[Federal Register Volume 83, Number 10 (Tuesday, January 16, 2018)]
[Proposed Rules]
[Pages 2104-2119]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-00153]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 54

[WC Docket Nos. 17-287, 11-42, 09-197; FCC 17-155]


Bridging the Digital Divide for Low-Income Consumers, Lifeline 
and Link Up Reform and Modernization, Telecommunications Carriers 
Eligible for Universal Service Support

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: In this document, the Federal Communications Commission 
(Commission) proposes and seeks comment on reforms to ensure the 
Lifeline program rules comport with the authority granted to the 
Commission in the Communications Act and to curb wasteful and abusive 
spending in the Lifeline program. The Commission also seeks comment on 
how Lifeline might more efficiently target funds to areas and 
households most in need of help in obtaining digital opportunity.

DATES: Comments are due on or before January 24, 2018, and reply 
comments are due on or before February 23, 2018. If you anticipate that 
you will be submitting comments, but find it difficult to do so within 
the period of time allowed by this document, you should advise the 
contact listed below as soon as possible.

ADDRESSES: You may submit comments, identified by WC Docket Nos. 17-
287, 11-42, and 09-197, by any of the following methods:
    <bullet> Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
    <bullet> Federal Communications Commission's website: http://fjallfoss.fcc.gov/ecfs2/. Follow the instructions for submitting 
comments.
    <bullet> People with Disabilities: Contact the FCC to request 
reasonable accommodations (accessible format documents, sign language 
interpreters, CART, etc.) by email: <a href="/cdn-cgi/l/email-protection#d5939696e0e5e195b3b6b6fbb2baa3"><span class="__cf_email__" data-cfemail="5a1c19196f6a6e1a3c3939743d352c">[email protected]</span></a> or phone: (202) 418-
0530 or TTY: (202) 418-0432.
For detailed instructions for submitting comments and additional 
information on the rulemaking process, see the SUPPLEMENTARY 
INFORMATION section of this document.

FOR FURTHER INFORMATION CONTACT: Jodie Griffin, Wireline Competition 
Bureau, (202) 418-7400 or TTY: (202) 418-0484.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice 
of Proposed Rulemaking and Notice of Inquiry (NPRM and NOI) in WC 
Docket Nos. 17-287, 11-42, 09-197; FCC 17-155, adopted on November 16, 
2017 and released on December 1, 2017. The full text of this document 
is available for public inspection during regular business hours in the 
FCC Reference Center, Room CY-A257, 445 12th Street SW, Washington, DC 
20554 or at the following internet address: http://transition.fcc.gov/Daily_Releases/Daily_Business/2017/db1201/FCC-17-155A1.pdf. The Fourth 
Report and Order, Order on Reconsideration and Memorandum Opinion and 
Order that was adopted concurrently with the NPRM and NOI are published 
elsewhere in this issue of the Federal Register.

I. Introduction

    1. In this Notice of Proposed Rulemaking, the Commission proposes 
and seeks comment on reforms to ensure the Lifeline program rules 
comport with the authority granted to the Commission in the 
Communications Act and to curb wasteful and abusive spending in the 
Lifeline program. Specifically, the NPRM seeks comment on ending the 
Commission's previous preemption of states' role in designating certain 
eligible telecommunications carriers and removing the Lifeline 
Broadband Provider designation; targeting Lifeline funds to facilities-
based broadband-capable networks offering both voice and broadband 
services; adopting a self-enforcing budget cap for the program; 
improving the eligibility verification and recertification processes to 
further prevent waste, fraud, and abuse in the program; and improving 
providers' incentive to provide quality communications services by 
establishing a maximum discount level for Lifeline-supported service. 
In the Notice of Inquiry, the Commission seeks comment on how Lifeline 
might more efficiently target funds to areas and households most in 
need of help in obtaining digital opportunity.

II. Notice of Proposed Rulemaking

    2. In this Notice of Proposed Rulemaking, the Commission proposes 
and seeks comment on reforms to ensure that the Commission is 
administering the Lifeline program on sound legal footing, recognizing 
the important and Congressionally mandated role of states in Lifeline 
program administration, and rooting out waste, fraud, and abuse in the 
program. These steps must precede broader discussions about how the 
Lifeline program can be updated to effectively bring digital 
opportunity to those who are currently on the wrong side of the digital 
divide.
    3. The Commission first seeks comment on ways the Commission can 
better accommodate the important and lawful role of the states in the 
Lifeline program. The Commission proposes to eliminate the Lifeline 
Broadband Provider category of ETCs and the state preemption on which 
it is based. The Commission also seeks comment on ways to encourage 
cooperative federalism between the states and the Commission to make 
the National Verifier a success.
    4. In this section, the Commission addresses the serious concerns 
that have been raised that the Commission's creation of Lifeline 
Broadband Provider (LBP) ETCs and preemption of state commissions' 
designations of such LBPs was inconsistent with the role contemplated 
for the states in Section 214 of the Act. In the 2016 Lifeline Order, 
81 FR 33026, May 24, 2016, the Commission established a framework to 
designate providers as Lifeline Broadband Providers (LBPs), eligible to 
receive Lifeline reimbursement for qualifying broadband internet access

[[Page 2105]]

service provided to eligible low-income consumers, but not Lifeline 
voice service. The Commission's role in this framework was premised on 
the Commission's authority to designate a common carrier ``that is not 
subject to the jurisdiction of a State commission.'' And to effectuate 
that policy goal, the agency preempted state authority in a manner 
wholly inconsistent with Section 214 of the Communications Act, which 
gives primary responsibility for designation of eligible 
telecommunications carriers to the states. (47 U.S.C. 214(e)(2), (3)). 
Based on these circumstances and on further review, the Commission 
believes it erred in preempting state commissions from their primary 
responsibility to designate ETCs under section 214(e) of the Act and 
seek comment on this issue. (See 47 U.S.C. 214(e)).
    5. The 2016 Lifeline Order's preemption of state designation of 
LBPs was challenged by the National Association of Regulatory Utility 
Commissioners (NARUC) and a coalition of states led by the State of 
Wisconsin (State Petitioners). (See NARUC v. FCC, Case No. 16-1170 (DC 
Cir., filed June 3, 2016); Wisconsin v. FCC, Case No. 16-1219 (DC Cir. 
filed June 30, 2016). Among other issues, NARUC and the State 
Petitioners contend the Commission's decision to preempt states from 
exercising any authority to designate broadband providers as LBPs 
violates the Act and the Administrative Procedure Act. The United 
States Court of Appeals for the DC Circuit has remanded the legal 
challenges to the Commission for further proceedings. (NARUC v. FCC, 
Case No. 16-1170, Order (DC Cir., Apr. 19, 2017), granting the 
Commission's motion for voluntary remand.) The legal challenges to the 
LBP designation process question the Commission's legal authority to 
create an LBP designation process and designate providers under that 
process. Additionally, members of Congress have introduced legislation 
to reverse the Commission's preemption and clarify that the 
Communications Act of 1934 and the Telecommunications Act of 1996 
cannot be interpreted to limit the jurisdiction of any state to 
designate an ETC. (See Preserving State Commission Oversight Act of 
2017, S. 421, 115th Cong. (2017)). Would reversing the preemption in 
the 2016 Lifeline Order resolve the legal issues surrounding LBPs and 
their designation process? How would reversing the preemption in the 
2016 Lifeline Order impact the future of LBPs in the Lifeline program? 
Should ETCs be designated through traditional state and federal roles 
either for purposes of only Lifeline or for both the high-cost and 
Lifeline programs? (See 47 U.S.C. 214(e)). What rule changes would be 
needed to restore the traditional state and federal roles for ETC 
designations? The Commission seeks comment on this proposal and on any 
alternatives.
    6. The 2016 Lifeline Order ``applaud[ed] state programs for 
devoting resources designed to help close the affordability gap for 
communications services.'' Although not formally constraining how 
states administer those state programs for voice and/or broadband 
support, the Order recognized that its approach to ETC designations 
could create inconsistencies with the operation of those state 
programs. States continue to play an important role in ensuring 
affordability of voice, and also supporting broadband; accordingly, 
reversing the preemption in the 2016 Lifeline Order may resolve 
inconsistencies between state and federal efforts and provide benefits 
to the operation of state and federal programs. The Commission seeks 
comment on these issues.
    7. The Commission also proposes eliminating stand-alone LBP 
designations to better reflect the structure, operation, and goals of 
the Lifeline program, as set forth in the Communications Act, as well 
as related state programs. For example, the existence of an LBP 
designation enables entities to participate in the Lifeline program 
without assuming any obligations with respect to voice service. The 
Commission seeks comment on this proposal.
    8. In the 2016 Lifeline Order, the Commission established the 
National Verifier to make eligibility determinations and perform a 
variety of other functions necessary to enroll eligible subscribers 
into the Lifeline Program. As outlined in the 2016 Lifeline Order, 
``[t]he Commission's key objectives for the National Verifier are to 
protect against and reduce waste, fraud, and abuse; to lower costs to 
the Fund and Lifeline providers through administrative efficiencies; 
and to better serve eligible beneficiaries by facilitating choice and 
improving the enrollment experience.'' A strong cooperative effort 
between the Commission and its state partners is critical to advancing 
these laudable objectives. In this Notice of Proposed Rulemaking, the 
Commission seeks comment on ways to ensure the Commission can partner 
with states to facilitate the successful implementation of the National 
Verifier.
    9. The Commission seeks comment on ways states can be encouraged to 
work cooperatively with the Commission and USAC to integrate their 
state databases into the National Verifier without unnecessary delay. 
Because the National Verifier is a critical part of improving the 
integrity of the Lifeline program, it is important all states join the 
National Verifier in a timely manner. To protect the integrity of the 
enrollment and eligibility determination process, the Commission seeks 
comment on whether new Lifeline enrollments should be halted in a state 
at any point if the launch of the National Verifier has been 
unnecessarily delayed in that state. For example, when the plan for 
National Verifier initiation in a state falls behind schedule, what 
steps should be taken to ensure no ineligible subscribers enroll in the 
program because of the delay? What is the proper response when the 
scheduled launch of the National Verifier in a state is not 
accomplished by the announced date and carriers relying on the launch 
announcement are unprepared to handle eligibility determinations? 
Should enrollments be halted for all consumers in the state or only for 
those whose eligibility must be verified using a state database?
    10. The Commission seeks comment on other steps to encourage 
cooperation and collaboration between the states, the Commission, and 
USAC to ensure the National Verifier is launched in a state in a timely 
fashion. Should the Commission adopt specific benchmarks or proposed 
timelines to guide this process? Are there ways to streamline the 
process of developing and executing the agreements necessary to allow 
data sharing between states and the Commission? In the event a state 
has demonstrated an unwillingness to engage in the effort to deploy the 
National Verifier or to do so at reasonable costs, are there other 
measures the Commission should take? In these situations, USAC is able 
to conduct a manual review of all eligibility documentation for 
potential Lifeline subscribers in that state but that measure is 
costly, burdensome, and inefficient; the Commission believes program 
expenses would be better directed towards electronic connections 
between state systems and the National Verifier platform. How can the 
Commission encourage states to work cooperatively with USAC to avoid 
unnecessary costs?
    11. The Lifeline program has an important role in bringing digital 
opportunity to low-income Americans. The Commission believes that 
changes to Lifeline policies are warranted to ensure the Commission's 
administration

[[Page 2106]]

of Lifeline support is faithful to Congress's stated universal service 
goals and is focused on helping low-income households obtain the 
benefits that come from access to modern communications networks. In 
this section, the Commission proposes policy changes to focus Lifeline 
support on encouraging service provider investment in networks that 
offer quality, affordable broadband service. The Commission also seeks 
comment on the Commission's legal authority for these proposed changes.
    12. Lifeline Support for Facilities-Based Broadband Service. The 
Commission seeks comment on focusing Lifeline support to encourage 
investment in broadband-capable networks. As explained in the 2016 
Lifeline Order, broadband service is increasingly important for 
participation in the 21st Century economy. However, broadband service 
is not as ubiquitous or as affordable as voice service. This is 
particularly true in rural and rural Tribal areas, where broadband 
deployment lags behind other areas of the country.
    13. Section 254(b) of the Act requires the Commission to base its 
policies for the preservation and advancement of universal service on 
the principles that ``[q]uality services should be available at just, 
reasonable, and affordable rates,'' ``[a]ccess to advanced 
telecommunications and information services shall be provided in all 
regions of the Nation'' and ``[c]onsumers in all regions of the Nation 
. . . should have access to . . . advanced 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 for similar services in urban 
areas.'' (47 U.S.C. 254(b)(1)-(3)).
    14. Mindful of the direction given to the Commission by Congress, 
the Commission believes Lifeline support will best promote access to 
advanced communications services if it is focused to encourage 
investment in broadband-capable networks. The Commission therefore 
proposes limiting Lifeline support to facilities-based broadband 
service provided to a qualifying low-income consumer over the ETC's 
voice- and broadband-capable last-mile network. The Commission believes 
this proposal would do more than the current reimbursement structure to 
encourage access to quality, affordable broadband service for low-
income Americans. In particular, Lifeline support can serve to increase 
the ability to pay for services of low-income households. Such an 
increase can thereby improve the business case for deploying facilities 
to serve low-income households. In this way, Lifeline can serve to help 
encourage the deployment of facilities-based networks by making 
deployment of the networks more economically viable. Furthermore, the 
competitive impacts of having multiple competing facilities-based 
networks can also help to lower prices for consumers. If Lifeline can 
help promote more facilities, it can then indirectly also serve to 
reduce prices for consumers.
    15. The Commission seeks comment on this proposal. What rule 
changes would be necessary to implement this proposal? How can the 
Commission ensure Lifeline support is only disbursed to ETCs that 
provide broadband service over facilities-based networks? How would his 
proposal impact the availability and affordability of Lifeline 
broadband services? Are there other steps the Commission should take to 
focus Lifeline support to encourage investment in broadband networks?
    16. Discontinuing Lifeline Support for Non-Facilities-Based 
Service. Next, the Commission seeks comment on discontinuing Lifeline 
support for service provided over non-facilities-based networks, to 
advance our policy of focusing Lifeline support to encourage investment 
in voice- and broadband-capable networks. The Commission proposes 
limiting Lifeline support to broadband service provided over 
facilities-based broadband networks that also support voice service. 
Under this proposal, Lifeline providers that are partially facilities-
based may obtain designation as an ETC, but would only receive Lifeline 
support for service provided over the last-mile facilities they own. 
The Commission seeks comment on how the Commission should define 
``facilities'' for this purpose. Should the Commission adopt the same 
definition of facilities that the Fourth Report and Order uses for 
enhanced support on rural Tribal lands? If the Commission adopts 
different facilities-based criteria for Lifeline generally, should the 
Commission also use that definition of ``facilities'' for purposes of 
enhanced Tribal support? The Commission seeks comment on any other rule 
changes that would be necessary to implement this proposal.
    17. How would this proposal impact the number of Lifeline providers 
participating in the program and the availability of quality, 
affordable Lifeline broadband services? Are there other means of 
providing broadband service that should be considered facilities-based 
for purposes of the Lifeline program? How should the facilities-based 
requirement apply in a situation where a reseller and a facilities-
based provider form a joint venture to provide Lifeline services? How 
should the Commission ensure Lifeline support is only issued to ETCs 
that satisfy the facilities requirement? Would the facilities-based 
requirement further the Commission's goal of eliminating waste, fraud, 
and abuse in the Lifeline program? On this last point, the Commission 
notes that the vast majority of Commission actions revealing waste, 
fraud, and abuse in the Lifeline program over the past five years have 
been against resellers, not facilities-based providers. And the 
proliferation of Lifeline resellers in 2009 corresponded with a 
tremendous increase in households receiving multiple subsidies under 
the Lifeline program. How do the incentives of resellers differ from 
those who use their own last-mile facilities? Why have waste, fraud, 
and abuse increased--including multiple-subsidies-per-household 
problems, self-certification problems, authentication-of-subscriber 
problems, phantom-subscriber problems, and eligibility problems--since 
the advent of multiple resellers within the program in 2009?
    18. The Commission does not expect that this approach would impact 
the forbearance relief from section 214(e)(1)(A)'s facilities 
requirement. However, the Commission recognizes that not reversing this 
forbearance relief may create a tension that could be relieved by 
making the requirements for obtaining a Lifeline-only ETC designation 
under section 214(e)(1)(A) match the facilities requirement for 
receiving Lifeline reimbursement. The Commission seeks comment on such 
matters.
    19. Alternatively, should the Commission reverse the forbearance 
from section 214(e)(1)(A)'s facilities requirement? If the Commission 
found that forbearing from the facilities-based requirement was no 
longer in the public interest, what other findings, if any, would the 
Commission need to make under section 10? If the Commission rescinded 
this forbearance, what effective date would give impacted ETCs and 
their customers an appropriate amount of time to make the transition? 
Furthermore, if the Commission were to rescind forbearance from the 
facilities requirement, should it reconsider its interpretation of that 
requirement? For example, Sec.  54.201(g) of our current rules states 
that an ETC's facilities need not be located within the relevant 
service area as long as the carrier uses them within the designated

[[Page 2107]]

service area. But the Commission has previously noted that ``[s]everal 
ETCs, some of which call themselves `facilities-based resellers,' have 
previously maintained they are facilities-based based on facilities 
that provision operator and/or directory assistance services, which are 
provided in conjunction with their retail offering.'' The Commission 
seeks comment on revising those rules to make clear that a carrier is 
only facilities-based under our rules if its facilities are located in 
its service area and it uses those facilities to provide last-mile 
service to its supported customers. The Commission also notes that the 
Act defines a facilities-based carrier as one that offers service 
``either using its own facilities or a combination of its own 
facilities and resale of another carrier's services.'' (47 U.S.C. 
214(e)(1)(A)). The Commission seeks comment on how to balance 
Congress's expectation that ETCs would invest universal service support 
in the areas they serve (See 47 U.S.C. 254(e).) and its recognition 
that some amount of resale should be permissible. The Commission seeks 
comment on any other formulations of this rule it should consider to 
ensure that facilities-based Lifeline carriers are in fact reinvesting 
the support they receive in facilities in the communities they serve.
    20. The Commission also seeks comment on the transition period for 
implementing this approach. If Lifeline support is only provided to 
ETCs that provide Lifeline broadband services over facilities-based 
voice- and broadband-capable last-mile networks, what should the 
transition period and transition process be for non-facilities-based 
providers currently participating in the Lifeline program and their 
customers? Should the transition process consider whether there is a 
facilities-based provider in a specific market that intends to continue 
providing Lifeline service? If so, what geographic area would be the 
appropriate focus of this determination? What sources could the 
Commission use to determine whether a facilities-based Lifeline 
provider is present in and plans to continue offering Lifeline service 
in a particular geographic market? What other factors should the 
Commission consider in developing the transition process? What would be 
an appropriate transition period for impacted ETCs and their customers? 
Should the Commission provide a three-year support phase down period 
for non-facilities-based ETCs participating in the Lifeline program, or 
would a shorter period be appropriate? How would the transition process 
and period differ if the Commission reversed the forbearance from 
section 214(e)(1)(A)'s facilities requirement?
    21. The Commission also seeks comment on how to determine whether 
existing or future resellers have fully complied with the statute's 
exhortation that universal service funding must be spent ``only for the 
provision, maintenance, and upgrading of facilities and services for 
which the support is intended.'' (47 U.S.C. 254(e)). Have Lifeline 
resellers passed through all Lifeline funding to their underlying 
carriers to ensure federal funding is appropriately spent on the 
required ``facilities and services'' rather than non-eligible expenses 
like free phones and equipment? What accounting measures have Lifeline 
resellers instituted to ensure that Lifeline funding has only been used 
for eligible expenses? Would eliminating resellers from the program 
address any concerns about the appropriate use of federal funds by 
Lifeline providers? Would limiting payments to resellers to what they 
pay their wholesale carriers fully effectuate the congressional intent 
of section 254(e)? What auditing or other review should the Commission 
or USAC carry out to ensure that resellers that have been receiving 
funds used them properly?
    22. Alternatively, the Commission seeks comment on TracFone's 
suggestions that it minimizes waste, fraud, and abuse in the Lifeline 
program through ``conduct-based requirements.'' One form of conduct-
based requirement would be to suspend for a year or disbar any Lifeline 
ETC with sufficiently high improper payment rates, whether on the basis 
of Payment Quality Assurance reviews or program audits. The Commission 
seeks comment on such a conduct-based requirement. If the Commission 
were to adopt such a requirement, what should be the measuring stick it 
uses and what should be the trigger? Should the Commission use a 
percent of Lifeline revenues improperly paid in a given state? Should 
the Commission establish a threshold amount of improper payments, such 
as $50,000, as a trigger for suspension in a state? What levels should 
be established for disbarment? And should the Commission apply such a 
requirement to all Lifeline providers, as TracFone suggests, or only 
wireless resellers, the historic source of most of the Commission's 
enforcement actions and investigations with respect to waste, fraud, 
and abuse? Another conduct-based requirement could be the suspension of 
companies that regularly engage in fraud-related conduct--such as 
practices that TracFone has previously suggested eliminating from the 
program. Would banning such practices and suspending those who engaged 
in them mitigate our concerns about rampant waste, fraud, and abuse? 
Would any of the conduct-based requirements minimize waste, fraud, and 
abuse in the Lifeline program to the same extent as the proposed 
facilities requirement? How could TracFone's proposals be implemented 
with minimal additional administrative burden on Lifeline service 
providers? How would such proposals ensure that Lifeline support is 
being appropriately used to advance the deployment of broadband-
eligible networks?
    23. Continuing the Phase Down of Lifeline Support for Voice 
Service. The Commission also seeks comment on continuing the phase down 
of Lifeline support for voice-only services. In the 2016 Lifeline 
Order, the Commission adopted rules to gradually phase out Lifeline 
support for voice-only services to further the Commission's goal of 
transitioning to a broadband-focused Lifeline program. The current 
rules provide that Lifeline support will decrease to zero dollars on 
December 1, 2021, with an exception permitting Lifeline voice support 
to continue in Census blocks where there is only one Lifeline provider. 
(47 CFR 54.403(a)(2)(iv).) In deciding to phase down Lifeline support 
for voice-only service, the Commission explained that continuing to 
provide Lifeline support for voice-only service may ``artificially 
perpetuate a market with decreasing demand'' and may incent Lifeline 
providers to ``avoid providing low-income consumers with modern 
services as Congress intended.'' The Commission also cited the 
declining prices of fixed and wireless voice-only services and the 
availability of a wide-range of voice-only services in the marketplace.
    24. Continuing the phase down of Lifeline support is faithful to 
section 254(b)'s mandates and would support our proposal to focus 
Lifeline support to encourage investment in broadband-capable networks. 
(See 47 U.S.C. 254(b)(1)-(3)). The Commission acknowledges that some 
parties have argued against the phase down of Lifeline support for 
voice service, citing, among other concerns, the lack of affordable of 
voice service. However, the Commission expects that even without 
Lifeline voice support, low-income consumers would be able to obtain 
quality, affordable voice service in urban areas. Based on the 2018 
Urban Rate Survey, several providers charge monthly rates of fifteen 
dollars or less

[[Page 2108]]

for fixed voice-only service, and the national average monthly rate for 
fixed voice-only service is $25.50. (See 2018 Urban Rate Survey, Voice 
Data, Column J, Rows 423, 496, 501, 763, 788, https://www.fcc.gov/general/urban-rate-survey-data-resources.) The 2016 Universal Service 
Monitoring Report indicates that telephone expenses represent under 
four percent of after-tax income for low-income households. (See 
Universal Service Monitoring Report, CC Docket No. 96-45, et al., at 
57, Table 6.12 (2016) https://apps.fcc.gov/edocs__public/attachmatch/DOC-343025A1.pdf.) Therefore, the Commission expects that even without 
Lifeline support for voice-only service, the monthly cost of such 
service in urban areas would represent a small percentage of low-income 
households' after-tax income. The Commission seeks comment on 
continuing the phase down of Lifeline support for voice-only service. 
Should the Commission make any changes to the current schedule for 
phasing out Lifeline support for voice services to support the policy 
changes the Commission proposes in this section? Should the Commission 
retain the exception permitting Lifeline support for voice services 
after December 1, 2021 in areas where there is only one Lifeline 
provider? (47 CFR 54.403.) Would retaining this exception impede the 
adoption of Lifeline broadband service or investment in broadband-
enabled networks?
    25. In contrast, it is unclear whether low-income consumers would 
be able to obtain quality, affordable voice service in rural areas 
without Lifeline voice support. The Commission's rules require high-
cost ETCs to offer voice service at rates that are reasonably 
comparable to the rates for similar services in urban areas, USF/ICC 
Transformation Order, 76 FR 73830, November 29, 2011. Although such 
rates may be affordable in theory, they may not be in practice: The 
2018 reasonable-comparability benchmark for voice services is $45.38--
almost double the average urban rate. The Commission accordingly seeks 
comment on eliminating the phase down of Lifeline support for voice-
only service in rural areas. Would eliminating the phase down be the 
best way to ensure that consumers in rural areas are offered affordable 
voice services? Should voice-only support be limited to a subset of 
rural areas where voice rates are actually above the urban average? If 
so, by how much? And how should the Commission determine the areas 
where voice-only support is available? Would offering voice-only 
support to rural Tribal lands ensure more affordable voice services in 
those areas? If so, what should be the level of support offered 
compared to the amount of support available for broadband?
    26. Legal Authority. The Commission believes it has authority under 
Section 254(e) of the Act to provide Lifeline support to ETCs that 
provide broadband service over facilities-based broadband-capable 
networks that support voice service. Section 254(e) provides that a 
carrier receiving universal service support ``shall use that support 
only for the provision, maintenance, and upgrading of facilities and 
services for which the support is intended.'' Our proposed changes to 
Lifeline support comport with the Commission's authority under Section 
254 because voice service would continue to be defined as a supported 
service under the Commission's rules, and the networks receiving 
Lifeline support would also support voice service. (47 CFR 
54.401(a)(2)). Thus, under the proposed changes, Lifeline support would 
be used ``for the provision, maintenance, and upgrading of facilities 
and services for which the support is intended.'' (47 U.S.C. 254(e)). 
This legal authority does not depend on the regulatory classification 
of broadband internet access service and, thus, ensures the Lifeline 
program has a role in closing the digital divide regardless of the 
regulatory classification of broadband service.
    27. Relying on the Commission's authority under Section 254(e) for 
the proposed changes to Lifeline support would also better reconcile 
the Commission's authority to leverage the Lifeline program to 
encourage access to broadband with the Commission's efforts to promote 
access to broadband through high-cost support. In the universal service 
high-cost program, the Commission relied on section 254(e) as its 
authority to require ETCs receiving support through the Connect America 
Fund (including the Mobility Fund) or the existing high cost-support 
mechanisms to invest in broadband-capable networks, but declined to add 
broadband internet access service to the list of supported services. In 
adopting this requirement, the Commission explained that Section 254(e) 
grants the Commission the authority to ``support not only voice 
telephony service but also the facilities over which it is offered'' 
and that Congress's use of the words ``services'' and ``facilities'' in 
Section 254(e) provides the ``Commission the flexibility not only to 
designate the types of telecommunications services for which support 
would be provided, but also to encourage the deployment of the types of 
facilities that will best achieve the principles set forth in section 
254(b) and any other universal service principle that the Commission 
may adopt under section 254(b)(7), USF/ICC Transformation Order. The 
Commission further explained that it has a `` `mandatory duty' to adopt 
universal service policies that advance the principles outlined in 
section 254(b) and the Commission has the authority to `create some 
inducement' to ensure that those principles are achieved.'' In 2014, 
the U.S. Court of Appeals for the Tenth Circuit upheld the Commission's 
interpretation of its section 254(e) authority in the USF/ICC 
Transformation Order.
    28. The Commission seeks comment on the Commission's legal 
authority to adopt the proposed changes to Lifeline support. Are there 
other sources of authority that allow the Commission to make these 
changes to Lifeline support proposed in this section?
    29. The Commission seeks comment on ways the Lifeline program can 
responsibly empower Lifeline subscribers to obtain the highest value 
for the Lifeline benefit through consumer choice in a competitive 
market. In particular, the Commission seeks comment on a request from 
TracFone Wireless, Inc. (TracFone) to allow providers to meet the 
minimum service standards through plans that provide subscribers with a 
particular number of ``units'' that can be used for either voice 
minutes or broadband service. TracFone argues that the Bureau's 
previous guidance that such ``units'' plans do not meet the minimum 
service standards was given without public comment and represented an 
improper reading of the relevant rule. (47 CFR 54.408.) Should the 
Commission now allow ``units'' plans to receive reimbursement from the 
Lifeline program? What impact would these plans have on consumer choice 
in the Lifeline market? Would such a decision require a change in the 
Commission's rules? If the Commission permits such plans, how should 
the Commission determine the appropriate support amount for those plans 
that combine voice and broadband options when the support level for 
voice service decreases to $7.25 while the support amount for broadband 
service remains at $9.25? (See 47 CFR 54.403(a).)
    30. The Commission also seeks comment on eliminating the Lifeline 
program's ``equipment requirement.'' (See 47 CFR 54.408(f).) That rule 
mandates that any Lifeline provider that ``provides devices to its 
consumers[] must ensure that all such devices are

[[Page 2109]]

Wi-Fi enabled,'' prohibits ``tethering charge[s],'' and requires mobile 
broadband providers to offer devices ``capable of being used as a 
hotspot.'' (See 47 CFR 54.408(f)(1)-(3)). The Commission never sought 
comment on such requirements before imposing them on all Lifeline 
providers and appears to lack the statutory authority to adopt or 
enforce such requirements. And although well-intentioned, the equipment 
mandate appears unnecessary if not affirmatively harmful. As the 2016 
Lifeline Order recognized, a ``substantial majority'' of Americans 
already own Wi-Fi enabled smartphones, suggesting such mandates are not 
needed. And even those Lifeline providers that appear to support 
offering Wi-Fi-enabled devices or hotspot-enabled equipment acknowledge 
the increased cost of such equipment, and fail to explain why consumers 
should not be free to choose lower-cost options. For example, the 
equipment mandate would prohibit a cable Lifeline provider from 
offering a low-cost modem rather than an integrated modem-Wi-Fi-router, 
even if a Lifeline consumer wanted to use a desktop computer to access 
the internet. What is more, the 2016 Lifeline Order lacked record 
evidence suggesting that these mandates would have any meaningful 
impact on the homework gap--their nominal purpose. As such, it appears 
these mandates are more likely to widen the digital divide than close 
it. And so, for the first time, the Commission seeks comment on whether 
the Commission may or should retain the equipment mandates in our 
rules, or whether they instead should be eliminated.
    31. In the interest of removing regulations that no longer benefit 
consumers, the Commission proposes to eliminate Sec.  54.418 of the 
Commission's rules, and the Commission seeks comment on this proposal. 
(See 47 CFR 54.418.) When enacted, section 54.418 required ETCs to 
notify their customers about the then-upcoming transition for over-the-
air full power broadcasters from analog to digital service (the ``DTV 
transition'') over the course of several months in 2009. The DTV 
transition has since occurred, and it appears that the rule is no 
longer relevant. The Commission seeks comment on this proposal.
    32. As the Commission embarks on an effort to reform the incentives 
and effectiveness of the Lifeline program, it is incumbent on the 
Commission to consider ways it can continue to fight and prevent waste, 
fraud, and abuse in the program. To that end, the Commission seeks 
comment on a number of proposals to improve the Lifeline program's 
administration to preserve program integrity.
    33. The Commission proposes to adjust the process that USAC 
currently uses to identify which service providers will be subjected to 
Lifeline audits by transitioning to a fully risk-based approach. The 
Commission proposes to transition the independent audit requirements 
required by section 54.420 of the Commission's rules away from a $5 
million threshold and, instead, to move toward identifying companies to 
be audited based on established risk factors and taking into 
consideration the potential amount of harm to the Fund. The Commission 
proposes modifying section 54.420 to allow companies to be selected 
based on risk factors identified by the Wireline Competition Bureau and 
Office of Managing Director, in coordination with USAC. This approach 
allows for adaptable, independent audits that respond to risk factors 
that change over time. The Commission believes this new audit approach 
will better target waste, fraud, and abuse in the program and also 
utilize administrative resources more efficiently and effectively than 
in prior years.
    34. USAC's current audit program consists of audits targeted to 
high-risk participants as well as mandatory audits of certain carriers, 
such as all carriers offering Lifeline for the first time and any 
carrier receiving more than $5 million in program support in a given 
year. Recognizing that some mandatory audits were unnecessary, the 
Commission in the 2016 Lifeline Order directed the Office of Managing 
Director to work with USAC to modify the approach for determining the 
first-year Lifeline providers to be audited. The Commission intended 
this direction to prevent wasteful auditing of companies with limited 
subscriber bases, for example, and to allow USAC to more efficiently 
direct audit resources to higher risk providers. The Commission's rules 
still require carriers drawing more than $5 million annually from the 
program to obtain independent biennial audits. (47 CFR 54.420.)
    35. The Commission seeks comment on transitioning from the 
mandatory $5 million threshold for the biennial independent audits 
under Sec.  54.420(a) of the Commission's rules to a purely risk-based 
model of targeted Lifeline audits. Under this approach, the Wireline 
Competition Bureau and Office of Managing Director, with support from 
USAC, would establish risk factors to identify the companies required 
to complete the biennial independent audits. The independent audits 
would then follow the same process currently outlined in the rules with 
the identified carriers obtaining an independent auditor and following 
a standardized audit plan outlined by the Commission. (47 CFR 
54.420(a)). The Commission believes this approach would be more 
efficient and more effective at rooting out waste, fraud, and abuse in 
the program because the identified risk factors would better target 
potential violations than merely focusing on companies receiving large 
Lifeline disbursements. A wider range of risk factors would be more 
responsive to identified program risks.
    36. The Commission also seeks comment on the impact and burdens the 
current audit program imposes on providers and whether this risk-based 
approach reduces those burdens. What resources have the current, non-
risk-based audits consumed in terms of employee time, recordkeeping 
systems, and other related audit costs? Would transitioning all 
Lifeline audits to a risk-based model improve the accountability of the 
program? What factors are key indicators of potential abuse in the 
program? Are there other risk factors the Wireline Competition Bureau, 
Office of Managing Director, and USAC should consider when identifying 
companies that should be subject to audit? How many companies should be 
required to obtain independent audits?
    37. In its recent report, the Government Accountability Office 
(GAO) identified significant fraud and an absence of internal controls 
by performing undercover work to determine whether ETCs would enroll 
subscribers who are not eligible for Lifeline support. (See GAO, 
Telecommunications: Additional Action Needed to Address Significant 
Risks in FCC's Lifeline Program, GAO-17-538, at 44-46 (2017), http://www.gao.gov/products/GAO-17-538.) The Commission seeks comment on 
conducting similar undercover work as part of the audits administered 
by USAC or a third-party auditor acting on USAC's behalf. Would such 
auditing techniques be a cost-effective way to eliminate fraud in the 
program? What administrative challenges would the Commission or USAC 
face in undertaking such undercover work?
    38. Finally, the Commission seeks comment on how Lifeline program 
audits can ensure that Lifeline beneficiaries are actually receiving 
the service for which ETCs are being reimbursed. What documentation 
should an audit require to demonstrate that service is being provided? 
How should an audit detect and report instances where the subscriber's 
equipment makes it difficult or

[[Page 2110]]

impossible for the subscriber to use the relevant service? Would 
changes to auditing methods on this issue require any changes to the 
Lifeline program rules? Should the Commission require Lifeline service 
providers to demonstrate that they have addressed any issues that 
resulted in PQA failures above a certain threshold, or audit findings 
that result in recovery of more than a certain percentage of the 
disbursements during the audit period?
    39. The Lifeline enrollment and recertification processes continue 
to demonstrate significant weaknesses that open the program to waste, 
fraud, and abuse that harms contributing ratepayers and fails to 
benefit low-income subscribers. The Commission therefore seeks comment 
on a number of potential changes to the eligibility verification and 
reverification processes in the Lifeline program.
    40. ETC Representatives. The Commission seeks comment on 
prohibiting agent commissions related to enrolling subscribers in the 
Lifeline program and on codifying a requirement that ETC 
representatives who participate in customer enrollment register with 
USAC. The Commission believes these measures may benefit ratepayers by 
reducing waste, fraud, and abuse in the program. Many ETCs compensate 
sales employees and contractors with a commission for each consumer 
enrolled, and these sales and marketing practices can encourage the 
employees and agents of ETCs to enroll subscribers in the program 
regardless of eligibility, enroll consumers in the program without 
their consent, or engage in other practices that increase waste, fraud, 
and abuse in the program.
    41. The Commission seeks comment on codifying in the Commission's 
rules the USAC administrative requirement that ETCs' customer 
enrollment representatives register with USAC in order to be able to 
submit information to the NLAD or National Verifier systems. The 
Commission also seeks comment on the scope of the use of 
representatives' information. USAC is currently implementing an ETC 
representative registration database to help detect and prevent 
impermissible activity when enrolling or otherwise working with USAC to 
enroll Lifeline subscribers. The Commission is aware of certain 
practices of sales representatives resulting in improper enrollments or 
otherwise violating the Lifeline rules. (See Letter from Ajit V. Pai, 
Chairman, FCC, to Vickie Robinson, Acting Chief Executive Officer and 
General Counsel, USAC, at 1-4 (July 11, 2017), http://transition.fcc.gov/Daily_Releases/Daily_Business/2017/db0711/DOC-345729A1.pdf; GAO, Telecommunications: Additional Action Needed to 
Address Significant Risks in FCC's Lifeline Program, GAO-17-538 (2017), 
http://www.gao.gov/products/GAO-17-538.) These practices include data 
manipulation to defeat NLAD protections, using personally identifying 
information (PII) of an eligible subscriber to enroll non-eligible 
subscribers, and obtaining false certifications from subscribers. 
USAC's current administrative efforts to create this database of ETC 
representatives would also combat waste in the event a representative 
using impermissible enrollment tactics is engaged by multiple ETCs. The 
Commission seeks comment on codifying the ETC representative 
registration requirement. How should the Commission define an ETC 
enrollment representative for these purposes? What information would be 
necessary for the creation of this database? What privacy and security 
practices should be used to safeguard this information?
    42. The Commission also seeks comment on its ability to take 
appropriate enforcement action against registered ETC representatives 
who violate the rules governing Lifeline enrollment. For the Commission 
to exercise its forfeiture authority for violations of the Act and its 
rules without first issuing a warning, the wrongdoer must hold (or be 
an applicant for) some form of authorization from the Commission, or be 
engaged in activity for which such an authorization is required. (See 
47 U.S.C. 503(b).) Toward this end, the Commission seeks comment on 
whether it should implement a certification or blanket authorization 
process applicable to ETC representatives who register with USAC. How 
would this blanket authorization coincide with the Commission's 
existing authority over Lifeline providers' officers, agents, and 
employees under Section 217 of the Act? (See 47 U.S.C. 217).
    43. The Commission also seeks comment on whether the Commission 
should require ETCs to implement procedures that prohibit commission-
based ETC personnel from verifying eligibility of Lifeline subscribers. 
By prohibiting commissions, the Commission hopes to dis-incent 
improper, fraudulent, or otherwise illegal enrollment processes 
sometimes utilized by ETCs' representatives. The Commission proposes 
that those employees, agents, or third parties who receive a 
significant portion of their compensation based on the number of 
Lifeline subscribers they enroll in the program be precluded from 
determining eligibility. The Commission is concerned that ETCs 
implementing procedures barring commission-based personnel from 
reviewing and verifying subscriber eligibility certifications and 
documentation will reduce financial incentives for commission-based 
personnel to enroll ineligible subscribers. Should this proposal 
preclude ETCs from using commission-based personnel altogether, or 
should it instead require ETCs to simply implement procedures 
precluding commission-based personnel from determining eligibility? As 
an additional safeguard, should the Commission require Lifeline 
providers to ensure that service provider representatives involved in 
soliciting customers are separated from service provider 
representatives who are involved in the verification process?
    44. NLAD Dispute Resolution. The Commission seeks comment on 
requiring USAC to directly review supporting documents for manual NLAD 
dispute resolutions, including information regarding the ETC agent 
submitting the documentation. The Commission believes this requirement 
would reduce improper enrollments in the program. Currently, manual 
documentation review is required when a subscriber wishes to dispute an 
NLAD denial. An NLAD denial occurs when a subscriber fails one of the 
protective checks contained in the NLAD system. For example, if USAC's 
automated identity check rejects a consumer's application, that 
consumer may produce documentation verifying their identity, because 
the databases that are available to automatically verify identity are 
not comprehensive. A Lifeline subscriber may dispute an NLAD denial by 
submitting the appropriate documentation to the ETC. The ETC then 
reviews the documents, verifies the information at issue in the 
dispute, and processes the dispute resolution with USAC.
    45. The current system's reliance on carrier certification for 
dispute resolution has been questioned for making the Lifeline program 
vulnerable to waste, fraud, and abuse. (See Testimony of FCC 
Commissioner Ajit Pai Before the Subcommittee on Communications and 
Technology of the United States House of Representatives Committee on 
Energy and Commerce, Oversight of the Federal Communications 
Commission, at 4-5 (July 12, 2016), available at https://www.fcc.gov/document/commissioner-pai-statement-house-oversight-hearing.) Having 
USAC conduct actual document review associated with NLAD dispute 
resolutions would increase the

[[Page 2111]]

accountability of the resolutions. The Commission seeks comment on this 
proposal. Do the associated costs and administrative burdens associated 
with such review justify this additional step? If the Commission 
directed USAC to adopt this measure, what would be the optimal response 
time for USAC to process such disputes? How should USAC collect the 
documentation and what privacy safeguards should be taken to protect 
that information? Should USAC offer a list of acceptable documentation, 
and what documentation should qualify?
    46. Subscriber Recertification. The Commission seeks comment on 
prohibiting subscribers from self-certifying their continued 
eligibility during the Lifeline program's annual recertification 
process if the consumer is no longer participating in the program they 
used to demonstrate their initial eligibility for the program. Section 
54.410(f) of the Commission's rules allows subscribers to self-certify 
that they continue to be eligible for the Lifeline program if their 
eligibility cannot be determined by querying an eligibility database. 
This is true even where the subscriber is seeking to recertify under a 
different qualifying program than the one they used to demonstrate 
their initial eligibility. Requiring eligibility documentation to be 
submitted in such cases would help to ensure the self-certification 
option for the eligibility recertification process is accurate and the 
subscriber is still eligible to participate in the Lifeline program 
through a different eligibility path. Should the Commission amend its 
rules to require documentation be submitted when the subscriber 
attempts to recertify by self-certification only when the subscriber 
seeks to recertify under a different program than the one through which 
they initially demonstrated eligibility and cannot be recertified 
through an eligibility database? Should the Commission require USAC to 
review that documentation?
    47. Independent Economic Household Forms. The Commission next seeks 
comment on limiting ETCs' use of the Independent Economic Household 
(IEH) worksheet only when the consumer shares an address with other 
subscribers already enrolled in the Lifeline program. The 2016 Lifeline 
Order amended the language of Sec.  54.410(g) of the Commission's rules 
to require a prospective subscriber to complete an IEH worksheet upon 
initial enrollment and during any recertification in which the 
subscriber changes households and as a result shared an address with 
another Lifeline subscriber. The intended purpose of the IEH worksheet 
was for use when multiple independent households reside at the same 
residence. If an ETC collects an IEH worksheet from all subscribers 
regardless of whether another Lifeline subscriber resides at the same 
address, it is more difficult for USAC to monitor aggregate trends and 
particular ETCs' use of the IEH worksheet to detect improper activity. 
Prophylactic use of the household worksheet can therefore subvert the 
duplicate address protections and may result in increased waste, fraud, 
and abuse. The Commission seeks comment on amending the language of 
Sec.  54.404(b)(3) to only permit the use of an IEH worksheet after the 
ETC has been notified by the NLAD, or state administrator in the case 
of NLAD opt-out states, that the prospective subscriber resides at the 
same address as another Lifeline subscriber.
    48. Additionally, the Commission seeks comment on other methods to 
prevent abuse of the IEH worksheet process. Should the Commission 
direct USAC to develop a list of addresses known to contain multiple 
households? The addresses would primarily be assisted-living and 
retirement facilities, homeless shelters, public housing, and similar 
institutions. This list would enable USAC or the Commission to more 
effectively investigate addresses with high numbers of enrollments that 
do not appear to be physically or organizationally capable of housing 
many independent economic households. How should this list of known 
multiple-household addresses impact whether an ETC may collect an IEH 
worksheet from the prospective Lifeline consumer? Should the Commission 
require Lifeline applicants residing in multi-person residences (e.g., 
homeless shelters, nursing homes, assisted living facilities) to submit 
a certification from the facility manager confirming that the applicant 
resides at the address and is not part of the same economic household 
as any other resident already receiving Lifeline support? What 
administrative approaches would reduce burdens on subscribers without 
creating vulnerabilities in the program's integrity?
    49. More broadly, the Commission seeks comment on other dispute 
resolutions or ``overrides'' to Lifeline enrollment requirements that 
should be restricted or eliminated. Are there other points of the 
enrollment process that rely on the consumer's certification or manual 
document review in a way that irreparably weakens the integrity of the 
enrollment process? The Commission notes that, currently, a consumer 
may go through a dispute resolution process if that consumer is not 
found in a third-party identity verification database, has the same 
address as another Lifeline subscriber, has an address not recognized 
by the U.S. Postal Service, or cannot be found in an available 
eligibility program database. What additional steps should the 
Commission institute as part of this resolution process to reduce the 
opportunity for abuse? Should the Commission limit the ability of 
providers or subscribers to override those initial failures with 
additional documentation to prevent fraudulent or abusive practices?
    50. Other Measures. Finally, the Commission seeks comment on 
whether there are other measures the Commission could take to further 
reduce waste, fraud, and abuse and improve transparency in the program. 
Should the Commission require USAC to conduct ongoing targeted risk-
based reviews of eligibility documentation or dispute resolution 
documentation? Should the Commission codify a requirement that 
subscribers be compared to the Social Security Master Death Index 
during the enrollment and recertification processes? Should the 
Commission amend its rules to require that a provider's Lifeline 
reimbursement be based directly on the subscribers it has enrolled in 
the NLAD to prevent claims for ``phantom'' subscribers? Should the 
Commission prohibit Lifeline providers from distributing handsets in 
person to Lifeline consumers and, if so, should there be any 
exceptions? Are there additional measures the Commission should take to 
address waste, fraud, and abuse in the program? The Commission seeks 
comment on these proposals.
    51. The Commission seeks comment on additional reports USAC could 
make public or available to state agencies to increase program 
transparency and accountability. The Commission seeks comment on 
directing USAC to periodically report suspicious activity or trends to 
the Wireline Competition and Enforcement Bureaus, as well as the Office 
of Managing Director, and any relevant state agencies. Suspicious 
activity would include trend analysis of NLAD exemptions, subscriber 
churn, TPIV failure rates, and IEH worksheet rates. It will also 
include information gained from analytics on the National Verifier 
data. In addition to more transparent reporting of NLAD exemptions, 
what information would state agencies need to access to increase the 
effectiveness of state enforcement in the Lifeline program? Further, 
what information should USAC make

[[Page 2112]]

accessible to other Lifeline stakeholders to increase the effectiveness 
and transparency of the program?
    52. The Commission seeks comment on what additional reports USAC 
should make available for state agencies. USAC currently makes 
available a number of Lifeline program statistics and reports showing 
eligible Lifeline population estimates, Lifeline participation, and 
ETCs receiving Lifeline support. In addition to this information, state 
agencies may request NLAD access for their respective state. This 
access allows the state agency to review detailed subscriber 
information in the NLAD to aid their own program administration and 
enforcement, including information regarding which carriers are 
providing service. In the 2016 Lifeline Order, the Commission directed 
USAC to publish Lifeline subscriber counts on the study area code (SAC) 
level to ``increase[] transparency and continue[] to promote 
accountability in the program.''
    53. In the 2016 Lifeline Order, the Commission implemented a budget 
process for the Lifeline program. This budget approach, however, does 
not include any mechanism that automatically curtails disbursements 
beyond the budget amount absent further action by the Commission. 
Instead, if Lifeline disbursements in a given year meet or exceed 90 
percent of that year's budget, initially set at $2.25 billion, the 
Bureau is required to issue a report to the full Commission detailing 
the reasons for the increased spending and recommending next steps.
    54. The Commission proposes to adopt a self-enforcing budget 
mechanism to ensure that Lifeline disbursements are kept at a 
responsible level and to prevent undue burdens on the ratepayers who 
contribute to the program. The Commission believes a self-enforcing 
budget is appropriate to ensure the efficient use of limited funds. The 
Commission therefore proposes to replace the approach adopted in the 
2016 Lifeline Order and require an annual cap for Lifeline 
disbursements. The Commission intends for the program to automatically 
make adjustments in order to maintain the cap in the event the budget 
is exceeded.
    55. The Commission seeks comment on the operation of such a self-
enforcing budget. What is the appropriate period over which the 
Commission should measure and enforce the cap? Would a six-month period 
be appropriate? For example, under this proposal, for each upcoming 
six-month period, USAC would forecast expected Lifeline and Link Up 
disbursements, as well as administrative expenses attributable to the 
operation of these programs. If projected disbursements and expenses 
are expected to exceed one half of the annual cap, USAC would 
proportionately reduce support amounts during the upcoming six-month 
period to bring total disbursements under one half of the annual cap. 
If, however, total payments in the upcoming six-month period are 
projected to be less than one half the annual cap, USAC would provide 
the full support amounts as determined by the Commission and collect 
only what is necessary to fund the demand. The Commission seeks comment 
on this proposal. What administrative difficulties should USAC 
anticipate when forecasting disbursements? What steps should USAC take, 
if any, in the midst of a six-month period in the event forecast 
disbursements and expenses vary significantly from actual disbursements 
and expenses? The Commission notes that USAC currently projects 
quarterly requirements for the Lifeline program and submits those 
projections to the Commission. What can the Commission learn from the 
accuracy of USAC's past forecasts that would inform how this proposal 
would work? Alternatively, would another period of time be more 
appropriate? Would a one-year period be more suitable for the Lifeline 
market? In particular, the Commission seeks comment on the concept of 
measuring the budget over a 12-month period and whether that concept 
fully protects the ratepayer from excessive spending.
    56. Alternatively, the Commission seeks comment on a different 
self-enforcing budget mechanism that would allow Lifeline spending in a 
given period to exceed the cap, but would result in Lifeline 
disbursements being reduced in the next period to accommodate the 
excessive spending. In this mechanism, disbursements would be reduced 
proportionally throughout the following period to ensure the 
disbursements and expenses do not exceed the budget less the amount by 
which the previous period's disbursements and expenses exceeded the 
budget. The Commission seeks comment on this approach, noting that it 
has the benefit of not requiring a forecast or handling the inevitable 
under- or over-shooting of the actual demand. Under this proposal, when 
should the cap for the second period of time be set? At the beginning 
of the first period, or the second one? The Commission also seeks 
comment on whether it is acceptable to allow disbursements to exceed 
the budget in a given period, even where adjustments made in the 
following period mean the program spends less than the total budgeted 
amount over the two periods. Would any of the proposed budget 
mechanisms result in a significant variance in the disbursement cap for 
consecutive funding years, and if so, what impact would that have on 
Lifeline consumers and providers?
    57. The Commission also seeks comment on whether Lifeline spending 
should be prioritized in the event that the cap is reached or USAC 
projects will be reached in a funding year. If so, the Commission 
proposes that the Commission prioritize funding in the following order 
if disbursements are projected to exceed the cap: (1) Rural Tribal 
lands, (2) rural areas, and (3) all other areas. The Commission seeks 
comment on this prioritization scheme and whether any other factors 
should weigh in our analysis. For example, should the Commission 
prioritize Lifeline spending in low-income areas where the business 
case for deployment is harder to make? If the Commission adopts such 
funding prioritizations, how should it implement such a system? Should 
the Commission adjust all of the support amount categories to different 
extents, or should categories with less prioritization receive no 
support before the support of the category with the next-highest 
prioritization is adjusted? The Commission seeks comment on these 
issues.
    58. The Commission also seeks comment on the appropriate initial 
amount for this cap. Would historical disbursement levels be 
instructive in determining the appropriate annual cap? In 2008, when 
the Commission first allowed a non-facilities-based ETC to receive 
Lifeline support, Lifeline expenditures totaled approximately $820 
million. By 2012, that amount had grown to over $2.1 billion. The 
Commission's initial steps to eliminate waste, fraud, and abuse within 
the program have reduced Lifeline disbursements to just over $1.5 
billion in 2015. If the Commission adopted a previous disbursement 
level as the annual disbursement cap, which disbursement level would be 
appropriate? The Commission seeks comment on these issues and other 
relevant matters, such as whether this cap should include USAC's 
expenses for administering the Lifeline program. If so, how should the 
Commission incorporate these administrative expenses?
    59. The Commission also seeks comment on whether and how the 
program's cap should be adjusted in subsequent years. Should the cap 
remain the same, absent further action

[[Page 2113]]

by the Commission, or should the cap be automatically indexed to 
inflation? Should the cap be tied to other metrics, like the growth or 
decrease of poverty nationwide or participation in means-tested 
programs?
    60. In this section, the Commission seeks comment on ways to focus 
Lifeline support toward encouraging broadband adoption among low-income 
consumers and minimizing wasteful spending in the program.
    61. Maximum Discount Level. The Commission seeks comment on whether 
to apply a maximum discount level for Lifeline services above which the 
costs of the service must be borne by the qualifying household. Today, 
many service providers use the monthly Lifeline support amount to offer 
free-to-the-end-user Lifeline service, for which the Lifeline customer 
has no personal financial obligation. In 2016, certain wireless 
Lifeline service providers estimated that 11 million Lifeline 
participants (85 percent of all Lifeline program participants) 
subscribed to plans providing free-to-the-end-user Lifeline service. 
(See Letter from John Heitmann, Kelly Drye & Warren LLP, to Marlene 
Dortch, Secretary, FCC, WC Docket No. 11-42 et al., at 2 (Feb. 3, 
2016)). In contrast, the Commission's other universal service support 
programs all require beneficiaries or support recipients to pay a 
portion of the costs of the supported service. For example, the E-rate 
program discount levels range from 20 percent to 90 percent of the 
costs of eligible goods and services, and E-rate beneficiaries are 
required to pay the remaining costs of the supported goods and 
services. (47 CFR 54.505(b) and 54.504(a)(1)(iii).) Should the approach 
that the Commission has taken in other universal service support 
programs be instructive in the Lifeline context? Do the users of the 
supported service value that service more if they contribute 
financially? Are such users more sensitive to the price and quality of 
the service? Is there any particular approach taken by another 
universal service support program that should inform the Commission's 
analysis for the Lifeline program? Under the Commission's rules, 
providers of video relay service (VRS) are compensated for the 
reasonable costs of providing VRS. (47 CFR 64.604(c)(5)(iii)(E)(1).) Do 
the policies underlying that approach apply in the Lifeline context? 
The concept of maximum discount levels and mandatory contributions is 
not limited to federal benefit programs administered by the Commission. 
For example, many participants in the U.S. Department of Housing and 
Urban Development's (HUD's) Public Housing and Housing Choice Voucher 
programs and the U.S. Department of Health and Human Services' (DHHS') 
Low-Income Home Energy Assistance Program (LIHEAP) are required to pay 
a portion of the costs of their utilities or rent. The Commission seeks 
comment on the utility of comparing these programs to the Lifeline 
program, and if the Commission should consider the approach undertaken 
in other benefit programs with capped support amounts. For those other 
benefit programs, has the efficacy of mandatory end user payments been 
evaluated? Did the requirement of end user payments impact services 
provided to the consumer, program enrollment, or competition in the 
relevant market? Importantly, did such a requirement reduce the waste, 
fraud, and abuse in those programs that would have occurred absent the 
cap?
    62. The Commission also seeks comment on the impact a maximum 
discount level would have on the Lifeline program. What impact would a 
maximum discount level have on the affordability, availability, and 
quality of communications service for low-income consumers? Would a 
maximum discount level for the Lifeline program impact the types of 
services that consumers obtain through the program? Would it change the 
quality of broadband service that Lifeline providers offer, including 
speed and data allowances? Would this change affect the availability of 
certain types of service more than others, for example, mobile versus 
fixed service? Would a maximum discount level help ensure that Lifeline 
funds are targeted at high-quality broadband service offerings that 
truly help close the digital divide for low-income consumers? Would 
adopting a maximum discount level encourage consumers to more carefully 
investigate and evaluate the service to which they wish to apply their 
Lifeline benefit, thereby decreasing Lifeline subscriber churn or 
violations of the one-per-household rule and helping further reduce 
waste, fraud, and abuse in the Lifeline program?
    63. One proposal is to adopt a maximum discount level to improve 
the Lifeline program's efficiency and further reduce waste, fraud, and 
abuse in the program. Under the current structure, service providers 
may engage in fraud or abuse by using no-cost Lifeline offerings to 
increase their Lifeline customer numbers when the customers do not 
value or may not even realize they are purportedly receiving a 
Lifeline-supported service. The Commission seeks comment on whether 
Lifeline's current benefit structure fails to ensure that the program 
supports services that consumers value. Would a maximum discount level 
curtail such practices and prevent universal service funds from being 
spent on services of little to no value for the Lifeline consumer?
    64. What rule changes would be needed to implement a maximum 
discount level? If the Commission established a maximum discount level 
requirement for Lifeline, how should such a requirement operate? Are 
there specific pricing data or other data that would help the 
Commission determine an appropriate maximum discount level? Should the 
required end user payment be a flat amount or a percentage of the price 
of the service? Should the maximum discount level apply differently to 
enhanced Lifeline support than standard Lifeline support? Should the 
maximum level apply to Link Up support? How would a maximum discount 
level apply for prepaid services or consumer payment structures that 
otherwise do not require a monthly billing relationship between the 
provider and the consumer? Should Lifeline service providers have 
flexibility to determine the timing of the customer's payment (e.g., 
upfront payments, monthly, post-paid)? What steps could the Commission 
take to ensure that Lifeline service providers actually collect the 
required customer share? How should the Commission treat partial 
payments by Lifeline subscribers? Should there be any exceptions to the 
maximum discount level and, if so, what is the justification for these 
exceptions? How could the Commission implement a maximum discount level 
with minimal increases in Lifeline service provider costs and 
administrative burdens? Are there specific data that would help the 
Commission evaluate the potential impact of a maximum discount level on 
the Lifeline participation rate of qualifying low-income consumers? Are 
there other alternatives the Commission should consider to ensure that 
the Lifeline program supports services that Lifeline customers value?
    65. In the 2016 Lifeline Order, the Commission adopted minimum 
service standards to make sure that Lifeline customers receive quality 
Lifeline-supported services. A maximum discount level may also achieve 
this goal because consumers who pay a portion of the costs may be more 
sensitive to the price and quality of the service. Would a maximum 
discount level therefore make minimum service standards unnecessary? Do 
the minimum service standards serve additional purposes that would not 
be

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served by a maximum discount level? If the Lifeline program rules 
included both a maximum discount level and minimum service standards, 
should the Commission revise the formulas used to determine the minimum 
service standards or adjust the mechanisms by which the minimum service 
standards are updated? Similarly, would adopting a maximum discount 
level eliminate the need for the usage requirement in Sec.  
54.407(c)(2) of the Lifeline program rules and the related non-usage 
de-enrollment rule in Sec.  54.405(e)(3)?
    66. Targeting Non-Adopters. The Lifeline program was originally 
created to promote low-income consumers' access to affordable services. 
Some parties have suggested that the Commission should target Lifeline 
support to low-income consumers who have not yet adopted broadband 
service. The Commission seeks comment on changes the Commission could 
make to target consumers who have not yet adopted broadband, and to 
what extent the Commission should weigh efforts that facilitate 
reaching those consumers specifically? The Commission seeks comment on 
whether and how the Commission should adopt a support framework that 
encourages adoption of high quality communications service by low-
income consumers. What rule changes would be necessary to implement 
these changes?
    67. The Commission seeks comment on the need for regulatory action 
to address the problems identified here, as well as the costs and 
benefits of our proposals along with data and other information that 
can be used to quantify these. Specifically, the Commission seeks 
comment on the need for and costs and benefits of regulatory action of 
the following proposals, relative to the status quo: Encouraging 
cooperative federalism between state data sources and the National 
Verifier; directing Lifeline support to facilities-based providers; 
alternatives to a facilities requirement; adopting a maximum discount 
level; changes to encourage Lifeline consumers to adopt broadband 
services; adopting a self-enforcing budget; enhancing targeted audits 
of participating providers; and acting on the other interpretive and 
policy changes for which the Commission seeks comment above. Commenters 
proposing alternatives to our proposals should discuss the need for and 
costs and benefits of their proposal, including relative costs and 
benefits of their proposal as compared to those set forth here, and 
should provide supporting evidence. The Commission also seeks comment 
on options to achieve the most effective use of resources to achieve 
the purposes of the Lifeline program, and specifically to lower the 
cost of adoption to lower-income subscribers. The Commission seeks data 
and information commenters believe is necessary for these analyses and 
comment on specific methodologies commenters believe are best suited 
for this purpose. The Commission also seeks comment generally on how to 
evaluate the relative importance of public interest outcomes that are 
not readily susceptible to quantification, such as ``equity, human 
dignity, fairness, and distributive impacts.'' (See Executive Order 
13563, 76 FR 3821, 3821-23 (Jan. 18, 2011)).

III. Notice of Inquiry

    68. The Lifeline program is an important means of achieving 
universal service. In the 2016 Lifeline Order the Commission took the 
step of allowing Lifeline to support broadband to help low-income 
Americans obtain access to quality, affordable service. However, the 
Commission remains concerned about the well-documented digital divide 
for low-income Americans, and in particular low-income Americans 
residing in rural Tribal, rural, and underserved areas.
    69. To ensure that the Lifeline program achieves universal service 
for 21st Century services, it is necessary to evaluate the ultimate 
purposes of the Lifeline program and identify the policies that will 
best accomplish those purposes. Sharpening the focus of the Lifeline 
program would further promote digital opportunity for low-income 
individuals, and in particular for low-income Americans who have not 
adopted broadband, or who reside in rural Tribal or rural areas.
    70. To focus the Lifeline program on supporting affordable 
communications service for the nation's low-income households and on 
improving the economic incentives of providers serving them, the 
Commission begins a proceeding to reexamine the Lifeline program's 
support structure to encourage affordable access to high quality 
services for low-income consumers while the Commission continues to 
discourage the practices leading to program waste, fraud, and abuse. 
Accordingly, the Commission seeks comment on potential changes to the 
Lifeline program funding paradigm that will help the Lifeline program 
more efficiently target funds to areas and households most in need of 
help obtaining digital opportunity.
    71. Ensuring that service providers have appropriate incentives to 
deploy and provide services to these populations can further the 
Commission's efforts to bring digital opportunity to low-income 
Americans who have not yet adopted broadband and low-income Americans 
residing in rural or rural Tribal areas who typically experience 
difficulty obtaining access to affordable, quality broadband. The 
Commission seeks comment on actions the Commission could take to create 
better economic incentives for providers participating in the Lifeline 
program. The Commission also seeks comment on how those incentives 
would impact the program's effectiveness at reaching certain subsets of 
the low-income population.
    72. The Commission also seeks comment on how the Commission could 
leverage the Lifeline program to encourage broadband deployment in 
areas that have found themselves on the wrong side of the digital 
divide. Where a provider has already invested in building a broadband-
capable network, that provider often has incentives to create mutually 
beneficial offerings that make affordable connectivity options 
available to low-income households within the network's footprint. The 
Commission seeks comment on whether the Commission should shape its 
Lifeline support structure to provide enhanced support in areas where 
providers do not have sufficient incentive to make available affordable 
high-speed broadband service.
    73. The Commission seeks comment on whether and how the Commission 
should adopt rule changes to target Lifeline support to bring digital 
opportunity to areas that offer less incentive for deployment of high-
speed broadband service, such as rural areas and rural Tribal areas. 
Rural and rural Tribal areas have higher percentages of broadband non-
adopters compared to other areas. It is also well documented that 
lower-income households have lower broadband adoption rates and lower 
in-home broadband connectivity rates compared to higher-income 
households. Some have suggested that the Commission should therefore 
target Lifeline support primarily to nonadopters to improve the 
effectiveness and efficiency of the Lifeline program. In light of these 
analyses, the Commission seeks comment on whether the Lifeline program 
could better reach nonadopters of broadband by focusing Lifeline 
support in areas where providers need additional incentive to offer 
high-speed broadband service.
    74. Rural and Rural Tribal Areas. The Commission specifically seeks 
comment on whether and how the Commission should adjust the Lifeline 
support amount to encourage affordable

[[Page 2115]]

broadband access for low-income consumers in rural areas. Low-income 
consumers in rural or rural Tribal areas may have difficulty obtaining 
affordable, quality broadband service because service providers have 
less incentive to incur the costs to deploy advanced facilities or to 
provide a wide range of services at competitive prices in these areas. 
In rural areas, higher deployment costs can also lead to fewer service 
options and higher prices that disproportionately impact low-income 
consumers. The Commission also focuses on rural Tribal areas in which 
affected stakeholders have suggested that the current Lifeline Tribal 
enhanced subsidy amount is insufficient to incentivize broadband 
deployment in rural Tribal areas. Although broadband deployment in both 
rural and rural Tribal areas is lagging compared to other areas, the 
current Lifeline program rules only provide targeted enhanced monthly 
Lifeline support (up to an additional $25 per month) for Lifeline 
customers residing on Tribal lands. (47 CFR 54.403(a)(3).)
    75. The Commission is also mindful about the need to establish the 
correct support amounts. If the Commission establishes enhanced 
Lifeline support for consumers living in rural and rural Tribal areas, 
how could the Commission provide targeted support while also promoting 
the interests of fiscal responsibility and minimizing the burden on the 
ratepayers who support the Fund? Are there specific pricing data or 
other data that the Commission should consider in determining the 
appropriate enhanced monthly support amounts for Lifeline subscribers 
in rural and rural Tribal areas? Should a single enhanced monthly 
support amount apply in all rural areas or should Lifeline consumers in 
rural areas on Tribal lands or another subset of rural residents 
receive a higher monthly support amount? How should the enhanced 
monthly support amounts compare to the monthly support amount for 
Lifeline subscribers who do not live in rural areas? What data or 
metrics should the Commission use to identify the rural areas that 
qualify for enhanced support? What geographic level (e.g., county, 
Census tracts, Census block groups) should the Commission use to 
identify these rural areas? Is the E-rate program's definition of 
``rural'' the best option for identifying rural areas in the Lifeline 
program, or should the Commission consider some other definition to 
identify rural areas? (47 CFR 54.505(b)(3)(i)-(ii))
    76. Underserved Areas. The Commission next seeks comment on whether 
and how the Commission should also target Lifeline support to bring 
digital opportunity to low-income areas where service providers have 
less incentive to invest in facilities or offer robust broadband 
offerings compared to other areas. Recent reports argue that certain 
low-income areas experience less facilities deployment when compared to 
other areas, and that low-income consumers in those areas may 
experience increased difficulty obtaining affordable, robust 
communications services.
    77. The Commission seeks comment on how the Commission can address 
this issue with the Lifeline program. If the Commission permits an 
enhanced subsidy amount for households in these areas, how should the 
Commission define underserved areas for the purpose of this enhanced 
support, and how should the Commission identify these underserved 
areas? What data could inform the Commission as to the prevalence of 
service providers electing not to invest as much in facilities or 
robust broadband offerings compared to other areas, and the areas where 
this has occurred? What types of broadband deployment, service 
offerings, adoption data or other measures could the Commission use to 
determine whether areas are underserved because service providers have 
less incentive to invest in facilities and broadband services in those 
areas compared to other areas? Are there certain income levels or other 
markers in a geographic area that could help the Commission reliably 
identify whether an area is likely to be underserved? For example, 
could the Commission address underserved areas by offering enhanced 
Lifeline support in areas where the median household income and/or 
broadband investment rates are significantly lower than the national 
average?
    78. What changes should the Commission make to the Lifeline program 
support structure to target support to underserved areas? Are there 
specific pricing or other data the Commission could use to determine 
the appropriate support amount for underserved areas? How should the 
targeted support for underserved areas compare to and interact with the 
support amounts for rural or Tribal areas? What level of geographic 
granularity (e.g., county, Census tracts, Census block groups) should 
the Commission use to identify areas that qualify for enhanced Lifeline 
support as underserved areas? How frequently should the Commission 
update the threshold for areas that qualify for enhanced support as 
underserved areas?
    79. The Commission next seeks comment on whether the Commission 
should implement a benefit limit that restricts the amount of support a 
household may receive or the length of time a household may participate 
in the program. The objectives of such restrictions include encouraging 
broadband adoption without reliance on the Lifeline subsidy and 
controlling the disbursement of scarce program funds. Such a limit 
would provide low-income households incentives to not take the subsidy 
unless it is needed, since taking the subsidy in a given month will 
forfeit the opportunity to use it in a future month. The Commission 
seeks comment on whether the Commission should adopt a benefit limit 
for the Lifeline program.
    80. What rule changes would be necessary to implement a benefit 
limit or time limit for consumer participation in the Lifeline program? 
If the Commission established a benefit limit or time limit for 
Lifeline, how should such a requirement operate and how should it be 
enforced? Are there specific data that would help the Commission 
determine an appropriate monetary or temporal limit in support? 
Currently in the Lifeline program, households remain enrolled for 1.75 
years on average. How should this information affect our decision to 
impose this restriction? Should the limit be applied to households or 
individuals, and how would the Commission or USAC track benefits 
received if consumers transfer to different providers? Should there be 
any exceptions to the benefit limit or time limit and, if so, what is 
the justification for these exceptions? How could the Commission 
implement a benefit limit or time limit with minimal increases in the 
costs or administrative burdens for Lifeline service providers? Are 
there specific data that would help the Commission evaluate the 
potential impact of a benefit or time limit on the Lifeline 
participation rate of qualifying low-income consumers? Are there other 
alternatives to a benefit limit that the Commission should consider to 
better focus Lifeline funds on those households who need it most?
    81. This Notice of Inquiry seeks comments on potential ways to 
sharpen the focus of the Lifeline program to further promote digital 
opportunity for all Americans. The Commission now seeks comment on the 
program's goals and metrics that would allow us to better determine if 
Lifeline support is truly achieving the purpose of closing the digital 
divide. In 2015, the GAO reported that ``outcome-based performance 
goals and measures will help illustrate to what extent, if any, the 
Lifeline program is fulfilling the guiding principles set forth by 
Congress.'' (GAO,

[[Page 2116]]

Telecommunications: FCC Should Evaluate the Efficiency and 
Effectiveness of the Lifeline Program, GAO-15-335, at 13 (2015), http://www.gao.gov/assets/670/669209.pdf.) In 2016, the Commission revised 
its Lifeline program goals by including the affordability of voice and 
broadband service, as measured as the percentage of disposable 
household income spent on those services, to the goals established in 
the Commission's 2012 Lifeline Order, 77 FR 12951, March 2, 2012. The 
Commission agrees outcome-based performance goals and measures have an 
important role ensuring Lifeline support is achieving Congress's 
universal service goals. The Commission seeks comment on how the 
Commission should determine and define the Lifeline program's goals and 
metrics and how those goals should inform the Commission's efforts to 
sharpen the focus of the Lifeline program, as discussed in this Notice 
of Inquiry.

IV. Procedural Matters

A. Paperwork Reduction Act

    82. This document contains proposed modified information collection 
requirements. The Commission, as part of its continuing effort to 
reduce paperwork burdens, invites the general public and the Office of 
Management and Budget (OMB) to comment on the information collection 
requirements contained in this document, as required by the Paperwork 
Reduction Act of 1995, Public Law 104-13. In addition, pursuant to the 
Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 
U.S.C. 3506(c)(4), the Commission seeks specific comment on how it 
might further reduce the information collection burden for small 
business concerns with fewer than 25 employees.
    83. As required by the Regulatory Flexibility Act of 1980, as 
amended (RFA), the Commission has prepared this Initial Regulatory 
Flexibility Analysis (IRFA) of the possible significant economic impact 
on a substantial number of small entities from the policies and rules 
proposed in this Notice of Proposed Rulemaking (Notice). The Commission 
requests written public comment on this IRFA. Comments must be 
identified as responses to the IRFA and must be filed by the deadlines 
for comments on the Notice provided on the first page of the Notice. 
The Commission will send a copy of the Notice, including this IRFA, to 
the Chief Counsel for Advocacy of the Small Business Administration 
(SBA). In addition, the Notice and IRFA (or summaries thereof) will be 
published in the Federal Register.
    84. The Commission is required by section 254 of the Communications 
Act of 1934, as amended, to promulgate rules to implement the universal 
service provisions of section 254. The Lifeline program was implemented 
in 1985 in the wake of the 1984 divestiture of AT&T. On May 8, 1997, 
the Commission adopted rules to reform its system of universal service 
support mechanisms so that universal service is preserved and advanced 
as markets move toward competition. The Lifeline program is 
administered by the Universal Service Administrative Company (USAC), 
the Administrator of the universal service support programs, under 
Commission direction, although many key attributes of the Lifeline 
program are currently implemented at the state level, including 
consumer eligibility, eligible telecommunication carrier (ETC) 
designations, outreach, and verification. Lifeline support is passed on 
to the subscriber by the ETC, which provides discounts to eligible 
households and receives reimbursement from the universal service fund 
(USF or Fund) for the provision of such discounts.
    85. When the Commission overhauled the Lifeline program in its 2016 
Lifeline Order, it included broadband internet access service as a 
supported service; laid the groundwork for a National Verifier; 
strengthened protections against waste, fraud and abuse; improved 
program administration and accountability; and improved enrollment and 
consumer disclosures. In this NPRM, the Commission proposes steps to 
focus Lifeline program support to effectively and efficiently bridge 
the digital divide for low-income consumers while minimizing the 
contributions burden on ratepayers. The actions and proposals in this 
NPRM aim to facilitate the Lifeline program's goal of supporting 
affordable, high-speed internet access for low-income households.
    86. In this NPRM, the Commission seeks comment on a number of 
significant reforms that will effectively and responsibly leverage the 
Lifeline program to bridge the digital divide for low-income consumers. 
The Commission seeks comment on respecting the states' primary role in 
eligible telecommunications carrier designation by eliminating Lifeline 
Broadband Provider designations. The Commission also seeks comment on 
proposals to enable consumer choice and proposed policies to focus 
Lifeline support to encourage investment in broadband-capable networks. 
Finally, the Commission proposes several program accountability 
improvements to reduce waste, fraud, and abuse and improve transparency 
in the program.
    87. The legal basis for the NPRM is contained in sections 1 through 
4, 201-205, 254, and 403 of the Communications Act of 1934, as amended 
by the Telecommunications Act of 1996, 47 U.S.C. 151 through 154, 201 
through 205, 254, and 403.
    88. 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. The RFA generally defines 
the term ``small entity'' as having the same meaning as the terms 
``small business,'' ``small organization,'' and ``small governmental 
jurisdiction.'' In addition, the term ``small business'' has the same 
meaning as the term ``small business concern'' 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) 
satisfies any additional criteria established by the Small Business 
Administration (SBA). Nationwide, there are a total of approximately 
28.2 million small businesses, according to the SBA. A ``small 
organization'' is generally ``any not-for-profit enterprise which is 
independently owned and operated and is not dominant in its field.''
    89. Small Entities, Small Organizations, Small Governmental 
Jurisdictions. Our actions, over time, may affect small entities that 
are not easily categorized at present. The Commission therefore 
describes here, at the outset, three comprehensive small entity size 
standards that could be directly affected herein. As of 2016, according 
to the SBA, there were 28.8 million small businesses in the U.S., which 
represented 99.9 percent of all businesses in the United States. 
Additionally, a ``small organization is generally any not-for-profit 
enterprise which is independently owned and operated and not dominant 
in its field.'' Nationwide, as of 2014, there were approximately 
2,131,200 small organizations. Finally, the term ``small governmental 
jurisdiction'' is defined generally as ``governments of cities, towns, 
townships, villages, school districts, or special districts, with a 
population of less than fifty thousand.'' U.S. Census Bureau data 
published in 2012 indicates that there were 89,476 local governmental 
jurisdictions in the United States. The Commission estimates that, of 
this total, as many as 88,761 entities may qualify as ``small 
governmental jurisdictions.'' Thus, the

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Commission estimates that most governmental jurisdictions are small.
    90. In this NPRM, the Commission seeks public input on new and 
additional solutions for the Lifeline program, including reforms that 
would bring the program closer to its core purpose and promote the 
availability of modern services for low-income families. The issues the 
Commission seeks comment on in this NPRM are directed at enabling us to 
meet our goals and objectives for the Lifeline program, and reducing 
waste, fraud, and abuse. Specifically, the Commission seeks comment on 
a number of potential changes that would increase the economic burdens 
on small entities, and also seek comment on proposals that would 
decrease those burdens. The Commission has identified the applicable 
potential changes below that impact small entities.
    91. Focusing Lifeline Support to Encourage Investment in Broadband-
Capable Networks. The Commission seeks comment on several policy 
changes that would focus Lifeline support to encourage investment in 
broadband-capable networks, including limiting Lifeline support to 
facilities-based broadband service provided to Lifeline customers over 
the ETC's voice-and-broadband-capable network, discontinuing Lifeline 
support for non-facilities-based service, and continuing the phase down 
of Lifeline support for voice service in urban areas.
    92. Reforms to Increase Efficient Administration of the Lifeline 
Program. The Commission seeks comment on a number of reforms to 
increase the efficient administration of the program, including 
requiring ETCs to supply documentation to USAC for National Lifeline 
Accountability Database (NLAD) dispute resolutions, ETCs to collect 
documentation for subscribers seeking to self-certify to continued 
eligibility, and limiting the use of independent economic household 
forms to only NLAD dispute resolutions.
    93. The RFA requires an agency to describe any significant, 
specifically small business, alternatives that it has considered in 
reaching its proposed approach, which may include the following four 
alternatives (among others): ``(1) the establishment of differing 
compliance or reporting requirements or timetables that take into 
account the resources available to small entities; (2) the 
clarification, consolidation, or simplification of compliance and 
reporting requirements under the rule for such small entities; (3) the 
use of performance rather than design standards; and (4) an exemption 
from coverage of the rule, or any part thereof, for such small 
entities.''
    94. The NPRM seeks comment on several policies that would bring the 
program closer to its core purpose and promote the availability of 
modern services for low-income families, and also reduce waste, fraud, 
and abuse in the program. As explained below, several of the policies 
would increase the economic burdens on small entities, and certain 
changes would lessen the economic impact on small entities. In those 
instances in which a policy would increase burdens on small entities, 
the Commission has determined that the benefits from such changes 
outweigh the increased burdens on small entities because those proposed 
changes would facilitate the Lifeline program's goal of supporting 
affordable, high-speed internet access for low-income Americans or 
would minimize waste, fraud, and abuse in the program. The Commission 
invites comments on ways in which the Commission can achieve its goals, 
but at the same time further reduce the burdens on small entities. The 
Commission expects to consider the economic impact on small entities, 
as identified in comments filed in response to the NPRM and this IRFA, 
in reaching its final conclusions and taking action in this proceeding.
    95. Eliminating Lifeline Device Requirements. The Commission seeks 
comment on eliminating the Lifeline program's device requirements. This 
would decrease the burdens for small entities because they would no 
longer be required to meet criteria imposed by the rule, including the 
requirement that devices provided to consumers be Wi-Fi enabled and the 
requirement that mobile broadband providers offer devices that are 
``capable of being used as a hotspot.'' Eliminating these requirements 
should reduce compliance costs for small entities because they will no 
longer be required to include these capabilities.
    96. Focusing Lifeline Support to Encourage Investment in Broadband-
Capable Networks. The Commission seeks comment on several potential 
policies that would focus Lifeline support to encourage investment in 
broadband-capable networks. The Commission also seeks comment on 
TracFone's suggested alternatives to the proposed facilities 
requirement. The Commission's proposed policies would change the 
services eligible for Lifeline support and would also change the type 
of providers that can receive Lifeline support. In particular, these 
policies would eliminate Lifeline support for ETCs that do not offer 
facilities-based broadband service over their own networks, or would 
continue the phase down of Lifeline support for voice-only service in 
urban areas. However, these policies would facilitate the Lifeline 
program goals of providing low-income consumers access to quality, 
affordable broadband services, in particular by encouraging service 
providers to invest in broadband networks in unserved and underserved 
areas. The Commission also notes that these policies may benefit small 
entities that operate facilities-based broadband-capable networks, 
whose services would be more affordable for low-income consumers 
through the application of the Lifeline discount. The benefits of these 
policies to Lifeline customers outweighs any impact of these changes on 
small entities. TracFone's suggested alternatives to the proposed 
facilities requirement would impact Lifeline service provider in-person 
hand-set distribution, operations practices concerning Lifeline 
solicitations and eligibility verifications, and application processes. 
These alternatives would increase service providers' administrative 
burdens. However, they would also minimize waste, fraud, and abuse in 
the program, which in turn benefits consumers and service providers 
that pay into the Universal Service Fund. Therefore, the benefits of 
these changes would outweigh and impact of these changes on small 
entities.
    97. Focusing Lifeline Support on Modern Communications Services. 
The Commission seeks comment on adopting a maximum discount level for 
Lifeline subscribers, and potential changes to encourage Lifeline 
consumers to adopt broadband services. These changes could increase 
costs associated with ETCs' administrative processes, including 
billing. However, the Commission expects these burdens to be manageable 
for ETCs. Further, these proposed changes would help minimize waste, 
fraud, and abuse in the Lifeline program, and would also increase the 
effectiveness of Lifeline support by targeting support to Lifeline 
consumers who have not yet adopted broadband services. Therefore, the 
benefits of these proposed changes outweigh the impact of the proposed 
changes on small entities.
    98. Reforms to Increase Efficient Administration of the Lifeline 
Program. The Commission seeks comment on a number of reforms to 
increase the efficient administration of the program, including 
requiring ETCs to supply documentation to USAC for National Lifeline 
Accountability Database (NLAD) dispute resolutions, ETCs to collect 
documentation for subscribers

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seeking to self-certify to continued eligibility, and limiting the use 
of independent economic household forms to only NLAD dispute 
resolutions. These reforms could increase costs associated with ETCs' 
administrative processes. However, the Commission expects these burdens 
to be manageable for ETCs. In addition, in states where the National 
Verifier will be implemented, these burdens would be temporary because 
the National Verifier would take over eligibility verification and 
recertification in those states. Further, these proposed changes would 
help minimize waste, fraud, and abuse in the Lifeline program, which in 
turn would benefit consumers and providers that pay into the Universal 
Service Fund. Therefore, the benefits of these proposed changes 
outweigh the impact of these proposed changes on small entities.
    99. Compliance burdens. Implementing any of our proposed rules 
(e.g., requiring ETCs to supply documentation to USAC for National 
Lifeline Accountability Database (NLAD) dispute resolutions, ETCs to 
collect documentation for subscribers seeking to self-certify to 
continued eligibility, and limiting the use of independent economic 
household forms to only NLAD dispute resolutions) would impose some 
burden on small entities by requiring them to make such certifications 
and entries on FCC forms, and requiring them to become familiar with 
the new rules to comply with them. For many of proposed the rules, 
there is a minimal burden. Thus, these new requirements should not 
require small businesses to seek outside assistance to comply with the 
Commission's rule but rather are more routine in nature as part of 
normal business processes. The importance of bringing the Lifeline 
program closer to its core purpose and promoting the availability of 
modern services for low-income families, however, outweighs the minimal 
burden requiring small entities to comply with the new rules would 
impose.
    100. The proceeding for this NPRM and NOI initiates shall be 
treated as a ``permit-but-disclose'' proceeding in accordance with the 
Commission's ex parte rules. Persons making ex parte presentations must 
file a copy of any written presentation or a memorandum summarizing any 
oral presentation within two business days after the presentation 
(unless a different deadline applicable to the Sunshine period 
applies). Persons making oral ex parte presentations are reminded that 
memoranda summarizing the presentation must (1) list all persons 
attending or otherwise participating in the meeting at which the ex 
parte presentation was made, and (2) summarize all data presented and 
arguments made during the presentation. If the presentation consisted 
in whole or in part of the presentation of data or arguments already 
reflected in the presenter's written comments, memoranda, or other 
filings in the proceeding, the presenter may provide citations to such 
data or arguments in his or her prior comments, memoranda, or other 
filings (specifying the relevant page and/or paragraph numbers where 
such data or arguments can be found) in lieu of summarizing them in the 
memorandum. Documents shown or given to Commission staff during ex 
parte meetings are deemed to be written ex parte presentations and must 
be filed consistent with rule 1.1206(b). In proceedings governed by 
rule 1.49(f) or for which the Commission has made available a method of 
electronic filing, written ex parte presentations and memoranda 
summarizing oral ex parte presentations, and all attachments thereto, 
must be filed through the electronic comment filing system available 
for that proceeding, and must be filed in their native format (e.g., 
.doc, .xml, .ppt, searchable .pdf). Participants in this proceeding 
should familiarize themselves with the Commission's ex parte rules.

D. Comment Filing Procedures

    Pursuant to Sec. Sec.  1.415 and 1.419 of the Commission's rules, 
47 CFR 1.415 and 1.419, interested parties may file comments and reply 
comments on or before the dates indicated on the first page of this 
document. Comments may be filed using the Commission's Electronic 
Comment Filing System (ECFS). See Electronic Filing of Documents in 
Rulemaking Proceedings, 63 FR 24121 (1998).
    <bullet> Electronic Filers: Comments may be filed electronically 
using the internet by accessing the ECFS: http://fjallfoss.fcc.gov/ecfs2/.
    <bullet> Paper Filers: Parties who choose to file by paper must 
file an original and one copy of each filing. If more than one docket 
or rulemaking number appears in the caption of this proceeding, filers 
must submit two additional copies for each additional docket or 
rulemaking number. Filings can be sent by hand or messenger delivery, 
by commercial overnight courier, or by first-class or overnight U.S. 
Postal Service mail. All filings must be addressed to the Commission's 
Secretary, Office of the Secretary, Federal Communications Commission.
    [cir] All hand-delivered or messenger-delivered paper filings for 
the Commission's Secretary must be delivered to FCC Headquarters at 445 
12th St. SW, Room TW-A325, Washington, DC 20554. The filing hours are 
8:00 a.m. to 7:00 p.m. All hand deliveries must be held together with 
rubber bands or fasteners. Any envelopes and boxes must be disposed of 
before entering the building.
    [cir] Commercial overnight mail (other than U.S. Postal Service 
Express Mail and Priority Mail) must be sent to 9050 Junction Drive, 
Annapolis Junction, MD 20701.
    [cir] U.S. Postal Service first-class, Express, and Priority mail 
must be addressed to 445 12th Street SW, Washington, DC 20554.
    Availability of Documents. Comments, reply comments, and ex parte 
submissions will be publicly available online via ECFS. These documents 
will also be available for public inspection during regular business 
hours in the FCC Reference Information Center, which is located in Room 
CYA257 at FCC Headquarters, 445 12th Street SW, Washington, DC 20554. 
The Reference Information Center is open to the public Monday through 
Thursday from 8:00 a.m. to 4:30 p.m. and Friday from 8:00 a.m. to 11:30 
a.m.
    People with Disabilities. To request materials in accessible 
formats for people with disabilities (braille, large print, electronic 
files, audio format), send an email to <a href="/cdn-cgi/l/email-protection" class="__cf_email__" data-cfemail="2b4d48481e1b1f6b4d4848054c445d">[email protected]</a> or call the 
Consumer & Governmental Affairs Bureau at 202-418-0530 (voice), 202-
418-0432 (tty).

V. Ordering Clauses

    121. Accordingly, it is ordered, that pursuant to the authority 
contained in sections 1 through 4, 201 through 205, 254, and 403 of the 
Communications Act of 1934, as amended, 47 U.S.C. 151-154, 201-205, 
254, and 403, and section 1.2 of the Commission's rules, 47 CFR 1.2, 
this Notice of Proposed Rulemaking and Notice of Inquiry is adopted.

List of Subjects in 47 CFR Part 54

    Communications common carriers, Health facilities, Infants and 
children, internet, Libraries, Reporting and recordkeeping 
requirements, Schools, Telecommunications, Telephone.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.

Proposed Rules

    For the reasons discussed in the preamble, the Federal 
Communications

[[Page 2119]]

Commission proposes to amend 47 CFR part 54 as follows:

PART 54--UNIVERSAL SERVICE

0
1. The authority citation for part 54 continues to read as follows:

    Authority: 47 U.S.C. 151, 154(i), 155, 201, 205, 214, 219, 220, 
254, 303(r), 403, and 1302 unless otherwise noted.


Sec.  54.201   [Amended]

0
2. Amend Sec.  54.201 by removing paragraph (j).


Sec.  54.202   [Amended]

0
3. Amend Sec.  54.202 by removing paragraphs (d) and (e).


Sec.  54.205   [Amended]

0
4. Amend Sec.  54.205 by removing paragraph (c).
0
5. Amend Sec.  54.404 by revising paragraph (b)(3) to read as follows:


Sec.  54.404   The National Lifeline Accountability Database.

* * * * *
    (b) * * *
    (3) If the Database indicates that another individual at the 
prospective subscriber's residential address is currently receiving a 
Lifeline service, the eligible telecommunications carrier must not seek 
and will not receive Lifeline reimbursement for providing service to 
that prospective subscriber, unless the prospective subscriber has 
certified, pursuant to Sec.  54.410(d) that to the best of his or her 
knowledge, no one in his or her household is already receiving a 
Lifeline service. This certification may only be obtained after the 
eligible telecommunications carrier receives a notification from the 
Database or state administrator that another Lifeline subscriber 
resides at the same address as the prospective subscriber.
* * * * *


Sec.  54.408   [Amended]

0
6. Amend Sec.  54.408 by removing paragraph (f).
0
7. Amend Sec.  54.410 by revising paragraphs (f)(2)(iii) and 
(f)(3)(iii) and removing and reserving paragraph (g) to read as 
follows:


Sec.  54.410   Subscriber eligibility determination and certification.

* * * * *
    (f) * * *
    (2) * * *
    (iii) If the subscriber's program-based or income-based eligibility 
for Lifeline cannot be determined by accessing one or more state 
databases containing information regarding enrollment in qualifying 
assistance programs, then the eligible telecommunications carrier may 
obtain a signed certification from the subscriber on a form that meets 
the certification requirements in paragraph (d) of this section. The 
subscriber must present documentation meeting the requirements in 
paragraph (b)(1)(i)(B) or (c)(1)(i)(B) of this section to establish 
continued eligibility. If a Federal eligibility recertification form is 
available, entities enrolling subscribers must use such form to re-
certify a qualifying low-income consumer.
* * * * *
    (3) * * *
    (iii) If the subscriber's eligibility for Lifeline cannot be 
determined by accessing one or more databases containing information 
regarding enrollment in qualifying assistance programs, then the 
National Verifier, state Lifeline administrator, or state agency may 
obtain a signed certification from the subscriber on a form that meets 
the certification requirements in paragraph (d) of this section. The 
subscriber must present documentation meeting the requirements in 
paragraph (b)(1)(i)(B) or (c)(1)(i)(B) of this section to establish 
continued eligibility. If a Federal eligibility recertification form is 
available, entities enrolling subscribers must use such form to 
recertify a qualifying low-income consumer.
* * * * *


Sec.  54.418   [Removed and Reserved]

0
8. Remove and reserve Sec.  54.418.

[FR Doc. 2018-00153 Filed 1-12-18; 8:45 am]
BILLING CODE 6712-01-P


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