Telecommunications: FCC Should Evaluate the Efficiency and Effectiveness of the Lifeline Program
Published: 2015-03-24T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Through FCC's Lifeline program, companies provide discounts to eligible low-income households for telephone service. Lifeline supports these companies through the Universal Service Fund (USF). Companies generally pass their USF contribution obligation on to their customers, typically in the form of a line item on their telephone bills. In 2012, FCC adopted reforms to address problems with duplicate and ineligible participants and to explore adding broadband through a pilot program.
GAO was asked to review FCC's reforms. This report examines (1) the status of reform efforts and the extent to which FCC has evaluated program effectiveness, (2) the extent to which households participate and challenges they face in accessing and retaining benefits, and (3) FCC's plans to evaluate the broadband pilot program.
GAO reviewed FCC orders and other relevant documentation; analyzed 2008–2012 Census Bureau data; and interviewed FCC officials, officials at four pilot projects selected based on features such as technology, and officials from 12 Lifeline providers and four states selected based on factors such as disbursements and participation.
section_title: What GAO Found
paragraphs: The Federal Communications Commission (FCC) has made progress implementing reforms to the Lifeline Program (Lifeline), which reduces the cost of telephone service for eligible low-income households. In 2012, FCC adopted a Reform Order with 11 key reforms that aimed to increase accountability and strengthen internal controls, among other things. FCC has implemented seven of the reforms and partially implemented four. In some cases, FCC needs to make a decision, and in other cases, additional time is needed to fully implement the reform. However, FCC has not evaluated Lifeline's effectiveness in achieving its goals—to ensure the availability of voice service for low-income Americans and minimize the burden on consumers and businesses that fund the program. FCC attributes improvements in the level of low-income households' subscribing to telephone service over the past 30 years to Lifeline, but other factors, such as lower prices, may play a role. FCC officials stated that Lifeline's structure makes evaluation difficult, but referred GAO to academic studies that suggest that many low-income households would subscribe to telephone service without Lifeline. GAO has found that program evaluation can help agencies understand whether a program is addressing an intended problem. Without a program evaluation, FCC does not know whether Lifeline is effectively ensuring the availability of telephone service for low-income households while minimizing program costs.
In 2014, over 12 million households participated in Lifeline, up from about 7 million in 2008. At its peak enrollment in 2012, Lifeline served about 18 million households. The introduction of prepaid wireless service contributed to this growth. After the Reform Order, program disbursements declined from $2.2 billion in 2012 to $1.7 billion in 2014, due in part to a reduction in the number of ineligible households receiving benefits. Based on interviews with stakeholders and providers, GAO identified challenges households may face in accessing and retaining benefits, including lack of awareness of the program and difficulty complying with new requirements, such as providing documentation of eligibility. Companies providing Lifeline service have taken steps, such as greater outreach and in-person enrollment, to mitigate these challenges.
The usefulness of information FCC gathered through its broadband pilot program may be limited due to the lack of an evaluation plan and other challenges. The pilot program included 14 projects to test an array of options and provide data on how Lifeline could be structured to promote broadband. According to FCC officials, the 14 projects enrolled about one-tenth of the 74,000 customers anticipated before ending subsidized service in October 2014. Although GAO previously recommended in 2010 that FCC develop a needs assessment and implementation and evaluation plans for the pilot, FCC did not do so and now faces difficulties in evaluating the program without established benchmarks. Although enrollment was lower than anticipated, FCC officials believe information on the number of eligible consumers offered service can provide relevant information regarding the options' effects on broadband adoption. However, FCC did not survey these consumers and does not know why eligible households did not enroll. The pilot projects are substantially complete, and FCC officials noted that the pilot program is one of many factors FCC will consider when deciding whether and how to incorporate broadband into Lifeline.
section_title: What GAO Recommends
paragraphs: FCC should conduct a program evaluation to determine the extent to which the Lifeline program is efficiently and effectively reaching its performance goals. FCC agreed that it should evaluate the extent to which the program is efficiently and effectively reaching its performance goals and said that FCC staff will address GAO's recommendation.

section_title: Letter
paragraphs: For many decades, federal policy has called for making affordable  residential telephone service available to the greatest number of  Americans—a policy known as “universal service.” The Federal  Communications Commission (FCC) carries out this policy through four  universal service programs, including the Lifeline program (Lifeline).program was created in the mid-1980s to promote telephone  subscribership among low-income households. As with all universal  service programs, Lifeline is funded through mandatory fees that are  usually passed along to consumers through a charge applied to their  monthly telephone bills. In 2014, FCC’s universal service disbursements  totaled $7.9 billion, and the Lifeline program’s disbursements totaled  approximately $1.7 billion.
Although the Lifeline program traditionally centered on wireline residential  telephone service, in 2005 and 2008, FCC acted to pave the way for  eligible households to receive prepaid wireless service from non-facilities- based wireless carriers. Subsequent to these actions, the Lifeline program experienced rapid growth in participation and disbursements.  For example, in 2009, disbursements increased by 25 percent. In  October 2010, we reported that the Lifeline program lacked some internal  control features. For example, we found that the program had limited  abilities to detect and prevent ineligible and duplicate subscribers from  enrolling in the program. We recommended that FCC take actions to  improve management and oversight, including conducting a robust risk  assessment and implementing a systemic process for considering the  results of ETC audits; FCC agreed with our recommendations. To  comprehensively reform and modernize the Lifeline program, among  other things, FCC adopted a Reform Order in January 2012 that sought to  improve the program’s internal controls and that included a pilot program  to evaluate inclusion of broadband into the program.
You asked us to examine the progress FCC has made toward  modernizing the Lifeline program. This report discusses (1) the status of  Lifeline reform efforts and the extent to which FCC has evaluated the  effectiveness of the program; (2) how the Lifeline program verifies  household eligibility and addresses associated privacy and data security;  (3) the extent to which households participate in Lifeline and the  challenges, if any, they face in accessing and retaining program benefits;  and (4) how FCC plans to evaluate the broadband pilot program and the  extent to which the pilot program will enable FCC to decide whether and  how to include broadband in the Lifeline program.
To address all of these objectives, we reviewed documents and  interviewed representatives from FCC, the Universal Service  Administrative Company (USAC),industry associations and consumer advocacy organizations. To answer   and stakeholders from state and  our first three objectives, we conducted four state case studies (Alabama,  Arizona, New York, and Wisconsin); we selected the states to capture a  range of Lifeline disbursement amounts and participation rates, and also  considered other factors. In each state, we interviewed officials from the  public utility commission and the state consumer advocate, where  available, and we collected documentation and interviewed  representatives from three prepaid wireless eligible telecommunications  carriers (ETC), which are companies eligible to receive Lifeline support.  We selected these ETCs based on their Lifeline market share in the state  and their nationwide revenues. In addition to these nine wireless ETCs,we also interviewed representatives from the three largest nationwide  wireline ETCs. Although using these criteria allowed us to obtain  information from a variety of states and ETCs, the findings from our case  studies cannot be generalized to all states and ETCs because case  studies were selected as part of a nonprobability sample. To assess the  extent to which FCC has evaluated the effectiveness of the Lifeline  program, we compared information collected from FCC to criteria on  program evaluation identified from our previous work. In addition, we  reviewed two academic studies that examined the effect of the Lifeline  program; we identified the studies through an interview with FCC. To  assess the methodological quality of the studies, at least two GAO  analysts and an economist reviewed the studies, and we discussed the  methodologies with four economists involved with the studies; the studies  met our criteria for methodological quality. To analyze how the Lifeline  program verifies household eligibility and addresses privacy and data  security, we reviewed documentation and interviewed officials from FCC,  USAC, and a state association.
To describe the extent to which eligible households participate in Lifeline,  we analyzed USAC data on quarterly Lifeline participation counts from  2008 through fourth quarter 2014 and yearly disbursements from 2008  through 2014; we selected 2008 since it was the first year non-facilities- based wireless carriers offered Lifeline service. We also analyzed data  from the Census Bureau’s Survey of Income and Program Participation  (SIPP) and the United States Department of Agriculture’s (USDA)  Supplemental Nutrition Assistance Program (SNAP) to estimate trends in  the number of households that would satisfy the federal criteria to  participate in Lifeline from 2008 through 2012. To assess the reliability of  these data, we reviewed relevant USAC, SIPP, and SNAP documentation  and interviewed USAC officials; we determined that the data were  sufficiently reliable for our purposes of reporting trends. To identify the  challenges, if any, eligible households face in accessing and retaining  program benefits, we reviewed FCC, USAC, and ETC policies,  processes, and practices that could influence participation in Lifeline. To  determine how FCC plans to evaluate the broadband pilot program, we  interviewed FCC officials and representatives from 4 case study pilot  projects that we selected from a universe of 14 projects to include both  wireline and wireless service, diverse locations (urban and rural), and  based on other factors. We also reviewed documentation from USAC on  each case study project and interviewed consumer advocates and  representatives from broadband adoption programs. Appendix I describes  our objectives, scope, and methodology in greater detail.
We conducted this performance audit from May 2014 to March 2015 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: The idea that communication services should be available “so far as  possible, to all the people of the United States” has been a goal of  telecommunications policy since enactment of the Communications Act of  1934. To this end, FCC has established four universal service  programs:
High-Cost Program—Provides support to telecommunications carriers  serving high-cost, rural, or insular areas.
Schools and Libraries Program—Provides support to eligible schools  and libraries in procuring telecommunications, telecommunications  services, internet access services, internal connections, and basic  maintenance of internal connections.
Rural Health Care Program—Provides support to eligible health care  providers through discounts for broadband and telecommunications  services.
Lifeline Program—Provides support to telecommunications carriers  that in turn offer discounts on telecommunications services to eligible  low-income households.
The Telecommunications Act of 1996 requires every telecommunications  carrier providing interstate telecommunications services to contribute to  federal universal service, unless exempted by FCC. The commission also  has broad permissive authority to require other providers of  telecommunications to contribute if the public interest so requires.  Contributions are to be equitable and nondiscriminatory and are to be  deposited into the Universal Service Fund (USF). Each quarter, FCC  calculates a “contribution factor” based on the projected demands of the  universal service programs and the projected contribution base. USAC  then bills contributors based on this factor. In the fourth quarter of 2014,  the contribution factor was 16.1 percent, down from a historic high of 17.9  percent in the first quarter of 2012. Carriers generally pass their USF  contribution obligation on to their customers, typically in the form of a line  item on their monthly telephone bill.
FCC, USAC, states, and ETCs all have roles and responsibilities in the  Lifeline program. At the federal level, FCC is responsible for setting  policy, making and interpreting rules, providing oversight, and, in certain  states, designating carriers as ETCs. Meanwhile, USAC, a not-for-profit  corporation designated by FCC as the administrator of its universal  service programs, manages the day-to-day operations of the Lifeline  program, including collecting USF contributions, disbursing payments,  auditing USF recipients, and reporting to FCC. At the state level, public  utility commissions can increase the scope of Lifeline in their states by  contributing additional financial support to Lifeline recipients, adding to  the list of programs that households use to qualify for Lifeline, or both. For  example, the Public Service Commission of Wisconsin contributes state  funds to Lifeline recipients and adds programs such as Wisconsin Works,  which provides employment preparation and other services to eligible  low-income families, to the list of programs that households use to qualify  for Lifeline. States can also play a role in Lifeline enrollment either by  accepting applicants directly or providing ETCs access to information on  enrollment in programs that households use to qualify for Lifeline for the  purposes of verifying eligibility, since this information is generally housed  at the state level. To receive Lifeline support, carriers must be designated  as ETCs by state public utility commissions or FCC. State public utility  commissions have the primary responsibility for designating carriers as  ETCs; however, in a situation where the telecommunications carrier is not  subject to state jurisdiction, FCC may designate the carrier as an ETC.  ETCs are generally responsible for advertising the availability of the  program, submitting forms for reimbursement, and verifying applicants’  eligibility for Lifeline.
Traditionally, Lifeline discounts only applied to wireline service and  eligibility standards varied significantly by state. In addition to Lifeline,  FCC’s efforts to promote phone service among the low-income population  included Link Up, which discounted the connection charges associated  with telephone service installation. In addition, carriers could receive  support to offset certain costs for providing consumers with toll limitation  service (TLS); TLS support subsidized carriers’ costs for blocking or  restricting long-distance service for low-income consumers, thus allowing  these consumers to specify a limit on the amount of toll charges that  could be incurred per billing cycle. In the past, certain states, called  “federal default states,” used FCC’s eligibility criteria, which included  household participation in one of several public assistance programs or  income at or below 135 percent of the federal poverty guidelines. FCC  also authorized states with their own Lifeline programs to develop their  own eligibility criteria and eligibility thresholds.which households could become eligible varied significantly by state.  However, in 2012, FCC reported that most consumers qualified for  Lifeline through Medicaid, the Supplemental Nutrition Assistance Program  (SNAP), and Supplemental Security Income.
As a result, the ways in  In 2005, FCC issued an order that allowed a non-facilities-based wireless  service provider to apply as an ETC for purposes of offering Lifeline, if it  met certain conditions. In particular, FCC granted TracFone forbearance  from the requirement that a carrier designated as an ETC for the purpose  of federal USF support provide services, at least in part, over its own   But, FCC required TracFone to meet several conditions, such  facilities. as obtaining self-certifications from subscribers that they will comply with  program requirements and establishing safeguards to prevent customers   While FCC found that TracFone’s  from receiving multiple benefits.Lifeline offering would provide a variety of benefits to Lifeline-eligible  consumers, including increased consumer choice, program participation,  and mobility, FCC did not quantify or estimate potential increases in  participation in the Lifeline program arising from its decision. In 2008,  FCC approved TracFone as an ETC for the limited purpose of providing  Lifeline service.facilities-based wireless carriers to offer Lifeline service, and the first  Lifeline offerings by these carriers began in 2008.
FCC’s TracFone orders paved the way for other non- Following FCC’s actions on non-facilities-based wireless carriers offering  prepaid service, participation in Lifeline as well as disbursements began  to increase significantly. We previously reported that program  participation and disbursements were stable from 2005 to 2008.  Specifically, in 2005 the program had 6.9 million participants and  disbursed $802 million, compared to 7.1 million participants and $823  million disbursed in 2008. However, in 2009 Lifeline had 8.6 million   In 2010, we found  participants and disbursed approximately $1 billion. that the Lifeline program lacked some features of internal controls, such  as the ability to detect duplicate benefits across ETCs. In 2012, FCC  noted that up to an estimated 15 percent of Lifeline subscribers could be  ineligible for program benefits. In addition, in April 2014, the Department  of Justice announced the indictment of three men for defrauding FCC of  approximately $32 million by submitting false Lifeline claims between  September 2009 and March 2011.oversight, in 2010, we recommended that FCC conduct a robust risk  assessment and implement a systemic process for considering the results  of ETC audits, among other things. FCC has taken some actions to  address these recommendations, as noted below.
In particular, FCC adopted the Lifeline Reform Order (the Order) in 2012  to strengthen internal controls, improve accountability, and explore the  inclusion of broadband in the program through a pilot program. Table 1  describes the key reforms contained in the Order. Among other things,  the Order required all states to use, at a minimum, the income and  program eligibility criteria previously used by federal default states. To  reduce the number of ineligible consumers in the program, the Order  adopted measures to check consumers’ initial and ongoing eligibility for  Lifeline. Further, in 2010, FCC began exploring the idea of modifying  Lifeline to support broadband service (high-speed internet access) as part  of FCC’s duty to periodically review its universal service programs in light  of advances in telecommunications and information technologies and  services. To this end, the Order included a broadband pilot program to  gather data on whether and how broadband could be incorporated into  Lifeline.
section_title: FCC Has Made Progress Implementing Lifeline Reforms, but It Has Not Evaluated the Program’s Effectiveness FCC Has Made Progress Implementing Lifeline Reforms, but Some Reform Efforts Remain Incomplete
paragraphs: Although FCC has made progress implementing the reforms contained in  the Order, four actions remain incomplete. FCC has eliminated Link-up  on non-Tribal lands and support for TLS, and it has implemented the one- per-household rule, uniform eligibility criteria, non-usage requirements,  payments based on actual claims, and the audit requirements. In addition,  the National Lifeline Accountability Database (NLAD) is operational in 46  states and the District of Columbia. However, FCC has not fully  implemented four additional reform efforts. In some cases, FCC needs to  make a decision, such as determining the permanent rate for Lifeline  reimbursement claims. In other cases, FCC needs additional time to fully  implement the reform, such as defining performance measures. We  provide more information on the status of the partially implemented  Lifeline reforms below.
Flat-rate reimbursement: Lifeline reimbursements to ETCs from the  USF are passed on to the subscriber in the form of a discount. To  simplify administration of the Lifeline program, FCC established a  uniform, interim flat rate of $9.25 per month for non-Tribal subscribers.  In a Further Notice of Proposed Rulemaking accompanying the Order,  FCC sought comment on the interim rate, but it has not issued a final  rule with a permanent reimbursement rate.
Initial eligibility verification and annual recertification procedures: To  reduce the number of ineligible consumers receiving program  benefits, the Order required that ETCs verify a Lifeline applicant’s  eligibility at enrollment and annually through recertification; these  requirements have gone into effect. In addition, to reduce the burden  on consumers and ETCs, the Order directed FCC’s Wireline  Competition Bureau and USAC to establish an automated means for  determining eligibility for the top three programs through which  households qualify for Lifeline as soon as possible and no later than  the end of 2013.  In a Further Notice of Proposed Rulemaking  accompanying the Order, FCC sought comment on how to best  achieve the automated means, such as through a state-specific or  national eligibility database.established in the Order or revised any timeframes for when or how  this automated means would be available. We provide more  information on eligibility verification below.
FCC has not met the timeframe
Broadband pilot program: FCC established the broadband pilot  program to gather data about how Lifeline could be used to support  broadband adoption. FCC announced the broadband pilot program in  December 2012, and it authorized approximately $13.8 million for 14  projects spanning 21 states and Puerto Rico. The pilot projects  completed offering subsidized service at the end of October 2014, but  data are still being collected from participants on how the service was  used and retained after the pilot finished. FCC has not announced  when or how it would share the results of the projects. We provide  more information on the broadband pilot program below.
Performance goals and measures: The Order established  performance goals for the Lifeline program to help FCC determine  whether Lifeline is being used for its intended purposes and is  accomplishing its objectives. These goals were: (1) to ensure the  availability of voice service for low-income Americans, (2) to ensure  the availability of broadband for low-income Americans, and (3) to  minimize the Universal Service Fund contribution burden on  consumers and businesses. FCC identified performance measures it  will use to evaluate progress toward these goals, but it has not yet  fully defined them. For example, the Order stated that the goal of  ensuring the availability of voice service will be measured by  comparing telephone penetration levels (the percentage of  households with telephone service) among low-income households to  households with the next highest level of income, but FCC officials  note that they are working on defining these measures using the  Census Bureau’s American Community Survey data, which was made  available in late 2014.
subsections: section_title: FCC Has Not Evaluated the Effectiveness of the Lifeline Program, Which Could Hinder Its Ability to Efficiently Achieve Program Goals
paragraphs: In the Order, FCC established outcome-based goals and noted that the  gap in penetration rates for telephone service between low-income and  higher-income households has narrowed. We previously concluded 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 the Congress. Once adopted, performance measures can  help FCC track progress toward reaching its goals. However,  performance measures alone will not fully explain the contribution of  Lifeline toward reaching the program goals, because performance  measurement does not assess what would have occurred in the absence  of the program. According to FCC, Lifeline has been instrumental in  narrowing the penetration gap between low-income and non-low income  households. In particular, FCC noted that since the inception of Lifeline,  the gap between telephone penetration rates for low-income and non-low  income households has narrowed from about 12 percent in 1984 to 4  percent in 2011. Although FCC attributes the penetration rate  improvement to Lifeline, several factors could play a role. For example,  changes to income levels and prices have increased the affordability of  telephone service, and technological improvements, such as mobility of  service, have increased the value of telephone service to households.
According to FCC officials, the commission has not evaluated the extent  to which Lifeline has contributed to the narrowing of the gap in  penetration rates and at what cost. As a result, FCC does not know the  extent to which the narrowing of the penetration rate is attributable to the  Lifeline program. FCC officials stated that the structure of the program  has made it difficult for the commission to determine causal connections  between the program and the penetration rate. In particular, FCC officials  noted that because Lifeline has existed since the 1980s, it is difficult to  compare results from the program to results in the absence of the  program. However, FCC officials noted that two academic studies have  assessed the program, including the impact of the Lifeline program on  household decisions to subscribe to telephone service.
Olga Ukhaneva, “Universal Service in a Wireless World” (2013). of the program’s performance goals; rather, it adopted availability of voice  service for low-income Americans, measured by the penetration rate.
section_title: Carriers Generally Review Documentation to Verify Household Eligibility, and FCC Officials Believe That Program Rules Limit Privacy and Security Concerns
subsections: section_title: Carriers Generally Verify Household Eligibility by Reviewing Consumers’ Documentation
paragraphs: Carriers must verify an applicant’s eligibility for Lifeline and generally do  so by reviewing documentation provided by consumers. To increase  consistency and reduce the number of ineligible participants in the  program, the Order required that ETCs verify consumer eligibility at  enrollment using one of three methods:  rely on confirmation of eligibility from a state agency or state Lifeline  administrator; query a state or federal database;review applicants’ qualifying documentation, such as a program  benefit card.
We found that ETCs generally review qualifying documentation. In  particular, we estimated approximately 8 states have a state agency or  state Lifeline administrator that verifies eligibility, approximately 17 states  have eligibility databases that ETCs can potentially use to verify eligibility,  and ETCs in the remaining states review consumer-provided  documentation. However, even in states with eligibility databases, ETCs  may review consumer-provided documentation, either because the  database does not cover all qualifying programs or because the ETC  does not participate in the database.officials in New York, only two ETCs currently use the state database,  despite over 50 ETCs providing Lifeline in the state.
For example, according to state  To reduce the burden on applicants and ETCs, the Order set a goal for  developing an automated means for verifying Lifeline eligibility; however,  as mentioned previously, FCC has not met the time frame defined in the  Order or established any revised time frames for when, how, or if this  automated means would be available. According to FCC officials, no  national database is currently available to check for Lifeline eligibility, as  nearly all qualifying program enrollment data are maintained at the state  level. The Order noted efforts among federal agencies to facilitate  eligibility determinations in various government programs. For example,  the federal Public Assistance Reporting Information System (PARIS) is  maintained by an intergovernmental board and permits states to check for  duplicative claims for several government programs across states,  including Medicaid. However, according to FCC officials, PARIS is not  designed for or updated regularly enough for the purpose of real-time  Lifeline eligibility checks. FCC officials also noted that PARIS officials  raised concerns about privacy and third party access. According to FCC  officials, there are many development challenges to creating a national  eligibility database, including the ability and willingness of other federal  agencies to share consumer information. FCC officials told us they  continue to investigate options for an automated means of eligibility  verification and promote the development of state databases.
An FCC Commissioner, along with some stakeholders with whom we  spoke, have questioned the appropriateness of ETCs, generally private  companies, being required to determine Lifeline eligibility, which requires  them to collect and analyze personal information about consumers that  they would not otherwise obtain. In a November 2014 speech, FCC  Commissioner Mignon Clyburn stated that ETCs should not be  responsible for determining Lifeline eligibility, noting that absolving ETCs  of this responsibility would improve program integrity and reduce privacy  concerns. This view is shared by representatives from both industry  associations, one consumer advocate, and 3 of the 12 ETCs we  interviewed. Commissioner Clyburn and these stakeholders suggest that  Lifeline should follow a similar arrangement as other low-income  assistance programs, such as SNAP or Medicaid, where the government  determines who is eligible for the benefit, while private companies, such  as grocery stores or health care providers, provide goods and services to  eligible beneficiaries. Meanwhile, in the Lifeline program, governmental  entities, such as states, FCC, and USAC, are not required to determine  an applicant’s initial eligibility, while ETCs are required to both  determine consumer eligibility and provide service to beneficiaries.  According to FCC officials, FCC has considered but has not reached a  decision on establishing a central administrator to determine consumer  eligibility for Lifeline.
The risk to consumer information security in the Lifeline program was  highlighted by a recent security breach and associated FCC enforcement  action. According to FCC, from September 2012 through April 2013, two  ETCs stored sensitive information collected from consumers to determine  Lifeline eligibility in a format readily accessible via the internet, exposing  up to 300,000 consumers’ information to public view and to identity theft  and fraud. This information included Social Security numbers, names,  addresses, and other sensitive information. In October 2014, FCC issued  a notice of apparent liability of $10 million. This proposed fine shows the  risks associated with ETCs improperly protecting sensitive information  they are required to collect to determine eligibility.
section_title: FCC Officials Said That Consumer Information Can Be Protected through Databases or Documentation
paragraphs: Each of the approaches ETCs can use to verify eligibility include  measures to protect consumer privacy; however, these measures vary on  where sensitive information is stored and who is responsible for  protecting it. Since ETCs, generally private companies, collect personal  information from consumers to meet Lifeline program requirements,  security measures are necessary to prevent that information from being  disclosed to unauthorized individuals or accessed for unauthorized  purposes. Such controls can include establishing firewalls and other  boundary protections to prevent unauthorized access to systems,  requiring users to authenticate themselves to ensure unauthorized  individuals do not access sensitive information, and setting usage  restrictions to ensure that even authorized individuals do not access  information inappropriately.associated with ETCs’ accessing a database and reviewing  documentation can be mitigated through implementation of appropriate  controls. However, the documentation review method places a much  greater burden on the ETCs to appropriately protect sensitive information  than the other two options, which put the burden on the states. For  example, in cases where eligibility is determined by a state agency or  where an ETC queries a state database, the state is responsible for  implementing security and privacy controls and ETCs do not directly  access sensitive consumer information.
subsections: section_title: FCC Promotes State Databases to Mitigate Privacy Concerns; However, Development Challenges Are a Potential Barrier
paragraphs: Although FCC promotes state databases to reduce the burden on ETCs  and applicants, ETCs and states face challenges to developing  databases, including implementing appropriate privacy protections.  According to FCC and representatives from 2 of the 12 ETCs we  interviewed, state agencies are often hesitant to grant ETCs direct access  to their databases because of concerns about protecting the privacy of  the personal information they contain. For example, representatives from  TracFone noted that states are often concerned about data privacy and  how to release information to ETCs while meeting privacy controls of the  applicable federal program that governs the data. For example, if a state  database grants an ETC access to Medicaid enrollment information, this  access must meet Medicaid federal privacy standards. In addition,  representatives from 3 of the 12 ETCs and two of the four state public  utility commissions we spoke to noted that negotiating with and  coordinating among agencies also presents a challenge to database  development. Coordination is important because enrollment information  for qualifying programs can be housed in numerous agencies within a  single state, requiring coordination among these agencies and the public  utility commission, which oversees the Lifeline program. Other challenges  noted by officials in one state we interviewed include waiting for  clarification from FCC on whether a national automated means of  verification will be developed, which, if developed, may eliminate the need  for state-level databases, and limited state resources for developing and  maintaining a database.
FCC has noted that concerns with data privacy can be overcome by  limiting ETC access to personally identifiable information. For example,  according to state officials in New York and Wisconsin, in those states,  ETCs input a minimal amount of identifying information into the state  database about an applicant—such as name and last four digits of a  Social Security number—and in response, the database returns a yes or  no response indicating whether a match exists with an eligible individual  enrolled in a qualifying program. This arrangement releases no additional  personally identifiable information to the ETC that may be contained in  the database, such as the specific program in which the applicant  participates. FCC officials note that they have encouraged state  databases through a June 13, 2014, joint letter with the United States  Department of Agriculture (USDA) to SNAP state agencies. In this letter,  FCC and USDA notified SNAP state agencies that they can release  limited information to ETCs for the purpose of determining eligibility,  should return only a yes or no response, and should have agreements in  place with ETCs that outline what SNAP information will be disclosed,  how the information will be used, and how ETCs shall safeguard such  information. These agreements must include information on how both  ETCs and the SNAP agencies will prevent unauthorized disclosure of  consumer information. FCC officials told us they do not establish privacy  and data security requirements for state databases, as the information is  subject to the requirements of the federal agencies that govern the  qualifying programs.
section_title: FCC Officials Believe Program Rules Prohibiting Document Retention Limit Security Concerns; However, ETCs Have Requested to Weaken These Policies
paragraphs: As mentioned earlier, ETCs generally determine applicants’ eligibility by  reviewing qualifying documentation, such as a program benefit card. This  transaction of an applicant’s producing and the ETC’s reviewing  documentation often occurs in person, as part of the enrollment process.  In particular, of the nine prepaid wireless ETCs we spoke to, six stated  that they enroll most of their customers in person, either at a store  location or mobile event, with several noting they enroll 90 percent or  more of their customers this way. These enrollments often involve  agents entering application information and capturing electronic copies of  eligibility documentation using a tablet computer. When asked about the  privacy and data security provisions for this process, representatives from  three ETCs told us this information is stored in a secure software  application rather than on the tablet itself and is transmitted to an off-site  back office for review, after which the electronic copy of the  documentation is deleted. However, as noted above, a recent security  breach and associated FCC enforcement action highlights the risk  involved when ETCs improperly handle sensitive information.
FCC rules prohibit ETCs from retaining copies of the documentation that  applicants provide to verify eligibility; however, many ETCs we spoke to  said they would like to retain this documentation indefinitely. Although  Lifeline rules require ETCs to keep accurate records on how each  consumer demonstrated his or her eligibility, FCC rules prohibit ETCs  from retaining any documentation provided by a consumer to  demonstrate eligibility after an eligibility determination has been made.  FCC officials say the requirement that prohibits ETCs from retaining  documentation provides privacy protection against unauthorized access  to or release of the information. According to FCC officials, FCC’s  Enforcement Bureau is charged with enforcing FCC and Lifeline privacy  rules, such as the recent notice of apparent liability against the two  carriers mentioned above. In addition, USAC officials said they review  ETCs’ document retention procedures as part of their audits of ETCs.  Representatives from 9 of the 12 ETCs we spoke to said that they comply  with program rules and destroy copies of customer documentation  regularly. Despite this, 7 of the 12 ETCs we spoke to support FCC  modifying its rules to allow ETCs to retain this documentation indefinitely.  Some of these ETCs state that they can use this documentation during  audits to demonstrate how they determined the applicant’s eligibility. In  addition, these ETCs argue that retaining documentation will better  enable the Lifeline program to detect waste, fraud, and abuse. For  example, TracFone noted that without a requirement to retain  documentation, ETCs have the ability and the economic incentive to claim  that they reviewed documentation without being required to retain  documentation that FCC and USAC can use to verify the claim. However,  because FCC relies on this rule to provide protection against  unauthorized access to or release of the information, dropping the rule  could also raise privacy and security risks.
section_title: In 2014, Over 12 Million Households Participated in Lifeline, and Some Households Faced Challenges in Accessing and Retaining Benefits
subsections: section_title: Lifeline Participation Was 18.1 Million Households in 2012 and Declined to 12.4 Million by 2014
paragraphs: Lifeline participation and disbursements increased rapidly from 2008  through mid-2012 and declined after FCC’s reform Order in 2012 (see fig.  2). From mid-2008 to mid-2012, Lifeline enrollment increased from 6.8  million households to 18.1 million households, a 166 percent increase.  In addition, annual disbursements increased from $820 million in 2008 to  $2.2 billion in 2012, a 167 percent increase. After FCC began  implementing the Order in mid-2012, Lifeline participation declined to 12.4  million households by the end of 2014, while disbursements declined to  approximately $1.7 billion in 2014.
We identified several factors that contributed to the Lifeline program’s  growth that began in 2008, including the following:
Prepaid wireless services: ETCs offering prepaid wireless service  attracted eligible consumers by offering greater mobility and lower  prices than traditional wireline ETCs. In 2010, we found that growth in  the program was primarily due to the introduction of prepaid wireless  as an eligible service. ETCs offering prepaid wireless typically  provide consumers with a free handset and 250 free monthly minutes,  rather than providing a discount on a monthly telephone bill like  traditional wireline ETCs. Since 2008, the Lifeline program shifted  from wireline ETCs, which received at least 82 percent of Lifeline  disbursements in 2008, to wireless ETCs, which received 85 percent  of disbursements in the third quarter of 2014.
Duplicate or ineligible enrollment: Duplicate enrollments and ineligible  subscribers may have contributed to the growth in the Lifeline  program. The transition to wireless removed the connection between  Lifeline service and a physical address, increasing the likelihood that  a household could receive more than one Lifeline-supported service.  As noted earlier, weak controls resulted in ineligible and duplicate  benefits. For example, USAC undertook an in-depth data validation  process to identify and remove duplicate subscribers, and reported  that it eliminated 2.2 million duplicate subscribers and yielded savings  of over $260 million from 2011 through 2013.
Increase in eligible households: The growth in Lifeline may also have  been partially due to an increase in the number of households eligible  for the benefit. Using Census data, we found the number of  households eligible for Lifeline grew from approximately 35 million in  2008 to 40 million in 2012, a 15 percent increase. In addition,  enrollment in SNAP, one of the primary programs through which  consumers become eligible for Lifeline, increased 64 percent from  2008 to 2012, according to USDA.
Lifeline enrollment and disbursements have declined since their peak in  2012 when FCC issued the Order. FCC’s reform efforts, such as initial  eligibility verification and recertification, resulted in declines in enrollment  and disbursements. For example, FCC reported that disbursements fell  by nearly $40 million in one month after the eligibility verification  requirements went into effect in June 2012, and projected that the 2012  recertification process could de-enroll up to 4 million subscribers and  save as much as $400 million in 2013. However, as noted earlier, some  FCC reforms are still in progress and therefore the full impact of the  reforms is not known. In addition, some Lifeline reforms may have  inadvertently reduced participation by eligible households as well as  ineligible households.
section_title: Some Eligible Households Face Challenges in Accessing and Retaining Lifeline Benefits, and Some Actions Have Been Taken to Mitigate These Challenges
paragraphs: Although some Lifeline-eligible households face challenges in accessing  and retaining benefits, ETCs, particularly prepaid wireless ETCs, have  taken actions to help mitigate these challenges (see table 2).
Some eligible households may face a variety of challenges enrolling in  Lifeline and retaining benefits over time. Some challenges stem from  eligible households’ unawareness of or difficulty in applying for the  program. Other challenges stem from FCC reforms, such as initial  eligibility verification and annual recertification, which may inadvertently  hinder participation by some eligible households while attempting to  prevent participation by ineligible households. We identified the following  challenges:
Knowledge about the program: Eligible households may be unaware  of the program. FCC requires ETCs to publicize the availability of  Lifeline in a manner reasonably designed to reach those likely to  qualify. In a 2010 recommended decision, the Federal-State Joint  Board on Universal Servicemay not reach some eligible households and that insufficient outreach  efforts by some ETCs may have contributed to low Lifeline  participation rates. The consumer advocacy organizations we  interviewed agreed that consumers’ lack of knowledge about Lifeline  remains a concern for the program.  observed that ETCs’ outreach efforts
Accessing and submitting applications: Eligible households may have  difficulty accessing or submitting Lifeline applications. For example,  representatives from two of the three wireline ETCs we interviewed  said applicants can access the application online and submit the  application by mail or fax. However, applicants may be challenged to  access or submit applications through such methods because they  may lack access to the Internet or fax machines. In addition, two  stakeholders we interviewed said that eligible consumers may  struggle to complete an application due to a lack of literacy or  language skills given the complexity of the form. For example,  representatives from one ETC noted that some applicants may not  understand statements such as “One Lifeline service is available per  household, and that, to the best of my knowledge, no other person in  my household is receiving a Lifeline service. For purposes of Lifeline,  a household is any individual or group of individuals who live together  at the same address and share income and expenses.”
Providing documentation of eligibility: Some households may be  unable to submit copies of their eligibility documentation such as a  SNAP benefit card with their applications. As mentioned earlier, ETCs  are now required to verify eligibility, which is often done by reviewing  documentation. Consumers submitting applications need to send  copies of documentation, but may be unable to do so due to a lack of  access to equipment such as scanners or photocopiers. According to  representatives from one ETC, this may result in consumers failing to  complete the application. In addition, some consumers may have  difficulty providing required documentation to prove eligibility, such as  tax returns or Social Security statement of benefits.
Recertification: FCC requires ETCs to annually recertify the eligibility  of all of their Lifeline customers and de-enroll those who do not reply  to recertification attempts, which stakeholders we interviewed said  may result in eligible households de-enrolled from the program. In  order to verify eligibility, ETCs often contact customers directly  through a variety of means, such as mail, telephone, and text  message. Customers must then reply to affirm their ongoing eligibility  for Lifeline. Representatives from all 12 ETCs we interviewed noted  that it is a challenge to get customers to respond. In the two  completed recertification rounds to date, 2012 and 2013, USAC  reports that many households were de-enrolled due to non- response. According to representatives from 3 of the 12 ETCs we  interviewed, eligible households may not respond because they have  moved and did not receive mailed notices or may not respond to  telephone calls from unknown callers. In addition, representatives  from ETCs, public utility commissions, and consumer advocates we  spoke to said that subscribers may have difficulty understanding the  recertification process or the language used on recertification forms.  For example, households responding to recertification must agree to  the same attestations included in the Lifeline application.
subsections: section_title: Some Actions Have Been Taken to Mitigate the Challenges Households Face
paragraphs: ETCs and some states have taken actions to mitigate the challenges  eligible households face in accessing and retaining Lifeline benefits.  ETCs, particularly prepaid wireless ETCs, have developed methods of  marketing to low-income consumers. In addition, some states have  developed eligibility databases that reduce the challenges associated with  submitting documentation and recertifying eligibility.
Outreach and in-person enrollment: Prepaid wireless ETCs conduct  outreach, including in-person outreach and enrollment, to overcome  challenges such as lack of customer knowledge about the program,  inability to submit applications, and recertification. FCC and USAC  officials report that states with more ETCs offering prepaid wireless  service tend to have higher Lifeline participation rates due to greater  outreach. Representatives from seven of the nine wireless ETCs we  spoke to reported that they use mobile in-person enrollment events  outside community locations such as thrift stores or food banks to  effectively target the eligible low-income population. Some wireless  ETCs noted that in-person enrollment agents can assist applicants by  translating the application’s legal language into layman terms,  explaining program requirements, or verifying eligibility. These agents  may verify eligibility by taking images of applicants’ eligibility  documentation with handheld tablet computers for review by ETC  employees. Representatives from all nine of the prepaid wireless  ETCs we interviewed also reported using a variety of channels to  contact and solicit responses from customers during recertification,  such as interactive voice response telephone systems. Some of these  wireless ETCs noted that increased outreach can overcome the  challenge of getting customers to respond to recertification.
Eligibility databases: Databases used by ETCs to verify household  eligibility could eliminate the need for applicants to provide eligibility  documentation and the need for ETCs to contact customers during  the recertification process. Some ETCs, public utility commissions,  and other stakeholders we spoke to said that databases could  increase participation by eligible households. For example,  representatives from one state public utility commission we spoke to  reported that ETCs that contacted customers during recertification  experienced a 30 to 40 percent drop in participation, while ETCs that  queried the state eligibility database experienced a 10 percent drop.  However, as discussed above, FCC has not created a national  database, most states lack databases, and ETCs may not use the  databases that states have created.
section_title: Usefulness of Broadband Pilot Program May Be Limited by FCC’s Lack of Evaluation Plan and Other Challenges
subsections: section_title: FCC Designed the Broadband Pilot Program to Test a Variety of Factors, but Did Not Conduct a Needs Assessment or Develop an Evaluation Plan
paragraphs: FCC’s broadband pilot program includes 14 pilot projects that test an  array of options and will generate information that FCC intends to use to  decide whether and how to incorporate broadband into Lifeline. According  to FCC, the projects are expected to provide high-quality data on how the  Lifeline program could be structured to promote broadband adoption by  low-income households. FCC noted the diversity of the 14 projects, which  differed by geography (e.g., urban, rural, Tribal); types of technologies  (e.g., fixed and mobile); and discount amounts. Projects were also  designed to test variables such as digital literacy training and equipment  discounts. FCC selected projects that were designed as field  experiments and offered randomized variation to consumers. For  example, one project we reviewed offered customers three different  discount levels and a choice of four different broadband speeds, thereby  testing 12 different program options. FCC officials said they aimed to test  and reveal “causal effects” of variables. FCC officials said this approach,  for example, would test how effective a $20 monthly subsidy was relative  to a $10 subsidy, which would help FCC evaluate the relative costs and  benefits of different subsidy amounts. However, FCC officials noted that  there was a lack of FCC or third party oversight of the program, meaning  that pilot projects themselves were largely responsible for administration  of the program.
We found that FCC did not conduct a needs assessment or develop  implementation and evaluation plans for the broadband pilot program, as  we had previously recommended. In October 2010, we recommended  that if FCC conducted a broadband pilot program, it should conduct a  needs assessment and develop implementation and evaluation plans,  which we noted are critical elements for the proper development of pilot  programs. We noted that a needs assessment could provide information  on the telecommunications needs of low-income households and the  most cost-effective means to meet those needs. Although FCC did not  publish a needs assessment, FCC officials said they consulted with  stakeholders and reviewed research on low-income broadband adoption  when designing the program. Well-developed plans for implementing and  evaluating pilot programs include key features such as: well-defined, clear, and measurable objectives;  criteria or standards for determining pilot program performance; clearly articulated methodology, including sound sampling methods,  determination of appropriate sample size for the evaluation design,  and a strategy for comparing the pilot results with other efforts; benchmarks to assess pilot success; and detailed evaluation time frames, roles, and responsibilities.
We noted in our October 2010 report that such evaluation plans help  ensure that evaluations will yield methodologically sound results and  support effective program and policy decisions. FCC officials said they did  not set out with an evaluation plan because they did not want to prejudge  the results by setting benchmark targets ahead of time. FCC officials said  they are optimistic that the information gathered from the pilot projects will  enable FCC to make recommendations regarding how broadband could  be incorporated in Lifeline. However, FCC officials said they do not have set milestones, time frames, or specific deliverables for their evaluation of  the program. In particular, according to FCC officials, the pilot projects  completed offering subsidized service in October 2014, but FCC has not  announced when or how it would share the results of the projects.
section_title: Broadband Pilot Projects Experienced Challenges, Including Lower-than- Anticipated Enrollment
paragraphs: The pilot projects enrolled approximately one-tenth of the 74,000 low- income consumers that FCC indicated would receive broadband through  the pilot projects. According to FCC officials, at the peak of enrollment in  October 2013, projects reported serving 7,425 consumers. FCC officials  said that the 74,000 consumers noted in the December 2012 order  adopting the pilot program was an estimate of consumers who could be  served through the program given the available funding and was not a  reliable number and should not be interpreted as a goal for the program.  FCC officials said they calculated this figure by adding together the  enrollment estimates provided by projects, which varied in their  methodologies. For example, some projects estimated serving all eligible  consumers, while others predicted that only a fraction of eligible  consumers would enroll. Due to the low enrollment in the pilot program, a  small fraction of the total money FCC authorized for the program was  spent. Specifically, FCC officials report that about $1.7 million of the  $13.8 million authorized was disbursed to projects.
FCC officials told us they do not view the pilot’s low enrollment as a  problem, as the program sought variation and the data collected will still  enable FCC to make comparisons across different treatments. In addition,  FCC officials noted that although insufficient sample size could be a  problem for some projects, most projects offered service to a sizable  number of consumers, even if a relatively small portion of those offered  service subsequently enrolled in the service. FCC officials believe  information on the number of consumers offered service can provide  relevant information regarding the subsidy’s effect on broadband  adoption. However, the program did not survey consumers who were  offered but did not enroll in the service and will not generate information  on why these consumers did not enroll.
FCC and pilot project officials we spoke to noted that a preliminary finding  from the pilot was that service offered at deeply discounted or free  monthly rates had high participation. FCC officials and representatives  from the four pilot projects we interviewed noted that broadband offered  at no or the lowest cost per month resulted in the highest participation.  For example, according to USAC data, one project that offered service at  no monthly cost to the customer reported 100 percent of its 709 enrollees  were enrolled in plans with no monthly cost as of October 2013, with no  customers enrolled in its plans with a $20 monthly fee. This information  raises questions about the feasibility of including broadband service in the  Lifeline program, since on a nationwide scale, offering broadband service  at no monthly cost would require significant resources and may conflict  with FCC’s goal to minimize the contribution burden.
In addition, representatives from the projects we interviewed noted other  challenges, such as difficulties with marketing the program and getting  customers to pay their bills. Representatives from all four pilot projects we  interviewed noted they had difficulty marketing the program. For example,  representatives from one pilot project we interviewed noted that without a  coordinated national brand, it was difficult to overcome the perception  among eligible consumers that the carrier was trying to sell a product.  Further, representatives from three of the four projects we spoke to noted  that eligible customers they contacted were unaware of or did not see the  benefits of broadband. In addition, officials from three of the four pilot  projects we interviewed noted the difficulty of getting customers to pay  their monthly bills. For example, at one project, an official noted that all  enrolled customers in the pilot lost service during the course of the project  due to inability to pay. FCC officials noted that understanding these  challenges faced by pilot projects will help the commission as it considers  whether and how to incorporate broadband into the Lifeline program.
For the reasons noted above, FCC’s broadband pilot program  experienced challenges. In particular, FCC did not adopt our previous  recommendation to conduct a needs assessment or develop  implementation and evaluation plans prior to establishing the program.  Without such planning, FCC now faces difficulties in evaluating the  program without established benchmarks for success. Further, FCC does  not know why large numbers of eligible households did not enroll in the  pilot projects. As noted earlier, FCC approved the introduction of non- facilities-based wireless service into the Lifeline program without  quantifying or estimating the potential cost increases, which contributed to  a 167 percent increase in disbursements from 2008 to 2012. The risk of  significant costs to the program are even greater given that FCC notes  that a lesson learned from the broadband pilot program is that higher  subsidies have the highest participation rates. However, the pilot projects  are now substantially complete. Further, FCC officials noted that the pilot  program is one of many factors the commission will consider when  deciding whether and how to incorporate broadband into Lifeline, and to  the extent the pilot program had flaws, those flaws will be taken into  consideration.
section_title: Conclusions
paragraphs: Although FCC is establishing performance measures for the Lifeline  program, these measures will not fully explain the program’s contribution  toward its performance goals, including ensuring voice service for low- income Americans and minimizing the contribution burden on consumers  and businesses. FCC attributes the narrowing of the gap between low- income and higher-income households’ telephone penetration rates over  the past 30 years to the Lifeline program. However, several factors could  play a role in this change, such as a reduction in the price of service over  time. Program evaluation is a critical strategy that can allow agencies to  assess the value or effectiveness of a program, among other things.  Officials report that FCC has not conducted a program evaluation of  Lifeline, noting that the program’s structure makes it difficult to determine  a causal connection between the program and the penetration rate.  However, FCC officials referenced academic studies that evaluated the  impact of Lifeline and suggest that the program may be a rather inefficient  and costly mechanism to increase telephone subscribership. This  suggested lack of efficiency is a concern, particularly since FCC has  proposed expanding the pool of households eligible for Lifeline. Such  actions may increase overall penetration, but might do so at a high cost  because households may enroll that already have phone service. Without  evaluating the program, FCC does not have information on which to base  program changes, such as expanding eligibility requirements. Taking  such actions without evaluating the program raises concerns about the  Lifeline program’s ability to meet its goals to increase telephone  penetration rates among low-income households and to minimize the  contribution burden.
section_title: Recommendation for Executive Action
paragraphs: We recommend that FCC conduct a program evaluation to determine the  extent to which the Lifeline program is efficiently and effectively reaching  its performance goals of ensuring the availability of voice service for low- income Americans while minimizing the contribution burden on  consumers and businesses.
section_title: Agency Comments
paragraphs: We provided a draft of this report to FCC and USAC for review and  comment. In written comments, reproduced in appendix II, FCC agreed  that it should evaluate the extent to which the program is efficiently and  effectively reaching its performance goals, and said that FCC staff will  address our recommendation. In addition, both FCC and USAC provided  technical comments that we incorporated as appropriate.
We are sending copies of this report to the Chairman of the Federal  Communications Commission, the Chief Executive Officer of the  Universal Service Administrative Company, and appropriate  congressional committees. We will make copies available to others on  request. In addition, the report will be available at no charge on the GAO  website at http://www.gao.gov.
If you or your staff have any questions about this report, please contact  me at (202) 512-2834 or goldsteinm@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff that made major contributions to  this report are listed in appendix III.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: The objectives of this report were to examine (1) the status of Lifeline  reform efforts and the extent to which the Federal Communications  Commission (FCC) has evaluated the effectiveness of the program; (2)  how the Lifeline program verifies household eligibility and addresses  associated privacy and data security; (3) the extent to which households  participate in Lifeline and the challenges, if any, they face in accessing  and retaining program benefits; and (4) how FCC plans to evaluate the  broadband pilot program and the extent to which the pilot program will  enable FCC to decide whether and how to include broadband in the  Lifeline program.
To examine the status of Lifeline reforms, we reviewed documents and  interviewed officials from FCC and the Universal Service Administrative  Company (USAC). In particular, we reviewed the Lifeline Reform Order  and other key guidance. To determine the extent to which FCC has  evaluated the effectiveness of the program, we compared information  collected from FCC to criteria on program evaluation identified from our  previous work. We also gained the perspective of a range of  stakeholders through interviews with representatives from industry  associations (CTIA-The Wireless Association and the United States  Telecom Association), state associations (the National Association of  State Utility Consumer Advocates and the National Association of  Regulatory Utility Commissioners), and consumer advocates (AARP and  the National Consumer Law Center). To analyze the extent to which the  Lifeline-eligible population subscribes to telephone service and how this  differs from higher income groups, we analyzed 2013 telephone service  penetration rates reported by FCC from the Census Bureau’s Current  Population Survey. To assess the reliability of the penetration data, we  reviewed documentation from FCC; we determined that the data from  these sources were sufficiently reliable for our purposes of comparing  penetration rates across income levels. Lastly, we reviewed two  academic studies that evaluated the impact of the Lifeline program and  interviewed four economists involved with the studies regarding the  studies’ methodologies and findings; we identified these studies through  an interview with FCC. At least two GAO analysts and an economist  reviewed the studies we cite in this report for methodological adequacy;  the studies met our criteria for methodological quality.
To analyze how the Lifeline program verifies household eligibility, we  reviewed documentation from FCC and a state association and  conducted four state case studies—Alabama, Arizona, New York, and  Wisconsin. We selected states to capture a range of Lifeline  disbursement amounts and Lifeline participation rates, which we  estimated as the number of Supplemental Nutrition Assistance Program  (SNAP) subscribers in the state relative to the number of Lifeline  subscribers. We also selected states that varied on whether or not the  state had an eligibility database and geography in terms of number of  urbanized areas. Within each selected state, we interviewed  representatives from the public utility commission, the state consumer  advocate, where available, and three wireless eligible  telecommunications carriers (ETC), and collected supporting  documentation such as comments filed to FCC. We selected the wireless  ETCs based on the carrier’s market share of Lifeline participation in the  state and the overall size of the company. See table 3 for the case study  wireless ETCs we interviewed. In addition to these nine wireless ETCs, in  order to gain the perspective of wireline ETCs, we collected  documentation and interviewed representatives from the three largest  nationwide providers: AT&T, Verizon, and CenturyLink. Although using  these criteria allowed us to obtain information from a variety of states and  ETCs, the findings from our case studies cannot be generalized to all  states and ETCs because they were selected as part of a nonprobability  sample.
To examine how the Lifeline program addresses privacy and data security  associated with eligibility verification, we reviewed documentation and  interviewed officials from FCC and USAC, including relevant  requirements, policies, and guidance. We interviewed case study state  officials and representatives from ETCs on the methods used to protect  personal consumer information. In addition, we interviewed stakeholders  about their views on data security and privacy.
To describe the extent to which eligible households participate in Lifeline,  we analyzed data on Lifeline participation and disbursements. In  particular, we collected data from USAC on Lifeline participation by  quarter from 2008 through fourth quarter 2014 and disbursements by year  from 2008 through 2014; we selected 2008 since it was the first year non- facilities based wireless carriers offered Lifeline service. Using data from  the Census Bureau’s Survey of Income and Program Participation (SIPP),  we estimated the number of households that would satisfy the federal  criteria to participate in Lifeline by calculating the number of households  participating in Lifeline qualifying programs and the number of households  at or below 135 percent of the federal poverty guidelines from 2008  through 2012. We also used SIPP data to estimate the number of  additional households that would be added if the Special Supplemental  Nutrition Program for Women, Infants, and Children were added as a  Lifeline qualifying program. In addition, we used SIPP data along with  SNAP participation data reported by the United States Department of  Agriculture (USDA) to analyze participation trends in the Lifeline- qualifying programs from 2009 through 2013. To assess the reliability of  the SIPP, SNAP, and USAC data, we reviewed documentation and  interviewed officials from USAC and reviewed documentation from the  Census Bureau and USDA; we determined that the data from these  sources were sufficiently reliable for our purposes of reporting trends. In  addition, we interviewed state officials, representatives from ETCs,  consumer advocates, and other stakeholders on the causes for Lifeline  participation trends.
To identify the challenges, if any, eligible households face in accessing  and retaining program benefits, we interviewed stakeholders and  representatives from the case-study states and ETCs. In addition, we  reviewed FCC and USAC policies and processes that could influence  household participation in Lifeline, including outreach, initial enrollment,  and annual recertification. We reviewed data ETCs reported to FCC  regarding the results of their recertification efforts. To analyze the  challenge posed by annual recertification, we interviewed officials from  FCC, representatives from USAC, and representatives from selected  ETCs regarding practices and approaches to overcome challenges to  participation, such as the relative merits of various enrollment and  recertification methods.
To determine how FCC plans to evaluate the broadband pilot program  and the extent to which the pilot will enable FCC to promote adoption by  eligible households, we reviewed policies and interviewed FCC officials  regarding the pilot program, including the solicitation for applications and  the December 2012 Order announcing the projects. We also selected four  case studies—Nexus Communications, XChange Telecom Corporation,  Virgin Mobile (an affiliate of Sprint), and Troy CableVision—from the  universe of 14 broadband pilot projects. We selected these projects  based on the technology types they used (wireline, wireless, or both);  whether they offered digital literacy training or equipment discounts; and  geographic diversity, including whether they offered service in urban or  rural areas. For each case study project, we interviewed representatives  regarding the project’s expectations, results, and lessons learned. We  also reviewed documentation from USAC on each case study project,  including the application and preliminary results, such as number of  participants. In addition, we interviewed consumer advocates and  representatives from broadband adoption programs, such as Comcast’s  Internet Essentials and CenturyLink’s Internet Basics, on best practices to  promote broadband adoption among the low-income population.
We conducted this performance audit from May 2014 to March 2015 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
section_title: Appendix II: Comments from the Federal Communications Commission
section_title: Appendix III: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Michael Clements (Assistant  Director), Amy Abramowitz, Melissa Bodeau, Antoine Clark, Tobias  Gillett, Bert Japikse, Emily Larson, Grant Mallie, Joshua Ormond, Cheryl  Peterson, and Kelly Rubin made key contributions to this report.