FCC Takes Next Step Toward USF Migration

Lifeline/Linkup Fund Begins Its Shift to a Broadband Subsidy

By John Eggerton -- Multichannel News, 2/6/2012 12:01:00 AM

Washington — The Federal Communications Commission has taken another step toward shifting phone subsidies to fund broadband service.

Last week, the agency approved, with a mix of partial concurrences and dissents, a rulemaking and notice of inquiry to reform its Lifeline/Linkup program, which subsidizes landline phone service for eligible lowincome participants.

The agency has already taken steps to reform the Universal Service Fund’s high-cost fund, and must still address issues related to the piece of the cross-subsidy that is passed along from telecom providers to customers.

The Lifeline/Linkup reforms include starting the migration of the fund to broadband, as the FCC last fall voted to do with the USF program. It also essentially gets rid of the linkup portion of the program, which incentivized companies to sign up users — what FCC chairman Julius Genachowski called a “bounty” for companies that was not working, in part, because it encouraged fraud.

There was unanimous support among the commissioners for broadband migration, as well as for limiting waste, fraud and abuse.

But there was disagreement over whether some of the planned savings from reducing waste, fraud and duplicative payments should be used to fund pilot broadband migration programs — GOP commissioner Robert McDowell concurred, which is short of approval — and the manner in which the FCC will require 100% recertification of current eligible subs, to which Clyburn concurred. The meeting was even delayed for over an hour as some lastminute negotiating went on, recalling the days of FCC chairman Kevin Martin.

Genachowski, a Democrat, said following the meeting that commissioners were able to come to agreement on a way forward with reforms by agreeing on target savings, as well as a way to measure those savings. Commissioner Mignon Clyburn, also a Democrat, said at the meeting she had problems with capping the program.

McDowell dissented from the portions of the rulemaking that used the FCC’s authority under section 706, which requires the agency to “encourage the deployment of advanced telecommunications to all Americans,” to buttress the move of the subsidy to broadband. McDowell has been leery of the FCC’s use of that broad mandate to justify broadband regulation.

Among the major components of the reforms are creating a national accountability database to weed out duplicative support and a database to check eligibility; confining that subsidy to one per household; audits for eligible carriers receiving more than $5 million in subsidies; cutting back support for service with high activation fees; targeting $200 million in savings for 2012, and up to $2 billion over three years. McDowell said he was not convinced the number would be that high.

McDowell said that the reforms put an exclamation point on the need to reform the contribution side of the subsidies, pointing out that some consumers — and not all of them well-heeled — crosssubsidize the low-income participants.