THE FEDERAL LIFELINE PROGRAM

Overview

• Low-income consumers apply for discounts for local telephone service through the telephone company.

• Low Income support reimburses eligible telecommunications carriers (ETCs) for providing eligible low income customers with discounts.

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Overview

Low Income support consists of three sub-components:

• Lifeline reimburses ETCs for discounting eligible customers’ monthly bill for basic, local telephone service.

• Link Up reimburses ETCs for discounting connection charges incurred when an eligible customer commences service for the first time or at a new address.

• Toll Limitation Service (TLS) reimburses ETCs for providing toll blocking and toll control to eligible customers at no cost to the customer.

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Overview

To participate, a carrier must be designated as an “eligible telecommunications carrier.”

• ETC status is granted by state public service commission, or FCC.

• ETCs must provide service using, at least in part, its own facilities pursuant to section 214(e) of the Telecommunications Act.

• A company can petition the FCC for forbearance from the requirement to use its own facilities.

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Disbursements

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Low Income Program

Low Income Support has grown significantly

• Number of subscribers increased:

– from 7 million in 1Q2009 to 9.2 million in 4Q2009

– from 9.6 in 1Q2010 to 11 in 4Q2010.

• Number of ETCs claiming support increased:

– 99 new SAC requests from April 2010 to March 2011.

– Now averaging 18 per month.

• Participation rate estimated to be 37% as of 4Q2010.

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Factors Contributing to Growth

• “Pre-paid wireless” carriers are non-facilities-based commercial mobile radio service (CMRS) operators that provide Lifeline service on a resold basis.

– TracFone Wireless is currently an ETC in 32 states, PR and DC.

– Virgin Mobile is currently an ETC in 19 states.

– TracFone and Virgin Mobile claim Lifeline support only.

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Pre-Paid Carriers

Lifeline service provided by pre-paid carriers is different from that of other ETCs

• Provide Lifeline customers free wireless handset.

• Provide an established number of free minutes of use per month (both TracFone and Virgin Mobile offer up to 250 per month in some states).

• Advertise heavily (television ads, direct mailings) to attract low-income consumers.

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Pre-Paid Carriers

Additional regulatory requirements imposed on pre-paid carriers

• Obtain certification that carrier is 911 and E911 compliant.

• Obtain annual certification that each consumer is head-of-household and receives Lifeline discounts only from the pre-paid carrier.

• Enact safeguards to prohibit more than one subsidy from the same carrier going to one address.

• Limited to claiming only Lifeline support (not eligible for Link Up or TLS).

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Factors Contributing to Growth

• The number of carriers offering traditional wireless service has also increased.

– Nexus, Midwestern Telecommunications and Yourtel America are among the largest non-pre-paid wireless Lifeline providers.

– Most traditional wireless carriers receive Link Up support.

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Factors Contributing to Growth

• The number of wireline competitors has increased significantly.

– These companies have a switch or purchase UNEs, but also provide service to many consumers via resale.

– Danger to consumers if these companies are cut off by the wholesale carrier due to a billing dispute.

– These companies generally claim Link Up and TLS support.

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Pending Regulatory Matters

Duplicate Lifeline Subscribers

• FCC addressing issue of consumers receiving Lifeline from two or more carriers.

– USAC is conducting In-Depth Data Validations to identify consumers receiving Lifeline from multiple carriers.

– FCC is establishing plan to ensure consumers receive subsidized service from only one carrier.

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Pending Regulatory Matters

Notice of Proposed Rulemaking

• Based on Federal State Joint Board recommended decision and GAO Report.

– Consumer eligibility

– Treatment of duplicate support claims

– Appropriateness of existing outreach and enrollment programs

– The potential expansion of Lifeline to include broadband

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Pending Regulatory Matters

National Broadband Plan

• Establish a pilot program for Low Income broadband support mechanism

• Allow consumers to apply Low Income subsidy to any service package that includes voice

• Promote wireless broadband to increase broadband adoption among Low Income households

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