NRRI 13-12 Lifeline and the States

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Congress authorized the Lifeline program in 1985 to ensure that telecommunications services are available to all citizens of the United States, regardless of their financial status. The program provides support to telecommunications carriers so that they may provide reduced-cost service to consumers with incomes at or below the poverty level. Section 214 of the 1996 Telecommunications Act gives states the authority to designate eligible telecommunications carriers (ETCs) for the purpose of offering Lifeline (and High Cost) service, subsidized by state and federal universal-service funds, to low-income state residents. Although it originally supported only wireline services provided by carriers of last resort (COLRs), the Lifeline program was opened to competitive local exchange carriers (CLECs) in 1996 and wireless carriers shortly thereafter. Changes proposed in the USF Transformation Order will result in adding broadband to the services ETCs must provide. As a result of the growing size of the program and questions about the practices of some of the companies participating in it, the FCC issued the Lifeline Reform Order1 in 2012, adding restrictions to the program to reduce waste, fraud, and abuse by ensuring that only qualified applicants could subscribe to the program and limiting participation to one Lifeline service per household. The FCC has chartered the Universal Service Administrative Company (USAC) with creating a duplicates database to monitor enrollment to one telephone per household and an eligibility database to determine which customers may apply for Lifeline service. The duplicates database became available in October 2013. The eligibility database is still in the planning stage.

The Lifeline program is a key example of the shared responsibility of cooperative federalism. The states and the FCC share the responsibility for designating and monitoring ETCs. The Lifeline Order provides a floor for the requirements providers must meet in order to be designated as ETCs. States, however, may add additional requirements above those designated by the FCC, including customer eligibility requirements and public interest requirements so long as they do not rely on or burden the federal support mechanism.

Currently, 48 states and the District of Columbia designate ETCs. Two states, Delaware and Maine, do not designate ETCs.2 Of those states that designate Lifeline providers, 5 designate wireline providers only; 18 designate wireline and wireless providers; 5 designate wireline and cable providers; 3 designate wireline, wireless, and cable providers; and 11 would allow carriers to seek certification regardless of the service platform they use (wireline, wireless, cable, and VoIP). Finally, 5 states responded that they address applications on an individual case basis. Carriers that are not certified at the state level may request ETC designation from the FCC.

In addition to certifying ETCs, 21 states have state Lifeline funds, which provide an additional reimbursement to carriers for providing affordable service to low-income consumers.

A number of states are reviewing their Lifeline programs as a result of changes to the federal Lifeline program, state legislation reducing or eliminating telecommunications oversight or eliminating Lifeline funding, and changes in the process for collecting and distributing universal-service funds. Maine stopped designating ETCs in 2012, deferring the process to the FCC; and Colorado ended its state Lifeline program in 2013. North Carolina will end its state Lifeline subsidy at the end of 2013 as a result of state legislation, while other states, including California, Massachusetts, Missouri, Texas, and Wisconsin, are studying their processes for designating ETCs. A key issue in the state reviews of the Lifeline program is determining whether the technology a carrier employs should affect its ability to become an ETC for the purpose of offering Lifeline service.

This paper reviews the process state commissions use to designate Lifeline ETCs and to monitor the effectiveness of the program, including ensuring that ETCs adhere to the rules designed to limit previous abuses and change the perception of the program. It addresses the following questions.

1. Which states certify ETCs? Is certification limited by technology? Are changes planned?

2. What are the guidelines for state ETC certification?

3. What is the process for state certification? How do states determine that an application is in the public interest?

4. How do state commissions ensure that ETCs "follow the rules"? Is there an enforcement process? Is there an audit process?

5. Will the states use the FCC duplicates and eligibility databases, or will they create their own?

The Lifeline program remains an important means of meeting the national goal of ensuring ubiquitous, affordable telecommunications services across the country, regardless of a consumer's location or income. The states have a critical part to play in this process, particularly as new technologies are introduced and new providers offer service. This paper provides information that the states may use to evaluate and amend their Lifeline processes as the need arises.