Rollback of the FCC’s Lifeline program can hurt households that need broadband the most

On November 16, the FCC released a ‘re-think’ of the Lifeline program. Directed exclusively at low-income households and providing a $9.25 monthly subsidy, Lifeline is the only federal program specifically designed to make phone and broadband service more affordable. While offering a digital gateway to the modern economy, the program also regularly receives criticism about significant fraud and waste.

The FCC decision focuses squarely on prior criticisms, and plans to scale back the $2.25 billion annual program in three important ways. First, it proposes to only support facilities-based providers, and might prevent resellers (telecom providers who provide service, but don’t own and operate their network) from offering subsidized subscription plans. That limit will especially impact those on Tribal Lands, who can no longer get enhanced lifeline support of an extra $25 every month through resellers. Second, the decision may introduce a national spending cap and third, it might disallow national approvals of qualified Lifeline providers.

While Lifeline may be in need of reform, the proposed changes will only make it harder for low-income Americans to enjoy the benefits of broadband in their homes. At a time when far too many people are digitally disconnected and digital skills are more important than ever, these reforms push the national economy in the wrong direction.

Launched under President Reagan in 1985 (though, ironically, often referred to as the “Obamaphone” program), the Lifeline program first provided discounts on phone services for qualifying low-income households: those with an income at or below 135 percent of the Federal Poverty Guidelines or who qualify for assistance programs, such as Medicaid and SNAP. In 2016, the program was expanded to include broadband services, a move that signaled the importance of getting all Americans online in a digitally connected world.

While Lifeline may be in need of reform, the proposed changes will only make it harder for low-income Americans to enjoy the benefits of broadband in their homes

America is showing signs of digital distress and most would guess that the primary cause is service availability, and that certainly is an issue. Rural areas are especially underserved by broadband infrastructure. Yet the vast majority of Americans—93 percent—actually live in neighborhoods with in-home broadband service. The numbers are even higher for wireless.

But our obsession with availability has meant overlooking the real challenge: America has an enormous subscription gap, and the Lifeline program addresses precisely that gap.

Based on national numbers from the U.S. Census Bureau and the Pew Research Center, roughly a quarter of Americans don’t subscribe to broadband. And our recent work showed deep subscription gaps in neighborhoods all across the country. In 2015, almost one in four people (a total of 73.5 million) lived in low subscription neighborhoods, where fewer than 40 percent of households subscribed to in-home broadband.

In a country undergoing an uneven transition to a digitally connected economy, programs like Lifeline are crucial to unlocking the internet’s economic benefits for disadvantaged households. That’s because Lifeline targets one of the major drivers of the subscription gap. Research consistently finds low incomes stand alongside less education and older age as the strongest indicators of lower subscription rates.

Dividing neighborhoods by income drives home the point. Low-income neighborhoods (i.e., census tracts with median incomes below 80 percent of the area median income, or AMI) register the weakest subscription rates. A staggering 37 percent of people in low-income neighborhoods have poor subscription rates. We recommend you check local maps on our interactive page, where you can see how income and education can correspond to low neighborhood subscription.

metro_20171127_low income neighborhoods broadband subscribership-01

These discrepancies in broadband subscription create a new layer of potential economic and social struggle. Lower-income households may struggle to access e-governance services or benefit from telehealth. Non-adoption creates challenges for Americans who might benefit the most from access to online education and job posting forums. Especially concerning are the 17.7 million children under the age of 18 living in low-subscription neighborhoods. Living without an in-home broadband connection can challenge young students’ ability to benefit from digital curricula or develop digital skills for the workplace.

Left unaddressed, subscription gaps are only likely to get worse

Left unaddressed, subscription gaps are only likely to get worse. The problem is different for service availability, where new satellite technology and 5G networks can offer new service in new places. But, internet service providers will only invest in physical networks where there is an ability and willingness to pay, and therefore, it is unlikely to be in low income areas. Tomorrow’s affordability challenge will grow if median wages continue to stall in the face of higher broadband prices.

If we all agree the internet is an essential ingredient to maximize macroeconomic growth, we simply cannot maximize prosperity when a quarter of all people aren’t fully online. It also means it is in everyone’s best interests to have a real debate about how to promote affordability. Should those with higher incomes subsidize service for the less fortunate? Would an internet sales tax spin-off enough funding? Should the public pay for targeted digital skills training and computing equipment? And who should qualify for what kind of support?

Lifeline may not be the best-designed program to promote subscription, but these new reforms only project to deepen the crisis. Instead, it’s time for federal legislators, the FCC, and the Department of Commerce to initiate a real effort to address digital disconnect. It’s too important to leave untouched.