Lifeline Reforms Present Opportunity to Improve Efficiency

Lifeline Reforms Present Opportunity to Improve Efficiency

Wallsten, Mayo and Ukhaneva File Comments with FCC on Lifeline Program

Contact: Amy Smorodin
(202) 828-4405

August 31, 2015 – The reforms to the Lifeline program proposed by the Federal Communications Commissions “are advertised as necessary because broadband access has become a more important communications tool than simple voice service,” explains Scott Wallsten, Technology Policy Institute Vice President for Research and Senior Fellow, in comments filed today with the FCC. “But the reforms present an opportunity to dramatically improve the efficiency of the program.” The comments were drafted and filed with John W. Mayo and Olga Ukhaneva from the Georgetown Center for Business and Public Policy.

Economics research has shown that the Lifeline universal service program has increased low-income access telephone service, but at a high cost. These subsidies flow to many consumers who would have subscribed even without a subsidy. The authors argue that the program can become more efficient by:

  • Better targeting those who would not have service without a subsidy. A perfect targeting mechanism is unrealistic, but it should be possible to understand demand well enough to improve on the current low level of cost-effectiveness. The FCC should continue the use of experiments and pilot projects to test the effectiveness of different approaches. It should also conduct studies of consumer demand to help determine how much different people are willing to pay for different types of services and better identify consumers on the margin.
  • Providing subsidies directly to consumers and allow them to use their subsidy with any broadband provider. Eligible recipients will receive more benefits from the program if they have the option of spending their subsidies with any available provider and broadband plan, not with just a select group. This approach could also help improve competition.
  • Imposing a budget. Most government programs operate within a budget, and Lifeline should, as well. A budget creates a powerful incentive to focus on cost-effectiveness. The lack of a budget creates the illusion of unlimited and costless funding.
  • Learning from private sector initiatives. The private sector has implemented initiatives that provide discounts to low-income households for Internet service. These have proven more successful than the FCC’s Lifeline broadband pilot programs. It would be worth rigorous study as to why some programs have been successful and other projects were not so that the lessons can be applied more broadly.
  • Setting program goals and incorporating program evaluation. The reforms should establish performance goals and explain how it plans to measure those goals. The FCC could leverage existing data sources over time to try to evaluate the effectiveness of the program. Additionally, the FCC could take more seriously independent evaluations, such as those done by the GAO.

The comments are available on the TPI website.

The Technology Policy Institute

The Technology Policy Institute is a non-profit research and educational organization that focuses on the economics of innovation, technological change, and related regulation in the United States and around the world. More information is available at https://techpolicyinstitute.org/.

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