Lifeline Program for Low-Income Consumers

Lifeline is a program that the Federal Communications Commission (FCC) established in 1985 to provide low-income Americans with a way to afford a telephone subscription. The program has been expanded and reformed many times, including by President George W. Bush, who broadened the program to cover cellphones in 2005. More recently, Lifeline has grown to cover broadband services, and there have been attempts to address accusations of fraud that have long dogged the program.

How the Lifeline Program Works

The Lifeline program provides a discount on phone or Internet service based on household income and size. It is available to eligible low-income subscribers in every state, territory, commonwealth, and tribal land in the U.S., as long as they meet certain income requirements. To qualify, household income must be less than 135% of the federal poverty level, and only one phone or Internet service is allowed per household. The discount on phone service is generally $9.25 a month.

Consumers must apply to the program and, when approved, can choose a phone or Internet company that offers the benefit and enroll. Companies are required to meet certain standards on Lifeline-supported devices, which include the number of usage minutes allowed, specified mobile and home Internet speeds, and the option of a hot-spot-enabled device.

At an administrative level, the Lifeline program is overseen by the Universal Service Administrative Company (USAC), an organization that also manages several other federal programs, including maintenance, data collection, and disbursements for lower-income programs.

History of the Lifeline Program

As noted above, the central idea of the Lifeline program is to provide lower-income Americans with more affordable access to communications services. It is based on the concept of ensuring all Americans have affordable access to communication services, and it is not a new idea. Back in 1792, for example, the Postal Service Act committed the federal government to providing a universal postal service—one that all Americans could access and afford.

This same principle of equal, affordable access was later applied to radio and (eventually) telephone communications. In 1913, AT&T made the Kingsbury Commitment, which included a promise to deliver a universal service.

The ideas of universality and affordability were codified further in the Communications Act of 1934. Section 1 of that statute created the Federal Communications Commission (FCC) to make “available…to all the people of the United States…a rapid, efficient, Nation-wide, and world-wide wire and radio communication service with adequate facilities at reasonable charges.”

The immediate context for the emergence of the Lifeline program, however, was the breakup of AT&T in 1984. As part of its program to increase competition in the telecommunications sector, the Reagan administration broke up the monopoly that AT&T then held on telephone services in the U.S. However, a concern remained that rates for telephone services would rise above the means of some consumers. The wide-ranging powers that had been granted in the 1934 Act enabled the FCC to set up the Lifeline program in 1985 to subsidize the cost of telephone services for low-income Americans.

Early Controversy

Most government assistance programs generate some level of controversy, but few have been met with the vociferous opposition directed at the Lifeline program. The most recent flare-up of this controversy occurred around 2015, when, according to The Washington Post, some critics railed against what they inaccurately called “Obama phones”—cellphones paid for by the federal government through a program that they claimed had little oversight. In fact, it was President Bush who added cellphones to the program, and the FCC had already addressed some of its critics' issues.

The subsidy the federal government paid to cellphone carriers meant that many of them were able to offer cellphone services to customers at essentially no cost, provided they could prove that the customers had low enough income. Though this benefited millions of Americans who would not otherwise have been able to afford a cellphone plan, it also meant that the cost of the assistance program rose rapidly.

There were also widespread concerns that some people were taking advantage of the program via fraudulent means. In late January 2012, the FCC responded to these allegations by ordering a Lifeline Reform Order. This order effectively mandated that all Lifeline subscribers present documentation to prove their stated income. Overall, the order led to savings of over $1 billion by 2016, according to an interim report on waste, fraud, and abuse in the Lifeline program by Frank Pallone Jr., Democratic ranking member of the U.S. House of Representatives Committee on Energy and Commerce.

Modernization of the Lifeline Program

Building on those early reforms, the Lifeline program has been the subject of two reform processes—one to bring the subsidies it offers in line with emerging technologies, and another to combat ongoing allegations of fraud.

Technological reform

With regard to technological reform, the biggest change to Lifeline has been to extend it to cover broadband services. Some analysts were arguing for this change from as early as 2005 and pointed out that Internet access was just as important as telephone service to most Americans. However, it wasn’t until 2012 that the FCC added a provision to Lifeline to allow applicants to use their subsidy to pay for broadband services.

This reform was followed in 2016 by a more fundamental change to the program. In comments announcing the change, then-FCC Chairman Tom Wheeler noted that "64.5 million Americans are missing out on the opportunities made possible by the most powerful and pervasive platform in history" and that the FCC had a responsibility to address the issue.

Accordingly, the FCC under Wheeler refocused Lifeline support on broadband, which enabled low-income Americans to transfer their subsidy to pay for broadband. At the same time, the FCC announced further reforms aimed at combating fraud in the program (see the 2016 National Verifier program, below), and a bidding process designed to encourage broadband providers to offer subsidized packages to low-income customers.

Combating fraud

With regard to fraud, the FCC has long sought to limit the vulnerability of the program to criminal interference.

In 2016, under then-FCC Chairman Wheeler, a new system was designed to verify the identity and income level of applicants. The Lifeline National Eligibility Verifier (National Verifier) decides whether or not new applicants are eligible for Lifeline. It is expected that this system will become the only route through which Lifeline may be accessed, with service providers using the National Verifier when assisting individuals who apply.

In 2017, under then-FCC Chairman Ajit Pai, an inquiry launched to limit the cost of the Lifeline program by eliminating support for broadband services so criminals could not take advantage of it. And in August 2019, then-Chairman Pai proposed new requirements to ensure that carriers enrolling subscribers in the program could prove that an individual was still alive.

The Future

Today, the Lifeline program provides both broadband and cellphone subsidies to qualifying low-income people across the U.S. Customers generally access these funds via their broadband provider, which can help them use the National Verifier system.

Given the history of the Lifeline program, it is unlikely that it will keep its current configuration for long. In the wake of the government's response to the pandemic, some analysts are already calling for further reforms. They point out that most Americans now access the Internet via their cellphone provider, and that the current distinction between cellphone plans and broadband is becoming increasingly arbitrary.

At the moment, however, the Lifeline program remains what its name suggests—a necessary subsidy that ensures greater access to both the Internet and cellphone services.