TELECOMMUNICATIONS

FCC Should Evaluate the 

Efficiency and 

Effectiveness of the 

Lifeline Program

Statement of Michael Clements, Acting Director 

Physical Infrastructure Issues

Testimony 

Before the Subcommittee on 

Communications, Technology, Innovation 

and the Internet, Committee on Commerce, 

Science and Transportation, U.S. Senate

For Release on Delivery 

Expected at 9:30 a.m. ET

Tuesday, June 2, 2015

GAO-15-638T

United States Government Accountability Office
Letter

Page 1 GAO-15-638T 

Chairman Wicker, Ranking Member Schatz, and Members of the

Subcommittee:

I am pleased to be here today as you discuss the Federal 

Communications Commission’s (FCC) efforts to promote telephone 

subscribership among low-income households. Through the Lifeline 

program, companies provide discounts to eligible low-income households 

for telephone service. The Lifeline program supports these companies 

through the Universal Service Fund, which is funded through mandatory 

fees that are usually passed along to consumers through a charge 

applied to their monthly telephone bills. The Lifeline program was created 

in the mid-1980s and has traditionally centered on wireline residential 

telephone service. However, FCC actions in 2005 and 2008 paved the 

way for prepaid wireless companies to begin offering Lifeline service in 

2008; at the time, FCC did not quantify or estimate the potential increases 

in participation from its decision. Subsequently, Lifeline experienced rapid 

growth in participation and disbursements. In particular, from mid-2008 to 

mid-2012, Lifeline enrollment increased from 6.8 million households to 

18.1 million households and annual disbursements increased from $820 

million in 2008 to $2.2 billion in 2012, a 167 percent increase. In 2010, we 

found that the Lifeline program lacked some features of internal controls, 

such as the ability to detect duplicate benefits across companies.1 We 

recommended that FCC take actions to improve management and 

oversight, including conducting a robust risk assessment and 

implementing a systematic process for considering the results of 

company audits; FCC agreed with our recommendations.

To comprehensively reform and modernize the program, among other 

things, FCC adopted a Reform Order in January 2012 that sought to 

improve the program’s internal controls and included a pilot program to 

evaluate the inclusion of broadband into the program (see Table 1 for the 

Order’s key reforms).2 For example, to reduce the number of ineligible 

consumers in the program, the Order adopted measures to check 

consumers’ initial and ongoing eligibility for Lifeline. After FCC began 

 1

Telecommunications: Improved Management Can Enhance FCC Decision Making for the 

Universal Service Fund Low-Income Program, GAO-11-11 (Washington, D.C.: Oct. 28, 

2010). 

2

See Lifeline and Link Up Reform and Modernization, Report and Order and Further 

Notice of Proposed Rulemaking, 27 FCC Rcd. 6656 (2012). See also 47 C.F.R. §§ 

54.400-54.422.

Letter
Page 2 GAO-15-638T 

implementing the Order in mid-2012, Lifeline participation declined to 12.4 

million households by the end of 2014, while disbursements declined to 

approximately $1.7 billion in 2014.

Table 1: Key Reforms Contained in the Federal Communications Commission (FCC) Lifeline Reform Order (2012)

Lifeline reform Description

One-per-household rule The Order limits Lifeline to a single subscription per household.

Elimination of Link-Up support on nonTribal lands and phase out support for toll 

limitation service

The Link Up program was originally designed to offset the activation charges wireline 

providers charged to install telephone service; the Order eliminated Link Up on non-Tribal 

lands. In addition, subsidies for toll limitation service, which allowed consumers to block or 

restrict long-distance telephone service, were phased out and eliminated beginning 

January 2014.

Uniform eligibility criteria Requires all states to use, at a minimum, eligibility criteria including (1) household income 

at or below 135 percent of the federal poverty guidelines or (2) participation in at least one 

of the following: Supplemental Nutrition Assistance Program, Medicaid, Supplemental 

Security Income, Temporary Assistance for Needy Families, National School Lunch 

Program’s free lunch program, Low-Income Home Energy Assistance Program, and 

Federal Public Housing Assistance or Section 8. Households residing on Tribal lands may 

be eligible through additional programs.

Non usage requirements Lifeline providers delivering service without a monthly bill must notify and de-enroll 

subscribers that do not use the service after a specified period of time—60 consecutive 

days of nonuse and a 30-day notice period.

Payments based upon actual support 

claims

Lifeline providers receive payment based on actual support claims. Before this, payments 

were based on projections that were “trued up” against actual claims.

Independent and first year audit 

requirements

In addition to audits that were previously ongoing, Lifeline providers that receive more 

than $5 million in annual support are required to hire independent auditors to conduct an 

audit of their compliance with the Lifeline rules on a biennial basis. In addition, all new 

Lifeline providers are audited by the program administrator—the Universal Service 

Administrative Company (USAC)—within their first year of service.

National Lifeline Accountability Database 

(NLAD)

Lifeline providers are required to query NLAD at enrollment to verify an applicant’s identity 

and to verify the individual is not already receiving Lifeline services. NLAD also checks 

applicants’ addresses against U.S. Postal Service software in part to ensure compliance 

with the one-per-household requirement.

Broadband pilot program The Order called for a pilot program to gather data on whether and how Lifeline could be 

structured to promote broadband and called on FCC to select, fund, and gather data from 

pilot projects offering broadband to Lifeline-eligible consumers. FCC selected 14 pilot 

projects that completed offering subsidized service at the end of October 2014. In May 

2015, FCC published the results of these projects. 

Flat-rate reimbursement The Order implemented an interim $9.25 flat rate reimbursement on non-Tribal lands. 

Previously, Lifeline had a tiered structure of support, with average monthly non-Tribal 

support ranging from $4.25 to $10.00 per subscriber in September 2011.

Initial eligibility verification and annual 

recertification procedures

Effective June 2012, Lifeline providers must verify an applicant’s eligibility at enrollment 

and annually through recertification. In addition, to reduce the burden on consumers and 

providers, the Order directed FCC and USAC to establish an automated means for 

determining eligibility.
Page 3 GAO-15-638T 

Lifeline reform Description

Performance goals and measures The Order specified three performance goals: (1) to ensure the availability of voice service 

for low-income Americans, (2) to ensure the availability of broadband for low-income 

Americans, and (3) to minimize the Universal Service Fund contribution burden on 

consumers and businesses. The Order directed FCC to define performance measures to 

evaluate progress made towards these goals.

Source: GAO summary of FCC Order. | GAO-15-638T

My remarks today highlight key findings from our recently issued report, 

Telecommunications: FCC Should Evaluate the Efficiency and 

Effectiveness of the Lifeline Program.3 I will discuss (1) the status of 

FCC’s Lifeline reform efforts, (2) the extent to which FCC has evaluated 

the effectiveness of the program, and (3) how FCC plans to evaluate the 

broadband pilot program and the extent to which the pilot program will 

enable FCC to decide whether and how to include broadband in the 

Lifeline program. For our report, we reviewed FCC orders and other 

relevant information; analyzed 2008-2012 Census Bureau data to 

estimate trends in the number of households that would satisfy the federal 

Lifeline criteria; and interviewed FCC officials, officials at four broadband 

pilot projects selected based on features such as technology, and officials 

from 12 Lifeline providers and four states that were selected based on 

factors such as disbursements and participation. We also reviewed two 

academic studies that examined the effect of the Lifeline program. More 

detailed information on our objectives, scope, and methodology can be 

found in the issued report. We conducted the work on which this 

statement is based in accordance with generally accepted government 

auditing standards. Those standards require that we plan and perform the 

audit to obtain sufficient, appropriate evidence to provide a reasonable 

basis for our findings and conclusions based on our audit objectives.

 3

GAO-15-335 (Washington, D.C.: Mar. 24, 2015).
Page 4 GAO-15-638T 

Our March 2015 report found that FCC has made progress implementing 

reform efforts contained in the Order.4 In particular, FCC has 

implemented eight reforms, including the one-subscription-per-household 

rule, uniform eligibility criteria, non-usage requirements, payments based

on actual claims, and the audit requirements. Furthermore, FCC 

eliminated Link-up on non-Tribal lands and support for toll limitation 

service, and the National Lifeline Accountability Database (NLAD) is 

operational in 46 states and the District of Columbia. In May 2015, FCC 

reported the results of the broadband pilot program.5 However, FCC has 

not fully implemented three reform efforts:

• Flat-rate reimbursement: To simplify administration of the Lifeline 

program, FCC established a uniform, interim flat rate of $9.25 per 

month for non-Tribal subscribers. FCC sought comment on the interim 

rate, but has not issued a final rule with a permanent reimbursement 

rate.

• Initial eligibility verification and annual recertification procedures: To 

reduce the number of ineligible consumers receiving program 

benefits, the Order required that Lifeline providers verify an applicant’s 

eligibility at enrollment and annually through recertification; these 

requirements have gone into effect. In addition, to reduce the burden 

on consumers and Lifeline providers, the Order called for an 

automated means for determining Lifeline eligibility by the end of 

2013. FCC has not met this timeframe or revised any timeframes for 

how or when this automated means would be available.

• Performance goals and measures: FCC established three outcomebased goals: (1) to ensure the availability of voice service for lowincome Americans, (2) to ensure the availability of broadband for lowincome Americans, and (3) to minimize the Universal Service Fund 

contribution burden on consumers and businesses. FCC identified 

performance measures it will use to evaluate progress towards these 

goals, but it has not yet fully defined these measures. FCC officials 

noted they are working on defining them using the Census Bureau’s 

 4

We did not evaluate the effectiveness of these reform efforts. GAO has ongoing work 

assessing the internal controls of the Lifeline program. Results from this work will be 

available in fall 2015.

5

Federal Communications Commission, Wireline Competition Bureau, Low-Income 

Broadband Pilot Program Staff Report, WC Docket No. 11-42 (May 22, 2015).

FCC Has Made 

Progress 

Implementing Lifeline 

Reforms, but Some 

Reform Efforts 

Remain Incomplete
Page 5 GAO-15-638T 

American Community Survey data, which were made available in late 

2014.

In our March 2015 report, we found that FCC has not evaluated the 

effectiveness of the Lifeline program, which could hinder its ability to 

efficiently achieve program goals. Once adopted, performance measures 

can help FCC track the Lifeline Program’s progress toward its goals. 

However, performance measures alone will not fully explain the 

contribution of the Lifeline program toward reaching program goals, 

because performance measurement does not assess what would have 

occurred in the absence of the program. According to FCC, Lifeline has 

been instrumental in narrowing the penetration gap (the percentage of 

households with telephone service) between low-income and non-lowincome households. In particular, FCC noted that since the inception of 

Lifeline, the gap between telephone penetration rates for low-income and 

non-low-income households has narrowed from about 12 percent in 1984 

to 4 percent in 2011. Although FCC attributes the penetration rate 

improvement to Lifeline, several factors could play a role. For example, 

changes to income levels and prices have increased the affordability of 

telephone service, and technological improvements, such as mobility of 

service, have increased the value of telephone service to households.

FCC officials stated that the structure of the program has made it difficult 

for the commission to determine causal connections between the 

program and the penetration rate. However, FCC officials noted that two 

academic studies have assessed the program.6 These studies suggest 

that household demand for telephone service—even among low-income 

households—is relatively insensitive to changes in the price of the service 

and household income. This suggests that many low-income households 

would choose to subscribe to telephone service in the absence of the 

Lifeline subsidy. For example, one study found that many households 

would choose to subscribe to telephone service in the absence of the 

subsidy.7 As a result, we concluded that the Lifeline program, as currently 

 6

Olga Ukhaneva, “Universal Service in a Wireless World” (Paper presented at The 42nd 

Research Conference on Communication, Information and Internet Policy, Washington, 

D.C., September 2014). Daniel A. Ackerberg, David R. DeRemer, Michael H. Riordan, 

Gregory L. Rosston, and Bradley S. Wimmer, Estimating the Impact of Low-Income 

Universal Service Programs, Center for Economic Studies, CES-13-33 (2013).

7

Olga Ukhaneva, “Universal Service in a Wireless World” (2013). 

FCC Has not 

Evaluated the Extent 

to which Lifeline is 

Efficiently and 

Effectively Reaching 

its Performance 

Goals
Page 6 GAO-15-638T 

structured, may be a rather inefficient and costly mechanism to increase 

telephone subscribership among low-income households, because 

several households receive the subsidy for every additional household 

that subscribes to telephone service due to the subsidy. FCC officials said 

that this view does not take into account the Lifeline program’s purpose of 

making telephone service affordable for low-income households. 

However, in the Order, the commission did not adopt affordability as one 

of the program’s performance goals; rather, it adopted availability of voice 

service for low-income Americans, measured by the penetration rate.8

These research findings raise questions about the design of Lifeline and 

FCC’s actions to expand the pool of eligible households. We estimated 

approximately 40 million households were eligible for Lifeline in 2012.9

The Order established minimum Lifeline eligibility, including households 

with incomes at or below 135 percent of the federal poverty guidelines, 

which expanded eligibility in some states that had more limited eligibility 

criteria. Further, FCC proposed adding qualifying programs, such as the 

Special Supplemental Nutrition Program of Women, Infants, and Children 

(WIC) program, and increasing income eligibility to 150 percent of the 

federal poverty guidelines. We estimated that over 2 million additional 

households would have been eligible for Lifeline in 2012 if WIC were 

included in the list of qualifying programs. These proposed changes 

would add households with higher income levels than current Lifelineeligible households. Given that the telephone penetration rate increases 

with income, making additional households with higher incomes eligible 

for Lifeline may increase telephone penetration somewhat, but at a high 

cost, since a majority of these households likely already purchase 

telephone service. This raises questions about expanding eligibility and 

the balance between Lifeline’s goals of increasing penetration rates while 

minimizing the burden on consumers and businesses that fund the 

program.

 8

FCC officials noted that voice service is only available to low-income consumers to the 

extent it is affordable. In the Order, FCC found that affordability is a component of the goal 

of ensuring the availability of voice service. See ¶ 28 of Order. 

9

We estimated the number of Lifeline-eligible households using Census Bureau data. The 

Census data approximate, but do not completely align with, Lifeline eligibility. For 

example, the Census data do not reflect state Lifeline eligibility that extends beyond the 

FCC minimum requirements or qualifying programs specific to Tribal areas. 
Page 7 GAO-15-638T 

In our March 2015 report, we recommended that FCC conduct a program 

evaluation to determine the extent to which the Lifeline program is 

efficiently and effectively reaching its performance goals of ensuring the 

availability of voice service for low-income Americans while minimizing 

program costs. Our prior work on federal agencies that have used 

program evaluation for decision making has shown that it can allow 

agencies to understand whether a program is addressing the problem it is 

intended to and assess the value or effectiveness of the program. The 

results of an evaluation could be used to clarify FCC’s and others’

understanding of how the Lifeline program does or does not address the 

problem of interest—subscription to telephone service among low-income 

households—and to assist FCC in making changes to improve program 

design or management. We believe that without such an evaluation, it will 

be difficult for FCC to determine whether the Lifeline program is 

increasing the telephone penetration rate among low-income customers, 

while minimizing the burden on those that contribute to the Universal 

Service Fund. FCC agreed that it should evaluate the extent to which the 

Lifeline program is efficiently and effectively reaching its performance 

goals and said that it would address our recommendation.

In our March 2015 report we also found that FCC’s broadband pilot 

program includes 14 projects that test an array of options and will 

generate information that FCC intends to use to decide whether and how 

to incorporate broadband into Lifeline. According to FCC, the pilot 

projects are expected to provide high-quality data on how the Lifeline 

program could be structured to promote broadband adoption by lowincome households. FCC noted the diversity of the 14 projects, which 

differed by geography (e.g., urban, rural, Tribal), types of technologies 

(e.g., fixed and mobile), and discount amounts. FCC selected projects 

that were designed as field experiments and offered randomized variation 

to consumers. For example, one project we reviewed offered customers 

three different discount levels and a choice of four different broadband 

speeds, thereby testing 12 different program options. FCC officials said 

they aimed to test and reveal “causal effects” of variables. FCC officials 

said this approach would, for example, test how effective a $20 monthly 

subsidy was relative to a $10 subsidy, which would help FCC evaluate 

the relative costs and benefits of different subsidy amounts. However, 

FCC officials noted that there was a lack of FCC or third party oversight of 

the program, meaning that pilot projects themselves were largely 

responsible for administration of the program.

Usefulness of 

Broadband Pilot 

Program May Be 

Limited by FCC’s 

Lack of Evaluation 

Plan and Other 

Challenges
Page 8 GAO-15-638T 

We found that FCC did not conduct a needs assessment or develop 

implementation and evaluation plans for the broadband pilot program, as 

we had previously recommended in October 2010. At that time, we 

recommended that if FCC conducted a broadband pilot program, it should 

conduct a needs assessment and develop implementation and evaluation 

plans, which we noted are critical elements for the proper development of 

pilot programs.10 We noted that a needs assessment could provide 

information on the telecommunications needs of low-income households 

and the most cost-effective means to meet those needs. Although FCC 

did not publish a needs assessment, FCC officials said they consulted 

with stakeholders and reviewed research on low-income broadband 

adoption when designing the program. Well-developed plans for 

implementing and evaluating pilot programs include key features such as 

clear and measurable objectives, clearly articulated methodology, 

benchmarks to assess success, and detailed evaluation time frames. 

FCC officials said they did not set out with an evaluation plan because 

they did not want to prejudge the results by setting benchmark targets 

ahead of time. FCC officials said they are optimistic that the information 

gathered from the pilot projects will enable FCC to make 

recommendations regarding how broadband could be incorporated into 

Lifeline.11 FCC officials noted that the pilot program is one of many factors 

it will consider when deciding whether and how to incorporate broadband 

into Lifeline, and to the extent the pilot program had flaws, those flaws will 

be taken into consideration. Since our report was issued, FCC released a 

report on the broadband pilot program, which discusses data collected 

from the 14 projects.

We also found that the broadband pilot projects experienced challenges, 

such as lower-than-anticipated enrollment. The pilot projects enrolled 

approximately 12 percent of the 74,000 low-income consumers that FCC 

indicated would receive broadband through the pilot projects. According 

to FCC’s May 2015 report, 8,634 consumers received service for any 

period of time during the pilot. FCC officials said that the 74,000 

consumers was an estimate and was not a reliable number and should 

 10GAO-11-11. 

11Under the Administrative Procedure Act, the law that governs agency rulemakings, FCC 

must give notice and seek public comment on any proposed regulations prior to their 

enactment through a Notice of Proposed Rulemaking. See 5 U.S.C. § 553. FCC officials 

noted that the commission may draw on many sources of information in crafting its final 

rule, such as outside studies. 
Page 9 GAO-15-638T 

not be interpreted as a program goal. FCC officials said they calculated 

this figure by adding together the enrollment estimates provided by 

projects, which varied in their methodologies. For example, some projects 

estimated serving all eligible consumers, while others predicted that only 

a fraction of those eligible would enroll. FCC officials told us they do not 

view the pilot’s low enrollment as a problem, as the program sought 

variation. Due to the low enrollment in the pilot program, a small fraction 

of the total money FCC authorized for the program was spent. 

Specifically, FCC officials reported that about $1.7 million of the $13.8 

million authorized was disbursed to projects.

FCC and pilot project officials we spoke to noted that a preliminary finding 

from the pilot was that service offered at deeply discounted or free 

monthly rates had high participation.12 FCC officials and representatives 

from the four pilot projects we interviewed noted that broadband offered 

at no or the lowest cost per month resulted in the highest participation. 

For example, we found one project that offered service at no monthly cost 

to the consumer reported 100 percent of its 709 enrollees were enrolled 

in plans with no monthly cost as of October 2013, with no customers 

enrolled in its plans with a $20 monthly fee. This information raises 

questions about the feasibility of including broadband service in the 

Lifeline program, since on a nationwide scale, offering broadband service 

at no monthly cost would require significant resources and may conflict 

with FCC’s goal to minimize the contribution burden.

Chairman Wicker, Ranking Member Schatz, and Members of the 

Subcommittee, this completes my prepared statement. I would be 

pleased to respond to any questions that you may have at this time.

 12In its May 2015 report, FCC noted that the cost to consumers affects their adoption 

choice.
Page 10 GAO-15-638T 

If you or your staff have any questions about this testimony, please 

contact Michael Clements, Acting Director, Physical Infrastructure Issues 

at (202) 512-2834 or clementsm@gao.gov. Contact points for our Offices 

of Congressional Relations and Public Affairs may be found on the last 

page of this statement. GAO staff who made key contributions to this 

testimony are Antoine Clark and Emily Larson.

GAO Contact and 

Staff 

Acknowledgments

(543364)
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