

 121 
 139 
 158 
 175 
 193 
 209 
 226 

 2,000 
 42 
 62 
 81 
 100 

 119 
 136 
 154 
 170 
 187 
 202 
 218 

 1 
 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. 

 2 
 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  . 
65
 Federal 
 Communications 

 Commission 

 FCC 
 04- 
 87 

 J- 
 3 

 Sample 
 Size 
 Table 

 Previously 
 Estimated 
 Proportion 

 of 
 Subscribers 

 Inappropriately 

 Taking 
 Lifeline 
 Service 
 (P) 

 (N) 
 Number  of  Lifeline  Subscribers 

 0.01 
 0.015 

 0.02 
 0.025 

 0. 
 03 

 0. 
 04 

 0. 
 04 

 0.045 

 0. 
 05 

 0. 
 06 

 0. 
 06 

 1,500 
 42 
 61 
 80 
 99 
 116 

 133 
 150 
 166 
 181 
 196 
 210 

 1,000 
 41 
 60 
 78 
 96 
 112 

 128 
 142 
 157 
 171 
 184 
 196 

 900 
 41 
 60 
 78 
 95 
 111 

 126 
 140 
 154 
 168 
 180 
 192 

 800 
 41 
 59 
 77 
 94 
 109 

 124 
 138 
 151 
 164 
 176 
 187 

 700 
 41 
 59 
 76 
 92 
 107 

 121 
 134 
 147 
 159 
 170 
 181 

 600 
 40 
 58 
 74 
 90 
 104 

 118 
 130 
 142 
 154 
 164 
 174 

 500 
 40 
 57 
 73 
 88 
 101 

 113 
 125 
 136 
 146 
 155 
 164 

 400 
 39 
 55 
 70 
 84 
 96 
 107 

 118 
 127 
 136 
 144 
 152 

 300 
 38 
 53 
 66 
 79 
 89 
 98 
 107 

 115 
 122 
 129 
 135 

 200 
 36 
 49 
 60 
 70 
 78 
 85 
 91 
 97 
 102 

 106 
 110 

 150 
 34 
 45 
 54 
 62 
 69 
 74 
 79 
 83 
 87 
 90 
 93 

 120 
 32 
 42 
 50 
 57 
 62 
 66 
 70 
 73 
 76 
 78 
 81 

 100 
 30 
 39 
 46 
 52 
 56 
 60 
 63 
 65 
 68 
 69 
 71 

 90 
 29 
 38 
 44 
 49 
 53 
 56 
 59 
 61 
 63 
 64 
 66 

 80 
 28 
 36 
 41 
 46 
 49 
 52 
 54 
 56 
 58 
 59 
 60 

 70 
 27 
 34 
 39 
 42 
 45 
 48 
 49 
 51 
 52 
 54 
 55 

 60 
 25 
 31 
 35 
 39 
 41 
 43 
 44 
 46 
 47 
 48 
 48 

 50 
 23 
 28 
 32 
 34 
 36 
 37 
 39 
 40 
 40 
 41 
 42 

 40 
 21 
 25 
 27 
 29 
 31 
 32 
 32 
 33 
 34 
 34 
 34 

 35 
 20 
 23 
 25 
 27 
 28 
 28 
 29 
 30 
 30 
 30 
 31 

 30 
 18 
 21 
 22 
 24 
 24 
 25 
 26 
 26 
 26 
 27 
 27 

 25 
 16 
 18 
 19 
 20 
 21 
 21 
 22 
 22 
 22 
 23 
 23 

 20 
 14 
 15 
 16 
 17 
 17 
 18 
 18 
 18 
 18 
 18 
 19 
66
 Federal 
 Communications 

 Commission 

 FCC 
 04- 
 87 

 J- 
 4 

 Sample 
 Size 
 Table 

 Previously 
 Estimated 
 Proportion 

 of 
 Subscribers 

 Inappropriately 

 Taking 
 Lifeline 
 Service 
 (P) 

 (N) 
 Number  of  Lifeline  Subscribers 

 0.01 
 0.015 

 0.02 
 0.025 

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67
 Federal  Communications  Commission  FCC  04-  87 
 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 
68
 Federal  Communications  Commission  FCC  04-  87 
 Table  of  Contents 
 Section  Page 
 Executive  Summary  1 
 Introduction  ..  3 
 Methodology  Summary  ..  5 
 Modeling  Process  ..  8 
 Methodology  Detail  .  8 
 Step  1:  Create  Baselines    9 
 Step  2:  Estimate  Changes  due  to  New  Policy    11 
 Step  3:  Apply  Changes  to  Baseline  to  Compute  New  Program  Levels  ..  12 
 Other  Factors    13 
 Additional  Assumptions  ..  13 
 Results    14 
 Technical  Appendix  1    47 
 Technical  Appendix  2    54 
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 K-  1 
 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.  1  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).  2  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  studys  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.  3  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. 

 1  See  Recommended  Decision,  18  FCC  Rcd  at  6633,  Appendix  F. 
 2  But  see  supra  note  41. 
 3  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. 
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 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 
 The  results  are  summarized  below: 

 Summary  information  for  Year  2005  if  all  states  adopt  a  1.35  PGC: 
 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 
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 K-  3 
 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  states  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.  4  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.  5  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 

 4  Consumer  Coalition  Comments  at  2;  Commissioner  Wilson  Pa  PUC  Reply  Comments  at  2-  3;  TOPC  Comments  at 
 5-  6;  USCCB  Comments  at  4-  5.  5 
 This  study  assumes  throughout  that  states  with  a  1.50  PGC  continue  to  use  a  1.50  PGC. 
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 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. 
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 K-  5 
 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. 
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 K-  6 
 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. 
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 K-  7 
 Lifeline  Subscribers 
 0 
 1 
 2 
 3 
 4 
 5 
 6 
 7 
 8 
 9 

 Millions 
 of 
 Lifeline 

 subscribers 

 Baseline  Change  due  to  1.35  PGC 
 2000  2002  2005 

 A  (Baseline) 
 B  (Baseline) 

 D 
 (Baseline) 

 E  (Policy  change) 
 F  (New  level  with  change) 

 C 
 (Baseline) 

 1998 
 Federal  Lifeline  Expenditures 

 $0 
 $100 
 $200 
 $300 
 $400 
 $500 
 $600 
 $700 
 $800 
 $900 
 $1,000 

 Millions 
 of 
 dollars 

 Baseline  Change  due  to  1.35  PGC 
 2000  2002  2005 

 A  (Baseline)  B  (Baseline) 
 D 
 (Baseline) 

 E  (Policy  change) 
 F  (New  level  with  change) 

 C  (Baseline) 
 1998 
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 K-  10 
 Lifeline.  Each  household  is  analyzed  according  to  its  states  eligibility  criteria,  as  reported  by  <www.  lifelinesupport.  org>.  7  Only  those  households  that  meet  at  least  one  of  the  eligibility 
 criteria  are  deemed  eligible  for  Lifeline,  the  rest  are  deemed  ineligible.  8  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). 

 7  The  website  was  viewed  in  early  2002. 
 8  This  is  accomplished  electronically  using  Visual  Basic  for  Applications  for  Microsoft  Access. 
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 Step  2:  Estimate  Changes  due  to  New  Policy 
 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  dont  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 
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 K-  12 
 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 
 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). 
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 Other  Factors 
 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.  9 
 Additional  Assumptions 
 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. 

 9  See  Henry  Scheffe,  The  Analysis  of  Variance,  at  8  (1959). 
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 Results 
 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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 , 

 Section  1:  Baseline  Information  Table  1.  A 
 Baseline  Lifeline  subscription  information  (Year  2002) 
 a  (CPSH  data)  b  (CPSH  data)  c=  a*  b  d  (USAC  data)  e=  d/  c 
 Percentage  of  Households  that  Households  Percentage  of  HH  that  would  qualify  would  qualify  that  took  households  that 

 Households  for  Lifeline  (LL)  for  Lifeline  Lifeline  took  Lifeline  State  in  2002  under  existing  rules  under  existing  rules  in  2002  in  2002 

 Alabama  1,  752,  018  17.0%  297,  228  25,  403  8.  5%  Alaska  224,  499  23.2%  52,  146  23,  302  44.  7% 
 Arizona  1,  939,  473  14.4%  279,  334  73,  186  26.  2%  Arkansas  1,059,  049  23.0%  243,  997  10,  100  4.  1% 
 California  11,  935,  960  20.5%  2,451,  057  3,  232,732  131.  9%  Colorado  1,690,  526  2.7%  45,  808  29,  709  64.  9% 
 Connecticut  1,  381,  915  13.7%  188,  857  58,  056  30.  7%  Delaware  310,  968  10.9%  33,  946  2,100  6.  2% 
 DC  269,  356  23.5%  63,  327  13,  645  21.  5%  Florida  6,  683,  618  15.8%  1,052,  902  142,  521  13.  5% 
 Georgia  3,  172,  213  14.3%  452,  827  68,  266  15.  1%  Hawaii  418,526  8.  6%  36,185  14,124  39.0% 
 Idaho  495,  397  25.3%  125,  089  27,  660  22.  1%  Illinois  4,836,  881  16.4%  793,  394  87,  188  11.  0% 
 Indiana  2,  501,  325  12.4%  309,  568  40,  326  13.  0%  Iowa  1,163,  128  14.6%  170,  241  17,  800  10.  5% 
 Kansas  1,088,  752  12.3%  133,  747  13,  775  10.  3%  Kentucky  1,583,  371  21.0%  332,  295  60,  739  18.  3% 
 Louisiana  1,  668,  964  17.2%  287,  759  21,  265  7.  4%  Maine  571,  277  22.5%  128,  698  85,  587  66.  5% 
 Maryland  2,083,  956  2.8%  57,  849  4,022  7.  0%  Massachusetts  2,  584,  626  16.4%  423,  706  164,  600  38.  8% 
 Michigan  3,947,  084  26.2%  1,032,  526  118,  794  11.  5%  Minnesota  1,  994,  754  14.  0%  278,453  47,554  17.1% 
 Mississippi  1,097,  592  29.7%  326,  524  22,  566  6.  9%  Missouri  2,  217,  997  14.6%  324,  392  33,  322  10.  3% 
 Montana  379,  228  14.2%  53,  704  15,  815  29.  4%  Nebraska  678,  736  13.1%  89,  251  15,  241  17.  1% 
 Nevada  809,  411  19.8%  160,  611  37,  204  23.  2%  New  Hampshire  523,  968  12.3%  64,  338  7,253  11.  3% 
 New  Jersey  3,262,  561  13.3%  435,  283  46,  687  10.  7%  New  Mexico  698,282  21.  7%  151,749  47,356  31.2% 
 New  York  7,294,  127  21.6%  1,578,  737  500,  671  31.  7%  North  Carolina  3,217,  678  19.2%  616,  817  99,  510  16.  1% 
 North  Dakota  275,  725  13.7%  37,  712  19,  226  51.  0%  Ohio  4,595,  674  15.8%  726,  907  279,  591  38.  5% 
 Oklahoma  1,366,  274  17.7%  241,  259  117,  297  48.  6%  Oregon  1,366,  819  25.0%  341,  162  36,  402  10.  7% 
 Pennsylvania  4,863,  997  12.0%  584,  754  94,  846  16.  2%  Rhode  Island  428,  672  18.2%  78,  185  46,  189  59.  1% 
 South  Carolina  1,  574,  457  18.4%  289,  051  21,  809  7.  5%  South  Dakota  308,  026  17.6%  54,  211  27,  117  50.  0% 
 Tennessee  2,  307,  548  33.1%  764,  595  49,  050  6.  4%  Texas  7,  493,  242  25.4%  1,901,  378  429,  970  22.  6% 
 Utah  716,  224  22.2%  159,  072  19,  652  12.  4%  Vermont  259,  765  32.9%  85,  439  29,  911  35.  0% 
 Virginia  2,759,  677  11.3%  312,  574  20,  730  6.  6%  Washington  2,397,  497  16.4%  393,  513  83,  327  21.  2% 
 West  Virginia  759,332  19.  8%  150,381  4,  905  3.3%  Wisconsin  2,181,  649  11.5%  250,  155  68,  333  27.  3% 
 Wyoming  196,  973  15.0%  29,  449  2,126  7.  2% 
 Nationwide  109,  388,  768  17.8%  19,  472,  000  6,  558,560  33.  7% 

 Note:  Some  numbers  in  this  table  have  been  rounded.  Source:  Current  Population  Survey  of  Households  (CPSH)  March  2002  data. 
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 Section  1:  Baseline  Information  Table  1.  B 
 Baseline  Lifeline  subscription  information  (Year  2005) 
 a  (Table  1.  A)  b  (CPSH)  c=  a*  b  d=  a+  c  e  (Table  1.  A)  f=  d*  e  g  (Table  1.  A)  h=  f*  g 
 Growth  (loss)  Expected  Percentage  of  Households  that  Lifeline  take  Expected  HH  1/  2002  -  7/  2005  New  (fewer)  total  HH  that  would  would  qualify  rate  for  HH  that  that  would  take 

 Households  based  on  households  households  qualify  for  LL  for  Lifeline  qualify  under  Lifeline  under 
 State  2002  1/  2000  -  1/  2002  1  in  2005  July  2005  under  existing  rules  under  existing  rules  existing  rules  existing  rules 
 Alabama  1,  752,018  0.8%  14,849  1,766,  868  17.0%  299,747  8.  5%  25,  618  Alaska  224,499  5.4%  12,185  236,684  23.2%  54,  977  44.7%  24,  567 

 Arizona  1,939,473  12.  7%  246,506  2,  185,  979  14.4%  314,837  26.2%  82,  488  Arkansas  1,059,049  5.5%  58,199  1,117,  248  23.0%  257,406  4.  1%  10,  655 
 California  11,935,  960  -2.2%  -259,963  11,675,997  20.5%  2,397,673  131.  9%  3,  162,324  Colorado  1,690,526  9.6%  162,683  1,  853,  209  2.7%  50,  216  64.9%  32,  568 
 Connecticut  1,381,915  12.  9%  178,850  1,  560,  766  13.7%  213,300  30.7%  65,  570  Delaware  310,968  13.  8%  42,992  353,960  10.9%  38,  639  6.  2%  2,390 
 DC  269,356  21.  9%  59,075  328,431  23.5%  77,  216  21.5%  16,  638  Florida  6,  683,618  17.  8%  1,  191,  839  7,875,  457  15.8%  1,240,658  13.5%  167,936 
 Georgia  3,  172,213  13.  1%  416,286  3,  588,  499  14.3%  512,251  15.1%  77,  224  Hawaii  418,526  2.9%  12,305  430,831  8.  6%  37,  249  39.0%  14,  539 
 Idaho  495,397  5.2%  25,673  521,070  25.3%  131,572  22.1%  29,  093  Illinois  4,  836,881  10.  0%  485,999  5,  322,  880  16.4%  873,112  11.0%  95,  948 
 Indiana  2,  501,325  15.  2%  380,568  2,  881,  893  12.4%  356,667  13.0%  46,  461  Iowa  1,163,128  2.2%  25,853  1,188,  981  14.6%  174,025  10.5%  18,  196 
 Kansas  1,088,752  7.4%  80,504  1,169,  256  12.3%  143,636  10.3%  14,  794  Kentucky  1,583,371  3.9%  61,169  1,644,  539  21.0%  345,132  18.3%  63,  085 
 Louisiana  1,  668,964  6.5%  108,680  1,  777,  645  17.2%  306,498  7.  4%  22,  650  Maine  571,277  26.  1%  149,312  720,  589  22.5%  162,335  66.5%  107,956 
 Maryland  2,083,956  8.4%  174,235  2,  258,  191  2.8%  62,  685  7.  0%  4,358  Massachusetts  2,584,626  8.4%  217,343  2,  801,  968  16.4%  459,336  38.8%  178,441 
 Michigan  3,947,084  11.  1%  439,803  4,  386,  888  26.2%  1,147,575  11.5%  132,031  Minnesota  1,994,754  13.  8%  275,225  2,  269,  978  14.0%  316,872  17.1%  54,  115 
 Mississippi  1,097,592  9.7%  106,991  1,  204,  582  29.7%  358,353  6.  9%  24,  766  Missouri  2,  217,997  3.8%  84,088  2,302,  085  14.6%  336,690  10.3%  34,  585 
 Montana  379,228  10.  9%  41,387  420,615  14.2%  59,  565  29.4%  17,  541  Nebraska  678,736  6.7%  45,409  724,145  13.1%  95,  222  17.1%  16,  261 
 Nevada  809,411  32.  0%  259,081  1,  068,  492  19.8%  212,021  23.2%  49,  112  New  Hampshire  523,968  22.  1%  115,836  639,  804  12.3%  78,  561  11.3%  8,856 
 New  Jersey  3,262,561  12.  5%  408,819  3,  671,  381  13.3%  489,827  10.7%  52,  537  New  Mexico  698,282  7.7%  54,043  752,325  21.7%  163,494  31.2%  51,  021 
 New  York  7,294,127  6.4%  465,077  7,  759,  204  21.6%  1,679,398  31.7%  532,594  North  Carolina  3,217,678  16.  0%  513,866  3,  731,  543  19.2%  715,324  16.1%  115,402 
 North  Dakota  275,725  13.  0%  35,890  311,615  13.7%  42,  621  51.0%  21,  729  Ohio  4,595,674  2.9%  133,391  4,  729,  065  15.8%  748,006  38.5%  287,706 
 Oklahoma  1,366,274  4.2%  57,363  1,423,  636  17.7%  251,388  48.6%  122,222  Oregon  1,366,819  3.4%  45,970  1,412,  789  25.0%  352,636  10.7%  37,  626 
 Pennsylvania  4,  863,997  7.4%  357,618  5,  221,  614  12.0%  627,747  16.2%  101,819  Rhode  Island  428,672  18.  6%  79,874  508,546  18.2%  92,  753  59.1%  54,  795 
 South  Carolina  1,  574,457  3.5%  54,896  1,629,  353  18.4%  299,129  7.  5%  22,  569  South  Dakota  308,026  16.  3%  50,279  358,305  17.6%  63,  060  50.0%  31,  543 
 Tennessee  2,307,548  13.  6%  313,658  2,  621,  206  33.1%  868,524  6.  4%  55,  717  Texas  7,  493,242  1.3%  100,170  7,  593,  412  25.4%  1,926,796  22.6%  435,718 
 Utah  716,224  9.7%  69,218  785,443  22.2%  174,445  12.4%  21,  551  Vermont  259,765  14.  3%  37,188  296,953  32.9%  97,  670  35.0%  34,  193 
 Virginia  2,759,677  7.1%  196,873  2,  956,  550  11.3%  334,873  6.  6%  22,  209  Washington  2,397,497  7.0%  168,037  2,  565,  534  16.4%  421,094  21.2%  89,  167 
 West  Virginia  759,332  0.6%  4,808  764,  140  19.8%  151,333  3.  3%  4,936  Wisconsin  2,181,649  13.  3%  289,380  2,  471,  029  11.5%  283,336  27.3%  77,  397 
 Wyoming  196,973  3.7%  7,223  204,  196  15.0%  30,  529  7.  2%  2,204 
 Nationwide  109,388,768  7.7%  8,  657,  000  118,  045,  768  17.8%  21,  013,  000  33.7%  6,775,000 
 1  1.  75  times  the  2-  year  growth  (2000-  2002)  equals  the  growth  over  3.5  years. 

 Note:  Some  numbers  in  this  spreadsheet  have  been  rounded.  Source:  Current  Population  Survey  of  Households  (CPSH)  March  2000  and  2002  data. 
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 K-  17 
 Section  1:  Baseline  Information  Table  1.  C 
 Forecasted  baseline  Lifeline  expenditures  (Year  2005) 
 a  (staff  estimate)  1  b=  a*  12  c  (Table  1.  B)  d=  b*  c 
 Monthly  federal  support  Annual  federal  Expected  Households  taking  Forecasted  Lifeline  expenditures 
 State  per  line  in  2005  support  per  line  Lifeline  under  existing  rules  under  existing  rules  Alabama  $10.00  $120.00  25,618  $3,074,197 

 Alaska  $10.00  $120.00  24,567  $2,948,007  Arizona  $8.31  $99.67  82,488  $8,221,159 
 Arkansas  $8.25  $99.00  10,655  $1,054,846  California  $8.34  $100.02  3,162,324  $316,308,133 
 Colorado  $10.00  $120.00  32,568  $3,908,155 
 Connecticut  $8.02  $96.26  65,570  $6,312,049  Delaware  $8.17  $98.04  2,390  $234,348 

 DC  $7.32  $87.84  16,638  $1,461,447  Florida  $10.00  $120.00  167,936  $20,152,282 
 Georgia  $10.00  $120.00  77,224  $9,266,937  Hawaii  $8.25  $99.00  14,539  $1,439,387 
 Idaho  $9.91  $118.92  29,093  $3,459,726  Illinois  $7.42  $89.01  95,948  $8,540,023 
 Indiana  $7.45  $89.39  46,461  $4,153,300  Iowa  $6.96  $83.48  18,196  $1,518,973 
 Kansas  $8.82  $105.87  14,794  $1,566,265  Kentucky  $9.86  $118.29  63,085  $7,462,594 
 Louisiana  $8.25  $99.00  22,650  $2,242,338 
 Maine  $9.93  $119.19  107,956  $12,867,569  Maryland  $9.11  $109.33  4,358  $476,493 

 Massachusetts  $9.92  $119.04  178,441  $21,241,723  Michigan  $8.21  $98.54  132,031  $13,010,610 
 Minnesota  $7.04  $84.44  54,115  $4,569,718  Mississippi  $10.00  $120.00  24,766  $2,971,882 
 Missouri  $7.08  $84.97  34,585  $2,938,649  Montana  $10.00  $120.00  17,541  $2,104,915 
 Nebraska  $9.43  $113.15  16,261  $1,839,924  Nevada  $7.87  $94.49  49,112  $4,640,695 
 New  Hampshire  $8.17  $98.08  8,856  $868,626  New  Jersey  $7.95  $95.45  52,537  $5,014,836 
 New  Mexico  $10.00  $120.00  51,021  $6,122,532 
 New  York  $9.83  $117.99  532,594  $62,842,179  North  Carolina  $9.72  $116.61  115,402  $13,457,472 

 North  Dakota  $10.00  $120.00  21,729  $2,607,431  Ohio  $7.33  $87.99  287,706  $25,315,775 
 Oklahoma  $7.78  $93.36  122,222  $11,410,768  Oregon  $10.00  $120.00  37,626  $4,515,156 
 Pennsylvania  $9.03  $108.32  101,819  $11,028,901  Rhode  Island  $9.92  $119.04  54,795  $6,522,833 
 South  Carolina  $9.98  $119.72  22,569  $2,702,025  South  Dakota  $8.21  $98.47  31,543  $3,106,151 
 Tennessee  $9.89  $118.70  55,717  $6,613,430  Texas  $8.90  $106.81  435,718  $46,540,253 
 Utah  $9.94  $119.22  21,551  $2,569,386 
 Vermont  $9.93  $119.20  34,193  $4,075,759  Virginia  $9.44  $113.22  22,209  $2,514,557 

 Washington  $9.62  $115.40  89,167  $10,289,790  West  Virginia  $9.25  $111.00  4,936  $547,914 
 Wisconsin  $7.72  $92.68  77,397  $7,173,137  Wyoming  $10.00  $120.00  2,204  $264,475 
 Nationwide  Not  applicable  Not  applicable  6,775,000  $706,000,000 

 Note:  Some  numbers  in  this  table  have  been  rounded. 
 1  Estimate  of  monthly  federal  expenditures  includes  the  Subscriber  Line  Charge  (SLC),  $1.  75,  and  any  federal  matching  funds  for  that 
 state.  SLC  amounts  were  estimated  on  a  company-  by-  company  basis,  and  are  based  on  rules  established  by  the  CALLS  and  MAG  proceedings.  The  SLC  for  each  state  is  a  weighted  average  based  on  the  number  of  Lifeline  subscribers  served  by  each  carrier  in  the 

 state. 
86
 Federal  Communications  Commission  FCC  04-  87 
 K-  18 
 Section  2:  Change  to  baseline:  effects  from  the  new  policy  Table  2.  A 
 Estimated  additional  Lifeline-  eligible  households  using  a  nationwide  1.  35  PGC  (Year  2002) 
 a  (Table  1.  A)  b  (CPSH  data)  c=  b/  a 
 Households  Additional  households  that  Additional  households  (%)  that 
 State  in  2002  would  qualify  with  a  1.35  PGC  1  would  qualify  with  a  1.35  PGC 
 Alabama  1,  752,018  215,207  12.3%  Alaska  224,499  13,844  6.2% 

 Arizona  1,  939,473  185,330  9.6%  Arkansas  1,059,049  118,958  11.2% 
 California  11,935,960  0  0.0%  Colorado  1,690,526  186,613  11.0% 
 Connecticut  1,381,915  89,134  6.5% 
 Delaware  310,968  17,289  5.6%  DC  269,356  0  0.0% 

 Florida  6,  683,618  796,448  11.9%  Georgia  3,  172,213  322,103  10.2% 
 Hawaii  418,526  49,646  11.9% 
 Idaho  495,397  0  0.0%  Illinois  4,836,881  308,489  6.4% 

 Indiana  2,  501,325  250,921  10.0%  Iowa  1,163,128  86,702  7.5% 
 Kansas  1,088,752  126,285  11.6% 
 Kentucky  1,583,371  152,902  9.7%  Louisiana  1,  668,964  224,683  13.5% 

 Maine  571,277  47,531  8.3%  Maryland  2,083,956  237,109  11.4% 
 Massachusetts  2,584,626  210,387  8.1%  Michigan  3,947,084  0  0.0% 
 Minnesota  1,994,754  112,747  5.7% 
 Mississippi  1,097,592  134,790  12.3%  Missouri  2,217,997  85,800  3.9% 

 Montana  379,228  47,148  12.4%  Nebraska  678,736  48,833  7.2% 
 Nevada  809,411  0  0.0% 
 New  Hampshire  523,968  30,006  5.7%  New  Jersey  3,262,561  269,354  8.3% 

 New  Mexico  698,282  82,183  11.8%  New  York  7,294,127  707,314  9.7% 
 North  Carolina  3,217,678  355,125  11.0% 
 North  Dakota  275,725  33,726  12.2%  Ohio  4,595,674  347,706  7.6% 

 Oklahoma  1,366,274  156,058  11.4%  Oregon  1,366,819  0  0.0% 
 Pennsylvania  4,863,997  259,911  5.3%  Rhode  Island  428,672  38,998  9.1% 
 South  Carolina  1,574,457  161,435  10.3% 
 South  Dakota  308,026  22,859  7.4%  Tennessee  2,  307,548  20,150  0.9% 

 Texas  7,  493,242  160,328  2.1%  Utah  716,224  0  0.0% 
 Vermont  259,765  0  0.0% 
 Virginia  2,759,677  219,268  7.9%  Washington  2,397,497  183,007  7.6% 

 West  Virginia  759,332  102,247  13.5%  Wisconsin  2,  181,649  122,718  5.6% 
 Wyoming  196,973  15,284  7.8% 
 Nationwide  109,388,768  7,357,000  6.  7% 
 1  States  that  already  have  a  1.33  or  a  1.50  PGC  would  not  see  increased  Lifeline  subscribership.  Note:  Some  numbers  in  this  table  have  been  rounded. 
87
 Federal  Communications  Commission  FCC  04-  87 
 K-  19 
 Section  2:  Change  to  baseline:  effects  from  the  new  policy  Table  2.  B 
 Estimated  additional  Lifeline-  eligible  households  using  a  nationwide  1.  35  PGC  (Year  2005) 
 a  (Table  1.  B)  b  (Table  2.  A)  c=  a*  b 
 Forecasted  Additional  households  (%)  that  Additional  households  that  State  Households  in  2005  would  qualify  with  a  1.35  PGC  would  qualify  with  a  1.35  PGC 

 Alabama  1,  766,  868  12.3%  217,  031  Alaska  236,  684  6.2%  14,  595 
 Arizona  2,  185,  979  9.6%  208,  885  Arkansas  1,  117,  248  11.2%  125,  495 
 California  11,675,997  0.  0%  0  Colorado  1,  853,  209  11.0%  204,  571 
 Connecticut  1,  560,  766  6.5%  100,  670  Delaware  353,  960  5.6%  19,  679 
 DC  328,  431  0.0%  0  Florida  7,  875,  457  11.9%  938,  473 
 Georgia  3,  588,  499  10.2%  364,  372  Hawaii  430,  831  11.9%  51,  105 
 Idaho  521,  070  0.0%  0  Illinois  5,  322,  880  6.4%  339,  486 
 Indiana  2,  881,  893  10.0%  289,  098  Iowa  1,  188,  981  7.5%  88,  629 
 Kansas  1,  169,  256  11.6%  135,  622  Kentucky  1,  644,  539  9.7%  158,  809 
 Louisiana  1,  777,  645  13.5%  239,  314  Maine  720,  589  8.3%  59,  954 
 Maryland  2,  258,  191  11.4%  256,  934  Massachusetts  2,  801,  968  8.1%  228,  078 
 Michigan  4,  386,  888  0.0%  0  Minnesota  2,  269,  978  5.7%  128,  303 
 Mississippi  1,  204,  582  12.3%  147,  929  Missouri  2,  302,  085  3.9%  89,  053 
 Montana  420,  615  12.4%  52,  294  Nebraska  724,  145  7.2%  52,  100 
 Nevada  1,  068,  492  0.0%  0  New  Hampshire  639,  804  5.7%  36,  640 
 New  Jersey  3,  671,  381  8.3%  303,  106  New  Mexico  752,  325  11.8%  88,  544 
 New  York  7,  759,  204  9.7%  752,  412  North  Carolina  3,  731,  543  11.0%  411,  839 
 North  Dakota  311,  615  12.2%  38,  116  Ohio  4,  729,  065  7.6%  357,  799 
 Oklahoma  1,  423,  636  11.4%  162,  610  Oregon  1,  412,  789  0.0%  0 
 Pennsylvania  5,  221,  614  5.3%  279,  020  Rhode  Island  508,  546  9.1%  46,  265 
 South  Carolina  1,  629,  353  10.3%  167,  064  South  Dakota  358,  305  7.4%  26,  591 
 Tennessee  2,  621,  206  0.9%  22,  889  Texas  7,  593,  412  2.1%  162,  471 
 Utah  785,  443  0.0%  0  Vermont  296,  953  0.0%  0 
 Virginia  2,  956,  550  7.9%  234,  910  Washington  2,  565,  534  7.6%  195,  834 
 West  Virginia  764,  140  13.5%  102,  895  Wisconsin  2,  471,  029  5.6%  138,  995 
 Wyoming  204,  196  7.8%  15,  844 
 Nationwide  118,  045,  768  6.7%  8,054,000 
 Note:  Some  numbers  in  this  table  have  been  rounded. 
88
 Federal  Communications  Commission  FCC  04-  87 
 K-  20 
 Section  2:  Change  to  baseline:  effects  from  the  new  policy  Table  2.  C 
 Regression  analysis:  Would  Lifeline  take  rates  1  increase  due  to  a  nationwide  implementation  of  a  1.35  PGC? 
 Regression  Model 
 Dependent  variable:  Lifeline  take  rat  e  Specific  at  ion  1  (  Low  Range)  Specific  at  io  n  2  (  High  Range) 

 Independent  variables  Coefficient  t-  statistic  Coefficient  t-  statistic 
 Amount  that  state's  PGC  is  above  1.25  3  0.554  1.  78  0.  612  1.99 
 California  0.990  5.  95  0.  992  5.96  Total  support  0.  010  1.  02 

 Constant  0.082  0.  88  0.  173  7.69 
 Sample  size:  51  R  2  =  0.  5636  0.  5539 
 Conclusion:  Yes,  for  both  specifications,  the  coefficient  on  "Amount  that  state's  PGC  is  above  1.  25"  is  positive  and  statistically  significant. 

 Result 
 Q:  If  a  state  without  a  PGC  (or  a  state  with  a  PGC  below  1.  35)  added  a  1.  35  PGC, 
 how  much  would  the  take  rate  increase?  Increase  in 

 Amount  1.35  PGC  portion  that  would 
 Coefficient  is  above  1.  25  take  Lifeline  4 
 Low  range:  0.554  0.  1  0.  055  High  range:  0.612  0.  1  0.  061 

 A:  The  take  rate  would  rise  by  5.5  to  6.  1  percentage  points. 
 Notes:  1 
 The  Lifeline  take  rate  is  the  number  of  households  that  take  Lifeline  divided  by  the  number  of  households  with 

 2  Significant  at  the  10%  level  in  a  two-  tailed  test. 
 3  For  instance,  if  a  state  has  a  1.  5  poverty  guidelines  criterion,  then  the  variable  has  a  value  of  .25  (=  1.  5  -  1.  25). 

 If  a  state  has  no  poverty  guidelines  criteria,  or  if  the  state's  poverty  guidelines  criteria  is  at  or  below  1.  25,  then  the  variable 
 has  a  value  of  0.  4 

 This  means  that  if  a  state  raised  its  PGC  from  1.25  to  1.35,  then,  on  average,  the  percentage  of  poor  households  that  take  Lifeline  would  rise  by  5.5  to  6.1  percentage  points.  Similarly,  on  average,  a  state  adding 

 a  1.35  PGC  where  no  PGC  existed  would  increase  its  Lifeline  take  rate  by  5.  5  to  6.1  percentage  points. 

 income  at  or  belo  w  1.  5  times  the  federal  povert  y  guid  elines.  F  or  more  informat  ion  on  the  regression,  including  why  the  number 
 of  households  at  or  below  1.5  times  the  federal  poverty  guidelines  is  used,  see  "Addit  ional  I  nfor  mat  ion  on  r  egr  es  s  ion  specific  at  ion"  in  Technical  Appendix  1. 
89
 Federal  Communications  Commission  FCC  04-  87 
 K-  21 
 Section  2:  Change  to  baseline:  effects  from  the  new  policy  Table  2.D 
 Estimated  additional  Lifeline  subscribership  with  a  nationwide  1.  35  PGC 
 a  (CPSH  data)  b  (Table  2.C)  c=  a*  b 
 Households  with  incomes  at  or  below  Additional  households  that  Additional  1.  5  times  the  poverty  guidelines  in  states  would  take  Lifeline  Lifeline  takers 

 with  1.33  or  lower  PGCs  (Year  2002)  1  due  to  1.35  PGC  due  to  1.35  PGC  2 
 Low  range:  19,232,000  5.5%  1,066,000 
 High  range:  19,232,000  6.1%  1,180,000 

 Q:  Of  the  households  that  would  become  eligible  to  take  Lifeline  because  of  a  1.  35  PGC,  what  percentage  would  do  so  only  because  of  the  1.35  PGC? 
 A  (Column  c,  above)  B  (Table  2.  A)  C=  A/  B 
 Additional  households  that  Additional  households  that  Percentage  of  newly  eligible  would  have  taken  Lifeline  would  have  become  eligible  households  that  would 

 due  to  a  1.  35  PGC  due  to  a  1.35  PGC  take  Lifeline  with  a  1.35  PGC  Low  range:  1,066,  000  7,357,  000  14.5% 
 High  range:  1,180,  000  7,357,  000  16.0% 
 A:  14.5%  to  16.0%  of  the  households  that  would  become  eligible  for  Lifeline  would  subscribe. 

 Notes:  1 

 2 
 Source:  Current  Population  Survey  of  Households  (CPSH)  March  2002  data. 

 The  regression  analysis  presented  in  Table  2.  C  examined  Lifeline  take  rates  among  households  with  incomes  at  or  below  1.5  times  the  federal  poverty  guidelines.  This  value  includes  households  in  states  without  a  poverty  guidelines  criterion  for  Lifeline.  For  more 
 information  on  the  regression,  including  why  the  number  of  households  at  or  below  1.  5  times  the  federal  poverty  guidelines  is  used,  see  "Additional  Information  on  regression  specification"  in  Technical  Appendix  1. 
 Assumes  that  states  with  a  Lifeline  criterion  of  1.5  PGC  do  not  change  their  criteria.  Also  assumes  that  states  with  1.  33  PGCs  see  no  measurable  effect  from  implementing  a  1.35  PGC. 
90
 Federal  Communications  Commission  FCC  04-  87 
 K-  22 
 Section  2:  Change  to  baseline:  effects  from  the  new  policy  Table  2.  E 
 Estimated  state-  by-  state  additional  Lifeline  subscribers  using  a  1.35  PGC  (Year  2002) 
 Low  range  High  range  a  (Table  2.  A)  b  (Table  2.D)  c=  a*  b  d  (Table  2.  D)  e=  a*  d 

 Additional  HH  Take  rate  among  Additional  LL  Take  rate  among  Additional  LL  that  would  qualify  if  HH  that  qualify  takers  due  to  HH  that  qualify  takers  due  to 
 State  1.35  PGC  were  added  due  to  1.35  PGC  1.35  PGC  due  to  1.35  PGC  1.35  PGC 
 Alabama  215,207  14.5%  31,183  16.0%  34,517  Alaska  13,844  14.5%  2,006  16.0%  2,220 

 Arizona  185,330  14.5%  26,854  16.0%  29,725  Arkansas  118,958  14.5%  17,237  16.0%  19,080 
 California  0  14.5%  0  16.0%  0  Colorado  186,613  14.5%  27,039  16.0%  29,931 
 Connecticut  89,134  14.5%  12,915  16.0%  14,296  Delaware  17,289  14.5%  2,505  16.0%  2,773 
 DC  0  14.5%  0  16.0%  0  Florida  796,448  14.5%  115,402  16.0%  127,744 
 Georgia  322,103  14.5%  46,671  16.0%  51,663  Hawaii  49,646  14.5%  7,193  16.0%  7,963 
 Idaho  0  14.5%  0  16.0%  0  Illinois  308,489  14.5%  44,699  16.0%  49,479 
 Indiana  250,921  14.5%  36,358  16.0%  40,246  Iowa  86,702  14.5%  12,563  16.0%  13,906 
 Kansas  126,285  14.5%  18,298  16.0%  20,255  Kentucky  152,902  14.5%  22,155  16.0%  24,524 
 Louisiana  224,683  14.5%  32,556  16.0%  36,037  Maine  47,531  14.5%  6,887  16.0%  7,624 
 Maryland  237,109  14.5%  34,356  16.0%  38,030  Massachusetts  210,387  14.5%  30,484  16.0%  33,744 
 Michigan  0  14.5%  0  16.0%  0  Minnesota  112,747  14.5%  16,337  16.0%  18,084 
 Mississippi  134,790  14.5%  19,530  16.0%  21,619  Missouri  85,800  14.5%  12,432  16.0%  13,762 
 Montana  47,148  14.5%  6,832  16.0%  7,562  Nebraska  48,833  14.5%  7,076  16.0%  7,832 
 Nevada  0  14.5%  0  16.0%  0  New  Hampshire  30,006  14.5%  4,348  16.0%  4,813 
 New  Jersey  269,354  14.5%  39,028  16.0%  43,202  New  Mexico  82,183  14.5%  11,908  16.0%  13,182 
 New  York  707,314  14.5%  102,487  16.0%  113,447  North  Carolina  355,125  14.5%  51,456  16.0%  56,959 
 North  Dakota  33,726  14.5%  4,887  16.0%  5,409  Ohio  347,706  14.5%  50,381  16.0%  55,769 
 Oklahoma  156,058  14.5%  22,612  16.0%  25,030  Oregon  0  14.5%  0  16.0%  0 
 Pennsylvania  259,911  14.5%  37,660  16.0%  41,687  Rhode  Island  38,998  14.5%  5,651  16.0%  6,255 
 South  Carolina  161,435  14.5%  23,391  16.0%  25,893  South  Dakota  22,859  14.5%  3,312  16.0%  3,666 
 Tennessee  20,150  14.5%  2,920  16.0%  3,232  Texas  160,328  14.5%  23,231  16.0%  25,715 
 Utah  0  14.5%  0  16.0%  0  Vermont  0  14.5%  0  16.0%  0 
 Virginia  219,268  14.5%  31,771  16.0%  35,169  Washington  183,007  14.5%  26,517  16.0%  29,353 
 West  Virginia  102,247  14.5%  14,815  16.0%  16,400  Wisconsin  122,718  14.5%  17,781  16.0%  19,683 
 Wyoming  15,284  14.5%  2,215  16.0%  2,451 
 Nationwide  7,  357,000  14.5%  1,066,000  16.0%  1,180,000 
 Note:  Some  numbers  in  this  table  have  been  rounded. 
91
 Federal  Communications  Commission  FCC  04-  87 
 K-  23 
 Section  2:  Change  to  baseline:  effects  from  the  new  policy  Table  2.  F 
 Estimated  state-  by-  state  additional  Lifeline  subscribers  using  a  1.  35  PGC  (Year  2005) 
 Low  range  High  range  a  (Table  2.  B)  b  (Table  2.D)  c=  a*  b  d  (Table  2.  D)  e=  a*  d 

 Additional  HH  Take  rate  among  Additional  LL  Take  rate  among  Additional  LL  that  would  qualify  if  HH  that  qualify  takers  due  to  HH  that  qualify  takers  due  to 
 State  1.35  PGC  were  added  due  to  1.35  PGC  1.35  PGC  due  to  1.35  PGC  1.35  PGC 
 Alabama  217,031  14.5%  31,447  16.  0%  34,810  Alaska  14,595  14.5%  2,115  16.  0%  2,  341 

 Arizona  208,885  14.5%  30,267  16.  0%  33,503  Arkansas  125,495  14.5%  18,184  16.  0%  20,128 
 California  0  14.  5%  0  16.  0%  0  Colorado  204,571  14.5%  29,641  16.  0%  32,811 
 Connecticut  100,670  14.5%  14,587  16.  0%  16,147  Delaware  19,679  14.5%  2,851  16.  0%  3,  156 
 DC  0  14.5%  0  16.0%  0  Florida  938,473  14.5%  135,981  16.0%  150,523 
 Georgia  364,372  14.5%  52,796  16.  0%  58,442  Hawaii  51,105  14.5%  7,405  16.  0%  8,  197 
 Idaho  0  14.  5%  0  16.  0%  0  Illinois  339,486  14.5%  49,190  16.  0%  54,451 
 Indiana  289,098  14.5%  41,889  16.  0%  46,369  Iowa  88,629  14.5%  12,842  16.  0%  14,215 
 Kansas  135,622  14.5%  19,651  16.  0%  21,753  Kentucky  158,809  14.5%  23,011  16.  0%  25,472 
 Louisiana  239,314  14.5%  34,676  16.  0%  38,384  Maine  59,954  14.5%  8,687  16.  0%  9,  616 
 Maryland  256,934  14.5%  37,229  16.  0%  41,210  Massachusetts  228,078  14.5%  33,048  16.  0%  36,582 
 Michigan  0  14.5%  0  16.0%  0  Minnesota  128,303  14.5%  18,591  16.  0%  20,579 
 Mississippi  147,929  14.5%  21,434  16.  0%  23,726  Missouri  89,053  14.5%  12,903  16.  0%  14,283 
 Montana  52,294  14.5%  7,577  16.  0%  8,  387  Nebraska  52,100  14.5%  7,549  16.  0%  8,  356 
 Nevada  0  14.5%  0  16.0%  0  New  Hampshire  36,640  14.5%  5,309  16.  0%  5,  877 
 New  Jersey  303,106  14.5%  43,919  16.  0%  48,616  New  Mexico  88,544  14.5%  12,830  16.  0%  14,202 
 New  York  752,412  14.5%  109,022  16.0%  120,680  North  Carolina  411,839  14.5%  59,674  16.  0%  66,055 
 North  Dakota  38,116  14.5%  5,523  16.  0%  6,  113  Ohio  357,799  14.5%  51,844  16.  0%  57,388 
 Oklahoma  162,610  14.5%  23,562  16.  0%  26,081  Oregon  0  14.5%  0  16.0%  0 
 Pennsylvania  279,020  14.5%  40,429  16.  0%  44,752  Rhode  Island  46,265  14.5%  6,704  16.  0%  7,  420 
 South  Carolina  167,064  14.5%  24,207  16.  0%  26,796  South  Dakota  26,591  14.5%  3,853  16.  0%  4,  265 
 Tennessee  22,889  14.5%  3,317  16.  0%  3,  671  Texas  162,471  14.5%  23,541  16.  0%  26,059 
 Utah  0  14.5%  0  16.0%  0  Vermont  0  14.5%  0  16.0%  0 
 Virginia  234,910  14.5%  34,038  16.  0%  37,678  Washington  195,834  14.5%  28,376  16.  0%  31,410 
 West  Virginia  102,895  14.5%  14,909  16.  0%  16,503  Wisconsin  138,995  14.5%  20,140  16.  0%  22,294 
 Wyoming  15,844  14.5%  2,296  16.  0%  2,  541 
 Nationwide  8,  054,000  14.  5%  1,  167,000  16.  0%  1,  292,  000 
 Note:  Some  numbers  in  this  table  have  been  rounded. 
92
 Federal  Communications  Commission  FCC  04-  87 
 K-  24 
 Section  2:  Change  to  baseline:  effects  from  the  new  policy  Table  2.  G 
 Estimated  increase  in  Lifeline  expenditures  (Year  2005) 
 Low  range  High  range  a  (Table  1.  C)  b  (Table  2.F)  c=  a*  b  d  (Table  2.  F)  e=  a*  d 

 Annual  federal  Forecasted  Forecasted  Forecasted  Forecasted  support  per  additional  HH  increased  federal  additional  HH  increased  federal 
 State  Lifeline  subscr  ib  er  taking  Lifeline  Lifeline  expenditures  taking  Lifeline  Lifeline  expenditures  Alabama  $120.  00  31,447  $3,773,626  34,810  $4,177,184 
 Alaska  $120.  00  2,  115  $253,772  2,  341  $280,911  Arizona  $99.67  30,267  $3,016,523  33,503  $3,339,116 
 Arkansas  $99.00  18,184  $1,800,188  20,128  $1,992,704 
 California  $100.  02  0  $0  0  $0  Colorado  $120.  00  29,641  $3,556,976  32,811  $3,937,366 

 Connecticut  $96.26  14,587  $1,404,187  16,147  $1,554,353  Delaware  $98.04  2,851  $279,548  3,  156  $309,443 
 DC  $87.84  0  $0  0  $0 
 Florida  $120.  00  135,  981  $16,317,721  150,523  $18,062,768  Georgia  $120.  00  52,796  $6,335,533  58,442  $7,013,066 

 Hawaii  $99.00  7,405  $733,088  8,  197  $811,486  Idaho  $118.  92  0  $0  0  $0 
 Illinois  $89.01  49,190  $4,378,232  54,451  $4,846,448  Indiana  $89.39  41,889  $3,744,574  46,369  $4,145,026 
 Iowa  $83.48  12,842  $1,072,049  14,215  $1,186,696  Kansas  $105.  87  19,651  $2,080,563  21,753  $2,303,063 
 Kentucky  $118.  29  23,011  $2,722,020  25,472  $3,013,118  Louisiana  $99.00  34,676  $3,432,915  38,384  $3,800,037 
 Maine  $119.  19  8,  687  $1,035,426  9,  616  $1,146,156 
 Maryland  $109.  33  37,229  $4,070,235  41,210  $4,505,513  Massachusetts  $119.  04  33,048  $3,934,001  36,582  $4,354,710 

 Michigan  $98.54  0  $0  0  $0  Minnesota  $84.44  18,591  $1,569,863  20,579  $1,737,748 
 Mississippi  $120.  00  21,434  $2,572,113  23,726  $2,847,179 
 Missouri  $84.97  12,903  $1,096,380  14,283  $1,213,629  Montana  $120.  00  7,  577  $909,256  8,  387  $1,006,493 

 Nebraska  $113.  15  7,  549  $854,199  8,  356  $945,549  Nevada  $94.49  0  $0  0  $0 
 New  Hampshire  $98.08  5,309  $520,691  5,  877  $576,375 
 New  Jersey  $95.45  43,919  $4,192,190  48,616  $4,640,511  New  Mexico  $120.  00  12,830  $1,539,560  14,202  $1,704,203 

 New  York  $117.  99  109,  022  $12,863,739  120,680  $14,239,411  North  Carolina  $116.  61  59,674  $6,958,802  66,055  $7,702,989 
 North  Dakota  $120.  00  5,  523  $662,744  6,  113  $733,619 
 Ohio  $87.99  51,844  $4,561,810  57,388  $5,049,659  Oklahoma  $93.36  23,562  $2,199,741  26,081  $2,434,986 

 Oregon  $120.  00  0  $0  0  $0  Pennsylvania  $108.  32  40,429  $4,379,192  44,752  $4,847,511 
 Rhode  Island  $119.  04  6,  704  $797,991  7,  420  $883,330 
 South  Carolina  $119.  72  24,207  $2,898,061  26,796  $3,207,985  South  Dakota  $98.47  3,853  $379,405  4,  265  $419,980 

 Tennessee  $118.  70  3,  317  $393,658  3,  671  $435,757  Texas  $106.  81  23,541  $2,514,529  26,059  $2,783,437 
 Utah  $119.  22  0  $0  0  $0  Vermont  $119.  20  0  $0  0  $0 
 Virginia  $113.  22  34,038  $3,853,841  37,678  $4,265,978  Washington  $115.  40  28,376  $3,274,503  31,410  $3,624,684 
 West  Virginia  $111.  00  14,909  $1,654,941  16,503  $1,831,923  Wisconsin  $92.68  20,140  $1,866,563  22,294  $2,066,177 
 Wyoming  $120.  00  2,  296  $275,487  2,  541  $304,949 
 Nationwide  Not  applicable  1,  167,  000  $127,  000,  000  1,  292,  000  $140,  000,  000 

 Note:  Some  numbers  in  this  table  have  been  rounded. 
93
 Federal  Communications  Commission  FCC  04-  87 
 K-  25 
 Section  2:  Change  to  baseline:  effects  from  the  new  policy  Table  2.  H 
 Logit  regression  results:  Would  a  1.35  poverty  guidelines  criterion  for  Lifeline  increase  telephone  penetration? 

 Logistic  regression  analysis  1 
 Dependent  side  variable:  Does  the  household  have  telephone  service? 
 Coefficient  Wald  Statistically  Independent  side  variables  value  statistic  P-  Value  significant 

 State  has  1.35  or  higher  poverty  guidelines  criterion  for  Lifeline  0.179  3.  37  0.  07  Yes 
 Income  (000s)  0.  035  69.99  0.  00  Yes  Household  is  a  mobile  home  -0.  757  71.  65  0.  00  Yes 

 Household  is  owned,  not  rented  0.975  203.  71  0.  00  Yes  Percentage  of  householders  who  have  lived  there  one  year  0.463  51.  65  0.00  Yes 
 Someone  in  the  household  is  on  food  stamps  -0.245  17.  20  0.  00  Yes 
 Household  is  in  a  state  with  a  Medicaid  criterion  -0.  269  3.  48  0.  06  Yes  2 
 Household  is  in  a  state  with  a  food  stamp  criterion  -0.  101  0.  52  0.47  Yes  2 
 Household  is  in  a  state  with  a  TANF  criterion  0.105  3.  03  0.  08  Yes  2 
 Household  is  in  a  state  with  a  LIHEAP  criterion  0.  160  3.  19  0.07  Yes  2 
 Household  is  in  a  state  with  a  Public  Housing  criterion  -0.  077  1.  12  0.29  Yes  2 
 Household  is  in  a  state  with  a  National  School  Lunch  criterion  0.  019  0.  01  0.  91  Yes  2 
 Household  is  in  a  state  with  an  SSI  criterion  0.060  0.  35  0.  56  Yes  2  California  0.  495  6.87  0.  01  Yes 

 Constant  1.241  90.  62  0.00  Yes 
 Conclusion:  Yes,  the  coefficient  on  "State  has  1.35  poverty  guidelines  criterion  for  Lifeline"  is  statistically  significant. 
 1  For  more  information  on  the  logistic  regression,  see  Technical  Appendix  2. 
 2  Although  some  criteria  variables  are  not  significant  by  themselves,  the  variables  as  a  set  are  significant.  The  nature  of 

 these  variables  is  such  that  they  should  all  be  used  together,  or  not  at  all.  Because  they  are  significant  as  a  set,  they  should  all  be  included  in  the  logit  regression. 
94
 Federal  Communications  Commission  FCC  04-  87 
 K-  26 
 Section  2:  Change  to  baseline:  effects  from  the  new  policy  Table  2.  I 
 Using  the  logit  regression  results:  Calculating  the  number  of  households  that  would  have  taken  telephone  service  with  a  nationwide  1.  35  PGC 

 a  (Table  2.  G)  b  (CPSH)  c=  a*  b  d  (CPSH)  e=  a*  d 
 Means  for  Means  households  (Same  as  column  b  Partial  effect 

 with  income  except  assumes  if  all  states  Coefficient  less  than  1.35  Partial  all  states  adopt  implement  1.35 

 Variable  value  PLG  effect  1.35  PGC  1  )  PGC  for  Lifeline  State  has  1.35  criteria  for  LL  0.179  0.180  0.  032  1.000  0.  179 
 Income  (dollar  values  in  000s)  0.  035  11.208  0.  397  11.208  0.  397  Lives  in  a  mobile  home  -0.757  0.  086  -0.065  0.086  -0.  065 
 Owns  home  0.975  0.440  0.  429  0.440  0.  429  Percent  HH  lived  there  one  year  0.463  0.820  0.  380  0.820  0.  380 
 On  food  stamps  -0.245  0.265  -0.065  0.265  -0.  065  Medicaid  criterion  -0.269  0.  823  -0.221  0.823  -0.  221 
 Food  stamp  criterion  -0.101  0.  781  -0.079  0.781  -0.  079  TANF  criterion  0.  105  0.450  0.  047  0.450  0.  047 
 Energy  Assistance  criterion  0.  160  0.642  0.  103  0.642  0.  103  Public?  Criterion  -0.077  0.  423  -0.033  0.423  -0.  033 
 Hot  lunch  criterion  0.  019  0.028  0.  001  0.028  0.  001  SSI  criterion  0.  060  0.770  0.  046  0.770  0.  046 
 California  0.495  0.075  0.  037  0.075  0.  037  Constant  1.241  1.000  1.  241  1.000  1.  241 
 Z  =  Sum  of  partial  effects  2.  250  2.396 

 Penetration  among  HH  with  incomes  below  1.35  PGC  =  1/(  1+  e  -z  ):  90.5%  91.  7% 
 Increase  in  penetration  among  HH  at  or  below  1.35  times  the  poverty  line  =  (90.5%  -  91.7%)  1.2%  A 
 Year  2002:  Households  below  1.  35  times  the  poverty  level.  19,  230,  000  B  (CPSH)  Year  2002:  Households  that  would  have  taken  phone  service  due  to  Lifeline  change:  229,  000  C=  A*  B 

 Year  2005:  Households  below  1.  35  times  the  poverty  level.  2  20,  710,  000  D  (CPSH)  Year  2005:  Households  that  would  have  taken  phone  service  due  to  Lifeline  change:  247,  000  E=  A*  D 

 Notes:  1 
 Assumes  that  states  with  1.5  PGC  criteria  keep  it.  2 
 Forecasted  using  CPSH  data. 
95
 Federal  Communications  Commission  FCC  04-  87 
 K-  27 
 Section  2:  Change  to  baseline:  effects  from  the  new  policy  Section  2:  Estimate  changes  from  new  policy 
 Table  2.  J  Breakdown  of  Lifeline  subscribers  with  a  nationwide  1.35  PGC  (Year  2002) 

 a  (Table  2.  E)  b  (Table  2.  H)  c=  a-  b 
 Households  that  Households  with  would  sign  up  for  Households  new  to  telephone  service  that 

 Lifeline  service  telephone  service  would  sign  up  for  due  to  1.35  PGC  due  to  1.35  PGC  Lifeline  due  to  1.35  PGC 
 Low  range:  1,066,000  229,  000  837,000  High  range:  1,180,000  229,  000  951,000 

 Section  2:  Change  to  baseline:  effects  from  the  new  policy  Table  2.K 
 Breakdown  of  Lifeline  subscribers  with  a  nationwide  1.35  PGC  (Year  2005) 
 a  (Table  2.  F)  b  (Table  2.  H)  c=  a-  b  Households  that  Households  with 
 would  sign  up  for  Households  new  to  telephone  service  that  Lifeline  service  telephone  service  would  sign  up  for 
 due  to  1.35  PGC  due  to  1.35  PGC  Lifeline  due  to  1.35  PGC  Low  range:  1,167,000  247,  000  920,000 
 High  range:  1,292,000  247,  000  1,045,000 
96
 Federal  Communications  Commission  FCC  04-  87 
 K-  28 
 Section  3:  New  policy:  new  levels  resulting  from  a  1.35  PGC  (as  of  July  1,  2005)  Table  3.  A 
 Forecasted  new  Lifeline  subscribers  (Year  2005) 
 Low  range  High  range 
 a  (Table  1.  B)  b  (Table  1.  B)  c  (Table  2.  F)  d=  b+  c  e  (Table  2.  F)  f=  b+  e 
 Forecasted  baseline  Additional  LL  New  total  Additional  LL  New  total 
 Forecasted  households  taking  takers  due  to  households  takers  due  to  households  State  households  Lifeline  1.35  PGC  t  aking  Lifeline  1.  35  PGC  taking  Lifeline 

 Alabama  1,  766,868  25,  618  31,447  57,065  34,810  60,428  Alaska  236,684  24,  567  2,115  26,681  2,341  26,908 
 Arizona  2,  185,979  82,  488  30,267  112,755  33,503  115,991 
 Arkansas  1,117,248  10,  655  18,184  28,839  20,128  30,783  California  11,675,997  3,162,324  0  3,  162,324  0  3,  162,324 

 Colorado  1,853,209  32,  568  29,641  62,209  32,811  65,379 
 Connecticut  1,560,766  65,  570  14,587  80,156  16,147  81,716  Delaware  353,960  2,390  2,851  5,  242  3,156  5,547 

 DC  328,431  16,  638  0  16,638  0  16,638  Florida  7,  875,457  167,936  135,981  303,917  150,523  318,459 
 Georgia  3,  588,499  77,  224  52,796  130,021  58,442  135,667 
 Hawaii  430,831  14,  539  7,405  21,944  8,197  22,736  Idaho  521,070  29,  093  0  29,093  0  29,093 

 Illinois  5,322,880  95,  948  49,190  145,139  54,451  150,399 
 Indiana  2,  881,893  46,  461  41,889  88,351  46,369  92,830  Iowa  1,188,981  18,  196  12,842  31,038  14,215  32,411 

 Kansas  1,169,256  14,  794  19,651  34,445  21,753  36,546  Kentucky  1,644,539  63,  085  23,011  86,096  25,472  88,557 
 Louisiana  1,  777,645  22,  650  34,676  57,325  38,384  61,034 
 Maine  720,589  107,956  8,687  116,643  9,  616  117,572  Maryland  2,258,191  4,358  37,229  41,587  41,210  45,568 

 Massachusetts  2,801,968  178,441  33,048  211,489  36,582  215,023  Michigan  4,386,888  132,031  0  132,031  0  132,031 
 Minnesota  2,269,978  54,  115  18,591  72,706  20,579  74,694 
 Mississippi  1,204,582  24,  766  21,434  46,200  23,726  48,492  Missouri  2,302,085  34,  585  12,903  47,489  14,283  48,869 

 Montana  420,615  17,  541  7,577  25,118  8,387  25,928 
 Nebraska  724,145  16,  261  7,549  23,810  8,356  24,617  Nevada  1,068,492  49,  112  0  49,112  0  49,112 

 New  Hampshire  639,804  8,856  5,309  14,165  5,877  14,733  New  Jersey  3,671,381  52,  537  43,919  96,456  48,616  101,153 
 New  Mexico  752,325  51,  021  12,830  63,851  14,202  65,223 
 New  York  7,759,204  532,594  109,022  641,616  120,680  653,275  North  Carolina  3,  731,543  115,402  59,674  175,076  66,055  181,457 

 North  Dakota  311,615  21,  729  5,523  27,251  6,113  27,842  Ohio  4,729,065  287,706  51,844  339,550  57,388  345,094 
 Oklahoma  1,423,636  122,222  23,562  145,783  26,081  148,303 
 Oregon  1,412,789  37,  626  0  37,626  0  37,626  Pennsylvania  5,  221,614  101,819  40,429  142,248  44,752  146,572 

 Rhode  Island  508,546  54,  795  6,704  61,499  7,420  62,216 
 South  Carolina  1,629,353  22,  569  24,207  46,776  26,796  49,365  South  Dakota  358,305  31,  543  3,853  35,396  4,265  35,808 

 Tennessee  2,621,206  55,  717  3,317  59,034  3,671  59,388  Texas  7,  593,412  435,718  23,541  459,259  26,059  461,777 
 Utah  785,443  21,  551  0  21,551  0  21,551 
 Vermont  296,953  34,  193  0  34,193  0  34,193  Virginia  2,956,550  22,  209  34,038  56,246  37,678  59,886 

 Washington  2,565,534  89,  167  28,376  117,543  31,410  120,577  West  Virginia  764,140  4,936  14,909  19,845  16,503  21,440 
 Wisconsin  2,  471,029  77,  397  20,140  97,537  22,294  99,691 
 Wyoming  204,196  2,204  2,296  4,  500  2,541  4,745 

 Nationwide  118,045,768  6,775,000  1,167,000  7,942,000  1,  292,000  8,067,000 

 Note:  Some  numbers  in  this  table  have  been  rounded. 
97
 Federal  Communications  Commission  FCC  04-  87 
 K-  29 
 Section  3:  New  policy:  new  levels  resulting  from  a  1.35  PGC  (as  of  July  1,  2005)  Table  3.  B 
 Forecasted  new  Lifeline  expenditures  (Year  2005) 
 Low  range  High  range  a  (Table  1.C)  b  (Table  2.K)  c=  a*  b  d  (Table  2.K)  e=  a*  d 

 Annual  federal  Additional  federal  Total  federal  Additional  federal  Total  federal  Lifeline  expenditures  Lifeline  expenditures  Lifeline  expenditures  Lifeline  expenditures  Lifeline  expenditures 
 State  without  1.35  PGC  with  1.35  PGC  with  1.35  PGC  with  1.  35  PGC  with  1.35  PGC  Alabama  $3,074,  197  $3,  773,626  $6,847,823  $4,  177,  184  $7,251,  381 
 Alaska  $2,948,  007  $253,772  $3,201,779  $280,911  $3,228,  918  Arizona  $8,221,  159  $3,  016,523  $11,  237,682  $3,  339,  116  $11,560,275 
 Arkansas  $1,054,  846  $1,  800,188  $2,855,034  $1,  992,  704  $3,047,  550  California  $316,  308,  133  $0  $316,308,  133  $0  $316,308,  133 
 Colorado  $3,908,  155  $3,  556,976  $7,465,132  $3,  937,  366  $7,845,  521  Connecticut  $6,312,  049  $1,  404,187  $7,716,236  $1,  554,  353  $7,866,  402 
 Delaware  $234,  348  $279,548  $513,896  $309,443  $543,791  DC  $1,461,  447  $0  $1,461,447  $0  $1,461,  447 
 Florida  $20,152,282  $16,317,  721  $36,  470,003  $18,062,768  $38,  215,050  Georgia  $9,266,  937  $6,  335,533  $15,  602,470  $7,  013,  066  $16,280,003 
 Hawaii  $1,439,  387  $733,088  $2,172,474  $811,486  $2,250,  872  Idaho  $3,459,  726  $0  $3,459,726  $0  $3,459,  726 
 Illinois  $8,540,  023  $4,  378,232  $12,  918,255  $4,  846,  448  $13,386,471  Indiana  $4,153,  300  $3,  744,574  $7,897,874  $4,  145,  026  $8,298,  326 
 Iowa  $1,518,  973  $1,  072,049  $2,591,022  $1,  186,  696  $2,705,  669  Kansas  $1,566,  265  $2,  080,563  $3,646,828  $2,  303,  063  $3,869,  327 
 Kentucky  $7,462,  594  $2,  722,020  $10,  184,614  $3,  013,  118  $10,475,712  Louisiana  $2,242,  338  $3,  432,915  $5,675,252  $3,  800,  037  $6,042,  374 
 Maine  $12,867,569  $1,  035,426  $13,  902,994  $1,  146,  156  $14,013,725  Maryland  $476,  493  $4,  070,235  $4,546,728  $4,  505,  513  $4,982,  006 
 Massachusetts  $21,241,723  $3,  934,001  $25,  175,724  $4,  354,  710  $25,596,434  Michigan  $13,010,610  $0  $13,  010,610  $0  $13,010,610 
 Minnesota  $4,569,  718  $1,  569,863  $6,139,582  $1,  737,  748  $6,307,  466  Mississippi  $2,971,  882  $2,  572,113  $5,543,994  $2,  847,  179  $5,819,  061 
 Missouri  $2,938,  649  $1,  096,380  $4,035,029  $1,  213,  629  $4,152,  278  Montana  $2,104,  915  $909,256  $3,014,171  $1,  006,  493  $3,111,  408 
 Nebraska  $1,839,  924  $854,199  $2,694,123  $945,549  $2,785,  472  Nevada  $4,640,  695  $0  $4,640,695  $0  $4,640,  695 
 New  Hampshire  $868,  626  $520,691  $1,389,317  $576,375  $1,445,  001  New  Jersey  $5,014,  836  $4,  192,190  $9,207,027  $4,  640,  511  $9,655,  347 
 New  Mexico  $6,122,  532  $1,  539,560  $7,662,091  $1,  704,  203  $7,826,  735  New  York  $62,842,179  $12,863,  739  $75,  705,918  $14,239,411  $77,  081,589 
 North  Carolina  $13,457,472  $6,  958,802  $20,  416,274  $7,  702,  989  $21,160,461  North  Dakota  $2,607,  431  $662,744  $3,270,175  $733,619  $3,341,  051 
 Ohio  $25,315,775  $4,  561,810  $29,  877,585  $5,  049,  659  $30,365,434  Oklahoma  $11,410,768  $2,  199,741  $13,  610,510  $2,  434,  986  $13,845,754 
 Oregon  $4,515,  156  $0  $4,515,156  $0  $4,515,  156  Pennsylvania  $11,028,901  $4,  379,192  $15,  408,093  $4,  847,  511  $15,876,412 
 Rhode  Island  $6,522,  833  $797,991  $7,320,824  $883,330  $7,406,  163  South  Carolina  $2,702,  025  $2,  898,061  $5,600,085  $3,  207,  985  $5,910,  009 
 South  Dakota  $3,106,  151  $379,405  $3,485,556  $419,980  $3,526,  131  Tennessee  $6,613,  430  $393,658  $7,007,088  $435,757  $7,049,  187 
 Texas  $46,540,253  $2,  514,529  $49,  054,782  $2,  783,  437  $49,323,690  Utah  $2,569,  386  $0  $2,569,386  $0  $2,569,  386 
 Vermont  $4,075,  759  $0  $4,075,759  $0  $4,075,  759  Virginia  $2,514,  557  $3,  853,841  $6,368,398  $4,  265,  978  $6,780,  534 
 Washington  $10,289,790  $3,  274,503  $13,  564,293  $3,  624,  684  $13,914,475  West  Virginia  $547,  914  $1,  654,941  $2,202,855  $1,  831,  923  $2,379,  837 
 Wisconsin  $7,173,  137  $1,  866,563  $9,039,700  $2,  066,  177  $9,239,  314  Wyoming  $264,  475  $275,487  $539,963  $304,949  $569,424 
 Nationwide  $706,  000,  000  $127,000,000  $833,000,  000  $140,000,000  $846,000,  000 
 Note:  Some  numbers  in  this  table  have  been  rounded. 
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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.  10  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 
 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). 

 10  Consumer  Coalition  Comments  at  2;  Commissioner  Wilson  Pa  PUC  Reply  Comments  at  2-  3;  TOPC  Comments  at 
 5-  6;  USCCB  Comments  at  4-  5. 
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 Step  2:  Estimate  Changes  due  to  New  Policy 
 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 
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 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.  11  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.  12 
 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. 

 11  The  model  in  the  preceding  section  used  households  with  incomes  below  1.35  times  the  FPG. 
 12  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. 
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 Step  3:  Apply  Changes  to  Baselines  to  Compute  New  Program  Levels 
 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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 Section  1:  Baseline  Information  Table  1.  A 
 Baseline  Lifeline  subscription  information  (Year  2002) 
 a  (CPSH  data)  b  (CPSH  data)  c=  a*  b  d  (USAC  data)  e=  d/  c 
 Percentage  of  Households  that  Households  Percentage  of  HH  that  would  qualify  would  qualify  that  took  households  that 

 Households  for  Lifeline  (LL)  for  Lifeline  Lifeline  took  Lifeline  State  in  2002  under  existing  rules  under  existing  rules  in  2002  in  2002 

 Alabama  1,  752,018  17.0%  297,228  25,403  8.5%  Alaska  224,499  23.2%  52,146  23,302  44.7% 
 Arizona  1,939,473  14.4%  279,334  73,186  26.2%  Arkansas  1,059,049  23.0%  243,997  10,100  4.1% 
 California  11,935,960  20.5%  2,451,057  3,232,732  131.9%  Colorado  1,690,526  2.7%  45,808  29,709  64.9% 
 Connecticut  1,381,915  13.7%  188,857  58,056  30.7%  Delaware  310,968  10.9%  33,946  2,100  6.2% 
 DC  269,356  23.5%  63,327  13,645  21.5%  Florida  6,  683,618  15.8%  1,052,902  142,521  13.5% 
 Georgia  3,  172,213  14.3%  452,827  68,266  15.1%  Hawaii  418,526  8.6%  36,185  14,124  39.0% 
 Idaho  495,397  25.3%  125,089  27,660  22.1%  Illinois  4,  836,881  16.4%  793,394  87,188  11.0% 
 Indiana  2,  501,325  12.4%  309,568  40,326  13.0%  Iowa  1,163,128  14.6%  170,241  17,800  10.5% 
 Kansas  1,088,752  12.3%  133,747  13,775  10.3%  Kentucky  1,583,371  21.0%  332,295  60,739  18.3% 
 Louisiana  1,  668,964  17.2%  287,759  21,265  7.4%  Maine  571,277  22.5%  128,698  85,587  66.5% 
 Maryland  2,083,956  2.8%  57,849  4,022  7.0%  Massachusetts  2,584,626  16.4%  423,706  164,600  38.8% 
 Michigan  3,947,084  26.2%  1,032,526  118,794  11.5%  Minnesota  1,994,754  14.0%  278,453  47,554  17.1% 
 Mississippi  1,097,592  29.7%  326,524  22,566  6.9%  Missouri  2,  217,997  14.6%  324,392  33,322  10.3% 
 Montana  379,228  14.2%  53,704  15,815  29.4%  Nebraska  678,736  13.1%  89,251  15,241  17.1% 
 Nevada  809,411  19.8%  160,611  37,204  23.2%  New  Hampshire  523,968  12.3%  64,338  7,253  11.3% 
 New  Jersey  3,262,561  13.3%  435,283  46,687  10.7%  New  Mexico  698,282  21.7%  151,749  47,356  31.2% 
 New  York  7,294,127  21.6%  1,578,737  500,671  31.7%  North  Carolina  3,  217,678  19.2%  616,817  99,510  16.1% 
 North  Dakota  275,725  13.7%  37,712  19,226  51.0%  Ohio  4,595,674  15.8%  726,907  279,591  38.5% 
 Oklahoma  1,  366,274  17.7%  241,259  117,297  48.6%  Oregon  1,366,819  25.0%  341,162  36,402  10.7% 
 Pennsylvania  4,  863,997  12.0%  584,754  94,846  16.2%  Rhode  Island  428,672  18.2%  78,185  46,189  59.1% 
 South  Carolina  1,  574,457  18.4%  289,051  21,809  7.5%  South  Dakota  308,026  17.6%  54,211  27,117  50.0% 
 Tennessee  2,307,548  33.1%  764,595  49,050  6.4%  Texas  7,  493,242  25.4%  1,901,378  429,970  22.6% 
 Utah  716,224  22.2%  159,072  19,652  12.4%  Vermont  259,765  32.9%  85,439  29,911  35.0% 
 Virginia  2,759,677  11.3%  312,574  20,730  6.6%  Washington  2,397,497  16.4%  393,513  83,327  21.2% 
 West  Virginia  759,332  19.8%  150,381  4,905  3.3%  Wisconsin  2,181,649  11.5%  250,155  68,333  27.3% 
 Wyoming  196,973  15.0%  29,449  2,126  7.2% 
 Nationwide  109,388,768  17.8%  19,472,000  6,558,560  33.7% 

 Note:  Some  numbers  in  this  table  have  been  rounded.  Source:  Current  Population  Survey  of  Households  (CPSH)  March  2002  data. 
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 Section  1:  Baseline  Information  Table  1.  B 
 Baseline  Lifeline  subscription  information  (Year  2005) 
 a  (Table  1.  A)  b  (CPSH)  c=  a*  b  d=  a+  c  e  (Table  1.  A)  f=  d*  e  g  (Table  1.  A)  h=  f*  g 
 Growth  (loss)  Expected  Percentage  of  Households  that  Lifeline  take  Expected  HH  1/  2002  -  7/  2005  New  (fewer)  total  HH  that  would  would  qualify  rate  for  HH  that  that  would  take 

 Households  based  on  households  households  qualify  for  LL  for  Lifeline  qualify  under  Lifeline  under 
 State  2002  1/  2000  -  1/  2002  1  in  2005  July  2005  under  exist  ing  rule  s  under  existing  rules  exis  t  ing  rule  s  exis  t  ing  r  ule  s 
 Alabama  1,  752,  018  0.8%  14,849  1,766,  868  17.  0%  299,747  8.  5%  25,618 
 Alaska  224,499  5.4%  12,185  236,684  23.  2%  54,977  44.7%  24,567  Arizona  1,  939,  473  12.  7%  246,506  2,  185,  979  14.  4%  314,837  26.2%  82,488 

 Arkansas  1,  059,  049  5.5%  58,199  1,117,  248  23.  0%  257,406  4.  1%  10,655 
 California  11,935,960  -2.  2%  -259,  963  11,675,997  20.  5%  2,  397,673  131.9%  3,162,324  Colorado  1,  690,  526  9.6%  162,683  1,  853,  209  2.7%  50,216  64.9%  32,568 

 Connecticut  1,  381,  915  12.  9%  178,850  1,  560,  766  13.  7%  213,300  30.7%  65,570 
 Delaware  310,968  13.  8%  42,992  353,960  10.  9%  38,639  6.  2%  2,390  DC  269,356  21.  9%  59,075  328,431  23.  5%  77,216  21.5%  16,638 

 Florida  6,  683,  618  17.  8%  1,  191,839  7,875,  457  15.  8%  1,  240,658  13.5%  167,936 
 Georgia  3,  172,  213  13.  1%  416,286  3,  588,  499  14.  3%  512,251  15.1%  77,224  Hawaii  418,526  2.9%  12,305  430,831  8.6%  37,249  39.0%  14,539 

 Idaho  495,397  5.2%  25,673  521,070  25.  3%  131,572  22.1%  29,093 
 Illinois  4,  836,  881  10.  0%  485,999  5,  322,  880  16.  4%  873,112  11.0%  95,948  Indiana  2,  501,  325  15.  2%  380,568  2,  881,  893  12.  4%  356,667  13.0%  46,461 

 Iowa  1,  163,  128  2.2%  25,853  1,188,  981  14.  6%  174,025  10.5%  18,196 
 Kansas  1,  088,  752  7.4%  80,504  1,169,  256  12.  3%  143,636  10.3%  14,794  Kentucky  1,  583,  371  3.9%  61,169  1,644,  539  21.  0%  345,132  18.3%  63,085 

 Louisiana  1,  668,  964  6.5%  108,680  1,  777,  645  17.  2%  306,498  7.  4%  22,650 
 Maine  571,277  26.  1%  149,312  720,589  22.  5%  162,335  66.5%  107,956  Maryland  2,  083,  956  8.4%  174,235  2,  258,  191  2.8%  62,685  7.  0%  4,358 

 Massachusetts  2,  584,  626  8.4%  217,343  2,  801,  968  16.  4%  459,336  38.8%  178,441 
 Michigan  3,  947,  084  11.  1%  439,803  4,  386,  888  26.  2%  1,  147,575  11.5%  132,031  Minnesota  1,  994,  754  13.  8%  275,225  2,  269,  978  14.  0%  316,872  17.1%  54,115 

 Mississippi  1,  097,  592  9.7%  106,991  1,  204,  582  29.  7%  358,353  6.  9%  24,766 
 Missouri  2,  217,  997  3.8%  84,088  2,302,  085  14.  6%  336,690  10.3%  34,585  Montana  379,228  10.  9%  41,387  420,615  14.  2%  59,565  29.4%  17,541 

 Nebraska  678,736  6.7%  45,409  724,145  13.  1%  95,222  17.1%  16,261  Nevada  809,411  32.  0%  259,081  1,  068,  492  19.  8%  212,021  23.2%  49,112 
 New  Hampshire  523,968  22.  1%  115,836  639,804  12.  3%  78,561  11.3%  8,856  New  Jersey  3,  262,  561  12.  5%  408,819  3,  671,  381  13.  3%  489,827  10.7%  52,537 
 New  Mexico  698,282  7.7%  54,043  752,325  21.  7%  163,494  31.2%  51,021 
 New  York  7,  294,  127  6.4%  465,077  7,  759,  204  21.  6%  1,  679,398  31.7%  532,594  North  Carolina  3,  217,  678  16.  0%  513,866  3,  731,  543  19.  2%  715,324  16.1%  115,402 

 North  Dakota  275,725  13.  0%  35,890  311,615  13.  7%  42,621  51.0%  21,729 
 Ohio  4,  595,  674  2.9%  133,391  4,  729,  065  15.  8%  748,006  38.5%  287,706  Oklahoma  1,  366,  274  4.2%  57,363  1,423,  636  17.  7%  251,388  48.6%  122,222 

 Oregon  1,  366,  819  3.4%  45,970  1,412,  789  25.  0%  352,636  10.7%  37,626 
 Pennsylvania  4,  863,  997  7.4%  357,618  5,  221,  614  12.  0%  627,747  16.2%  101,819  Rhode  Island  428,672  18.  6%  79,874  508,546  18.  2%  92,753  59.1%  54,795 

 South  Carolina  1,  574,  457  3.5%  54,896  1,629,  353  18.  4%  299,129  7.  5%  22,569 
 South  Dakota  308,026  16.  3%  50,279  358,305  17.  6%  63,060  50.0%  31,543  Tennessee  2,  307,  548  13.  6%  313,658  2,  621,  206  33.  1%  868,524  6.  4%  55,717 

 Texas  7,  493,  242  1.3%  100,170  7,  593,  412  25.  4%  1,  926,796  22.6%  435,718 
 Utah  716,224  9.7%  69,218  785,443  22.  2%  174,445  12.4%  21,551  Vermont  259,765  14.  3%  37,188  296,953  32.  9%  97,670  35.0%  34,193 

 Virginia  2,  759,  677  7.1%  196,873  2,  956,  550  11.  3%  334,873  6.  6%  22,209 
 Washington  2,  397,  497  7.0%  168,037  2,  565,  534  16.  4%  421,094  21.2%  89,167  West  Virginia  759,332  0.6%  4,808  764,140  19.  8%  151,333  3.  3%  4,  936 

 Wisconsin  2,  181,  649  13.  3%  289,380  2,  471,  029  11.  5%  283,336  27.3%  77,397 
 Wyoming  196,973  3.7%  7,223  204,196  15.  0%  30,529  7.  2%  2,204 

 Nationwide  109,388,768  7.7%  8,657,000  118,045,768  17.  8%  21,013,000  33.7%  6,775,000 
 1  1.75  times  the  2-  year  growth  (2000-  2002)  equals  the  growth  over  3.5  years. 

 Note:  Some  numbers  in  this  table  have  been  rounded. 
 Source:  Current  Population  Survey  of  Households  (CPSH)  March  2000  and  2002  data. 
104
 Federal  Communications  Commission  FCC  04-  87 
 K-  36 
 Section  1:  Baseline  Information  Table  1.C 
 Forecasted  baseline  Lifeline  expenditures  (Year  2005) 
 a  (staff  estimate)  1  b=  a*  12  c  (Table  1.B)  d=  b*  c 
 Monthly  federal  support  Annual  federal  Expected  Households  taking  Forecasted  Lifeline  expenditures  State  per  line  in  2005  support  per  line  Lifeline  under  existing  rules  under  existing  rules 

 Alabama  $10.00  $120.00  25,  618  $3,  074,  197  Alaska  $10.00  $120.00  24,  567  $2,  948,  007 
 Arizona  $8.31  $99.67  82,  488  $8,  221,  159  Arkansas  $8.25  $99.00  10,  655  $1,  054,  846 
 California  $8.34  $100.02  3,162,  324  $316,308,133  Colorado  $10.00  $120.00  32,  568  $3,  908,  155 
 Connecticut  $8.02  $96.26  65,  570  $6,  312,  049  Delaware  $8.17  $98.04  2,390  $234,  348 
 DC  $7.32  $87.84  16,  638  $1,  461,  447  Florida  $10.00  $120.00  167,  936  $20,152,282 
 Georgia  $10.00  $120.00  77,  224  $9,  266,  937  Hawaii  $8.25  $99.00  14,  539  $1,  439,  387 
 Idaho  $9.91  $118.92  29,  093  $3,  459,  726  Illinois  $7.42  $89.01  95,  948  $8,  540,  023 
 Indiana  $7.45  $89.39  46,  461  $4,  153,  300  Iowa  $6.96  $83.48  18,  196  $1,  518,  973 
 Kansas  $8.82  $105.87  14,  794  $1,  566,  265  Kentucky  $9.86  $118.29  63,  085  $7,  462,  594 
 Louisiana  $8.25  $99.00  22,  650  $2,  242,  338  Maine  $9.93  $119.19  107,  956  $12,867,569 
 Maryland  $9.11  $109.33  4,358  $476,  493  Massachusetts  $9.92  $119.04  178,  441  $21,241,723 
 Michigan  $8.21  $98.54  132,  031  $13,010,610  Minnesota  $7.04  $84.44  54,  115  $4,  569,  718 
 Mississippi  $10.00  $120.00  24,  766  $2,  971,  882  Missouri  $7.08  $84.97  34,  585  $2,  938,  649 
 Montana  $10.00  $120.00  17,  541  $2,  104,  915  Nebraska  $9.43  $113.15  16,  261  $1,  839,  924 
 Nevada  $7.87  $94.49  49,  112  $4,  640,  695  New  Hampshire  $8.17  $98.08  8,856  $868,  626 
 New  Jersey  $7.95  $95.45  52,  537  $5,  014,  836  New  Mexico  $10.00  $120.00  51,  021  $6,  122,  532 
 New  York  $9.83  $117.99  532,  594  $62,842,179  North  Carolina  $9.72  $116.61  115,  402  $13,457,472 
 North  Dakota  $10.00  $120.00  21,  729  $2,  607,  431  Ohio  $7.33  $87.99  287,  706  $25,315,775 
 Oklahoma  $7.78  $93.36  122,  222  $11,410,768  Oregon  $10.00  $120.00  37,  626  $4,  515,  156 
 Pennsylvania  $9.03  $108.32  101,  819  $11,028,901  Rhode  Island  $9.92  $119.04  54,  795  $6,  522,  833 
 South  Carolina  $9.98  $119.72  22,  569  $2,  702,  025  South  Dakota  $8.21  $98.47  31,  543  $3,  106,  151 
 Tennessee  $9.89  $118.70  55,  717  $6,  613,  430  Texas  $8.90  $106.81  435,  718  $46,540,253 
 Utah  $9.94  $119.22  21,  551  $2,  569,  386  Vermont  $9.93  $119.20  34,  193  $4,  075,  759 
 Virginia  $9.44  $113.22  22,  209  $2,  514,  557  Washington  $9.62  $115.40  89,  167  $10,289,790 
 West  Virginia  $9.25  $111.00  4,936  $547,  914  Wisconsin  $7.72  $92.68  77,  397  $7,  173,  137 
 Wyoming  $10.00  $120.00  2,204  $264,  475  Nationwide  Not  applicable  Not  applicable  6,775,  000  $706,000,000 

 Note:  Some  numbers  in  this  table  have  been  rounded. 
 1  Estimate  of  monthly  federal  expenditures  includes  the  Subscriber  Line  Charge  (SLC),  $1.  75,  and  any  federal  matching  funds 
 for  that  state.  SLC  amounts  were  estimated  on  a  company-  by-  company  basis,  and  are  based  on  rules  established  by  the  CALLS  and  MAG  proceedings.  The  SLC  for  each  state  is  a  weighted  average  based  on  the  number  of  Lifeline  subscribers  served  by 

 each  carrier  in  the  state. 
105
 Federal  Communications  Commission  FCC  04-  87 
 K-  37 
 Section  2:  Change  to  baseline:  effects  from  the  new  policy  Table  2.  A 
 Estimated  additional  Lifeline-  eligible  households  using  a  nationwide  1.50  PGC  (Year  2002) 
 a  (Table  1.A)  b  (CPSH  data)  c=  b/  a 
 Households  Additional  households  that  Additional  households  (%)  that  State  in  2002  would  qualify  with  a  1.5  PGC  would  qualify  with  a  1.5  PGC 

 Alabama  1,  752,  018  256,491  14.6%  Alaska  224,499  16,090  7.  2% 
 Arizona  1,  939,  473  235,401  12.1%  Arkansas  1,059,049  154,  167  14.  6% 
 California  11,  935,  960  0  0.0%  Colorado  1,690,526  222,  464  13.  2% 
 Connecticut  1,381,915  110,  365  8.0%  Delaware  310,968  22,559  7.  3% 
 DC  269,356  0  0.  0%  Florida  6,  683,  618  981,969  14.7% 
 Georgia  3,  172,  213  401,966  12.7%  Hawaii  418,526  62,311  14.9% 
 Idaho  495,  397  19,  115  3.  9%  Illinois  4,  836,  881  414,  479  8.  6% 
 Indiana  2,  501,  325  334,218  13.4%  Iowa  1,163,128  114,  108  9.8% 
 Kansas  1,088,752  148,  384  13.  6%  Kentucky  1,583,371  203,  808  12.  9% 
 Louisiana  1,  668,  964  278,378  16.7%  Maine  571,  277  58,443  10.2% 
 Maryland  2,083,956  277,  035  13.  3%  Massachusetts  2,584,626  272,  646  10.  5% 
 Michigan  3,947,084  0  0.0%  Minnesota  1,  994,  754  137,500  6.  9% 
 Mississippi  1,  097,  592  178,003  16.2%  Missouri  2,  217,  997  132,829  6.  0% 
 Montana  379,  228  60,  091  15.  8%  Nebraska  678,736  62,530  9.  2% 
 Nevada  809,411  0  0.  0%  New  Hampshire  523,  968  39,079  7.  5% 
 New  Jersey  3,262,561  347,  871  10.  7%  New  Mexico  698,  282  101,  850  14.  6% 
 New  York  7,294,127  831,  139  11.  4%  North  Carolina  3,  217,  678  425,055  13.2% 
 North  Dakota  275,  725  43,283  15.7%  Ohio  4,595,674  429,  961  9.4% 
 Oklahoma  1,  366,  274  202,226  14.8%  Oregon  1,366,819  29,  048  2.  1% 
 Pennsylvania  4,863,997  365,  771  7.5%  Rhode  Island  428,672  51,691  12.1% 
 South  Carolina  1,  574,  457  177,234  11.3%  South  Dakota  308,026  27,625  9.  0% 
 Tennessee  2,  307,  548  61,918  2.  7%  Texas  7,  493,  242  364,564  4.  9% 
 Utah  716,224  19,425  2.  7%  Vermont  259,  765  0  0.  0% 
 Virginia  2,759,677  270,  158  9.8%  Washington  2,397,497  236,  432  9.9% 
 West  Virginia  759,332  126,  545  16.  7%  Wisconsin  2,  181,  649  167,455  7.  7% 
 Wyoming  196,  973  21,  734  11.  0% 
 Nationwide  109,  388,  768  9,  495,  000  8.  7% 
 Note:  Some  numbers  in  this  table  have  been  rounded. 
106
 Federal  Communications  Commission  FCC  04-  87 
 K-  38 
 Section  2:  Change  to  baseline:  effects  from  the  new  policy  Table  2.B 
 Estimated  additional  Lifeline-  eligible  households  using  a  nationwide  1.  50  PGC  (Year  2005) 
 a  (Table  1.  B)  b  (Table  2.  A)  c=  a*  b 
 Forecasted  Additional  households  (%)  that  Additional  households  that  State  Households  in  2005  would  qualify  with  a  1.5  PGC  would  qualify  with  a  1.5  PGC 

 Alabama  1,  766,  868  14.6%  258,665  Alaska  236,684  7.  2%  16,963 
 Arizona  2,185,  979  12.1%  265,320  Arkansas  1,117,  248  14.6%  162,639 
 California  11,675,997  0.0%  0  Colorado  1,853,  209  13.2%  243,872 
 Connecticut  1,560,  766  8.0%  124,648  Delaware  353,960  7.  3%  25,677 
 DC  328,431  0.  0%  0  Florida  7,  875,  457  14.7%  1,157,077 
 Georgia  3,  588,  499  12.7%  454,716  Hawaii  430,831  14.9%  64,143 
 Idaho  521,070  3.  9%  20,106  Illinois  5,  322,  880  8.6%  456,124 
 Indiana  2,  881,  893  13.4%  385,069  Iowa  1,188,  981  9.8%  116,644 
 Kansas  1,169,  256  13.6%  159,356  Kentucky  1,644,  539  12.9%  211,682 
 Louisiana  1,  777,  645  16.7%  296,506  Maine  720,589  10.2%  73,718 
 Maryland  2,258,  191  13.3%  300,198  Massachusetts  2,801,  968  10.5%  295,573 
 Michigan  4,386,  888  0.0%  0  Minnesota  2,269,  978  6.9%  156,472 
 Mississippi  1,204,  582  16.2%  195,354  Missouri  2,  302,  085  6.0%  137,865 
 Montana  420,615  15.8%  66,649  Nebraska  724,145  9.  2%  66,713 
 Nevada  1,068,  492  0.0%  0  New  Hampshire  639,804  7.  5%  47,718 
 New  Jersey  3,671,  381  10.7%  391,462  New  Mexico  752,325  14.6%  109,732 
 New  York  7,759,  204  11.4%  884,133  North  Carolina  3,731,  543  13.2%  492,937 
 North  Dakota  311,615  15.7%  48,917  Ohio  4,729,  065  9.4%  442,441 
 Oklahoma  1,  423,  636  14.8%  210,716  Oregon  1,412,  789  2.1%  30,025 
 Pennsylvania  5,  221,  614  7.5%  392,664  Rhode  Island  508,546  12.1%  61,322 
 South  Carolina  1,  629,  353  11.3%  183,413  South  Dakota  358,305  9.  0%  32,135 
 Tennessee  2,  621,  206  2.7%  70,334  Texas  7,  593,  412  4.9%  369,437 
 Utah  785,443  2.  7%  21,303  Vermont  296,953  0.  0%  0 
 Virginia  2,956,  550  9.8%  289,431  Washington  2,565,  534  9.9%  253,003 
 West  Virginia  764,140  16.7%  127,347  Wisconsin  2,471,  029  7.7%  189,667 
 Wyoming  204,196  11.0%  22,531 
 Nationwide  118,045,768  8.7%  10,382,000 
 Note:  Some  numbers  in  this  table  have  been  rounded. 
107
 Federal  Communications  Commission  FCC  04-  87 
 K-  39 
 Section  2:  Change  to  baseline:  effects  from  the  new  policy  Table  2.  C 
 Regression  analysis:  Would  Lifeline  take  rates  1  increase  due  to  a  nationwide  implementation  of  a  1.50  PGC? 
 Regression  Model 
 Dependent  variable:  Lifeline  take  rate  Specification  1  (Low  Range)  Specification  2  (High  Range) 

 Independent  variables  Coefficient  t-  statistic  Coefficient  t-  statistic  Amount  that  state's  PGC  is  above  1.253  0.554  1.78  0.  612  1.99 
 California  0.  990  5.95  0.  992  5.96  Total  support  0.  010  1.02 
 Constant  0.082  0.88  0.  173  7.69 
 Sample  size:  51  R  2  =  0.  5636  0.  5539 
 Conclusion:  Yes,  for  both  specifications,  the  coefficient  on  "Amount  that  state's  PGC  is  above  1.  25"  is  positive  and  statistically  significant. 

 Result 
 Q:  If  a  state  without  a  PGC  (or  a  state  with  a  PGC  below  1.  5)  added  a  1.  5  PGC,  how  much  would  the  take  rate  increase? 

 Increase  in  Amount  1.5  PGC  portion  that  would 

 Coefficient  is  above  1.25  take  Lifeline  4  Low  range:  0.  554  0.  25  0.139 
 High  range:  0.612  0.  25  0.153 

 A:  The  take  rate  would  rise  by  13.  9  to  15.  3  percentage  points. 
 Notes:  1 
 The  Lifeline  take  rate  is  the  number  of  households  that  take  Lifeline  divided  by  the  number  of  households  with  income  at  or  below  1.5  times  the  poverty  guidelines.  For  more  information  on  the  regression,  see  Technical  Appendix  1. 

 2  Significant  at  the  10%  level  in  a  two-  tailed  test. 
 3  For  instance,  if  a  state  has  a  1.5  poverty  guidelines  criterion,  then  the  variable  has  a  value  of  .25  (=  1.5  -  1.  25). 

 If  a  state  has  no  poverty  guidelines  criteria,  or  if  the  state's  poverty  guidelines  criteria  is  at  or  below  1.  25,  then  the  variable  has  a  value  of  0. 

 4  This  means  that  if  a  state  raised  its  PGC  from  1.  25  to  1.  50,  then,  on  average,  the  percentage  of  poor 
 households  that  take  Lifeline  would  rise  by  13.  9  to  15.  3  percentage  points.  Similarly,  on  average,  a  state  adding  a  1.50  PGC  where  no  PGC  existed  would  increase  its  Lifeline  take  rate  by  13.  9  to  15.  3  percentage  points. 
108
 Federal  Communications  Commission  FCC  04-  87 
 K-  40 
 Section  2:  Change  to  baseline:  effects  from  the  new  policy  Table  2.D 
 Estimated  additional  Lifeline  subscribership  with  a  nationwide  1.  50  PGC 
 a  (CPSH  data)  b  (Table  2.C)  c=  a*  b 
 Households  with  incomes  at  or  below  Additional  households  that  Additional  1.  50  times  the  poverty  guidelines  in  states  would  take  Lifeline  Lifeline  takers 

 with  1.33  or  lower  PGCs  (Year  2002)  1  due  to  1.50  PGC  due  to  1.50  PGC 
 Low  range:  19,  232,  000  13.  9%  2,  665,000 
 High  range:  19,232,000  15.  3%  2,940,  000 

 Q:  Of  the  households  that  would  become  eligible  to  take  Lifeline  because  of  a  1.5  PGC,  what  percentage  would  do  so  only  because  of  the  1.5  PGC? 
 A  (Column  c,  above)  B  (Table  2.  A)  C=  A/  B 
 Additional  households  that  Additional  households  that  Percentage  of  newly  eligible  would  have  taken  Lifeline  would  have  become  eligible  households  that  would 

 due  to  a  1.5  PGC  due  to  a  1.5  PGC  take  Lifeline  with  a  1.5  PGC  Low  range:  2,665,  000  9,495,000  28.  1% 
 High  range:  2,  940,  000  9,495,000  31.  0% 
 A:  28.  1%  to  31.  0%  of  the  households  that  would  become  eligible  for  Lifeline  would  subscribe. 

 Notes  1 

 Source:  Current  Population  Survey  of  Households  (CPSH)  March  2002  data. 
 The  regression  analysis  presented  in  Table  2.  C  examined  Lifeline  take  rates  among  households  with  incomes  at  or  below  1.  5  times  the  federal  poverty  guidelines.  This  value  includes  households  in  states  without  a  poverty  level  criterion  for  Lifeline. 
109
 Federal  Communications  Commission  FCC  04-  87 
 K-  41 
 Section  2:  Change  to  baseline:  effects  from  the  new  policy  Table  2.  E 
 Estimated  state-  by-  state  additional  Lifeline  subscribers  using  a  1.  50  PGC  (Year  2002) 
 Low  range  High  range  a  (Table  2.  A)  b  (Table  2.  D)  c=  a*  b  d  (Table  2.D)  e=  a*  d 

 Additional  HH  Take  rate  among  Additional  LL  Take  rate  among  Additional  LL  that  would  qualify  if  HH  that  qualify  takers  due  to  HH  that  qualify  takers  due  to 
 State  1.  5  PGC  were  added  due  to  1.5  PGC  1.5  PGC  due  to  1.5  PGC  1.5  PGC 
 Alabama  256,  491  28.  1%  71,990  31.0%  79,  419  Alaska  16,  090  28.  1%  4,  516  31.  0%  4,  982 

 Arizona  235,  401  28.  1%  66,071  31.0%  72,  889  Arkansas  154,167  28.1%  43,  271  31.  0%  47,  736 
 California  0  28.  1%  0  31.  0%  0  Colorado  222,464  28.1%  62,  440  31.  0%  68,  883 
 Connecticut  110,365  28.1%  30,  977  31.  0%  34,  173  Delaware  22,  559  28.  1%  6,  332  31.  0%  6,  985 
 DC  0  28.  1%  0  31.0%  0  Florida  981,  969  28.  1%  275,  613  31.  0%  304,  054 
 Georgia  401,  966  28.  1%  112,  821  31.  0%  124,  463  Hawaii  62,  311  28.  1%  17,489  31.0%  19,  294 
 Idaho  19,115  28.1%  5,365  31.  0%  5,919  Illinois  414,  479  28.  1%  116,  333  31.  0%  128,  338 
 Indiana  334,  218  28.  1%  93,806  31.0%  103,486  Iowa  114,108  28.1%  32,  027  31.  0%  35,  332 
 Kansas  148,384  28.1%  41,  648  31.  0%  45,  945  Kentucky  203,808  28.1%  57,  204  31.  0%  63,  106 
 Louisiana  278,  378  28.  1%  78,134  31.0%  86,  196  Maine  58,443  28.1%  16,  403  31.  0%  18,  096 
 Maryland  277,035  28.1%  77,  757  31.  0%  85,  780  Massachusetts  272,646  28.1%  76,  525  31.  0%  84,  421 
 Michigan  0  28.1%  0  31.0%  0  Minnesota  137,500  28.1%  38,  593  31.  0%  42,  575 
 Mississippi  178,003  28.1%  49,  961  31.  0%  55,  116  Missouri  132,  829  28.  1%  37,282  31.0%  41,  129 
 Montana  60,091  28.1%  16,  866  31.  0%  18,  606  Nebraska  62,  530  28.  1%  17,  551  31.  0%  19,  362 
 Nevada  0  28.1%  0  31.  0%  0  New  Hampshire  39,  079  28.  1%  10,  968  31.  0%  12,100 
 New  Jersey  347,871  28.1%  97,  638  31.  0%  107,  714  New  Mexico  101,850  28.1%  28,  587  31.  0%  31,  536 
 New  York  831,139  28.1%  233,  279  31.  0%  257,  351  North  Carolina  425,  055  28.  1%  119,  302  31.  0%  131,  613 
 North  Dakota  43,  283  28.  1%  12,148  31.0%  13,  402  Ohio  429,961  28.1%  120,  679  31.  0%  133,  132 
 Oklahoma  202,  226  28.  1%  56,760  31.0%  62,  616  Oregon  29,  048  28.  1%  8,  153  31.  0%  8,  994 
 Pennsylvania  365,  771  28.  1%  102,  662  31.  0%  113,  256  Rhode  Island  51,  691  28.  1%  14,508  31.0%  16,  005 
 South  Carolina  177,  234  28.  1%  49,745  31.0%  54,  878  South  Dakota  27,  625  28.  1%  7,  754  31.  0%  8,  554 
 Tennessee  61,918  28.1%  17,  379  31.  0%  19,  172  Texas  364,  564  28.  1%  102,  324  31.  0%  112,  882 
 Utah  19,  425  28.  1%  5,  452  31.  0%  6,  015  Vermont  0  28.  1%  0  31.  0%  0 
 Virginia  270,158  28.1%  75,  826  31.  0%  83,  651  Washington  236,432  28.1%  66,  360  31.  0%  73,  208 
 West  Virginia  126,545  28.1%  35,  518  31.  0%  39,  183  Wisconsin  167,  455  28.  1%  47,000  31.0%  51,  850 
 Wyoming  21,734  28.1%  6,100  31.  0%  6,730 
 Nationwide  9,  495,000  28.1%  2,665,  000  31.  0%  2,  940,  000 
 Note:  Some  numbers  in  this  table  have  been  rounded. 
110
 Federal  Communications  Commission  FCC  04-  87 
 K-  42 
 Section  2:  Change  to  baseline:  effects  from  the  new  policy  Table  2.  F 
 Estimated  state-  by-  state  additional  Lifeline  subscribers  using  a  1.  50  PGC  (Year  2005)  Low  range  High  range 
 a  (Table  2.  B)  b  (Table  2.  D)  c=  a*  b  d  (Table  2.  D)  e=  a*  d 
 Additional  HH  Take  rate  among  Additional  LL  Take  rate  among  Additional  LL  that  would  qualify  if  HH  that  qualify  takers  due  to  HH  that  qualify  takers  due  to 

 State  1.5  PGC  were  added  due  to  1.5  PGC  1.5  PGC  due  to  1.5  PGC  1.5  PGC 
 Alabama  258,665  28.  1%  72,600  31.  0%  80,092  Alaska  16,963  28.  1%  4,  761  31.  0%  5,  252 

 Arizona  265,320  28.  1%  74,468  31.  0%  82,153 
 Arkansas  162,639  28.  1%  45,649  31.  0%  50,359  California  0  28.  1%  0  31.  0%  0 

 Colorado  243,872  28.  1%  68,449  31.  0%  75,512  Connecticut  124,648  28.  1%  34,986  31.  0%  38,596 
 Delaware  25,677  28.  1%  7,  207  31.  0%  7,  951  DC  0  28.1%  0  31.0%  0 
 Florida  1,  157,077  28.  1%  324,761  31.  0%  358,273  Georgia  454,716  28.  1%  127,627  31.  0%  140,797 
 Hawaii  64,143  28.  1%  18,003  31.  0%  19,861  Idaho  20,106  28.  1%  5,  643  31.  0%  6,  226 
 I  llinois  456,124  28.  1%  128,022  31.  0%  141,233 
 Indiana  385,069  28.  1%  108,079  31.  0%  119,231  Iowa  116,644  28.  1%  32,739  31.  0%  36,117 

 Kansas  159,356  28.  1%  44,727  31.  0%  49,342  Kentucky  211,682  28.  1%  59,414  31.  0%  65,544 
 Louisiana  296,506  28.  1%  83,222  31.  0%  91,809 
 Maine  73,718  28.  1%  20,691  31.  0%  22,826  Maryland  300,198  28.  1%  84,258  31.  0%  92,952 

 Massachusetts  295,573  28.  1%  82,960  31.  0%  91,520  Michigan  0  28.1%  0  31.0%  0 
 Minnesota  156,472  28.  1%  43,918  31.  0%  48,449 
 Mississippi  195,354  28.  1%  54,831  31.  0%  60,489  Missouri  137,865  28.  1%  38,695  31.  0%  42,688 

 Montana  66,649  28.  1%  18,707  31.  0%  20,637  Nebraska  66,713  28.  1%  18,725  31.  0%  20,657 
 Nevada  0  28.  1%  0  31.  0%  0 
 New  Hampshire  47,718  28.  1%  13,393  31.  0%  14,775  New  Jersey  391,462  28.  1%  109,873  31.  0%  121,211 

 New  Mexico  109,732  28.  1%  30,799  31.  0%  33,977  New  York  884,133  28.  1%  248,153  31.  0%  273,760 
 North  Carolina  492,937  28.  1%  138,355  31.  0%  152,631  North  Dakota  48,917  28.  1%  13,730  31.  0%  15,147 
 Ohio  442,441  28.  1%  124,182  31.  0%  136,996  Oklahoma  210,716  28.  1%  59,143  31.  0%  65,245 
 Oregon  30,025  28.  1%  8,  427  31.  0%  9,  297  Pennsylvania  392,664  28.  1%  110,210  31.  0%  121,583 
 Rhode  Island  61,322  28.  1%  17,212  31.  0%  18,988 
 South  Carolina  183,413  28.  1%  51,479  31.  0%  56,791  South  Dakota  32,135  28.  1%  9,  019  31.  0%  9,  950 

 Tennessee  70,334  28.  1%  19,741  31.  0%  21,778  Texas  369,437  28.  1%  103,691  31.  0%  114,391 
 Utah  21,303  28.  1%  5,  979  31.  0%  6,  596 
 Vermont  0  28.  1%  0  31.  0%  0  Virginia  289,431  28.  1%  81,236  31.  0%  89,618 

 Washington  253,003  28.  1%  71,011  31.  0%  78,339  West  Virginia  127,347  28.  1%  35,743  31.  0%  39,431 
 Wisconsin  189,667  28.  1%  53,235  31.  0%  58,728 
 Wyoming  22,531  28.  1%  6,  324  31.  0%  6,  976 

 Nationwide  10,382,000  28.  1%  2,  914,000  31.  0%  3,215,  000 
 Note:  Some  numbers  in  this  table  have  been  rounded. 
111
 Federal  Communications  Commission  FCC  04-  87 
 K-  43 
 Section  2:  Change  to  baseline:  effects  from  the  new  policy  Table  2.  G 
 Estimated  increase  in  Lifeline  expenditures  (Year  2005) 
 Low  range  High  range  a  (Table  1.C)  b  (Table  2.  F)  c=  a*  b  d  (Table  2.  F)  e=  a*  d 

 Annual  federal  Forecasted  Forecasted  Forecasted  Forecasted  support  per  additional  HH  increased  federal  additional  HH  increased  federal 
 State  Lifeline  subscriber  taking  Lifeline  Lifeline  expenditures  taking  Lifeline  Lifeline  expenditures  Alabama  $120.00  72,  600  $8,  712,  054  80,  092  $9,611,  046 
 Alaska  $120.00  4,761  $571,334  5,  252  $630,  290  Arizona  $99.  67  74,468  $7,421,900  82,  153  $8,187,  762 
 Arkansas  $99.00  45,  649  $4,  519,  194  50,  359  $4,985,  527  California  $100.02  0  $0  0  $0 
 Colorado  $120.00  68,  449  $8,  213,  836  75,  512  $9,061,  418  Connecticut  $96.26  34,  986  $3,  367,  877  38,  596  $3,715,  406 
 Delaware  $98.04  7,207  $706,571  7,  951  $779,  481  DC  $87.84  0  $0  0  $0 
 Florida  $120.00  324,761  $38,  971,362  358,  273  $42,  992,  797  Georgia  $120.00  127,627  $15,  315,227  140,  797  $16,  895,  598 
 Hawaii  $99.00  18,  003  $1,  782,  313  19,  861  $1,966,  229  Idaho  $118.92  5,643  $671,075  6,  226  $740,  323 
 Illinois  $89.01  128,022  $11,  394,798  141,  233  $12,  570,  621  Indiana  $89.  39  108,079  $9,661,413  119,  231  $10,  658,  369 
 Iowa  $83.48  32,  739  $2,  733,  047  36,  117  $3,015,  069  Kansas  $105.87  44,  727  $4,  735,  469  49,  342  $5,224,  119 
 Kentucky  $118.29  59,  414  $7,  028,  232  65,  544  $7,753,  471  Louisiana  $99.  00  83,222  $8,238,980  91,  809  $9,089,  156 
 Maine  $119.19  20,  691  $2,  466,  169  22,  826  $2,720,  651  Maryland  $109.33  84,  258  $9,  211,  947  92,  952  $10,  162,  523 
 Massachusetts  $119.04  82,  960  $9,  875,  552  91,  520  $10,  894,  605  Michigan  $98.54  0  $0  0  $0 
 Minnesota  $84.44  43,  918  $3,  708,  590  48,  449  $4,091,  278  Mississippi  $120.00  54,  831  $6,  579,  710  60,  489  $7,258,  667 
 Missouri  $84.  97  38,695  $3,287,844  42,  688  $3,627,  115  Montana  $120.00  18,  707  $2,  244,  788  20,  637  $2,476,  427 
 Nebraska  $113.15  18,  725  $2,  118,  733  20,  657  $2,337,  364  Nevada  $94.49  0  $0  0  $0 
 New  Hampshire  $98.  08  13,393  $1,313,584  14,  775  $1,449,  132  New  Jersey  $95.45  109,873  $10,  487,737  121,  211  $11,  569,  961 
 New  Mexico  $120.00  30,  799  $3,  695,  875  33,  977  $4,077,  250  New  York  $117.99  248,153  $29,  280,261  273,  760  $32,  301,  676 
 North  Carolina  $116.61  138,355  $16,  134,077  152,  631  $17,  798,  944  North  Dakota  $120.00  13,  730  $1,  647,  578  15,  147  $1,817,  590 
 Ohio  $87.99  124,182  $10,  926,961  136,  996  $12,  054,  508  Oklahoma  $93.  36  59,143  $5,521,621  65,  245  $6,091,  394 
 Oregon  $120.00  8,427  $1,011,274  9,  297  $1,115,  627  Pennsylvania  $108.32  110,210  $11,  937,808  121,  583  $13,  169,  664 
 Rhode  Island  $119.04  17,  212  $2,  048,  864  18,  988  $2,260,  285  South  Carolina  $119.72  51,  479  $6,  163,  141  56,  791  $6,799,  113 
 South  Dakota  $98.47  9,019  $888,163  9,  950  $979,  812  Tennessee  $118.70  19,  741  $2,  343,  169  21,  778  $2,584,  960 
 Texas  $106.81  103,691  $11,  075,569  114,  391  $12,  218,  451  Utah  $119.22  5,979  $712,838  6,  596  $786,  395 
 Vermont  $119.20  0  $0  0  $0  Virginia  $113.22  81,  236  $9,  197,  758  89,  618  $10,  146,  870 
 Washington  $115.40  71,  011  $8,  194,  635  78,  339  $9,040,  235  West  Virginia  $111.00  35,  743  $3,  967,  545  39,  431  $4,376,  954 
 Wisconsin  $92.  68  53,235  $4,933,780  58,  728  $5,442,  894  Wyoming  $120.00  6,324  $758,866  6,  976  $837,  173 
 Nationwide  Not  applicable  2,914,000  $316,000,000  3,215,  000  $348,  000,  000 
 Note:  Some  numbers  in  this  table  have  been  rounded. 
112
 Federal  Communications  Commission  FCC  04-  87 
 K-  44 
 Section  2:  Change  to  baseline:  effects  from  the  new  policy  Table  2.  H 
 Logit  regression  results:  Would  a  1.50  Poverty  Guidelines  Criterion  for  Lifeline  increase  telephone  penetration? 

 Logistic  regression  analysis  1 
 Dependent  side  variable:  Does  the  household  have  telephone  service? 
 Coefficient  Wald  Statistically  Independent  side  variables  value  statistic  P-  Value  significant 

 State  has  1.50  poverty  guidelines  criterion  for  Lifeline  0.110  0.  21  0.  65  No 
 Income  (000s)  0.  027  4.  90  0.  03  Yes  Household  is  a  mobile  home  -1.137  24.  10  0.  00  Yes 

 Household  is  owned,  not  rented  0.962  26.  60  0.  00  Yes  Percentage  of  householders  who  have  lived  there  one  year  0.784  17.  66  0.  00  Yes 
 Someone  in  the  household  is  on  food  stamps  -0.  456  3.  51  0.  06  Yes  Constant  1.195  18.  23  0.  00  Yes 

 Conclusion:  No,  the  coefficient  on  "State  has  1.5  poverty  guidelines  criterion  for  Lifeline"  is  not  statistically  significant. 
 1  For  more  information  on  the  logistic  regression,  see  Technical  Appendix  2. 
113
 Federal  Communications  Commission  FCC  04-  87 
 K-  45 
 Section  3:  New  policy:  new  levels  resulting  from  a  1.50  PGC  (as  of  July  1,  2005)  Table  3.  A 
 Forecasted  new  Lifeline  subscribers  (Year  2005) 
 Low  range  High  range 
 a  (Table  1.B)  b  (Table  1.B)  c  (Table  2.  F)  d=  b+  c  e  (Table  2.  F)  f=  b+  e 
 Forecasted  baseline  Additional  LL  New  total  Additional  LL  New  total  Forecasted  households  taking  takers  due  to  households  takers  due  to  households 

 State  households  Lifeline  1.5  PGC  taking  Lifeline  1.5  PGC  taking  Lifeline 
 Alabama  1,  766,868  25,618  72,600  98,219  80,092  105,710  Alaska  236,684  24,567  4,761  29,328  5,252  29,819 

 Arizona  2,185,979  82,488  74,468  156,956  82,153  164,641  Arkansas  1,117,248  10,655  45,649  56,304  50,359  61,014 
 California  11,675,997  3,162,324  0  3,  162,324  0  3,  162,324  Colorado  1,853,209  32,568  68,449  101,017  75,512  108,080 
 Connecticut  1,560,766  65,570  34,986  100,555  38,596  104,165  Delaware  353,960  2,390  7,207  9,597  7,951  10,341 
 DC  328,431  16,638  0  16,638  0  16,638  Florida  7,  875,457  167,936  324,761  492,697  358,273  526,209 
 Georgia  3,  588,499  77,224  127,627  204,851  140,797  218,021  Hawaii  430,831  14,539  18,003  32,542  19,861  34,400 
 Idaho  521,070  29,093  5,643  34,737  6,226  35,319  Illinois  5,  322,880  95,948  128,022  223,971  141,233  237,181 
 Indiana  2,  881,893  46,461  108,079  154,540  119,231  165,693  Iowa  1,188,981  18,196  32,739  50,935  36,117  54,313 
 Kansas  1,169,256  14,794  44,727  59,521  49,342  64,136  Kentucky  1,644,539  63,085  59,414  122,499  65,544  128,630 
 Louisiana  1,  777,645  22,650  83,222  105,871  91,809  114,459  Maine  720,589  107,956  20,691  128,647  22,826  130,782 
 Maryland  2,258,191  4,358  84,258  88,616  92,952  97,310  Massachusetts  2,801,968  178,441  82,960  261,401  91,520  269,962 
 Michigan  4,386,888  132,031  0  132,031  0  132,031  Minnesota  2,269,978  54,115  43,918  98,033  48,449  102,565 
 Mississippi  1,204,582  24,766  54,831  79,597  60,489  85,255  Missouri  2,  302,085  34,585  38,695  73,280  42,688  77,273 
 Montana  420,615  17,541  18,707  36,248  20,637  38,178  Nebraska  724,145  16,261  18,725  34,985  20,657  36,918 
 Nevada  1,068,492  49,112  0  49,112  0  49,112  New  Hampshire  639,804  8,856  13,393  22,250  14,775  23,632 
 New  Jersey  3,671,381  52,537  109,873  162,410  121,211  173,748  New  Mexico  752,325  51,021  30,799  81,820  33,977  84,998 
 New  York  7,759,204  532,594  248,153  780,747  273,760  806,354  North  Carolina  3,731,543  115,402  138,355  253,756  152,631  268,033 
 North  Dakota  311,615  21,729  13,730  35,458  15,147  36,875  Ohio  4,729,065  287,706  124,182  411,888  136,996  424,702 
 Oklahoma  1,  423,636  122,222  59,143  181,364  65,245  187,467  Oregon  1,412,789  37,626  8,427  46,054  9,297  46,923 
 Pennsylvania  5,  221,614  101,819  110,210  212,030  121,583  223,402  Rhode  Island  508,546  54,795  17,212  72,007  18,988  73,783 
 South  Carolina  1,  629,353  22,569  51,479  74,049  56,791  79,361  South  Dakota  358,305  31,543  9,019  40,563  9,950  41,493 
 Tennessee  2,621,206  55,717  19,741  75,458  21,778  77,495  Texas  7,  593,412  435,718  103,691  539,409  114,391  550,109 
 Utah  785,443  21,551  5,979  27,530  6,596  28,147  Vermont  296,953  34,193  0  34,193  0  34,193 
 Virginia  2,956,550  22,209  81,236  103,445  89,618  111,827  Washington  2,565,534  89,167  71,011  160,179  78,339  167,506 
 West  Virginia  764,140  4,936  35,743  40,679  39,431  44,367  Wisconsin  2,471,029  77,397  53,235  130,631  58,728  136,125 
 Wyoming  204,196  2,204  6,324  8,528  6,976  9,180 
 Nationwide  118,045,768  6,  775,000  2,914,000  9,689,000  3,215,000  9,990,000 

 Note:  Some  numbers  in  this  table  have  been  rounded. 
114
 Federal  Communications  Commission  FCC  04-  87 
 K-  46 
 Section  3:  New  policy:  new  levels  resulting  from  a  1.50  PGC  (as  of  July  1,  2005)  Table  3.  B 
 Forecasted  new  Lifeline  expenditures  (Year  2005) 
 Low  range  High  range  a  (Table  1.  C)  b  (Table  2.  K)  c=  a*  b  d  (Table  2.  K)  e=  a*  d 

 Annual  federal  Additional  federal  Total  federal  Additional  federal  Total  federal  Lifeline  expenditures  Lifeline  expenditures  Lifeline  expenditures  Lifeline  expenditures  Lifeline  expenditures 
 State  without  1.5  PGC  with  1.5  PGC  with  1.5  PGC  with  1.5  PGC  with  1.5  PGC  Alabama  $3,074,197  $8,712,054  $11,786,251  $9,611,046  $12,685,243 
 Alaska  $2,948,007  $571,334  $3,519,341  $630,290  $3,578,296  Arizona  $8,221,159  $7,421,900  $15,643,060  $8,187,762  $16,408,922 
 Arkansas  $1,054,846  $4,519,194  $5,574,040  $4,985,527  $6,040,373  California  $316,308,133  $0  $316,308,133  $0  $316,308,133 
 Colorado  $3,908,155  $8,213,836  $12,121,991  $9,061,418  $12,969,573  Connecticut  $6,312,049  $3,367,877  $9,679,926  $3,715,406  $10,027,455 
 Delaware  $234,348  $706,571  $940,918  $779,481  $1,013,829  DC  $1,461,447  $0  $1,461,447  $0  $1,461,447 
 Florida  $20,152,282  $38,971,362  $59,123,644  $42,992,797  $63,145,079  Georgia  $9,266,937  $15,315,227  $24,582,164  $16,895,598  $26,162,535 
 Hawaii  $1,439,387  $1,782,313  $3,221,699  $1,966,229  $3,405,615  Idaho  $3,459,726  $671,075  $4,130,801  $740,323  $4,200,049 
 Illinois  $8,540,023  $11,394,798  $19,934,821  $12,570,621  $21,110,644  Indiana  $4,153,300  $9,661,413  $13,814,713  $10,658,369  $14,811,669 
 Iowa  $1,518,973  $2,733,047  $4,252,020  $3,015,069  $4,534,042  Kansas  $1,566,265  $4,735,469  $6,301,733  $5,224,119  $6,790,384 
 Kentucky  $7,462,594  $7,028,232  $14,490,826  $7,753,471  $15,216,065  Louisiana  $2,242,338  $8,238,980  $10,481,318  $9,089,156  $11,331,494 
 Maine  $12,867,569  $2,466,169  $15,333,737  $2,720,651  $15,588,220  Maryland  $476,493  $9,211,947  $9,688,440  $10,162,523  $10,639,016 
 Massachusetts  $21,241,723  $9,875,552  $31,117,276  $10,894,605  $32,136,329  Michigan  $13,010,610  $0  $13,010,610  $0  $13,010,610 
 Minnesota  $4,569,718  $3,708,590  $8,278,308  $4,091,278  $8,660,996  Mississippi  $2,971,882  $6,579,710  $9,551,592  $7,258,667  $10,230,549 
 Missouri  $2,938,649  $3,287,844  $6,226,493  $3,627,115  $6,565,764  Montana  $2,104,915  $2,244,788  $4,349,703  $2,476,427  $4,581,342 
 Nebraska  $1,839,924  $2,118,733  $3,958,657  $2,337,364  $4,177,288  Nevada  $4,640,695  $0  $4,640,695  $0  $4,640,695 
 New  Hampshire  $868,626  $1,313,584  $2,182,210  $1,449,132  $2,317,758  New  Jersey  $5,014,836  $10,487,737  $15,502,573  $11,569,961  $16,584,798 
 New  Mexico  $6,122,532  $3,695,875  $9,818,407  $4,077,250  $10,199,782  New  York  $62,842,179  $29,280,261  $92,122,439  $32,301,676  $95,143,854 
 North  Carolina  $13,457,472  $16,134,077  $29,591,549  $17,798,944  $31,256,416  North  Dakota  $2,607,431  $1,647,578  $4,255,009  $1,817,590  $4,425,022 
 Ohio  $25,315,775  $10,926,961  $36,242,736  $12,054,508  $37,370,283  Oklahoma  $11,410,768  $5,521,621  $16,932,389  $6,091,394  $17,502,162 
 Oregon  $4,515,156  $1,011,274  $5,526,430  $1,115,627  $5,630,783  Pennsylvania  $11,028,901  $11,937,808  $22,966,709  $13,169,664  $24,198,565 
 Rhode  Island  $6,522,833  $2,048,864  $8,571,697  $2,260,285  $8,783,118  South  Carolina  $2,702,025  $6,163,141  $8,865,166  $6,799,113  $9,501,137 
 South  Dakota  $3,106,151  $888,163  $3,994,314  $979,812  $4,085,963  Tennessee  $6,613,430  $2,343,169  $8,956,599  $2,584,960  $9,198,389 
 Texas  $46,540,253  $11,075,569  $57,615,822  $12,218,451  $58,758,704  Utah  $2,569,386  $712,838  $3,282,223  $786,395  $3,355,781 
 Vermont  $4,075,759  $0  $4,075,759  $0  $4,075,759  Virginia  $2,514,557  $9,197,758  $11,712,315  $10,146,870  $12,661,427 
 Washington  $10,289,790  $8,194,635  $18,484,425  $9,040,235  $19,330,025  West  Virginia  $547,914  $3,967,545  $4,515,460  $4,376,954  $4,924,869 
 Wisconsin  $7,173,137  $4,933,780  $12,106,917  $5,442,894  $12,616,031  Wyoming  $264,475  $758,866  $1,023,341  $837,173  $1,101,648 
 Nationwide  $706,000,000  $316,000,000  $1,022,000,000  $348,000,  000  $1,054,000,000 
 Note:  Some  numbers  in  this  table  have  been  rounded. 
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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.  13  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  states  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. 

 13  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. 
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 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%.  14 
 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. 

 14  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. 
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 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.  USACs  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.) 
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 Additional  information  on  regression  specification 
 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  states  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. 
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 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  households  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 
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 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.  15 
 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. 

 15  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. 
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 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 
 ------------------------------------------------------------------------------ 
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 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?  (X1  =  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. 
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 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.  16 

 This  quantification  is  accomplished  as  follows:  When  X1  is  changed,  Y  will  change.  For  an  individual  household,  the  change  of  X1  from  0  to  1  models  the  effect  of  implementing  a  1.35 
 PGC  for  that  particular  household.  When  modeling  the  change  nationally,  X1  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.  17  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  (X2  =  HTOTVAL) 
 The  data  points  for  each  household  equal  the  households  entire  annual  income,  including  any  cash  payments. 

 Is  the  household  a  mobile  home?  (X3  =  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?  (X4  =  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.  (X5  =  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. 

 16  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.  17 
 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. 
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 Is  someone  in  the  household  on  Food  Stamps?  (X6  =  HFOODSP) 
 If  someone  in  the  household  is  on  Food  Stamps,  then  HFOODSP  equals  one  for  that  data  point;  otherwise,  it  equals  zero. 

 Variables  X7  through  X13: 
 X7  =  State  has  Medicaid  criterion  X8  =  State  has  Food  Stamp  criterion 
 X9  =  State  has  TANF  criterion  X10  =  State  has  LIHEAP  criterion 
 X11  =  State  has  FRHA  (Section  8)  X12  =  State  has  National  free  lunch  program  criterion 
 X13  =  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  X10  equals  1.  If  the  state  does  not 
 use  LIHEAP  as  a  criterion,  then  the  data  point  equals  0. 
 Is  the  household  in  California  (X14  =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.  18 
 For  the  results  of  this  specification,  see  page  XX,  below. 

 Additional  information  about  specifications  1  and  2 
 18  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. 
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 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.  19 

 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)  households  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 
 19  The  formula  for  calculating  the  missing  variable  bias  can  be  found  in  many  textbooks,  including  William  H. 
 Greene,  Econometric  Analysis,  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). 
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 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.  20 

 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. 

 20  For  more  information  on  logistic  regression  analysis,  see  Damodar  Gujarati,  Basic  Econometrics  at  481-  491  (2  nd 
 ed.  1998). 
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 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  Ys  (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.  21  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. 

 21  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. 
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 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: 
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 Logistic  Regression 
 Case  Processing  Summary 
 13828  100.0 
 0  .0 
 13828  100.0 
 0  .0 
 13828  100.0 

 Unweighted  Cases  a  Included  in  Analysis 
 Missing  Cases 
 Total 

 Selected  Cases 

 Unselected  Cases 
 Total 

 N  Percent 

 If  weight  is  in  effect,  see  classification  table  for  the  total  number  of  cases.  a. 
 Omnibus  Tests  of  Model  Coefficients 
 617.340  14  .000 
 617.340  14  .000 
 617.340  14  .000 

 Step 
 Block 
 Model 

 Step  1  Chi-  square  df  Sig. 

 Model  Summary 
 9123.395  .044  .086  Step  1 
 -2  Log  likelihood  Cox  &  Snell  R  Square  Nagelkerke  R  Square 

 Classification  Table  a 
 1  1558  .1 
 0  12269  100.0 
 88.7 

 Observed  .00 
 1.00 
 H_  TELHHD 

 Overall  Percentage 
 Step  1  .00  1.00 
 H_  TELHHD  Percentage 
 Correct 

 Predicted 

 The  cut  value  is  .500  a. 
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 Variables  in  the  Equation 
 .178692  .097  3.365  1  .067  1.196 
 .000035  .000  69.991  1  .000  1.000 
 -.  756729  .089  71.653  1  .000  .469 
 .974900  .068  203.709  1  .000  2.651 
 .463240  .064  51.652  1  .000  1.589 
 -.  245187  .059  17.204  1  .000  .783 
 -.  268743  .144  3.477  1  .062  .764 
 -.  101100  .140  .523  1  .470  .904 
 .104803  .060  3.031  1  .082  1.110 
 .159704  .089  3.191  1  .074  1.173 
 -.  077088  .073  1.121  1  .290  .926 
 .019298  .175  .012  1  .912  1.019 
 .060251  .102  .349  1  .555  1.062 
 .495371  .189  6.874  1  .009  1.641 
 1.241  .130  90.623  1  .000  3.461 

 SH133ORB 
 HTOTVAL 
 MOBILEH 
 OWNHOME 
 PCTONEYR 
 HFOODSP 
 SHMCAID 
 SHFOODSP 
 SHAFDCH 
 SHENGAST 
 SHPUBLIC 
 SHHFLUNC 
 SHSSI 
 CALIFORN 
 Constant 

 Step  1  a  B  S.  E.  Wald  df  Sig.  Exp(  B) 

 Variable(  s)  entered  on  step  1:  SH133ORB,  HTOTVAL,  MOBILEH,  OWNHOME,  PCTONEYR,  HFOODSP,  SHMCAID,  SHFOODSP,  SHAFDCH,  SHENGAST,  SHPUBLIC, 
 SHHFLUNC,  SHSSI,  CALIFORN. 
 a. 
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 Case  Processing  Summary 
 13828  100.0 
 0  .0 
 13828  100.0 
 0  .0 
 13828  100.0 

 Unweighted  Cases  a  Included  in  Analysis 
 Missing  Cases 
 Total 

 Selected  Cases 

 Unselected  Cases 
 Total 

 N  Percent 

 If  weight  is  in  effect,  see  classification  table  for  the  total  number  of  cases.  a. 

 Omnibus  Tests  of  Model  Coefficients 
 602.148  7  .000 
 602.148  7  .000 
 602.148  7  .000 

 Step 
 Block 
 Model 

 Step  1  Chi-  square  df  Sig. 

 Model  Summary 
 9138.587  .043  .084  Step  1 
 -2  Log  likelihood  Cox  &  Snell  R  Square  Nagelkerke  R  Square 

 Classification  Table  a 

 0  1559  .0 
 0  12269  100.0 
 88.7 

 Observed  .00 
 1.00 
 H_  TELHHD 

 Overall  Percentage 
 Step  1  .00  1.00 
 H_  TELHHD  Percentage 
 Correct 

 Predicted 

 The  cut  value  is  .500  a. 
 Variables  in  the  Equation 

 .161  .093  3.008  1  .083  1.175 
 .000  .000  69.963  1  .000  1.000 
 -.  783  .088  78.773  1  .000  .457 
 .962  .068  200.282  1  .000  2.617 
 .476  .064  54.902  1  .000  1.610 
 -.  254  .059  18.562  1  .000  .776 
 .658  .165  15.975  1  .000  1.931 
 1.094  .072  231.366  1  .000  2.985 

 SH133ORB 
 HTOTVAL 
 MOBILEH 
 OWNHOME 
 PCTONEYR 
 HFOODSP 
 CALIFORN 
 Constant 

 Step  1  a  B  S.  E.  Wald  df  Sig.  Exp(  B) 

 Variable(  s)  entered  on  step  1:  SH133ORB,  HTOTVAL,  MOBILEH,  OWNHOME,  PCTONEYR,  HFOODSP,  CALIFORN.  a. 
133
 Federal  Communications  Commission  FCC  04-  87 
 STATEMENT  OF  CHAIRMAN  MICHAEL  K.  POWELL 
 Todays  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  peoples  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,  todays  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. 
134
 Federal  Communications  Commission  FCC  04-  87 
 STATEMENT  OF  COMMISSIONER  MICHAEL  J.  COPPS 
 Congress  defined  universal  service  as  an  evolving  level  of  telecommunications  services.  As  times  change,  so  must  the  Commissions  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  Commissions  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  Boards  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. 
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 Federal  Communications  Commission  FCC  04-  87 
 STATEMENT  OF  COMMISSIONER  KEVIN  J.  MARTIN 
 Today  the  Commission  takes  steps  to  update  and  improve  the  effectiveness  of  its  low-  income  support  mechanism.  The  Commissions  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. 
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 Federal  Communications  Commission  FCC  04-  87 
 STATEMENT  OF  COMMISSIONER  JONATHAN  S.  ADELSTEIN 
 I  am  pleased  to  support  this  Order  because  it  strengthens  and  enhances  the  Commissions  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. 
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