Democrats' bill would subsidize Internet service

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The bill is co-sponsored by Energy and Commerce Committee ranking member Henry Waxman (D-Calif.), communications subcommittee ranking member Anna Eshoo (D-Calif.) and five other Democrats.

Subscribers would have to choose whether they wanted to use the federal funds to cover landline service, cellphone service or Internet service.

In recent months, Republicans have attacked the FCC's Lifeline program as a wasteful handout. The Energy and Commerce Committee will hold a hearing on Thursday to examine Lifeline, which has been derisively referred to as the "Obama phone program."

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.

Even the program's supporters have acknowledged that it has been plagued by waste and fraud. In an effort to reform the program, the FCC last year toughened its eligibility standards and created a database to ensure that multiple companies were not receiving subsidies to provide service to the same customer.

The FCC claims the reforms saved $200 million last year and are on track to save $400 million this year.

The bill introduced on Tuesday would require the FCC to expand those efforts.

Matsui introduced similar legislation last Congress, but the Energy and Commerce Committee never took it up.

Expanding broadband access was the top priority of outgoing FCC Chairman Julius Genachowski.

In 2011, the agency converted a subsidy for rural phone service into a program to expand broadband Internet access. Lifeline and the high-cost rural phone subsidy are both part of the FCC's $8 billion Universal Service Fund.