FCC faces pressure on Internet subsidy plan

Think Stock

An unlikely union of industry lobbyists and consumer groups is warning the Federal Communications Commission against changes to a phone subsidy program.

Critics say that if the overhaul goes through as planned, many poor Americans who receive free phone service through the program will drop out. Even the White House is expressing concern.

The late lobbying scrabble has caught the agency's attention ahead of a vote scheduled next week.

In recent days, the FCC has given strong hints it is open to changes, and officials have asked for recommendations in private meetings.

There could be a “drastic reduction in Lifeline participation because many eligible subscribers simply won't have the ability or means to make monthly payments,” former Democratic Rep. Henry Waxman, now a lobbyist, told FCC Chairman Tom Wheeler in a phone call earlier this week.

Wheeler, Democratic Commissioner Mignon Clyburn and FCC staff were inundated by similar calls and meetings ahead of the March 24th "sunshine" deadline, when all lobbying was officially supposed to cease in the days before a vote.

The FCC plans to overhaul the federal Lifeline phone-subsidy program, which currently has 13 million subscribers, so that it can begin helping poor families pay for Internet service. Currently, it only offers $9.25 per month subsidies for basic phone service.

Nearly all sides support expanding it to cover broadband, but there are mounting concerns over the FCC’s minimum service standards, which will mandate the speed, data capacity and unlimited voice minutes that companies must offer families to qualify for the program.

Today, many Lifeline subscribers receive free basic cellphone service because their subsidy covers the full cost. Critics say that the higher minimum standards will result in out-of-pocket costs for consumers. Poor families who can't afford to pay even a few dollars extra a month will simply be forced out of the Lifeline program, they warn.

“I think they are hearing that, but we don’t know where they are going to end up at this point. We are hopeful,” one wireless industry lobbyist said.

By December, Lifeline providers would have to offer unlimited minutes for basic cellphones or 500 MB of smartphone data. By 2019, smartphone providers would have to offer 2 GB of data and the program would completely end subsidies for basic voice-only cellphone service after a review.

Calls to change that plan are coming from a number of diverse groups that are often at odds over other FCC actions. They include the wireless industry, groups representing senior citizens, advocates for people with disabilities and public interest groups like FreePress.

“Free Press is not in the habit of accepting without healthy skepticism any telecommunications carriers’ cost and pricing claims. Nevertheless, the record evidence in the docket is mounting,” the group’s policy director Matt Wood wrote after a call with agency officials.

The move to expand subsidies to cover Internet service is meant to reflect changing consumer preferences. The FCC hopes reforms to the program and advances in technology will help drive down prices for Internet and bundled voice service.

But the industry says unlimited voice plans today are much higher than the $9.25 subsidy, not to mention data plans. Sprint said the cheapest unlimited minute plan on the market is at least $25.

TracFone, a major Lifeline provider, said 80 percent of its customers surveyed would drop service if any kind of out-of-pocket cost is required per month.

The changes industry groups are calling for are technical but relatively minor.

For example, Sprint says people should be given 500 minutes instead of unlimited minutes for basic cellphone plans by December. And by 2019, instead of smartphone plans with 2GB of data as the FCC outlined, providers should be allowed to offer another plan with 1 GB of data and a few hundred voice minutes.

Consumer advocates are also calling for close monitoring of the program to guard against a quick drop in participation.

Home Internet providers have also expressed concerns about minimum standards imposed on them, but the FCC has expressed less public interest in those issues.

Because of the price of home Internet, it is likely people using the subsidy for broadband would have to pay out-of-pocket costs.

The home Internet industry said it is fine with the FCC's mandate that companies offer higher speeds to Lifeline customers. But consumers should have the ability to pick a lower speed if they want it, they say.

“Lifeline consumers should have the ability to use their subsidy to purchase the broadband services that meet their needs,” the National Cable and Telecommunications Association told the commissionearlier this month.

All eyes are on the FCC as it nears a vote.

“We continue to talk to a variety of stakeholders on this issue,” Gigi Sohn, a counselor to the FCC chairman, said this week.