FCC pushes overhaul of phone subsidy

By Brendan Sasso - 01/09/12 02:11 PM ET

Federal Communications Commission (FCC) Chairman Julius Genachowski proposed an overhaul of the agency's low-income phone subsidy program on Monday.

He said his proposal, which he will send to the other commissioners on Tuesday, would eliminate waste and fraud in the multibillion-dollar Lifeline program and would use the savings to pay for expanding broadband Internet access.

"Lifeline is a vitally important program," Genachowski said, arguing the government should help low-income residents afford telephone service so they can call 911 during an emergency.

But he said the cost of the program has grown in recent years because of "waste and inefficiency."

Some companies collect government subsidies to provide service to people who already receive Lifeline support from another company, and other companies enroll people who are not eligible for the program, Genachowski said.

"Defrauding a public program designed to help our most vulnerable citizens is flat-out wrong and simply unacceptable, and we have launched multiple investigations into these reported violations," he said.

Under the proposal, the FCC would create a database to ensure multiple companies are not receiving subsidies to provide service to the same customer.

The plan would set national eligibility standards for the program and require outside audits of companies receiving subsidies.

Genachowski said the reforms could save as much as $2 billion over the next few years.

The FCC would then use some of the savings to provide broadband Internet access to low-income consumers.

"Broadband has gone from being a luxury to a necessity in the 21st Century," Genachowski said, noting that many job openings are now only listed online.

“For many years the Lifeline program has provided low-income Americans across the country with affordable access to basic monthly telephone service. It has also been beset with many problems," California Rep. Anna Eshoo, the ranking Democrat on the House Energy and Commerce Committee's telecom subpanel, said in a statement after Genachowski's speech. "It’s time to modernize the program by bringing it into the 21st Century, with support of broadband access for low-income Americans."

The proposed reforms follow the FCC's decision in October to transition its $4.5 billion telephone subsidy aimed at rural residents to one aimed at expanding broadband access in rural areas.