FCC OKs Lifeline Order 3-2 After Budget Cap Falls Apart; Republicans Outraged

The commission did modify proposed minimum broadband and voice service standards and a phaseout of stand-alone voice support while stretching out some implementation schedules, all of which had come under heavy criticism recently. Mobile Lifeline providers will have to offer 500 voice minutes -- not unlimited talk, as had been proposed -- and 500 MB of data monthly starting on Dec. 1, rising in stages to 1,000 minutes and 2 GB monthly by December 2018, an agency release said. Fixed broadband must offer 10/1 Mbps data speeds and 150 GB monthly, with the usage allowance "updated thereafter."

Lifeline's $9.25 monthly per-household support would be phased down for stand-alone voice -- fixed and mobile, apparently -- to $5.25 by Dec. 1, 2020, and targeted for being phased out by Dec. 1, 2021, but only after an FCC review in mid-2021 that could lead to adjustments. (A draft order had proposed phasing out stand-alone mobile voice only by December 2019.) Voice would remain eligible for support as part of broadband bundles. "This isn't the phasing out of voice. This is the phasing in of broadband," Wheeler said. Commissioner Jessica Rosenworcel said the broadband expansion would narrow "the homework gap" but there was work yet to be done.

The order shifts responsibility for verifying consumer low-income eligibility for Lifeline from providers to a national third party. It also creates a path for broadband providers to be approved to participate nationally in the program, potentially bypassing state processes. Asked about changes to a draft order, Wheeler said there were a "bunch of tweaks along the way," including to components of the national verifier's database and the creation of a mandate for "Wi-Fi tethering."

Partisan Divide Deepens

Republicans blasted the FCC decision to stick with a proposed $2.25 billion budget for Lifeline, indexed for inflation, that can be adjusted in the future when spending reaches 90 percent of that level. Commissioner Ajit Pai said Commissioner Mignon Clyburn backed out of a negotiated compromise under pressure from Wheeler and others. Pai offered blow-by-blow accounts of deliberations over the past two days that he said resulted in an agreement among three commissioners' offices Thursday morning to set a hard cap of $2 billion, among other things. But he said Wheeler and his staff had actively worked "to unwind that bipartisan compromise" by leaking information to the press and encouraging lawmakers and stakeholders -- from "left-wing special interests" to former commissioners -- to attack the deal before the final vote. The campaign led Clyburn "to renege" on the deal, Pai said.

"This agency in this proceeding represented the worst of government," Pai said. "Bipartisan agreements that would deliver digital opportunity to millions of Americans are thrown away and even Democratic commissioners are bulldozed simply because the Chairman can get away with it." Pai said he would highlight further "legal and administrative flaws" in the order in a later written statement.

O'Rielly said the episode was like a "cruel April Fools' joke." He said over the past 24 hours he had gone through "a thousand drafts of statements from every possible angle" as "this item has done a complete 360." He thought he could trust the word of a commissioner in negotiating an agreement. "Now it seems that even that basic foundation has gone out the windows of the 8th floor. What has happened will do irreparable harm to our ability to engage going forward," he said.

O'Rielly disputed the notion the FCC is setting a budget. He said spending could exceed the $2.25 billion level. "If the commission does absolutely nothing, spending blows right through the magic number and continues indefinitely. What does that make the magic number? A joke. Not a budget," he said. "The majority can and will misrepresent, cut corners and welch on deals. But please, can the rest of us at least agree to describe what the Commission has done in honest language?"

Clyburn said that while she had never liked a budget cap, she "negotiated in good faith to have a budget mechanism in place," but "upon further deliberation" concluded it didn't conform with her vision of a modern Lifeline program. Wheeler praised Clyburn, O'Rielly and Pai for their efforts into the night, but he simply said the "deliberative process" sometimes doesn't result in consensus.

Clyburn said afterward that commissioners came "very, very close" to a deal that could have produced a 5-0 vote, but "at the end of the day we could not strike that balance." Asked at a press conference if she had ever reached some sort of agreement with the Republicans, she didn't seem to directly answer, but did at times acknowledge that she had had second thoughts "upon reflection" about the state of play. She said she had gone back to her colleagues and asked for tweaks, but neither Pai nor O'Rielly could "move any further." She denied she was "bullied" by Wheeler and said she had made the decision on her own: "I can say the chairman did not pressure me."

Asked if he had bullied Clyburn, Wheeler responded, "Balderdash." Asked if he had encouraged lawmakers to pressure Clyburn, Wheeler said, "Balderdash."

Pai Chief of Staff Matthew Berry said that Pai, Clyburn and O'Rielly had been pursuing a compromise for the last two days, and that Pai aide Nick Degani started drafting a compromise order at 3 a.m. Thursday morning. By 9:49 a.m. Clyburn, Pai and O’Rielly had agreed to the compromise draft, Berry said during one of the meeting delays. "But some people in this building don't like bipartisan compromises," he said, adding that he was referring to Wheeler. At about 1:15 p.m., Pai’s office learned that Clyburn was backing out of the compromise. Pai's office is "unhappy" to see the work done on the compromise draft "go down the drain." Berry said the compromise included a $2 billion cap, minimum standards of 25 Mbps for fixed broadband and 4G LTE for mobile broadband, and an agreement to eliminate enhanced subsidies for some tribal lands. Berry also said that Wheeler rejected every one of their proposed compromises. "What was done was unfair to Clyburn," he said. Clyburn has "flip-flopped" and "it looks very bad," he said.

NARUC, Others React

The final order failed to quell NARUC’s fears that the order strips states of a key role in determining provider participation in the Lifeline program. While praising the FCC for expanding the program to cover broadband, NARUC President Travis Kavulla said state commissioners “remain very concerned with the national designation procedure outlined in today’s meeting. That one provision definitively undermines the program and the service offered to qualifying consumers.”

NARUC hasn’t decided how to respond. “NARUC is still reviewing the draft to inform its next steps with respect to the FCC’s order,” said South Dakota Commissioner Chris Nelson, chairman of the NARUC Committee on Telecommunications. “It is clear, that a carrier choosing the national designation bypasses the consumer subsidies in States with matching programs, expanded State service quality oversight, and State compliance audits. In short, taking these ‘state cops’ off the beat can only reduce oversight and open the program to more waste, fraud and abuse.” A NARUC spokeswoman added, “The decision to appeal is a decision that will be made by individual state commissions. As for NARUC, we will have to review the order before determining next steps.”

The National Governors Association supports an expanded Lifeline program but wants to ensure states still have a “meaningful voice in determining eligibility,” NGA Deputy Director David Quam said in an interview. “We are looking through the details to determine … the remaining role for the states,” he said. “Our biggest concern was that taking states out of that process could be detrimental. It’s better to have more eyes than fewer.” On Wednesday the NGA had urged the FCC to reject the Lifeline order (see 1603300051), warning that the proposed rule “would disrupt the existing state-federal partnership and preempt states’ authority to protect consumer interest by creating a third-party National Eligibility Verifier.”

TracFone said it would review the full text but is "encouraged" by what it has heard so far on FCC changes addressing the minimum service standards for stand-alone mobile voice service. "These and other changes are vital to preserving the important service that wireless Lifeline provides to more than 12 million qualifying low-income Americans," a company spokesperson said. "TracFone appreciates the foresight and the hard work of the commissioners and the staff that brought us to today's milestone."

Former FCC Commissioner Michael Copps called the order “a giant leap forward.” The program will extend the “awesome power of the Internet to those who need it most. School children, job seekers, the elderly and infirm in particular will all benefit.”

USTelecom applauded the national system for verifying consumer eligibility. “In addition to moving the Lifeline program into the 21st century by expanding it to include broadband, the FCC also took important steps to ensure the program benefits from increased administrative efficiency,” USTelecom CEO Walter McCormick said. “By establishing a national system for verifying consumer eligibility for the program, the FCC can work toward reducing instances of waste, fraud, and abuse. We look forward to working with the commission to implement the changes in the program.” Similarly, NTCA CEO Shirley Bloomfield said the order “will make it easier for carriers to focus on the job of serving consumers by centralizing and streamlining verification of program eligibility.”

“Notwithstanding the controversy that occurred over the Lifeline action at today’s meeting, positive steps were taken to move Lifeline into the 21st century by beginning the transition of the program from voice to broadband,” said Bob Quinn, AT&T senior vice president of federal regulatory. “The agency also started the process of removing carriers from determining whether or not consumers are eligible to receive the benefits of Lifeline service. The administrative reforms contemplated by today’s action will enable service providers to focus on better serving the participants in the program.”

Free Press praised the commission’s decision on minimum standards and its rejection of a proposed change on this from Pai. “Adopting unduly high standards such as a 25 Mbps minimum speed for wired broadband may sound like a good idea, but it would have placed home broadband connections out of reach for the majority of low-income Americans,” Free Press Policy Director Matt Wood said.