FCC overhauls phone subsidy for the poor

The Federal Communications Commission (FCC) voted to overhaul its Lifeline program on Tuesday, claiming the changes will eliminate $2 billion in waste over three years. 

The multibillion-dollar Lifeline program subsidizes landline phones for low-income consumers.

But, according to the FCC, the program is rife with fraud and abuse.

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, FCC Chairman Julius Genachowski said. 

Under the plan adopted Tuesday, the FCC will create a database to ensure multiple companies are not receiving subsidies to provide service to the same customer.

The agency set national eligibility standards for the program and established a pilot program to use some of the funds to expand broadband Internet access.

The FCC also proposed using some of the savings from the Lifeline reforms to fund digital literacy training in libraries and schools.

“Today’s vote to reform and modernize Lifeline is an important milestone for a program which has helped provide low-income consumers with affordable phone service for nearly 30 years," Rep. Anna Eshoo (D-Calif.) said in a statement. “In addition to rooting out inefficiencies, the FCC has recognized with these reforms that broadband is an essential communications tool for all Americans."

Rep. Doris Matsui (D-Calif.) said the broadband pilot program will "enable low-income households to have access to affordable broadband services and connect with the increasingly digital American economy."

“I will continue to campaign for the FCC to fully expand the Lifeline program to broadband in order to help close our nation’s digital divide, and commend the FCC for taking the first step by setting up this pilot program," she said.

AT&T, which has clashed repeatedly with the FCC in recent months over its failed merger with T-Mobile and the FCC's authority over spectrum auctions, said reform is "long overdue," but expressed skepticism that the agency was doing enough to control the cost of the program.

“While the steps the FCC announced today are commendable, we fear the speed of reform is getting far outpaced by the actual dollar growth of the fund itself," said Bob Quinn, a senior vice president for AT&T. "Policymakers must begin to discuss whether it continues to make sense for an independent agency to administer a fund this size with no congressional oversight or decision-making input to the appropriate size of the fund."