With covid–19 pandemic lockdowns continuing in most states, albeit with gradual loosening underway, democrats in the house of representatives in Washington, D.C. want to pump $5.5 billion into broadband access subsidies to ensure that people and institutions can remain connected to the online resources they will be depending on, likely for months to come. It’s one of the opening shots in the negotiations over what might be a second stimulus bill in the trillion dollar range to keep the U.S. economy afloat.
It’s a big leap from the $375 million for broadband that was included in the first, $2 trillion pandemic stimulus bill approved by congress in March. But it’s also broadband funding of a different sort. In March, the money went to supply-side uses, such as $100 million for broadband infrastructure via the federal agriculture department’s ReConnect program. This time around, house democrats want the money to feed the demand side – $4 billion is earmarked to subsidise monthly Internet bills for low income families, up to $50 per month per household. The remaining $1.5 billion would go to school and libraries to pay for mobile network-enabled WiFi devices and service, and other expenses necessary for keeping kids connected to school lessons.
Ultimately, that money will hit the bottom lines of major, monopoly model incumbent Internet service providers like AT&T, Comcast, Charter and the rest. If the bill sets a de facto base price of $50 per month for Internet service, then that’s what those companies will charge. It’s a lot easier to up sell customers from what are, in effect, low income loss leader promotions such as the $10 per month Comcast Internet Essentials or Access from AT&T packages, and move them into expensive long term contracts when someone else is picking up the tab. But $4 billion only lasts so long. When the subsidies run out, those households will be stuck with higher bills for a long time.
The odds of this latest proposal making it into law as is are pretty slim, though. What house democrats seem to doing is setting up for negotiations with U.S. senate republicans and the white house. The D.C. beltway sausage machine is about to crank into high gear.
We recently notified the FCC that we had claimed monthly subsidies for serving subscribers even though these subscribers may not have met usage requirements under Sprint’s usage policy for the Lifeline program. We are committed to reimbursing federal and state governments for any subsidy payments that were collected incorrectly. While not material to overall results, net operating revenue, wireless service revenue, adjusted EBITDA*, operating income, and net loss in the quarter were all negatively impacted by this issue.
Wireless service revenue of $5.0 billion in the quarter was down $453 million year over year, mostly due to both lower Lifeline revenue as a result of the associated usage issue discussed above and the continued amortization of prepaid contract balances as a result of adopting the new revenue standard last year.
So far Sprint’s, um, oops hasn’t surfaced in the California Public Utilities Commission’s review of the pending Sprint/T-Mobile merger, although the Communications Workers of America tried unsuccessfully to make it an issue at the FCC.
Sprint could be collecting payments from California’s broadband and telephone lifeline subsidy program for hundreds of thousands of inactive accounts. A Federal Communications Commission press release accuses Sprint of taking “tens of millions of dollars” for 885,000 federally subsidised customers who weren’t using the service anymore. That represents 30% of Sprint’s national lifeline customer base, says the FCC.
Sprint, through its Virgin Mobile brand, is the only [facilities-based mobile network operator] that participates in the California LifeLine program. Under the trade name of “Assurance Wireless brought to you by Virgin Mobile,” Virgin Mobile serves roughly 482,000 LifeLine wireless customers in California, over 200,000 more customers than the next largest LifeLine wireless carrier, and more than all other LifeLine wireline carriers combined.
If the FCC’s 30% “inactive” rate applies equally to Sprint’s California lifeline base, then the CPUC gave the company subsidies for 145,000 non-existent customers. There isn’t enough information available yet to figure out how much money that represents, but on a back of the envelope basis, 145,000 inactive accounts subsidised at $15 each comes out to about $2.2 million per month. Even given that every payment wasn’t the $15 max, it doesn’t take too many months for California’s outlay to land in the FCC’s “tens of millions of dollars” ballpark too.
The Communications Workers of America union is one of the leading opponents of the T-Mobile/Sprint merger, in California and federally, and has already asked the FCC to put everything on hold “until [Sprint’s corporate] character issue is investigated and resolved”. It’s a fair bet that T-Mobile and Sprint will have to answer for the false billing – Sprint is calling it an “error” dating back to 2016 – as they try to gain CPUC approval for their merger. A hearing to decide next steps in the case is scheduled at the CPUC on 10 October 2019.
Lifeline broadband and telephone subsidies can be used to buy either mobile or wireline service. But that could end. Nineteen republican members of the U.S. house of representatives signed onto a draft bill that would scrap that option.
The lifeline program run by the Federal Communications Commission is routinely slammed by republicans – including those on the FCC itself – as a swamp of fraud and abuse, with wireless options frequently singled out as particularly problematic. On the other hand, democrats, on and off the commission, rush to its defence waving the battle flag of social justice just as quickly and reflexively.
The fraud and abuse mantra is chanted by republicans whenever income-based government subsidies are on the table, and need not be given any particular weight regarding telecoms lifeline programs.
The social justice argument cuts both ways, though. Despite the nonsense offered by telecoms lobbyists – and ignorantly parroted by members of both the FCC and the California Public Utilities Commission – mobile service is not a substitute for wireline broadband, now or in the foreseeable future.
The problem is compounded by the fact that lifeline subsidies are given out on a per-household basis. As a practical matter, that means that one person – typically an adult – gets the cell phone and everyone else, including kids vainly trying to do homework, have to beg or borrow Internet access as they can.
Hyped up claims of con jobs and complicit bureaucrats are the wrong reasons to clamp down on mobile lifeline subsidies. But it’s the right idea.
Companies that want to offer subsidised broadband service to low income households will have to seek approval from state regulators, and not the Federal Communications Commission. That will be the result of a decision made public yesterday by FCC chair Ajit Pai. In effect, he’s conceding an appeals court challenge to the broadband lifeline program approved by the FCC in 2016 and, instead, will have the current commission – a very different beast from a year ago – rework it.
“Because our network is a shared resource and we need to ensure all customers have a great mobile experience with Verizon, we are notifying a very small group of customers on unlimited plans who use an extraordinary amount of data that they must move to one of the new Verizon Plans by August 31, 2016. These users are using data amounts well in excess of our largest plan size (100 GB),” a Verizon spokeswoman wrote. “While the Verizon Plan at 100 GB is designed to be shared across multiple users, each line receiving notification to move to the new Verizon Plan is using well in excess of that on a single device.”
The FCC’s mobile broadband lifeline cap is 500 megabytes – half a gigabyte – as compared to the 150 GB cap it allows customers taking wireline service. The mobile cap will rise to 2 GB over a couple of years, but that’s still far below any reasonable minimum for a family’s monthly usage. Assuming the entire family actually gets to share the single phone the program allows per household.
What Verizon’s statement tells us is 1. very few customers use mobile bandwidth at the same level most of us consume wireline service, and 2. if mobile lifeline customers did try to use it for everyday purposes – say, homework, the FCC’s marquee example – they would quickly rack up huge excess data charges. Its plans for that kind of shared use have data caps in the same ball park as wireline service, albeit at many times the price.
An FCC commissioner wants Californian regulators, along with their counterparts in Oregon, Vermont and Texas, to answer questions about how eligibility for lifeline telephone service subsidies is managed. All four states have their own process for determining whether a subsidised lifeline customer meets income eligibility standards and verifying that any given household only receives one subsidy.
In his letter – which largely tracks with earlier ones sent to the company that handles verifications for the other 46 states – Pai points to “waste, fraud, and abuse that has riddled the Universal Service Fund’s Lifeline program since wireless resellers began participating in this program” and claims that 5.9 million subsidised wireless phones were given out using poorly supervised eligibility overrides, at an annual cost of $650 million.
How many of those overrides met the strict standard of the rules is an open question. But regardless, it points to a disconnect between the FCC’s one-subsidy-per-household rule and the realities of mobile service. Does anyone at the FCC – or the CPUC – really think that a mobile lifeline customer will leave his cellphone hanging on the wall, so the whole family can use it?
That’s an increasingly urgent question as the FCC implements its plan to include broadband in subsidised lifeline service. Mobile carriers are eligible for subsidies too but, unlike with voice service, have dramatically lower standards to meet – 500 megabytes of data per month at “3G” speeds (whatever that means), versus 150 gigabytes at 10 Mbps down/1 Mbps up for wireline providers.
The marquee goal of the broadband lifeline program is to make it possible for students to do their homework. Slow and often spotty service capped at 500 megabytes a month won’t cut it for one kid, let alone a whole family, even assuming the phone is around when it’s needed or isn’t being used to make a voice call. Whatever the actual level of fraud, the FCC’s poorly provisioned broadband lifeline program will only increase the pressure to illegally double and triple up on subscriptions.
The Federal Communication Commission’s new broadband lifeline program is intended as a means of closing the digital divide between affluent and low income households in the U.S. There’s sufficient consensus around that goal that a bipartisan compromise was nearly worked out between commissioners. But in the end, the vote was 3 to 2 on strict party lines.
There are many points of disagreement between democrat and republican commissioners, but one that sticks out is whether the program standards – 10 Mbps download and 1 Mbps upload for wireline (and fixed wireless) service and a vague “3G” reference for mobile service – will do any good. Jessica Rosenworcel, a democrat, thinks small improvements will matter…
Today’s decision includes steps designed to help close the Homework Gap. By incorporating broadband into the Lifeline program, we open the doors of digital opportunity. This simple change can help bring more broadband to low-income households with school-aged children. But significantly, we do not stop here. Our decision also modernizes Lifeline by making sure that the devices used for Lifeline broadband services are able to access Wi-Fi signals and that these devices can be turned into Wi-Fi hotspots. For a student with a computer but no way to connect at home, a hotspot can be the difference between keeping up in class and falling behind. It can be the difference between being a digital consumer and becoming a digital creator. It can help put more students on the pathway to science, technology, engineering, and math—a road that suffers today from an unacceptable lack of diversity. So it may seem small—but giving more students the tools to do digital age homework—can yield big results.
When it comes to actually delivering for America’s low-income families and students, the Commission majority takes a far different tack. 10 Mbps fixed broadband is deemed sufficient for a poor family’s home. 3G mobile broadband—service so slow the Commission didn’t even bother to measure it in the 2016 Broadband Progress Report—is all the impoverished need get. The Order goes out of its way to give Lifeline subscribers the opportunity to buy hotspot-enabled smartphones (for all the good that will do them over a 3G network). But it doesn’t do a thing to make sure that Lifeline subscribers have the option to purchase the 25 Mbps fixed and 4G LTE mobile broadband that many other Americans take for granted—and that the majority happily lectured us last year was a digital floor…For all the kerfuffle about fast lanes, the FCC has decreed that Lifeline subscribers will be stuck in the slow lane.
Rosenworcel is correct to the extent that properly provisioned 10 Mbps down/1 Mbps up wireline service with WiFi capabilities will meet the homework needs of most students. But Pai is right that the standard for mobile service all but guarantees no homework will get done.
10 Mbps download and 1 Mbps upload speeds for fixed service (wireline or wireless), except where existing networks can’t support that level. Then the download standard slips to 4 Mbps.
Mobile broadband only has to deliver “3G” service levels, without defining what that might be.
Monthly caps are set at 150 GB for fixed service and 500 MB for mobile.
The good news is that speed and usage standards for fixed service will be reviewed every year using quantitative and reasonably objective benchmarks. Fixed service speed levels will be calculated using the subscriber data that ISPs are required to submit to the FCC, with the standard “based on the service to which a ‘substantial majority’ of consumers subscribe”. Substantial majority is described as 70% of consumers. There’s more than a few weasel words in the upgrade criteria, including an escape hatch if FCC staff miss deadlines, but there’s at least a defined process and schedule.
Mobile speed and data caps won’t be as rigorously reviewed. FCC staff will only have to “consider updating the mobile broadband speed standard” annually, with the suggestion that the same kind of data be used as with the fixed service review. Mobile data caps will ramp up to 2 GB by the end of 2018, with further increases more or less based on the usage level of 70% of mobile subscribers.
What started out as a 150-page broadband lifeline rulebook has grown to more than 200 pages. It allows ample room for mischief by industry lobbyists, but it also offers possible ways to counter that kind of deep pocketed political influence at the FCC as the years go on.
While gigabit speeds are fast, we have come across an application where 1,000 Mbps is actually quite slow. Terribly slow. Research organizations that wish to remain anonymous have been working on an application that would enable the teleportation of a 160 pound person a distance of 60 miles in 1.2 seconds. This application requires a tremendous amount of bandwidth, because a 160-pound person represents a vast amount of data.
Yesterday, the FCC adopted its Lifeline modernization order, an essential move to encouraging broadband adoption nationwide. Until now, Lifeline has provided funds to enable providers to deliver voice service to consumers at affordable rates…For the first time, low-income consumers can apply the $9.25 Lifeline subsidy to lower the cost of qualifying broadband plans.