'Obamaphones' for the Web?

The FCC chairman wants a digital update for what began as Reagan-era phone subsidy.


The FCC wants a program subsidizing low-income Americans' phones, which was expanded to include cellphones during the George W. Bush administration, to also apply to Internet access.

Tom RisenMay 28, 2015 | 3:08 p.m. EDT+ More


The Obama administration on Thursday announced a plan to add broadband coverage as part of the government's $1.7 billion Lifeline phone subsidy program, a proposal certain to rile Republicans who say the program is wasteful and have been seeking its elimination.

The Federal Communications Commission program, derisively called "Obamaphone" by critics who argue that it is riddled with fraud and abuse, subsidizes $9.25 per month for low-income Americans using fees collected from consumers' monthly phone bills. Administered by the states and telecommunications companies, the Lifeline program delivered subsidies to approximately 12 million Americans in 2014.

People who use welfare programs including food stamps are eligible for the program but can only receive one Lifeline subsidy per household. Participants could use the funds on either phone service or Internet service.


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The program began during the Reagan administration with coverage of landline phones, expanded to include cellphones during the George W. Bush administration and should be rebooted once again to reflect the need for Internet access, a senior FCC official said during a conference call on Thursday.

"While over 95 percent of U.S. households with incomes of $150,000 or more have Internet access, only 48 percent of households making less than $25,000 have service at home," the official said during the call. "In an era where access to broadband is necessary for full participation in society, this digital divide is unacceptable."

The proposal, which proponents say would help bridge that digital divide for millions of Americans who are unable to afford Internet service, requires a vote by the full commission before it becomes part of Lifeline. Commissioner Mignon Clyburn has supported the idea in the past, so the FCC's Democratic majority will likely approve the motion.

Republican critics of the program include Sen. David Vitter of Louisiana and Rep. Marsha Blackburn of Tennessee, both of whom have written letters to the FCC claiming the program is misused by low-income Americans that are not eligible for the monthly subsidies. Vitter has also introduced a bill in the Senate that would remove the Bush-era cellphone coverage added to Lifeline in 2008. The bill has so far not been given a vote by the Senate Committee on Commerce, Science and Transportation.

"The current standards regulating Lifeline beneficiaries are ineffective and allow for routine abuse by repeat offenders, which is why reforms must be prioritized and implemented immediately," Vitter said in his letter sent to the commission in February.

The FCC on Thursday vowed that the proposal to include broadband as part of Lifeline would also build on the program's 2012 updates to make it more efficient and less vulnerable to misuse. Indeed, the Government Accountability Office reports that since the 2012 program disbursements declined from $2.2 billion to $1.7 billion as of 2014, due in part to a reduction in the number of ineligible households receiving benefits.


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Privacy for the data on which Americans are eligible for the program is another concern noted by the FCC's proposal. The proposal would require telecoms to keep Lifeline records on eligible Americans for 10 years, instead of the current three, as part of an effort to cut down on abuse. During Thursday's conference call, the FCC official​ said the commission would push for tougher privacy protections for the data.

Misuse of Lifeline user data by YourTel America and TerraCom Inc., led the FCC to adopt cybersecurity as part of its mission in October, when it charged the telecom providers $10 million for failing to encrypt the sensitive information like Social Security numbers, addresses, names and driver's licenses.

Expanding the phone service program to include broadband subsidies "recognizes the fundamental importance of connecting low-income communities to the jobs, education, and services they need," says Kristine DeBry, vice president of the Policy Strategy Center at consumer advocacy group Public Knowledge.

Extending welfare service to include broadband Internet also raises the possibility that the fees charged to consumers to fund the program could increase "because more people will sign up," and "there is no cap on subsidies in the program," says Berin Szoka, president of think tank TechFreedom. ​​​​​​

While the FCC official said there was not yet information available on possible cost increases, he added, "we are confident the program will be kept in check by the $9.25 contribution amount." The FCC would also combat waste by shifting eligibility review from the program away from phone companies to "a neutral third-party administrator," he said.

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