Please contact Michael Bennet at or Tony Veach at for more information.

Transcription

1 FCC PROPOSES NUMEROUS REFORMS TO LIFELINE PROGRAM Posted on July 13, 2015 Please contact Michael Bennet at or Tony Veach at for more information. The Federal Communications Commission (FCC or Commission) has released a Second Further Notice of Proposed Rulemaking (FNPRM) related to the universal service Lifeline program.[1] Comments in response to the FNPRM are due on or before 30 days after publication in the Federal Register, which has yet to occur. Reply comments are due 60 days after Federal Register publication. Bottom Line: Most are familiar with the portion of the FNPRM in which the Commission proposes that the Lifeline program support broadband Internet access service. However, all ETCs should review the other various proposals in the FNPRM that, if adopted, will fundamentally change many aspects of the Lifeline program, while also imposing additional burdens and costs on all those that provide Lifeline. BACKGROUND Lifeline was originally implemented in 1985 to ensure that the increase in local rates that occurred in the aftermath of the breakup of AT&T would not put local phone service out of reach for low-income households. [2] The Telecommunications Act of 1996 modernized and enlarged the Lifeline program, but it really began to grow following the FCC s decision to allow non-facilities-based mobile wireless resellers to be designated as eligible telecommunications carriers (ETCs) for the purpose of participating in the Lifeline program.[3] In February 2012, the FCC adopted its landmark Lifeline Reform Order, which made comprehensive reforms to the universal service Lifeline program aimed at preventing waste, fraud, and abuse. The next step in the evolution of the Lifeline program is to support broadband Internet access service. ESTABLISHING MINIMUM SERVICE STANDARDS FOR VOICE The Commission has found that unlike competitive offerings for non-lifeline customers, minutes and service plans for Lifeline customers have largely been stagnant the standard Lifeline market offering for prepaid wireless service has remained largely unchanged for the past three years at 250 minutes at no cost to the recipient. The Commission believes it is necessary to establish minimum voice standards to ensure maximum value for each dollar of universal service and that consumers receive reasonable comparable service. Comment is sought on this analysis and its proposals to establish minimum voice service standards. Page 1 of 16

2 ESTABLISHING MINIMUM SERVICE STANDARDS FOR BROADBAND As part of its proposal to modernize the Lifeline program to support broadband, the Commission wants to ensure that any Lifeline broadband offering is sufficient to meet consumers education, health care, public safety, and other needs. Accordingly, comment is sought on setting minimum broadband service standards with respect to these purposes. Education. For education, the Commission is primarily focused on using Lifeline to help close the homework gap. Nearly all schools utilize some form of online learning both inside and outside of the classroom to supplement learning and provide additional lessons. But, according to recent data, almost one in three households do not subscribe to broadband services at any speed, which prevents many students from completing coursework at home. Therefore, the Commission seeks comment on creative solutions to address the homework gap so that eligible low-income students are provided with affordable, reliable, and quality broadband services. Comment is also requested on the following: How can the FCC ensure that low income households that include school children are aware of and have the opportunity to participate in a broadband-focused Lifeline program? How can the FCC identify low-income households that include school children? How can the FCC incentivize Lifeline providers to reach out to households with school children to provide Lifeline supported services? Are there ways to use the E-Rate program and the data the FCC already collects to address the homework gap? Health Care. Broadband is an important tool for health care because it can reduce health care-related costs for both the patient and the health care providers. For example, telehealth, the ability to connect with health care professionals remotely via broadband, has significant potential to enrich a patient s life by reducing the need for frequent visits to the doctor and by utilizing e-visits and remote telemetry monitoring. The FCC seeks comment on broadband health care related initiatives that can significantly improve the health outcomes for low-income consumers. Individuals With Disabilities. Broadband adds countless benefits to the daily lives of individuals with disabilities because broadband is a flexible and adaptable tool that can be used to deliver affordable, convenient, and effective services, and enable a range of social, economic, and health-related benefits. The FCC is seeking comment on how to ensure the benefits of broadband reach low-income individuals with disabilities. Comment is sought on existing outreach efforts or eligibility initiatives targeted towards individuals with disabilities that ensure the benefits of broadband are utilized by this community. Comment is also sought on data showing the use, benefits, and penetration of broadband for individuals with disabilities so that the Commission may identify trends across different types of communities and regions, particularly those that serve individuals with disabilities. 911 Services. Currently, Lifeline providers must ensure that their Lifeline service offerings are compliant with all applicable 911 requirements. As the Lifeline program modernizes, the Commission seeks to ensure that low-income consumers have access to critical broadband public safety communications during an Page 2 of 16

3 emergency, and at service levels comparable to those offered to other residential subscribers. Accordingly, the FCC seeks comment on the utilization of broadband by low-income consumers to receive public safety alerts and connect with public safety professionals. MINIMUM SERVICE LEVELS FOR VOICE AND BROADBAND The universal service statute directs the Commission to base its universal service policies on a number of principles, including the principle that quality services be available at just, reasonable, and affordable rates. The statute also states that low-income Americans should have access to telecommunications and information services that are reasonably comparable to those services provided in urban areas. The FCC seeks comment on developing minimum Lifeline service standards for voice and broadband based on these principles. In general, the FCC asks how many monthly voice minutes should be provided to Lifeline subscribers; how much monthly data should a broadband Lifeline offering provide; and what broadband speeds should be provided to Lifeline subscribers. Comment is sought on the following issues: Voice Service: How can the FCC require providers to continue offering affordable stand-alone voice service to Lifeline subscribers? Will requiring Lifeline providers to offer stand-alone voice service affect providers business models and affordability to the consumer? Should the FCC establish a standard for mobile and/or fixed voice-only service based on objective data? Should the baseline for minimum mobile voice service be based on average monthly usage (consumers use an average of 690 to 746 voice minutes per month)? Should the FCC require mobile providers to offer unlimited talk and text to Lifeline consumers to maximize the benefit of the Lifeline subsidy? How can the FCC ensure fixed voice service provides reasonably comparable service that is affordable for low-income consumers? Is there a price to the low-income consumer above which voice telephony service is no longer affordable? Fixed Broadband Service: How can the FCC define an objective minimum service level standard for fixed broadband service? The FCC proposes to require providers to offer data-only broadband to Lifeline customers to ensure affordability of the service. Should the FCC define an objective standard for fixed service by looking at what kinds of services are typically offered or subscribed to in urban areas or by a substantial majority of Americans? Could the FCC look to the minimum broadband service standards adopted in the Connect America Fund proceeding? Could the FCC establish an objective standard that could be updated on a regular basis simply by examining new data about fixed broadband service? Mobile Broadband Service: Page 3 of 16

4 Should the FCC define an objective minimum service level standard for mobile broadband service by looking at what kinds of services are typically offered or subscribed to in urban areas or by a substantial majority of Americans? For example, in December 2014, an average American consumer utilized roughly 1.8 GB of data across both 3G and 4G networks. Should a mobile minimum service standard be tied to this average, or a similar metric? Would it be more appropriate to set a standard tied to a different level of consumer usage? Minimum Service for Tribal Lifeline: How should the FCC establish minimum levels of Lifeline service for voice and broadband for low-income residents living on Tribal lands? What are the appropriate standards for mobile data as well as a fixed broadband service? What metric should be used and how should it evolve over time? Setting Minimum Service Levels and Ensuring Compliance: The Commission has requested comment on how it should set appropriate minimum Lifeline service levels that evolve with technology and innovation, and how it can ensure compliance with those levels. The Commission proposes that it delegate to the Wireline Competition Bureau (Bureau) the responsibility for establishing and regularly updating a mechanism setting the minimum service levels that are tied to objective, publicly available data. As for ensuring Lifeline providers comply with any minimum voice and broadband service level requirements, the Commission seeks comment the following: Should minimum service requirements be part of an annual certification by Lifeline providers? Should they be part of any application to become a Lifeline provider? What information and records should be retained for an audit or review? MAKING THE $9.25 MONTHLY SUPPORT AMOUNT PERMANENT The basic federal Lifeline support amount is $9.25 per subscriber per month. Lifeline providers receive $9.25 per subscriber per month from the universal service fund (USF) if they pass the full support amount through to each low-income subscriber.[4] The $9.25 support amount was adopted on an interim basis in the Lifeline Reform Order, and the FCC sought comment in the further notice on establishing a permanent, more appropriate amount, but the Commission has taken no further action since then. In the FNPRM, the Commission proposes to make the $9.25 monthly support amount permanent. Comment is sought generally on this tentative conclusion. Comment is also sought on the following issues related to a permanent $9.25 monthly support amount: If the Commission sets a minimum service level where $9.25 is insufficient to cover broadband service, would an end-user charge be necessary? How can the FCC ensure both a sufficient level of broadband service while also ensuring the service is affordable to the consumer? Will service bundles be impacted by a permanent $9.25 support level? Should the support amount be reduced for Lifeline supported mobile voice-only service? What level of Page 4 of 16

5 support is needed for mobile voice-only service? Should there be a different level of support for a voice and broadband bundle? If so, what would be appropriate for each? BROADBAND CONNECTION CHARGE REIMBURSEMENT When a consumer initially subscribes to fixed broadband service, a visit from one of the Internet service provider s technicians is usually required, which results in an up-front charge. According to the Commission, such fees may serve as a barrier for low-income consumers to adopt broadband. Accordingly, the Commission is seeking comment on whether the Lifeline program should provide a one-time reimbursement to Lifeline consumers to cover any up-front broadband connection charges for fixed residential service. Comment is also sought on how to appropriately set the level of the broadband connection charge subsidy, while at the same time protecting against waste, fraud, and abuse. DOES THE LIFELINE PROGRAM NEED A BUDGET? Of the four individual support mechanisms that make up the USF, the Lifeline program is the only one that is not subject to a budget or funding disbursement cap. Total support amount disbursements have fluctuated over the past five years. In 2012, USAC disbursed approximately $2.2 billion in Lifeline support payments compared to approximately $1.6 billion in Lifeline support payments in However, due to the reforms adopted in the 2012 Lifeline Reform Order, disbursements appear to have leveled off, and the Commission now believes it is in a position to take a realistic look at whether the Lifeline program should be placed on a budget. Accordingly, the Commission requests comment on a number of issues related to adopting and implementing a budget for the Lifeline program: What should the Lifeline budget be? Today, not every eligible household participates in the Lifeline program. If the Commission were to adopt the current size of the Lifeline program as a budget, would this foreclose some eligible households from participating in the program? Ultimately the size of the Lifeline program is limited by the number of households living in poverty and, as the economy improves, the Lifeline program should naturally reduce in size. Currently, there is no data to suggest that the particular size of Lifeline in a given year is the right approach. Comment is sought on these findings. Because Lifeline is a month-to-month program, could a budget create situations where the Commission would be forced to suddenly halt support for individuals that otherwise meet the eligibility requirements? How can the FCC monitor and forecast demand for the Lifeline program so that it will be in a position to address any possible increases in advance of reaching the budget, should that necessity arise? CREATING A NATIONAL LIFELINE ELIGIBILITY VERIFIER Under current FCC rules, Lifeline providers are the ones who verify whether individuals are eligible to receive Lifeline benefits. In order to further reduce fraud, waste, and abuse, the Commission proposes that Page 5 of 16

6 the responsibility of determining Lifeline eligibility, along with other functions related to the Lifeline program be shifted away from Lifeline providers to a trusted third party a national Lifeline Eligibility Verifier. A national verifier would review consumer eligibility documentation to verify Lifeline eligibility, and where feasible, interface with state eligibility databases to verify Lifeline eligibility. A national verifier would operate in a manner similar to the systems some states have already implemented, but on a national scale. The Commission proposes that Lifeline providers be required to cover part or all of the costs of the operations of the national verifier. Additionally, the Commission proposes leveraging eligibility and oversight procedures that already exist within other benefit programs and states. Comment is sought on the following issues: Core Functions. A national verifier would, at a minimum, review consumers proof of eligibility and certification forms, and be responsible for determining prospective subscribers eligibility. Comment is requested on other potential responsibilities related to these core functions. Comment is also requested on reasonable data security practices that should be adopted by a national verifier and whether a national verifier should notify consumers if their information has been compromised. Interfacing with Subscribers and Providers. Comment is sought on whether consumers should be permitted to directly interface with a national verifier, or whether only providers should be permitted to do so. If consumers are permitted to interface with a national verifier, could they compile and submit all required Lifeline eligibility documentation and obtain approval for Lifeline prior to contacting a provider for service? Should interaction with a national verifier be limited to providers because consumers may be unfamiliar with many of the Lifeline application documents and program requirements? Should potential subscribers be able to contact the national verifier to learn about Lifeline service and the providers that serve the subscriber s area? Processing Applications. Under any implementation of a national verifier, there will likely be a delay between a national verifier receiving documentation and the time a national verifier makes an eligibility determination. Therefore, the Commission asks whether a provider should be permitted to provision service to a consumer prior to verification of eligibility by a national verifier. The Commission also asks where there should be a pre-approval process. Comment is sought on the additional related issues: What assistance, if any, should providers or a national verifier give to the subscriber in completing a Lifeline application and compiling supporting eligibility documentation to shorten the eligibility verification process? How should providers and/or consumers transmit and receive Lifeline applications and proof documentation with a national verifier? If consumers are not permitted to submit documentation on their own, how should providers submit consumer eligibility documentation to a national verifier? Interacting with State Databases. The Commission is seeking comment on the scope of a national verifier s operations and how or whether it should interact with states that have already put in place state eligibility databases and/or processes to check documentary proof of eligibility. Existing State Systems for Verifying Eligibility. The Commission is seeking comment on the relationship between a national verifier and states that have existing systems for verifying eligibility. Comment is Page 6 of 16

7 requested on the following questions: Should states be required to use a national verifier? Should states be allowed to opt-out of using a national verifier in those cases where the state has developed a process to examine subscribers eligibility and/or a state eligibility database and the state wishes to continue to perform the eligibility screening function on its own? What standards would a state need to meet in order to opt-out of using a national verifier? Should states be required to update eligibility database data on a daily basis? Should the FCC and USAC be allowed to audit state databases? Could Lifeline providers be required to fund any necessary implementation efforts for state eligibility databases? Alternatively, should state eligibility systems be utilized as the primary means of verifying Lifeline eligibility, while also utilizing a national verifier to promote and coordinate state eligibility verification efforts? Dispute Resolution. The Commission is seeking comment on whether there should be a dispute resolution process for consumers or providers to contest a rejection of a prospective consumer s eligibility for Lifeline. Privacy. According to the Commission, consumer privacy is of the utmost concern in establishing a national verifier. The Commission proposes that that any national verifier be required to put in place significant data privacy and security protections to guard against unauthorized misappropriation, breach, or disclosure of personal information. In order to ensure that consumers privacy is protected at all stages of the Lifeline eligibility verification process, comment is sought on how a national verifier can receive, process, and retain eligibility documentation while ensuring adequate protections of consumer privacy. How would the functions of a national verifier conform to government-wide statutory requirements and regulatory guidance with respect to privacy and information technology? What privacy and data security practices should the FCC require a national verifier to adopt with respect to its receipt, processing, use, sharing, and retention of applicant information? Should a national verifier be required to provide consumers with a privacy policy, and what topics should such a policy include? Additional Functions of a National Verifier. The Commission is seeking comment on additional functions that a national verifier could perform to further eliminate waste, fraud, and abuse. Should a national verifier become involved in the subscriber recertification process? Could a national verifier interact with the National Lifeline Accountability Database (NLAD) to check for duplicates? Should a national verifier be responsible for loading subscriber information into the NLAD on behalf of Lifeline providers? Should a national verifier assist in the process of generating or verifying the accuracy of Lifeline providers FCC Form 497s? Page 7 of 16

8 If the Commission establishes a national verifier or otherwise removes the responsibility for determining eligibility from Lifeline providers, should Lifeline providers document retention obligations be changed? If the Commission establishes a national verifier, how should the Commission transition to such a system? COORDINATED ENROLLMENT WITH FEDERAL AND STATE PROGRAMS The Commission is seeking comment on coordinating with Federal and state agencies to educate consumers about, or simultaneously allow consumers to enroll themselves in, the Lifeline program.[5] It has suggested that coordinated enrollment could be used in lieu of creating a separate national verifier to confirm Lifeline. According to the Commissioner, coordinated enrollment with other Federal and state benefit programs could: (1) educate consumers about the possibility of signing up for Lifeline while they sign up for other programs; (2) leverage existing infrastructure and technologies further minimizing waste, fraud, and abuse, while confirming eligibility; (3) provide more dignity to the program and better protect consumer privacy, because it would limit the number of entities to which consumers would disclose personal information; (4) allow consumers to simultaneously apply for Lifeline as they enroll in other programs; and (5) work, together with other benefit programs to transfer Lifeline benefits directly to consumers allowing consumers to redeem Lifeline benefits with the Lifeline provider of their choice. Comment is sought on a number of issues, including the following: How can the Lifeline program leverage existing technologies, databases, and fraud protections that already exist in other federal benefit programs? What are the incremental costs of adding Lifeline to an existing eligibility database in lieu of setting up a separate national framework? Would administrative burdens and costs outweigh the benefits of such a proposal? How can the Commission facilitate coordinated enrollment with other Federal benefit programs such as the USDA and its state agency counterparts (the agencies that administer the Supplemental Nutritional Assistance Program SNAP)? TRANSFERRING LIFELINE BENEFITS DIRECTLY TO THE CONSUMER Previously, the Commission has considered assigning Lifeline benefits directly to the consumer. Under this approach, consumers can take their benefit to the Lifeline providers of their choosing and can receive Lifeline support for whatever service best meets their needs. The Commission has once again put this up for consideration. The Commission is seeking comment on having third parties directly assign Lifeline benefits to individual consumers through a physical media (e.g., like a debit card) or a unique code (e.g., PIN).[6] STREAMLINE ELIGIBILITY FOR LIFELINE SUPPORT Under current Lifeline rules, consumers qualify for Lifeline benefits if they have a household income at or below 135 percent of the Federal Poverty Guidelines or receive benefits from at least one of a number of Page 8 of 16

9 federal assistance programs. The Commission is seeking comment on the prospect of modifying the way low-income consumers qualify for support under the Lifeline program to target the Lifeline subsidy to those low-income consumers most in need of the support.[7] Comment is sought on a number of issues, including the following: Which federal assistance programs should the FCC continue to use to qualify low-income consumers for support under the Lifeline program? What other benefit programs should be used to qualify consumers for Lifeline? Should the FCC limit the qualification criteria for Lifeline support exclusively to households receiving benefits under specific federal assistance programs? If the Commission modifies the Lifeline program eligibility criteria, to what extent would Lifeline providers recordkeeping processes by reduced and/or streamlined? If the Commission modifies the Lifeline program eligibility criteria, how should the Commission structure and implement a transition period? STANDARDS FOR ELIGIBILITY DOCUMENTATION Under current Lifeline rules, Lifeline providers are required to confirm an applicant s eligibility prior to enrolling the applicant in the Lifeline Program. But, program eligibility documentation may not contain sufficient information to tie the documentation to the identity of the prospective subscriber and often does not include a photograph. Accordingly, the Commission proposes that Lifeline providers be required to obtain additional information in certain instances to verify that the eligibility documentation being presented by the consumer is valid, including obtaining eligibility documentation that includes identification information or a photograph.[8] STREAMLINING THE ETC DESIGNATION PROCESS As part of a general effort to increase competition and innovation in the Lifeline marketplace, the Commission is seeking comment on streamlining the ETC designation process at the state and federal levels to increase market entry into the Lifeline space. Comment is sought on the following: What is the extent of the Commission s authority under section 214(e) to streamline the ETC designation process at the Commission? In what ways can the Commissioner streamline the ETC designation process to best promote the universal service goals found in the Communications Act? Are there certain ETC requirements that are overly burdensome? What are the benefits and drawbacks to a uniform, streamlined approach at both the state and federal levels? How can the Commission best encourage state commissions to adopt a path similar to a federal streamlined approach? PERMITTING ETCS TO OPT-OUT OF PROVIDING LIFELINE Page 9 of 16

10 Pursuant to Section of the FCC s rules, carriers designated as ETCs are required to offer Lifeline supported service throughout their ETC-designated service area. Recently, a number of ETCs have told the Commission that competition in the Lifeline program has resulted in multiple areas where several ETCs provision Lifeline supported service to the same potential customer base. They have also proposed that ETCs be permitted to opt-out of providing Lifeline supported service in certain circumstances. Accordingly, comment is sought on whether the Commission should relieve ETCs of the obligation to provide Lifeline supported service, pursuant to their ETC designation, in specific areas where there is a sufficient number of Lifeline providers. CREATING A NEW LIFELINE APPROVAL PROCESS According to the Commission, there is evidence that the ETC designation process may be an impediment to broader participation in the Lifeline program. As a way to address this barrier, the Commission is seeking comment on the creation of a process to participate in Lifeline that is entirely separate from the ETC designation process required to receive high cost universal service support. Comment is sought on the following related issues: Does the Commission have the authority to give non-etcs Lifeline support? How would a process and mechanism to designate providers for participation in the Lifeline program be structured? What information should providers submit to participate in the Lifeline program? What certifications or other information should be required? How would other reform proposals impact any new Lifeline approval process? What role would the states play in a new Lifeline approval process? TRACFONE PETITION FOR RULEMAKING REGARDING TEXTING In October 2014, TracFone Wireless, Inc. (TracFone) filed a petition requesting that the FCC commence a rulemaking proceeding to amend its rules to allow the sending and receiving of text messages to count as usage of a Lifeline service.[9] TracFone also requested an interim waiver to allow TracFone s customers to demonstrate usage of their Lifeline service via text messaging pending adoption of the proposed rule amendment. As part of the FNPRM, the Commission has granted the portion of Tracfone s petition that requests the initiation of a rulemaking proceeding to amend Section (c)(2) of the FCC s rules to allow Lifeline subscribers to establish usage of Lifeline service by sending text messages. Comment is sought on that issue and whether the distinctions between text messaging, voice, and should remain relevant, for the purposes of the usage rules, given that all such transmissions may occur over the same broadband Internet access service. The Commission has denied the portion of TracFone s petition that requests the initiation of a rulemaking to also include receipt of text messages to count as usage. The Commission has also denied the portion of Tracfone s petition that concerns a request for interim relief allowing subscribers to use text messaging to establish usage during the pendency of the requested rulemaking. Page 10 of 16

11 SUBSCRIBER DE-ENROLLMENT PROCEDURES According to the Commission, there is evidence that subscribers cannot readily reach their Lifeline provider to terminate service, or their request to terminate service is not followed. As a result, funds are wasted for services that are either not used or no longer desired. The Commission proposes that Lifeline providers make readily available a 24 hour customer service number allowing subscribers to de-enroll from Lifeline services, for any reason. Further, the Commission proposes that Lifeline providers complete a termination request within two business days. WIRELESS EMERGENCY ALERTS Wireless Emergency Alerts (WEA) are text-like messages that alert subscribers of emergencies in their area. WEAs fall under one of the following three classes: 1) Presidential alerts, 2) imminent threats, and 3) child abduction emergency, or AMBER, alerts. Participation in the WEA system by wireless carriers is widespread but entirely voluntary. The Commission is seeking comment on ways to increase Lifeline provider participation in the WEA system. LIFELINE PROGRAM EVALUATION In response to a Government Accountability Office recommendation, the Commission is seeking comment on how it should conduct a program evaluation to determine how well Lifeline is serving its intended objectives. Comment is sought on whether an evaluation should focus on narrowing the gap in telephone penetration rates, affordability, or some other goals. Comment is also sought on how an evaluation plan should be structured. LIFELINE SUPPORT FOR TRIBAL LANDS The Commission is requesting comment on an extensive set of questions on three issues related to Lifeline support for Tribal lands. First, the Commission is requesting information on whether and how enhanced Tribal support is being utilized on Tribal lands, and whether the minimum service level for Tribal consumers should be different from the proposed minimum service levels for other consumers. Second, the Commission is seeking comment on narrowly tailoring enhanced Lifeline support to ensure that it actually supports the deployment of infrastructure. One of the Commission s original intentions in adopting enhanced Tribal Lifeline support was to encourage deployment and infrastructure build-out to and on Tribal lands. Third, the Commission is seeking comment on requiring subscribers to produce additional documentation to demonstrate that they reside on Tribal lands. ELECTRONIC SIGNATURES In the Lifeline Reform Order, the Commission clarified that Lifeline providers could obtain electronic signatures from potential or current subscribers certifying eligibility pursuant to Section of the FCC s rules. This allows Lifeline providers to use tablets and other electronic devices to sign up potential Lifeline subscribers. In order to ensure that new technologies are deployed with adequate protections and mechanisms that permit oversight, the Commission is seeking comment on the types of techniques or Page 11 of 16

12 processes whose use might, in the event of an investigation or audit, show that an electronic signature is valid. In other words, the Commission is seeking ways to prove that a signature on an electronic certification form in fact reflects the subscriber s intent to sign up for Lifeline service. THE NATIONAL LIFELINE ACCOUNTABILITY DATABASE: APPLICATIONS AND PROCESSES Under current rules, a Lifeline provider must submit an FCC Form 497 to USAC every month to receive a reimbursement for providing Lifeline service. In the FNPRM, the Commission proposes that the NLAD be used to calculate Lifeline providers monthly Lifeline reimbursements. Comment is sought on the legal and administrative aspects of transitioning to a process whereby Lifeline providers support is calculated based on Lifeline provider subscriber information in the NLAD: How would officers continue to make the monthly certifications now required on the FCC Form 497 in the NLAD? Should there be a separate electronic certification? Would Lifeline providers operating in states that opted out of the NLAD be required to continue to file FCC Form 497s for those states? How should Lifeline providers be required to pay for the implementation and operation of additional NLAD functions? How can the NLAD ensure that Lifeline providers do not receive reimbursement for subscribers that they no longer serve? Is a dispute resolution process needed? Additionally, the Commission is seeking comment on using information stored in the NLAD for other aspects of the Lifeline program. For example, the Commission asks whether USAC could use NLAD subscriber information to perform recertification in those instances where a Lifeline provider selects USAC to perform those duties. ASSUMPTION OF ETC DESIGNATIONS, ASSIGNMENT OF LIFELINE SUBSCRIBER BASE AND EXITING THE MARKET The Commission is seeking comment on proposals to minimize the disruption to Lifeline subscribers associated with the transfer of control of ETCs or the sale of assets and lists of customers receiving benefits under the program, as well as the transfer of ETC designations between providers. Comment is sought on a host of issues, including: When should an ETC be permitted to assume an ETC designation from another carrier? Should the Commission apply its existing approval process to facilitate assumption of ETC designations in which the Commission is the ETC-designating authority? The Commission proposes that a more streamlined approach should apply to transactions where the acquiring entity is also an FCC Designated ETC. What type of requirements should apply if the Commission provides Lifeline support to non-etcs or creates a separation designation? Should the Commission establish notification requirements that are triggered when a carrier sells or otherwise transfers Lifeline subscribers to another provider or exits the market? Page 12 of 16

13 What type of notice and approval process should apply when a Lifeline provider sells or transfers its Lifeline subscribers to another service provider? What type of notice and approval process should apply when a Lifeline provider exits the market? SHORTENING THE NON-USAGE PERIOD TO 30 DAYS Pursuant to the FCC s rules, if a Lifeline subscriber fails to use his Lifeline service for 60 consecutive days, an ETC must notify the subscriber that his Lifeline service will be terminated for non-usage if he does not use it within the next 30 days.[10] As part of an ongoing effort to reduce waste and inefficiency in the Lifeline program, the Commission proposes to reduce the non-usage interval to 30 days, and seeks comment on the proposal. INCREASING PUBLIC ACCESS TO LIFELINE PROGRAM DISBURSEMENTS AND SUBSCRIBER COUNTS To increase transparency and promote accountability in the Lifeline program, the Commission proposes that USAC modify its online disbursement tool to display the total number of subscribers for which an ETC seeks Lifeline support for each study area code, including how many subscribers for which the ETC claims enhanced Tribal support. The Commission believes that making this data more accessible will allow the public, regulators, and policymakers to more easily ascertain the number of subscribers that each ETC serves on a monthly basis. Comment is sought on this proposal. UNIVERSAL CONSUMER CERTIFICATION, RECERTIFICATION, AND HOUSEHOLD WORKSHEET FORMS When enrolling in Lifeline service, consumers must complete and sign a written form (certification form) by providing certain personal information and making a number of certifications. Completion of a similar form (recertification form) is required when a consumer annually recertifies his or her eligibility for Lifeline. Both forms must meet the requirements set forth in Section of the FCC s rules. In the FNPRM, the Commission is seeking comment on adopting forms approved by the Office of Management and Budget that all consumers, ETCs, or states, where applicable, must use in order to certify consumers initial and ongoing eligibility for Lifeline benefits. Additionally, the Commission is seeking comment on adopting a standard one-per-household worksheet for when multiple households reside at the same address and seek Lifeline benefits. EXECUTION DATE FOR CERTIFICATION AND RECERTIFICATION When consumers complete the Lifeline certification form and recertification form, Lifeline providers are not required to obtain from the consumer the date on which each form was executed or to record such date. The lack of an execution date can create confusion regarding which rules should apply to a given subscriber s enrollment. Thus, the Commission seeks comment on a proposal to require Lifeline providers to record the subscriber execution date on certification and recertification forms. OFFICER TRAINING CERTIFICATION Page 13 of 16

14 In order to increase ETC accountability and compliance with the Lifeline rules, the Commission proposes to require an officer of an ETC to certify on each FCC Form 497 that all individuals taking part in that ETC s enrollment and recertification processes have received sufficient training on the Lifeline rules. Under the proposal, ETCs would be required to affirmatively certify on each FCC Form 497 that all individuals, both company employees and third-party agents, interfacing with consumers on behalf of the company have received sufficient training on the Lifeline program rules. Comment is sought on the proposal. FIRST-YEAR ETC AUDITS In the Lifeline Reform Order, the Commission adopted a requirement that USAC conduct audits of new Lifeline providers within the first year of their participation in the program, after the provider completes its first annual recertification of its subscriber base.[11] In the FNPRM, however, the Commission proposes to revise this audit rule because a number of first-year audits have proved to be of no value due to the fact that during their first year, many Lifeline providers are still ramping up operation. The number of subscribers they are serving results in a sample size too small to draw conclusions regarding compliance with the FCC s Lifeline rules. Accordingly, the Commission proposes that, if a new Lifeline provider has sufficiently limited operations, the audit be delayed until such time that it is useful to audit the Lifeline provider. The Commission proposes to delegate authority to the Office of Management and Budget (OMB), in its role of overseeing USF audit programs, to work with USAC to identify those audits of first-year Lifeline providers that will not result in useful audits and permit those carriers to be audited after the one-year deadline. Comment in sought on this proposal. CONCLUSION In the months leading up to the release of the FNPRM, most of the attention was focused on the Commission proposal that the Lifeline program support broadband Internet access service.[12] Most agree that this is long overdue because every other universal service support mechanism provides funding for broadband service in some way. But, there are a number of issues that must be addressed along the way, some of which are more important than others, such as whether the current $9.25 discount/reimbursement rate will adequately support broadband service. Another very important issue that is closely related to the monthly $9.25 rate is whether the Lifeline program should be subject to a budget. If the monthly discount rate is increased, it is possible that the amount of Lifeline support that is annually distributed could grow significantly because the Low-Income support mechanism is the only portion of the USF that remains truly uncapped. Historical data shows that of the total number of households that are eligible for Lifeline service, only about half receive the benefit. In 2012, the total number of households eligible for Lifeline totaled 40 million, but only roughly 18.1 million households participated in Lifeline. Because of the importance of broadband in today s society and economy, it is possible that many more consumers will enroll in Lifeline service if they can apply the discount to broadband. However, there are some that disagree, and believe that if the Lifeline program is changed to support broadband, there will not be an increase in total Lifeline subscribers. They argue there will not be an increase in program participation because the high cost of computers and related equipment are often a barrier to broadband adoption by low-income Americans. However, low-cost computers and tablets continue to be introduced into Page 14 of 16

15 the market, along with inexpensive smartphones. Even if the monthly discount rate does not change, it is possible that Lifeline enrollment could increase. In the FNPRM, the Commission is seeking comment on easing the ETC designation process and many other issues related to increasing the number of Lifeline providers in the market changes which could result in more Americans signing up for Lifeline. Without a budget, the Lifeline portion of the USF will continue to grow, which in turn will increase the overall pressure on the USF and boost the USF contribution factor. This will irritate policymakers, regulators, tax reform groups and others that believe the FCC should reign in the overspending of the USF. One alternative to a budget that would relieve some stress on the USF that is likely to come from an enlarged Lifeline program could be USF contributions reform. Indeed, the Lifeline reforms proposed in the FNPRM will likely re-open the door to USF contributions reform. If you are interested in filing comments on the FCC s proposals, please let us know. [1] Lifeline and Link Up Reform and Modernization, WC Docket No ; Telecommunications Carriers Eligible for Universal Service Support, WC Docket No ; Connect America Fund, WC Docket No , Second Further Notice of Proposed Rulemaking, Order on Reconsideration, Second Report and Order, and Memorandum Opinion and Order, FCC (rel. June 22, 2015) (FNPRM). [2] See Lifeline and Link Up Reform and Modernization, WC Docket No ; Federal-State Joint Board on Universal Service, CC Docket No ; Lifeline and Link Up, WC Docket No , Notice of Proposed Rulemaking, FCC 11-32, 14 (Mar. 4, 2011). [3] See e.g., Petition of TracFone Wireless, Inc. for Forbearance from 47 U.S.C. 214(e)(1)(A) and 47 C.F.R (i), CC Docket No , Order, FCC (2005); Virgin Mobile USA, L.P. Petition for Forbearance from 47 U.S.C. 214(e)(1)(A); Petition for Designation as an Eligible Telecommunications Carrier, CC Docket No , Order, FCC (2009). [4] 47 C.F.R (b). Up to an additional $25 per month of Lifeline support is available to consumers that reside on Tribal lands. See 47 C.F.R (a)(2). [5] See FNPRM at [6] See FNPRM at [7] See FNPRM at [8] See FNPRM at [9] Wireline Competition Bureau Seeks Comment on TracFone s Petition for Rulemaking and Interim Relief to Amend the Lifeline Usage Rules, WC Docket No , Public Notice, DA (Nov. 3, 2014); TracFone Petition for Rulemaking and for Interim Relief, WC Docket No Page 15 of 16

16 (filed Oct. 1, 2014). [10] See 47 C.F.R (e)(3). [11] See 47 C.F.R (b). [12] Throughout the FNPRM, the Commission uses the term broadband generally to mean access to the Internet that is not via a dial-up connection. See FNPRM at footnote 3. TAGS: Broadband, Lifeline, USF, Wireless, Wireline Edit Post Page 16 of 16

17 Bennet & Bennet, PLLC - Commissioner Pai Proposes USF Reforms for Rate of Return Carriers COMMISSIONER PAI PROPOSES USF REFORMS FOR RATE OF RETURN CARRIERS Posted on July 1, 2015 Please contact Michael Bennet at mbennet@bennetlaw.com or Tony Veach at tveach@bennetlaw.com for more information. Senior Republican Federal Communications Commission (FCC or Commission) Commissioner Ajit Pai has formally proposed a plan for reforming the FCC s rules that govern the way high-cost universal service fund (USF) support is distributed to rate-of-return incumbent local exchange carriers.[1] Specifically, Commissioner Pai s plan would provide USF support for stand-alone broadband service. Commissioner Pai announced his plan during a meeting in Omaha, Nebraska with representatives from broadband providers that serve rural Nebraska. Bottom Line: Bottom Line: The targeted changes to the FCC s rules that have been proposed by Commissioner Pai would allow rate-of-return carriers to use USF support to offset the cost of providing stand-alone broadband service. NTCA, WTA, NECA, and others have been calling on the FCC to make these changes for well over a year now. With the addition of Commissioner Pai s voice to the consensus on stand-alone broadband that has already been reached, there is good reason for the FCC to take action in the immediate future. However, it appears that the debate over the details of a voluntary path to cost model support may continue to hold things up. THE STAND-ALONE BROADBAND CONUNDRUM Under the FCC s current universal service rules, USF support is not available to a rate-of-return carrier when a customer drops his voice service and chooses to subscribe only to broadband service from that carrier (referred to as stand-alone broadband service). This is problematic because more and more subscribers are terminating their voice service and using an over-the-top VoIP product or a mobile wireless phone for voice calls. In many cases, upon moving to a standalone broadband service, customers are often shocked to find that their standalone broadband service is more expensive than a bundle of broadband and traditional voice service. As Commissioner Pai explains, many carriers are faced with a difficult choice. On one hand, they can offer stand-alone broadband which urban consumers have and rural consumers want and lose universal service support. On the other, they can deny consumers the option of an Internet-only service, and risk them dropping service altogether (which they increasingly are). This lousy situation that rate-of-return carriers find themselves in is a byproduct of the FCC s USF/ICC Transformation Order, which was intended Page 1 of 4

18 Bennet & Bennet, PLLC - Commissioner Pai Proposes USF Reforms for Rate of Return Carriers to promote broadband deployment in rural areas. COMMISSIONER PAI SUPPORT FOR STAND-ALONE BROADBAND Commissioner Pai believes that targeted changes to existing universal service rules can solve the standalone broadband problem. These targeted changes are detailed in a set of proposed rules which are attached at the end of Commissioner Pai s statement announcing his USF reform plan. Generally, the rules direct stand-alone broadband costs to be included in the calculation of high-cost loop support and interstate common line support. The rules would determine how much support should be attributed to stand-alone broadband, and would allow high-cost USF to be used to offset the cost of providing stand-alone broadband service. Additionally, Commissioner Pai states that his plan would keep rate-of-return support within the existing budget. COMMISSIONER PAI A RATE-OF-RETURN COST MODEL While Commissioner Pai believes that making targeted changes to the FCC s rules is the solution, he also supports giving rate-of-return carriers the option of moving to a regulatory regime that is based on a cost model, and he believes the Commission should have that path in place by the end of the year. Commissioner Pai acknowledges that the Alternative Connect America Cost Model (A-CAM) might not be perfect, but states that this should not prohibit participation on a strictly voluntary basis. In Commissioner Pai s view, there appears to be a consensus on a number of key points related to a rate-ofreturn cost model: Participation should be voluntary; Cost model support should last for 10 years; Support should target unserved locations; and FCC Form 477 data can form the basis of a streamlined challenge process. To help advance the debate over the cost model, Commissioner Pai has offered a few key points of his own that are related to the transition process. First, Commissioner Pai proposes that there be a five-year transition period for carriers that move to the model and would see their support decrease. He believes there should be no limit on the number of carriers that are allowed to move to the model and receive decreased support. Second, Commissioner Pai is concerned that a large number of carriers that will receive an increase in annual USF support from the model will choose that path. This could swamp the rate-of-return budget. He is in favor of using funding from the FCC s broadband reserve fund to address budget overages, but also suggests that the FCC should consider prioritizing model participation for those areas that have the lowest build out of high-speed broadband. BROADBAND RESERVE FUNDS Commissioner Pai supports using broadband reserve funds to cover budget overages that could result from moving to cost model support and receiving an increased level of annual support. Other Commissioners and FCC staff have indicated that they also support using broadband reserve funds for that purpose. The broadband reserve fund was created when the FCC placed the high cost fund on a budget, and is made up Page 2 of 4

19 Bennet & Bennet, PLLC - Commissioner Pai Proposes USF Reforms for Rate of Return Carriers of excess USF funding. In the USF/ICC Transformation Order, the FCC established an annual budget for the high-cost portion of the USF of no more than $4.5 billion. [2] As part of the implementation of that budget, the Commission instructed the Universal Service Administrative Company (USAC) not to make any prior period adjustments related to support for the high-cost portion of the USF. In other words, if actual USF contributions exceed demand, excess contributions are to be credited to a new Connect America Fund reserve account, to be used to fund future broadband deployment.[3] In a May 1 filing, USAC projects that the broadband reserve fund will contain $2.5 billion in the third quarter of CONCLUSION: CHAIRMAN WHEELER SAYS HURRY UP On June 26, 2015, FCC Chairman Tom Wheeler made a keynote speech at the Brookings Institute s event on maximizing the benefits of broadband. His overall message to those in attendance was this It s pedal to the metal on broadband policy for both consumers and competitors. Among the topics he discussed was universal service reform for rate-of-return carriers. By the end of 2015, the Chairman expects the FCC to have a regulatory system in place that presents two options for rate-of-return carriers: (1) stay on a highcost loop support system that has been modified to provide support for stand-alone broadband (along with a few other changes); or (2) voluntarily move to cost model regulation. In his Brookings speech, Chairman Wheeler reaffirmed his goal of completing reform by the end of the year, but also warned rate-of-return carriers that time is running out: We had been in search of a consensus proposal from the rate of return carriers that would help us meet the policy objectives the Commission unanimously adopted in April Unfortunately, while I appreciate the carriers willingness to engage, if we are to keep on schedule, time is not our friend. Absent a consensus from the parties involved we will put forth our own proposal.[4] Representatives of the rate-of-return carrier industry have been meeting non-stop over the past two months in an effort to develop a comprehensive plan for long-term high-cost universal service reform. They submitted a proposal on June 3, 2015, outlining many details on which a consensus has been reached. Further, these representatives are meeting with FCC staff on a daily basis and amongst themselves to reach a consensus on outstanding issues. But, at this point, the FCC should realize that there will never by 100 percent agreement on every aspect of long-term universal service reform. Perhaps when the FCC says it wants the rate-of-return carrier industry to present a consensus plan, it really means it wants them to present a plan that the FCC favors. Unfortunately, the industry knows what the FCC s last plan for long-term USF reform looked like (QRA), which is why it s troubling that the FCC has not acknowledged the consensus that has already been reached. [1] FCC News Release, Statement Of FCC Commissioner Ajit Pai Announcing His Plan to Support Broadband Deployment in Rural America (June 29, 2015). [2] USF/ICC Transformation Order at 545. [3] Universal Service Administrative Company, Federal Universal Service Support Mechanisms Fund Size, Page 3 of 4

20 Bennet & Bennet, PLLC - Commissioner Pai Proposes USF Reforms for Rate of Return Carriers Projections for Third Quarter 2015, CC Docket No , p (May 1, 2015). [4] Prepared Remarks of FCC Chairman Tom Wheeler, The Brookings Institution (June 26, 2015), available at TAGS: Broadband, USF, Wireline Edit Post Page 4 of 4