A Lifeline for Lifeline: Evaluating the Impacts of the 2012 Reforms

This paper is an evaluation of the operation of the Lifeline Program, since the Federal Communications Commission initiated a comprehensive reform the program through the 2012 Lifeline Reform Order. Specifically, it examines any changes in state-by-state rates of Program utilization by the targeted demographic, investigates socio-economic, demographic and policy specific variables that might explain the observed patterns. This analysis will contribute to the ongoing second round of reforms, as the FCC seeks to modernize the program and reorient it towards universal broadband access. The Lifeline program, in existence since 1985, has been afflicted by low enrollment rates among the targeted low-income households, as well as widespread allegations of waste, fraud and abuse. The FCC’s 2012 reforms were intended to target these problems and sought to increase protections against waste, fraud, and abuse, control support expenditures from the Universal Service Fund, improve program administration and accountability, increase enrollment in the program, and initiate a transition to broadband support. It tightened eligibility rules to ensure that each household availed of only one supported service, and later that year, created a National Lifeline Accountability Database to weed out ineligible subscribers from the Program. As a result, the Wireline Competition Bureau reported that 29 percent of previously enrolled subscribers had been de-enrolled from the program, with $213 million in USF savings for 2012 alone. While reforms to deter waste, fraud and abuse are broadly beneficial, and contribute to the long-term financial sustainability and political viability of the program, it also has an impact on another, equally worthy objective of the program — namely, the goal of increasing enrollment of eligible subscribers in the program. Whereas enrollments in the program have declined as a result of the de-enrollment of ineligible subscribers, it is relevant to investigate whether state-by-state data indicate any patterns in enrollment rate changes. This is all the more important, since the high unemployment and recessionary conditions of the past several years has potentially increased the pool of eligible low-income households in many states. Perhaps, as Colley (2014) has argued, efforts to save a valuable program are hurting the very people it was intended to help. A review of the recent research literature since 2012 shows few studies of the program. Colley (2014) cited above chronicled efforts to reform the program, Ellig (2013) suggested further remedies, Ackerberg, DeRemer, Riordan, Rosston and Wimmer (2014) estimated the impact of Lifeline subsidies on penetration rates, and Holt and Galligan (2013) evaluated the program in light of the objectives of the 1996 Telecommunications Act. Others such as Hudson (2013), Rhinesmith (2016) and Strover (2014) have discussed the Lifeline program in articles addressing wider digital divide debates. No study since 2012 has attempted to examine state-by-state Lifeline enrollment rates, and the changes in those rates over time. To address this question, we use data from the Federal-State Joint Board Monitoring Reports (2010-2015), a six-year period of data punctuated by the 2012 reforms. This will be supplemented with demographic and socio-economic data from the U.S. Census Bureau to construct a state-level panel dataset. State level efforts to promote Lifeline program enrollments will be included as policy dummies, alternative explanatory variables. Regression analysis will be performed on this dataset to identify significant predictors of enrollment rates. We expect that our findings will help identify areas of concern relative to enrollment, and suggest remedies that might improve enrollment while preserving the cost-effectiveness and integrity of the program. These remedies will be useful inputs to the policy process as the FCC moves to re-orient the Lifeline program towards universal broadband. Ackerberg, A. A., DeRemer, D. R., Riordan, M. H., Rosston, G. L., & Wimmer, B. S. (2014). Estimating the impact of low-income universal service programs. International Journal of Industrial Organization, 37, 84-98. Colley, C. (2014) Homeless, not phoneless: An overview of the Lifeline program, Georgia’s attempt to reduce fraud by penalizing the poor, and proposals to save a valuable program. Loyola Journal of Public Interest Law, 16, 35- Ellig, J. (2013). Reforming the FCC’s low-income phone subsidies. Washington, DC: Mercatus Center, George Mason University. Available at http://mercatus.org/sites/default/files/Ellig_FCC-phone-subsidy_MOP_101813.pdf Federal State Joint Board Monitoring Reports (2010-2015). Available at https://www.fcc.gov/general/federal-state-joint-board-monitoring-reports (2011-15) and https://www.fcc.gov/general/monitoring-reports-2010-and-earlier (prior to 2011) Holt, L., & Galligan, M. (2013). Mapping the field: Retrospective of the federal universal service programs. Telecommunications Policy, 37(9), 773-793. Hudson, H. E. (2013). Beyond Infrastructure: Broadband for Development in Remote and Indigenous Regions. Journal of Rural and Community Development, 8(2), 44-61. Rhinesmith, C. (2016). Digital inclusion and meaningful broadband adoption initiatives. Washington, DC: Benton Foundation. Available at https://www.benton.org/sites/default/files/broadbandinclusion.pdf Strover, S. (2014). The US digital divide: A call for a new philosophy. Critical Studies in Media Communications, 31(2), 114-122.