Senate Homeland Security Leaders Delaying Lifeline Legislation
Administration and oversight of the Lifeline USF program drew criticism during Thursday's Senate Homeland Security Committee hearing, as expected (see 1709130053), and committee leaders sought major improvements. Chairman Ron Johnson, R-Wis., and ranking member Claire McCaskill, D-Mo., indicated they will hold off on a legislative response until the national verifier program and other fixes instituted in the FCC 2016 Lifeline overhaul order fully roll out. McCaskill had said she would consider a possible bill, depending on results of the hearing, including a restructuring and budget cap (see 1709060063).
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Johnson and McCaskill hammered the program, as did other members from both parties, citing findings of a May GAO report on “weaknesses" in management. It found Lifeline management remains deficient despite FCC and Universal Service Administrative Co. efforts to improve controls over finances and enrollment by low-income consumers (see 1706290037). GAO Forensic Audits and Investigative Service Director-Audit Services Seto Bagdoyan noted the FCC agreed to implement the study's recommendations.
“This is a real head-shaker,” since problems have been well known for years, Johnson said. “We must consider ways to target those who actually need this Lifeline.” The “combination of ineffective oversight and the greed of some private carriers has led to hundreds of millions in wasted taxpayer dollars,” McCaskill said. She later called prolonged abuses of the system by some eligible telecom carriers (ETCs) “outrageous” and questioned why the FCC continued to disburse $2 billion Lifeline funding to 10 carriers that owe back $90 million. Sen. Gary Peters, D-Mich., was equally angry “scammers” imperil Lifeline given its role in providing “vital services” to low-income consumers. Sen. Steve Daines, R-Mont., applauded efforts to fix Lifeline but also said the program should ensure it better serves rural consumers.
FCC Chairman Ajit Pai said fixes are a "top priority” for the agency "now that I'm in the driver's seat," and it's “not falling into the cracks,” implying a failure of leadership under former Chairman Tom Wheeler. Pai backed a budget cap for annual Lifeline disbursements and said “upfront verification” of eligible Lifeline recipients, as outlined in the national verifier program plan, would help rein in abuse. Pai said the FCC and USAC need to consider how they monitor key metrics. USAC acting CEO Vickie Robinson said ETCs wouldn't be able to bypass or override the national verifier as they had the existing local verification process. She defended USAC administration of Lifeline, noting there needed to be a balance between encouraging participation and maintaining program integrity.
Lifeline's distribution system “probably” needs a complete overhaul to create an environment that “would be far less prone to fraud and abuse,” Johnson told reporters. He's hoping he won't need to pursue legislation with McCaskill or others if the FCC and USAC can institute internal solutions. “We need to completely rethink how we distribute that subsidy,” including requiring a forensic audit of the top 30 Lifeline ETC and a sampling of smaller ETCs “to find out where these abuses are occurring,” Johnson said: “Hopefully,” the FCC will be able to conduct those reviews as a part of future ETC agreements under its existing authority, but “if not, maybe we need legislation to force that.”
“I don't know that legislation is necessary” now, McCaskill told us. “I do want to give [Pai] time to implement the reforms that I think he's serious about.” Lifeline “is worthy, it's the structure of the program that's flawed,” she said: “I tried to light a fire under them about enforcement” because there are “some bad actors who are getting away with fraud and we need to have much more enthusiasm about putting them in jail.”
Commissioner Mignon Clyburn struck back against the narrative on the report and Pai's proposed Lifeline fixes, which she said “do not match the realities.” She said in a statement she's “especially disappointed by the current FCC majority and those who repeatedly reject real reform efforts.” Continuing “to vilify our nation’s only means-tested universal service program and remaining on the sidelines while communities and their residents do without connectivity, is a dereliction of the oath we were sworn to uphold,” Clyburn said.
Free State Foundation President Randolph May juxtaposed the hearing with the FCC's Wednesday public notice announcing it was proposing to raise the USF contribution factor in Q4 to 18.8 percent of net carrier revenue from interstate and international telecom service end users, from the existing 17.1 percent rate (see 1709130043). “This tax of almost 19% -- the highest ever -- on all phone bills shows why it is so important to curtail fraud and abuse if support for the program is to be sustained,” he wrote.