Senate rejects bid to end cellphone subsidy

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The program, called Lifeline, has been derisively referred to as the "Obama phone" program, although it began long before Obama took office.

Congress first enacted the Lifeline program in 1985, during the Reagan administration. In 2005, under President George W. Bush, the FCC expanded the program to cover cellphone service.

The program pays for phone service, not the phones themselves. But many companies that receive funding through the program offer free and low-cost phones to their subscribers. The program is funded through fees that the telephone companies pass on to consumers on their monthly bills.

Lifeline gained more attention last year when conservatives seized on a viral video of a woman saying she would vote for President Obama because he gave her a free phone. Republican lawmakers have decried the program as a prime example of a wasteful government handout.

Vitter's non-binding amendment sought to end the cellphone portion of the program.

Outgoing Federal Communications Commission Chairman Julius Genachowski fired back at the sponsors of the amendment in a statement late on Friday.

“The Lifeline program has helped some of our most vulnerable citizens connect to emergency services, doctors and family in times of crisis," he said. "It has been a literal lifeline for these Americans -- and in today’s era, with a third of Americans having cut the cord to wireline phone service, it’s appropriate that Lifeline supports wireless service."

He touted the commission's efforts to curb waste and abuse in the program.

"This FCC inherited a number of [Universal Service Fund] programs that lacked proper controls, but we acted quickly and aggressively to correct course, saving more than $200 million last year in Lifeline and putting us on track to save $2 billion by the end of 2014," Genachowski said. "We took these steps precisely because Lifeline is so vital to millions of Americans in need.”

FCC Commissioner Mignon Clyburn, the agency's most vocal defender of Lifeline, said the amendment failed to take into account how important Lifeline is to low-income families.

"The Commission is open to making additional adjustments where necessary, but in no uncertain terms should qualifying low-income consumers who have followed the rules, be refused service," she said.