*Pages 1--138 from Microsoft Word - 38989* Federal Communications Commission FCC 04- 87 Before the Federal Communications Commission Washington, D. C. 20554 In the Matter of Lifeline and Link- Up ) ) ) ) ) ) ) ) ) WC Docket No. 03- 109 REPORT AND ORDER AND FURTHER NOTICE OF PROPOSED RULEMAKING Adopted: April 2, 2004 Released: April 29, 2004 Comment Date: 60 days after publication in the Federal Register Reply Comment Date: 105 days after publication in the Federal Register By the Commission: Chairman Powell and Commissioners Abernathy, Copps, Martin, and Adelstein issuing separate statements. TABLE OF CONTENTS Paragraph Number I. INTRODUCTION.................................................................................................................... 1 II. BACKGROUND ...................................................................................................................... 3 III. REPORT AND ORDER.......................................................................................................... 7 A. Eligibility............................................................................................................................. 7 1. Background .................................................................................................................. 7 2. Discussion.................................................................................................................... 10 a. Income- based Criteria ......................................................................................... 10 b. Program- based Criteria ...................................................................................... 13 B. Duration of an Individual’s Eligibility for Lifeline/ Link- Up....................................... 19 1. Background ................................................................................................................ 19 2. Discussion.................................................................................................................... 20 1 Federal Communications Commission FCC 04- 87 2 C. Certification and Verification Procedures..................................................................... 23 1. Background ................................................................................................................ 23 2. Discussion.................................................................................................................... 25 a. Automatic Enrollment......................................................................................... 25 b. Certification of Program- based Eligibility ........................................................ 27 c. Certification of Income- based Eligibility........................................................... 28 d. Verification of Continued Eligibility Under Program- based and Income- based Eligibility...................................................................................... 33 D. Implementation and Recordkeeping.............................................................................. 37 E. Outreach ........................................................................................................................... 41 1. Background ................................................................................................................ 41 2. Discussion.................................................................................................................... 44 F. Other Issues ...................................................................................................................... 51 1. Voluntary Survey....................................................................................................... 51 2. Unpaid Toll Charges.................................................................................................. 52 3. Vertical Services......................................................................................................... 53 4. Support for Non- ETCs .............................................................................................. 54 5. Minor Rule Changes.................................................................................................. 55 IV. FURTHER NOTICE OF PROPOSED RULEMAKING .................................................. 56 A. Income- based Criterion................................................................................................... 56 B. Lifeline Advertising Requirements ................................................................................ 58 V. PROCEDURAL MATTERS................................................................................................. 59 A. Regulatory Flexibility Analysis....................................................................................... 59 B. Paperwork Reduction Act Analysis ............................................................................... 60 C. Filing Procedures ............................................................................................................. 61 D. Further Information ........................................................................................................ 69 VI. ORDERING CLAUSES........................................................................................................ 70 APPENDIX A: FINAL RULES APPENDIX B: LIST OF PARTIES FILING COMMENTS IN RESPONSE TO THE NOTICE OF PROPOSED RULEMAKING APPENDIX C: LIFELINE/ LINK- UP STATE SURVEY 2 Federal Communications Commission FCC 04- 87 3 APPENDIX D: ESTIMATED INCOME REQUIREMENTS FOR A HOUSEHOLD AT OR BELOW 135% OF THE FEDERAL POVERTY GUIDELINES APPENDIX E: LIFELINE/ LINK- UP STATE PROCEDURES AS COMPILED BY THE FEDERAL- STATE JOINT BOARD ON UNIVERSAL SERVICE APPENDIX F: ESTIMATED INCOME REQUIREMENTS FOR A HOUSEHOLD AT OR BELOW 150% OF THE FEDERAL POVERTY GUIDELINES APPENDIX G: LIST OF CURRENT FEDERAL DEFAULT STATES APPENDIX H: FINAL REGULATORY FLEXIBILITY ANALYSIS APPENDIX I: INITIAL REGULATORY FLEXIBILITY ANALYSIS APPENDIX J: STATISTICALLY VALID SAMPLE APPENDIX K: LIFELINE STAFF ANALYSIS: Quantifying the effects of adding an income criterion to the Lifeline eligibility criteria SEPARATE STATEMENT OF CHAIRMAN MICHAEL K. POWELL SEPARATE STATEMENT OF COMMISSIONER KATHLEEN Q. ABERNATHY SEPARATE STATEMENT OF COMMISSIONER MICHAEL J. COPPS SEPARATE STATEMENT OF COMMISSIONER KEVIN J. MARTIN SEPARATE STATEMENT OF COMMISSIONER JONATHAN S. ADELSTEIN 3 Federal Communications Commission FCC 04- 87 4 I. INTRODUCTION 1. In this Report and Order and Further Notice of Proposed Rulemaking, we modify our rules to improve the effectiveness of the low- income support mechanism, which ensures that quality telecommunications services are available to low- income consumers at just, reasonable, and affordable rates. Since its inception, Lifeline/ Link- Up has provided support for telephone service to millions of low- income consumers. 1 Nationally, the telephone penetration rate is 94.7%, in large part due to the success of the Lifeline/ Link- Up program and our other universal service programs. 2 Nevertheless, we believe there is more that we can do to make telephone service affordable for more low- income households. Only one- third of households currently eligible for Lifeline/ Link- Up assistance actually subscribe to this program. 3 We agree with the Federal- State Joint Board on Universal Service (Joint Board) that the current Lifeline/ Link- Up program could be modified to serve the goals of universal service better. 4 2. Consistent with the Joint Board’s recommendation, we expand the federal default eligibility criteria to include an income- based criterion and additional means- tested programs. We adopt federal certification and verification procedures, and require states, under certain circumstances, to establish certification and verification procedures to minimize potential abuse of these programs. To target low- income consumers more effectively, we adopt outreach guidelines for the Lifeline/ Link- Up program. We issue a voluntary survey to gather data and information from states regarding the administration of Lifeline/ Link- Up programs. Finally, in the Further Notice of Proposed Rulemaking, we seek comment on whether the inclusion of a broader income- based criterion in the federal default eligibility criteria would further increase Lifeline/ Link- Up subscription rates. The actions we take today will result in a more inclusive and robust Lifeline/ Link- Up program, consistent with the statutory goals of maintaining affordability and access of low- income consumers to supported services, while ensuring that support is used for its intended purpose. 5 II. BACKGROUND 3. Section 254 of the Communications Act of 1934, as amended (the Act), 6 codified the Commission’s and the states’ historical commitment to advancing the availability of 1 See Wireline Competition Bureau, Federal Communications Commission, Trends in Telephone Service Report, Tables 20. 2, 20. 4 (August 2003) (2003 Trends Report) (estimating that 6. 6 million people paid reduced rates under the Lifeline program in 2002 and 13. 7 million people paid reduced charges under Link- Up since 1991). 2 See Wireline Competition Bureau, Federal Communications Commission, Telephone Subscribership in theUnited States Report, Table 1 (rel. May 14, 2004) (Telephone Subscribership Report) (data through Nov. 2003). 3 See Commission Staff Analysis set forth in Appendix K at Table 1. B. These projections were based on March 2000 and March 2002 Current Population Survey of Household data (CPSH data), and adjusted for growth. 4 47 U. S. C. § 254( b); Federal- State Joint Board on Universal Service, CC Docket No. 96- 45, Recommended Decision, 18 FCC Rcd 6589, 6591, para. 1 (2003) (Recommended Decision). 5 47 U. S. C. § 254( b). 6 Pub. L. No. 104- 104, 110 Stat. 56. The Telecommunications Act of 1996 (the 1996 Act) amended the Communications Act of 1934 (the Act). 4 Federal Communications Commission FCC 04- 87 5 telecommunications services for all Americans. 7 Section 254( b) establishes principles upon which the Commission shall base policies for the preservation and advancement of universal service. Among other things, these principles state that consumers in all regions of the Nation, including low- income consumers, should have access to telecommunications and information services that are reasonably comparable to those services provided in urban areas and that are available at rates that are reasonably comparable to rates charged in urban areas. 8 These principles also recognize that ensuring rates are affordable is a national priority. 4. The Lifeline/ Link- Up program is one of several universal service support mechanisms that further these goals. 9 Lifeline provides low- income consumers with discounts of up to $10.00 off of the monthly cost of telephone service for a single telephone line in their principal residence. 10 Link- Up provides low- income consumers with discounts of up to $30.00 off of the initial costs of installing telephone service. 11 Recognizing the unique needs and characteristics of tribal communities, enhanced Lifeline and Link- Up provides qualifying low-income individuals living on tribal lands with up to $25.00 in additional discounts off the monthly cost of telephone service and up to $70.00 more off the initial costs of installing telephone service. 12 Pursuant to section 254( e), only eligible telecommunication carriers (ETCs) designated pursuant to section 214( e) 13 are eligible to receive Lifeline/ Link- Up support. 14 5. Under the Commission’s current rules, states and territories have the authority to establish their own Lifeline/ Link- Up programs that provide additional support to low- income consumers that incorporate the unique characteristics of each state or territory. 15 For example, in 7 47 U. S. C. § 254. 8 47 U. S. C. § 254( b). 9 The Commission adopted Lifeline/ Link- Up prior to passage of the 1996 Act pursuant to its general authority under sections 1, 4( i), 201, and 205 of the Act. See Federal- State Joint Board on Universal Service, CC Docket No. 96- 45, Report and Order, 12 FCC Rcd 8776, 8952- 53, para. 329 (1997) (1997 Universal Service Order); 47 U. S. C. §§ 151, 154( i), 201, 205. 10 See 47 C. F. R. § 54. 401( a)( 2); 1997 Universal Service Order, 12 FCC Rcd at 8957, para. 341. 11 See 47 C. F. R. § 54. 411( a)( 1). 12 See 47 C. F. R. §§ 54. 405( a)( 4), 54. 411( a)( 3). Under the Commission’s rules, there are four tiers of federal Lifeline support. All eligible subscribers receive Tier 1 support which provides a discount equal to the ETC’s subscriber line charge. Tier 2 support provides an additional $1. 75 per month in federal support, available if all relevant state regulatory authorities approve such a reduction. (All fifty states have approved.) Tier 3 of federal support provides one half of the subscriber’s state Lifeline support, up to a maximum of $1. 75. Only subscribers residing in a state that has established its own Lifeline/ Link- Up program may receive Tier 3 support, assuming that the ETC has all necessary approvals to pass on the full amount of this total support in discounts to subscribers. Tier 4 support provides eligible subscribers living on tribal lands up to an additional $25 per month towards reducing basic local service rates, but this discount cannot bring the subscriber’s cost for basic local service to less than $1. See 47 C. F. R. § 54. 403. 13 47 U. S. C. § 214( e) (setting forth the requirements for ETC designation). 14 47 U. S. C. § 254( e). 15 See 47 C. F. R. §§ 54. 409( a), 54. 415( a). See also 47 U. S. C. § 254( j) (giving the Commission the authority to maintain pre- 1996 Act Lifeline/ Link- Up framework). 5 Federal Communications Commission FCC 04- 87 6 establishing eligibility criteria, states have the flexibility to consider federal and state- specific public assistance programs with high rates of participation among low- income consumers in the state. State certification procedures and outreach efforts can also take into account existing state laws and budgetary limits. Some states and territories, however, have elected to use the federal criteria as their default standard. These “federal default states” include not only states and territories with their own Lifeline/ Link- Up programs that have adopted the federal default criteria, but also states and territories that have not adopted their own Lifeline/ Link- Up program. The modifications to the federal default criteria that we adopt in this Order, unless specifically stated otherwise, will affect only federal default states. 16 We request that states notify this Commission if their status as a federal default state changes. 6. On December 21, 2000, the Commission requested that the Joint Board review the Lifeline/ Link- Up program for all low- income customers, including a review of the income eligibility criteria. 17 The Joint Board issued its Recommended Decision on April 2, 2003. 18 In its Recommended Decision, the Joint Board recommended several changes, discussed in more detail below, to improve the effectiveness of the low- income support mechanism. 19 The Commission sought comment on the Joint Board’s Recommended Decision regarding modifications to the Lifeline/ Link- Up program in a Notice of Proposed Rulemaking (NPRM) released on June 9, 2003. 20 III. REPORT AND ORDER A. Eligibility 1. Background 7. Currently, Lifeline/ Link- Up eligibility is based on participation in means- tested programs. In order to be eligible for Lifeline/ Link- Up assistance under the federal default eligibility criteria for federal default states, a consumer must certify, under penalty of perjury, that he/ she participates in at least one of the following federal programs: Medicaid, Food Stamps, Supplemental Security Income (SSI), Federal Public Housing Assistance (Section 8) (FPHA), or the Low Income Home Energy Assistance Program (LIHEAP). 21 In states that have their own Lifeline/ Link- Up programs, the consumer must meet the eligibility criteria established by the 16 See Appendix G for a list of current federal default states. Except as otherwise specifically provided, the term “State” means the States, the District of Columbia, Territories, and possessions of the United States of America. 17 See Federal- State Joint Board on Universal Service, CC Docket No. 96- 45, Order, 15 FCC Rcd 25257 (2000) (Referral Order). 18 See generally Recommended Decision. 19 See generally Recommended Decision. 20 See Lifeline and Link- Up, WC Docket No. 03- 109, Notice of Proposed Rulemaking, 18 FCC Rcd 11628 (2003), modified by Federal- State Board on Universal Service Lifeline and Link- Up, WC Docket No. 03- 109, Erratum, 18 FCC Rcd 16694 (2003) (collectively NPRM). 21 See 47 C. F. R. §§ 54. 409( b), 54. 415( b). 6 Federal Communications Commission FCC 04- 87 7 state, consistent with sections 54.409 and 54.415 of the Commission’s rules. 22 8. In the Twelfth Report and Order, 23 the Commission adopted more expansive Lifeline/ Link- Up eligibility criteria for low- income consumers living on tribal lands. 24 For those consumers, the Commission established an enhanced Lifeline/ Link- Up program. In order to qualify for enhanced Lifeline/ Link- Up under the federal default eligibility criteria, the consumer must certify, under penalty of perjury, that he/ she participates in one of the five programs listed above or any of the following additional federal programs: Bureau of Indian Affairs General Assistance, Tribally- Administered Temporary Assistance for Needy Families (Tribal TANF), Head Start (only for those meeting its income qualifying standard), or the National School Lunch Program’s free lunch program. 25 In a state with its own enhanced Lifeline/ Link- Up program, a consumer living on tribal lands may qualify for Lifeline/ Link- Up support by meeting either the eligibility and verification criteria established by the state or the federal default eligibility criteria for the enhanced program. 26 9. In the NPRM, the Commission sought comment on the Joint Board’s recommendation that the Commission expand the federal default eligibility criteria to include an income- based criterion and additional means- tested programs. 27 Specifically, the Joint Board recommended that a consumer be eligible for Lifeline/ Link- Up when the consumer’s income is at or below 135% of the Federal Poverty Guidelines (FPG), or if the consumer participates in Temporary Assistance for Needy Families (TANF) or the National School Lunch’s free lunch program (NSL). 2. Discussion a. Income- based Criteria 10. We adopt the Joint Board’s recommendation that a consumer be eligible to participate in Lifeline/ Link- Up if the consumer’s income is at or below 135% of the FPG. 28 We agree with the Joint Board that adding an income- based criterion to the federal default eligibility criteria may increase participation in the Lifeline/ Link- Up program. 29 This will enable, for example, a family of four whose annual income is at or below $24,840 to qualify for Lifeline/ Link- Up 22 See 47 C. F. R. §§ 54. 409( a), 54. 415( a). 23 Federal- State Joint Board on Universal Service; Promoting Deployment and Subscribership in Unserved and Underserved Areas, Including Tribal and Insular Areas, CC Docket No. 96- 45, Twelfth Report and Order, Memorandum Opinion and Order, and Further Notice of Proposed Rulemaking, 15 FCC Rcd 12208 (2000) (Twelfth Report and Order). 24 See Twelfth Report and Order, 15 FCC Rcd at 12245- 48, paras. 68- 74. 25 See 47 C. F. R. §§ 54. 409( c), 54. 415( c); Twelfth Report and Order, 15 FCC Rcd at 12245, para. 68. 26 See 47 C. F. R. §§ 54. 409( c), 54. 415( c). See Twelfth Report and Order, 15 FCC Rcd at 12247- 48, paras. 73- 74. 27 See NPRM, 18 FCC Rcd at 11628, para. 1. 28 See Recommended Decision, 18 FCC Rcd at 6597, para. 15. 29 See Recommended Decision, 18 FCC Rcd at 6597, para. 15. 7 Federal Communications Commission FCC 04- 87 8 support even if they do not participate in one of the current qualifying assistance programs. 30 We have included, in Appendix D, estimated income requirements for various sizes of households at or below 135% of the FPG. 31 Our staff analysis estimates that adding an income-based criterion of 135% of the FPG could result in approximately 1.17 million to 1.29 million new Lifeline/ Link- Up subscribers. 32 Of these new Lifeline/ Link- Up subscribers, the analysis projects that approximately one in five likely would be new subscribers to telephone service. 33 Therefore, in addition to ensuring that many low- income subscribers may be better able to afford to maintain their existing service, this criterion will enable many low- income subscribers to have service for the first time. 34 Adding an income- based standard should thereby promote universal service by increasing subscribership and making rates more affordable for existing low- income subscribers. 11. We agree with the majority of commenters that support adding an income- based standard to the current program- based criteria. 35 We also agree with the Joint Board and several commenters that adding an income- based standard likely will capture some low- income consumers who are not eligible for Lifeline/ Link- Up because they no longer participate in the qualifying assistance programs. 36 In 1996, Congress passed “The Personal Responsibility and Work Opportunity Reconciliation Act,” 37 also known by the acronym “PRWORA.” PRWORA instituted sweeping changes to several federal public assistance programs, including time limits 30 See 2003 Poverty Guidelines for the 48 Contiguous States and the District of Columbia, 68 Fed. Reg. 6456- 58 (2003) (2003 FPG). 31 See Appendix D. In order to qualify under this income- based criterion, all income actually received by all members of the household will be counted. This includes salary before deductions for taxes, public assistance benefits, social security payments, pensions, unemployment compensation, veteran’s benefits, inheritances, alimony, child support payments, worker’s compensation benefits, gifts, lottery winnings, and the like. The only exceptions are student financial aid, military housing and cost- of- living allowances, irregular income from occasional small jobs such as baby- sitting or lawn mowing, and the like. States with their own Lifeline/ Link- Up programs may adopt their own definition of income if they have not already done so. See Appendix A (defining “income”). 32 See Appendix K at Table 2. F. The staff analysis assumes that all states without an existing income criterion or an income criterion at or below 135% of the FPG adopt the new federal default income- based standard. Accordingly, the estimates presented are likely to represent the upper limit of potential new Lifeline and telephone subscribers and estimated impact on the fund. If some states choose not to adopt the federal income- based criteria, the number of subscribers would be correspondingly lower. This analysis also assumes the following: states that already have an income criterion of 150% of the FPG or higher keep it; there are no other changes to the Lifeline/ Link- Up program or the qualifying Lifeline/ Link- Up eligibility programs; and states, ETCs, and consumers quickly learn of the program change and rapidly act on that information. See Appendix K at 3, 13. 33 See Appendix K at Table 2.H. 34 See Appendix K at Table 2. F. 35 See Acorn Comments at 4; BellSouth Comments at 3, Reply Comments at 3; Consumer Coalition Comments at 1; Florida PSC Comments at 3; NASUCA Reply Comments at 5, 9; NCLC Comments at 3, Reply Comments at 4; NFFN Comments at 7; NY Dep’t of Public Service Comments at 1- 2; OH PUC Comments at 4; Commissioner Wilson PaPUC at Reply Comments 2- 3; PULP Comments at 1- 2; TX Legal Services Center Comments at 1; TOPC Comments at 5- 6; Tribal Telecom Outreach Comments at 1; USCCB Comments at 3- 4, 6; UUI Comments at 4. 36 See NASUCA Reply Comments at 12; NCLC Comments at 5- 6; NFFN Comments at 7; PULP Comments at 1- 2; TX Legal Services Center Comments at 1. 37 Pub. L. No. 104- 193, 110 Stat. 2105 (Aug. 22, 1996). 8 Federal Communications Commission FCC 04- 87 9 and work requirements backed by sanctions. In the 1997 Universal Service Order, the Commission indicated it would monitor the impact of PRWORA on participation in Lifeline/ Link- Up qualifying programs and revise eligibility criteria if the program- based criteria model “becomes an unworkable standard.” 38 In the Twelfth Report and Order, the Commission also noted it would consider adding an income- based criterion in the future because it might “reach more low- income consumers, including low- income tribal members, than the current method of conditioning eligibility on participation in particular low- income assistance programs.” 39 We understand that participation is decreasing in many public assistance programs, including at least one program used to determine eligibility for Lifeline/ Link- Up. 40 At the same time, poverty rates in the U. S. are increasing by the traditional measure. In 2002, 12.1% or 34.6 million people fell below the poverty threshold, compared to 11.3% or 31. 1 million people in 2000. 41 At the same time, however, the Census Bureau has published six alternative measures of poverty, none of which appear to show a statistically significant increase in poverty rates between 2001 and 2002. 42 Regardless of factual differences in the data, broadening eligibility criteria to include an income- based standard at this time should ensure continued participation in Lifeline/ Link- Up among low- income households, which, in turn, should increase subscribership to the network. Several commenters also state that individuals who are no longer eligible to receive welfare or benefits under federal assistance programs may still be too poor to afford the cost of local telephone service. 43 Adding an income- based standard could increase subscribership among low- income individuals affected by PRWORA. Thus, this action will further the goals of section 254. 44 38 1997 Universal Service Order, 12 FCC Rcd at 8974, para. 374. 39 Twelfth Report and Order, 15 FCC Rcd at 12247, para. 72. 40 Food Stamps enrollment fell from 25.5 million recipients in FY 1996 to 21. 3 million recipients in FY 2003. See . 41 See U. S. Census Bureau, Current Population Survey, 2002 and 2003, Annual Social and Economic Supplements; U. S. Census Bureau, Current Population Survey, 2001 to 2002, Annual Demographic Supplements; U. S. Census Bureau, Current Population Survey, March 2000 and 2001; see also (2003 press briefing); (2002 press briefing); (2001 press briefing). According to the U. S. Census Bureau, the poverty threshold for a family of four was $18, 392 in 2002, and $17,603 in 2000. See id. Poverty thresholds, updated each year by the Census Bureau, are used mainly for statistical purposes. In contrast, poverty guidelines, issued each year by the Department of Health and Human Services, are a simplification of the poverty thresholds, used for administrative purposes such as determining financial eligibility for certain federal programs. Therefore, Census Bureau poverty thresholds, including those for years 2002 and 2000, differ from the Department of Health and Human Service’s Federal Poverty Guidelines. See generally , . 42 See U. S. Census Bureau, Press Briefing (Sept. 26, 2003), Chart 12, available at (last visited, Mar. 12, 2004). 43 BellSouth Comments at 3; NASUCA Reply Comments at 12; NCLC Comments at 5- 6, Reply Comments at 4; OH PUC Comments at 4; PULP Comments at 1- 2; TX Legal Services Center Comments at 1. 44 47 U. S. C. § 254. 9 Federal Communications Commission FCC 04- 87 10 12. Consistent with the Joint Board recommendation, 45 we initially set the income- based standard at 135% of the FPG, while we further develop the record on the costs and benefits of adopting a 150% FPG standard. 46 The Joint Board concluded that an income- based standard at 135% of the FPG struck an appropriate balance between increasing subscribership without significantly overburdening the universal service fund. It noted that most commenters supported adoption of an income- based standard ranging from 125% to 150% of the FPG, and that many other federal welfare programs, and state Lifeline programs, base eligibility on a standard within that range. 47 We note that our staff analysis projects that if all states were to adopt an income-based standard at or below 135% of the FPG, federal Lifeline expenditures could increase by $127 to $140 million over current levels; 48 in contrast, if we were to adopt an income- based standard at or below 150% of the FPG, federal Lifeline expenditures could increase by $316 to $348 million. 49 We also note that while our staff analysis projects that adoption of an income-based standard at or below 135% of the FPG could result in more than 200,000 households newly subscribing to telephone service, that study also projects no net increase in new subscribers under an income- based standard at or below 150% of the FPG. We recognize that a few commenters are concerned about the potential financial burdens placed on the universal service fund due to increased participation in the Lifeline/ Link- Up program, 50 but we conclude that the benefits of adopting a 135% income- based standard now – namely, adding new low-income subscribers and retaining existing low- income subscribers on the network – outweigh the potential increased costs. In sum, we conclude that adopting a 135% income- based standard at this time represents a reasonable and cautious approach, while we explore further whether to adopt a 150% income standard. 51 45 See Recommended Decision, 18 FCC Rcd at 6599, para. 17. 46 See infra para. 56. 47 See Recommended Decision, 18 FCC Rcd at 6599, para. 17. For example, the following federal programs use an income- based standard as an eligibility criterion: Medicaid (income at or below 133% of the FPG), Food Stamps (gross income at or below 130% of the FPG, net income at or below 100% of the FPG), Low Income Home Energy Assistance Program (LIHEAP) (income at or below 150% of the FPG but not lower than 110% of the FPG or 60% of state median income), National School Lunch program’s free lunch program (income at or below 130% of the FPG). We note that these programs may also use other eligibility criteria. States with their own Lifeline/ Link- Up programs may establish their own eligibility criteria or may allow carriers to define eligibility. For example, BellSouth Florida, Sprint Tennessee, ALLTEL Texas, and Southwestern Bell Texas have an income- based eligibility criterion of 125% of the FPG. Qwest Idaho, Oregon, and Utah have an income- based eligibility criterion of 133% of the FPG. Verizon Oregon has an income- based eligibility criterion of 135% of the FPG. Pacific Bell California, Verizon Michigan, Sprint Minnesota, Missouri, Nebraska, Nevada, Moapa Valley Nevada, Verizon Nevada, Sprint Pennsylvania, and Verizon Vermont have an income- based eligibility criterion of 150% of the FPG. See . We note these programs may also use other eligibility criteria. 48 See Appendix K at Table 2.G. As recognized in the staff study, this amount represents the upper bound of the potential increase in funding as it assumes that all states that do not already have an income criterion of at least 135% of the FPG will choose to implement the new federal default standard. Moreover, we recognize that it is difficult to predict with certainty how consumers may behave if program requirements change. See Appendix K at 13. 49 See Appendix K at Table 2.G. 50 See AT& T Reply Comments at 4; CPUC Comments at 6; Florida PSC Comments at 3; MCI Comments at 2. 51 See infra paras. 56- 57. 10 Federal Communications Commission FCC 04- 87 11 b. Program- based Criteria 13. We also adopt the Joint Board’s recommendation that the Temporary Assistance to Needy Families program (TANF) 52 and the National School Lunch’s free lunch program (NSL) 53 be added to the federal default eligibility criteria. 54 We believe adding these programs is likely to help improve participation in the Lifeline/ Link- Up program, and in doing so, would increase telephone subscribership and/ or make rates more affordable for low- income households. Additionally, low- income consumers that come into contact with state agencies while enrolling in one public assistance program are often made aware of their eligibility to participate in another public assistance program. Therefore, participation in Lifeline/ Link- Up could be increased by adding these public assistance programs to the current program- based criteria because it increases the possibility that low- income consumers could be made aware of Lifeline/ Link- Up when they enroll in TANF and NSL and thereby increases or maintains subscribership. 55 14. Under the Commission’s current rules, Tribal TANF is an eligibility criterion for enhanced Lifeline/ Link- Up. 56 The Commission extended Lifeline/ Link- Up eligibility criteria to include the Tribal TANF program, as well as Bureau of Indian Affairs General Assistance, Tribal National School Lunch’s free lunch program, and Tribal Head Start program (income qualifying standard only) concluding that the “household income thresholds for these newly added programs range[ d] from 100- 130 percent of the [FPG]” and were therefore “consistent with the [income thresholds of those] programs included in our current federal default list.” 57 Adding TANF to the current list of eligibility criteria may permit more low- income individuals, not just those living on tribal lands, to qualify for Lifeline/ Link- Up support, thereby potentially increasing telephone subscribership and making rates more affordable for existing low- income subscribers. 58 Although 5.1 million recipients currently participate in TANF, 59 like the Joint 52 TANF replaced the Aid to Families with Dependent Children program (AFDC). TANF is codified at 42 U. S. C. §§ 600 et seq. 53 NSL is codified at 42 U. S. C. §§ 1751 et seq. 54 See Recommended Decision, 18 FCC Rcd at 6601, para. 20. 55 See Consumer Coalition Comments at 2. 56 In Tribal TANF, participation is only open to those living on tribal lands, and tribes implement their own TANF programs with eligibility criteria and benefits that vary by tribe rather than by state. See . 57 Twelfth Report and Order, 15 FCC Rcd at 12245, para. 68. We note that: (1) income eligibility criteria in the programs listed may have changed in the four years since the Twelfth Report and Order was released and (2) because Tribal TANF eligibility criteria varies by tribe, income eligibility criteria in certain Tribal TANF programs may not range from 100- 130% of the FPG. 58 See NCLC Comments at 3- 4. 59 In fiscal year 2002, there were approximately 5.1 million recipients receiving TANF support. See HHS/ ACF/ Office of Family Assistance/ Division of Data Collection and Analysis, ACF- 3637, Statistical Report on Recipients under Public Assistance (OMB Approval No. 0970- 008), ACF- 198, Emergency TANF Data Report (0970- 0164), ACF- 199, TANF Data Report (0970- 0199); . 11 Federal Communications Commission FCC 04- 87 12 Board, we cannot project how many additional persons may become eligible for Lifeline/ Link-Up under this new criterion because many low- income households participate in more than one assistance program. 60 Nevertheless, we share the Joint Board’s belief that extending Lifeline/ Link- Up benefits to TANF participants will promote the goals of universal service. 15. We note that, in the 1997 Universal Service Order, the Commission rejected a proposal to add TANF’s predecessor, Aid to Families with Dependent Children (AFDC), to the list of qualifying Lifeline/ Link- Up programs. 61 At the time, the Commission was concerned about the impact of PRWORA on that particular program. 62 Although TANF participation rates have decreased since fiscal year 1996 and the implementation of PRWORA, participation rates remain high. 63 Accordingly, adding this particular program to the federal default eligibility criteria may still potentially affect significant numbers of low- income consumers. 16. We agree with the Joint Board that one benefit of adding TANF is the broad discretion that states are given to establish eligibility standards for each state’s respective TANF program. 64 This broad discretion enables states to tailor the TANF program to meet their constituents’ needs. Therefore, we agree with the Joint Board and most commenters that adding TANF as an eligibility criterion for Lifeline/ Link- Up will help target the program to appropriate low- income households. 65 Another advantage of adding TANF is that verification of Lifeline/ Link- Up eligibility would simply involve checking TANF program records. We agree with NASUCA that monitoring participation in TANF is no more difficult than other programs. 66 17. We agree with the Joint Board that adding NSL’s free lunch program to the current list of federal default eligibility criteria may permit more low- income individuals, not just those living on tribal lands, to qualify for Lifeline/ Link- Up support, thereby increasing subscribership and/ or making rates more affordable for low- income households. 67 Under the Commission’s current rules, Tribal NSL is an eligibility criterion for enhanced Lifeline/ Link- Up on tribal lands. 68 In general, NSL’s eligibility criteria are the same as for Tribal NSL. 69 To be eligible for 60 See Recommended Decision, 18 FCC Rcd at 6601, para. 21. 61 See 1997 Universal Service Order, 12 FCC Rcd at 8974, para. 374. 62 See id. 63 See infra note 198. 64 See Recommended Decision, 18 FCC Rcd at 6601, para. 22. We note that each state’s TANF program is subject to modification, as are all the means- tested programs that comprise Lifeline/ Link- Up’s program- based criteria. 65 See Consumer Coalition Comments at 1- 2; Florida PSC Comments at 4; NCLC Comments at 3- 4; NASUCA Reply Comments at 16; NY Dep’t of Public Service Comments at 1- 2; PaPUC Reply Comments at 3; Commissioner Wilson PaPUC Reply Comments at 4- 5; Tribal Telecom Outreach Comments at 1; USCCB Comments at 8- 9. 66 See NASUCA Reply Comments at 16. 67 See Recommended Decision, 18 FCC Rcd at 6602, para. 23. 68 See 47 C. F. R. § 54. 409( c). 69 In Tribal NSL, participation is only open to children living on tribal lands, and children living on tribal lands are automatically eligible if they or their household receives assistance under the Food Distribution Program on Indian Reservations. See generally . 12 Federal Communications Commission FCC 04- 87 13 NSL’s free lunch program, the household income must be at or below 130% of the FPG, which is $23,920 for a family of four. 70 Children are automatically eligible for free school meals if their household receives Food Stamps, benefits under the Food Distribution Program on Indian Reservations or, in most cases, benefits under the TANF program. 71 There were approximately 13.7 million children enrolled in NSL’s free lunch program in fiscal year 2003. 72 As with TANF, however, it is difficult to project how many additional persons may become eligible for Lifeline/ Link- Up by adopting NSL because many low- income households typically participate in more than one assistance program once they meet the qualifying criteria. 73 We are not aware of any data on the total number of households in which NSL participants reside, because more than one NSL participant may reside in a single household. Nevertheless, we agree with the Joint Board that adding NSL as an eligibility criterion could increase telephone subscribership and/ or make rates more affordable for low- income households. 18. There is significant support in the record for adding NSL’s free lunch program to the federal default eligibility criteria. 74 We agree with NCLC that adding NSL may improve telephone penetration among low- income subscribers because it may capture many low- income households that may not participate in other Lifeline/ Link- Up qualifying public- assistance programs. 75 According to NCLC, many households do not feel that children participating in NSL carries the same social stigma as participation in programs whose aim is assistance for adults. 76 Also, adding NSL’s free lunch program is consistent with the Commission’s determination in the Twelfth Report and Order that eligibility for enhanced Lifeline/ Link- Up should be limited to those qualifying for free lunch from NSL. 77 We note that participation in the NSL program is increasing, unlike other assistance programs where PRWORA may have prompted decreased enrollment. 78 It is also easy to verify eligibility under this criterion because it would simply involve checking NSL program records. We note that in the 1997 Universal Service Order, the Commission found that “in the interest of administrative ease and avoiding fraud, waste, and abuse, the named subscriber to the local telecommunications service must participate in [the] program[ ] to qualify for Lifeline.” 79 Although the child is the named 70 See 2003 FPG, 68 Fed. Reg. at 6456- 58. We note that the NSL program is subject to modification, as are all the means- tested programs that comprise Lifeline/ Link- Up’s program- based criteria. 71 See . 72 See . 73 See Recommended Decision, 18 FCC Rcd at 6602, para. 23. 74 These commenters supported adding NSL to the federal default eligibility criteria. See Consumer Coalition Comments at 2; Florida PSC Comments at 4; NCLC Comments at 3- 5; NASUCA Reply Comments at 16- 17; NY Dep’t of Public Service Comments at 1- 2; OK Corporation Commission Comments at 3; Commissioner Wilson PaPUC Reply Comments at 4- 5; Tribal Telecom Outreach Comments at 1; USCCB Comments at 8- 9. 75 See NCLC Comments at 3- 5. 76 See NCLC Comments at 5. 77 See Twelfth Report and Order, 15 FCC Rcd at 12245, para. 68. 78 For example, in 1996, there were 12. 7 million children enrolled in NSL’s free lunch program. In 2003, there were 13. 7 million children enrolled in NSL’s free lunch program. See . 79 See 1997 Universal Service Order, 12 FCC Rcd at 8974, para. 374. 13 Federal Communications Commission FCC 04- 87 14 participant in the NSL program, it is the household’s income that qualifies the child for participation in the program. No commenters have brought to our attention any evidence of problems with its use in the enhanced Lifeline/ Link- Up federal default eligibility criteria for those living on tribal lands. Accordingly, we believe that adding NSL will help to target Lifeline/ Link- Up support to the appropriate low- income households. B. Duration of an Individual’s Eligibility for Lifeline/ Link- Up 1. Background 19. Only qualifying low- income consumers may participate in the Lifeline/ Link- Up program. 80 Therefore, if a consumer ceases to meet any of the eligibility criteria, he or she may no longer receive the benefits of Lifeline/ Link- Up. The Joint Board was concerned that an automatic termination process might result in erroneous disconnection of service for certain consumers. Accordingly, the Joint Board recommended that the Commission seek comment on establishing an appeals process for the termination of Lifeline benefits and determine whether 60 days is an appropriate time period for a consumer to appeal. 81 In the NPRM, the Commission sought comment on this proposal and asked commenters to provide more information on how an appeals process could work. 82 2. Discussion 20. We agree with the Joint Board and several commenters that consumers should be given a period of time in which to show continued eligibility for Lifeline. 83 As described below, dispute resolution procedures are necessary to allow consumers to demonstrate continued eligibility. Moreover, such a timeframe will provide Lifeline customers, who may not be aware of a change to their eligibility status, a period of time in which to transition to the full cost of non- Lifeline service should they be found to be ineligible. This transitional period will reduce the likelihood that such customers would be subsequently disconnected from the network. Therefore, an appeal and transition period will promote the goals of section 254. 84 Moreover, allowing Lifeline benefits to continue prior to a final decision to terminate enrollment should not burden the fund excessively, while providing administrative stability. 21. We recognize that some states may have existing dispute resolution procedures between telephone companies and consumers governing termination of telephone service that could apply to termination of Lifeline benefits. For example, the Pennsylvania Public Utility Commission (PaPUC) asserts that “Pennsylvania carriers would treat an appeal regarding termination of Lifeline service as a ‘dispute’ and would follow the PaPUC procedural rules 80 See 47 C. F. R. § 54. 409( b). 81 See Recommended Decision, 18 FCC Rcd at 6605, paras. 29, 30. 82 See NPRM, 18 FCC Rcd at 11629, para. 2. 83 See Recommended Decision, 18 FCC Rcd at 6604, para. 29; NASUCA Reply Comments at 30; NCLC Comments at 13- 15; OH PUC Comments at 8. 84 See 47 U. S. C. §§ 254( b)( 1), 254( b)( 3). 14 Federal Communications Commission FCC 04- 87 15 regarding the resolution of disputes[.]” 85 The PaPUC explains that termination of service would be stayed pending resolution of the dispute. 86 Accordingly, in such a state, consumers would have an opportunity to dispute Lifeline termination, and there would be no need for the ETC to follow the federal default procedures, as described below. 87 Therefore, where a state maintains its own procedures that would require, at a minimum, written customer notification of impending termination of Lifeline benefits, similar to the federal default requirements, that state will retain the flexibility to develop its own appeals process. Moreover, we agree with the PaPUC and the Joint Board that preempting a state’s existing appeals process could result in customer confusion and unnecessary expense for the carrier. States should make their own determination as to whether the state’s existing laws could apply to termination of Lifeline benefits. 22. In states that lack dispute resolution procedures applicable to Lifeline termination, we adopt the Joint Board’s recommendation and require ETCs that have a reasonable basis to believe that consumers no longer qualify for Lifeline 88 to notify consumers of their impending termination of Lifeline benefits and implement a 60- day period of time in which to demonstrate continued eligibility. 89 For those states, we adopt the following federal default procedures. ETCs in such states will be required to notify consumers of their impending termination of Lifeline benefits by sending a termination of Lifeline benefits notice in a letter separate from the consumer’s monthly bill. If a consumer receives such a termination notice, the consumer would have up to 60 days from the date of the termination letter in which to demonstrate his or her continued eligibility before Lifeline support is discontinued. For example, a consumer who enrolled in Lifeline because he or she participated in LIHEAP may nevertheless qualify for Lifeline after discontinuing participation in LIHEAP under a different program- based or income-based criterion. Consumers should be given a period of time in which to make such a showing of continued eligibility if they believe they have received a termination letter in error. The 60- day time period also should ensure that consumers have ample notice to make arrangements to pay the full cost of local service should they wish to continue telephone service after termination of Lifeline benefits. 90 This 60- day time period thus furthers the goal of section 254 to provide access to telecommunications services for low- income consumers. 91 A consumer who appeals must present proof of continued eligibility to the carrier consistent with his or her state’s 85 See PaPUC Reply Comments at 4 (citing 52 Pa. Code §§ 64. 131- 134, 64. 141- 142). See also Commissioner Wilson PaPUC Reply Comments at 5- 6. 86 See PaPUC Reply Comments at 4 (citing 52 Pa. Code § 64. 133). See also Commissioner Wilson PaPUC Reply Comments at 5- 6. 87 See infra para. 22. 88 An ETC may have a reasonable basis to believe that a consumer no longer qualifies for Lifeline if, for example, the state alerts the ETC that a particular consumer no longer participates in a Lifeline- qualifying program or the consumer fails to provide information in response to a request for documentation by the ETC. 89 Where ETCs provide wholesale Lifeline rates to non- ETC resellers that provide discounted service to low- income consumers in states that lack dispute resolution procedures, the non- ETC reseller must comply with these requirements. 90 Commenters also agreed that 60 days is a reasonable amount of time. See NASUCA Reply Comments at 30; NCLC Comments at 14; OH PUC Comments at 8. 91 See generally 47 U. S. C. § 254. 15 Federal Communications Commission FCC 04- 87 16 verification requirements or federal verification requirements, if relevant, as modified in the Certification and Verification Procedures section below. 92 This procedure is only required when the carrier has initiated termination of benefits. This 60- day period of time is not necessary when the Lifeline subscriber has notified the carrier that he or she is no longer eligible. 93 Presumably such subscribers will be aware of their impending termination of benefits and will be able to budget their resources accordingly. C. Certification and Verification Procedures 1. Background 23. Certification and verification are the processes by which eligible consumers establish their qualification for Lifeline/ Link- Up. Certification occurs at the time an individual is applying to enroll in Lifeline/ Link- Up, while verification occurs on a periodic basis after the subscriber has already been certified. Currently, in a state that has instituted its own Lifeline/ Link- Up program, an individual must follow that state’s certification and verification procedures, if any, in order to enroll and continue to participate in that state’s Lifeline/ Link- Up program. 94 In federal default states, an individual must self- certify to his/ her carrier, under penalty of perjury, that he/ she is enrolled in a qualifying assistance program. 95 Although there is currently no verification requirement for federal default states, Lifeline subscribers are required to notify their carriers when they cease to participate in a qualifying program. 96 24. In its Recommended Decision, the Joint Board recommended that the Commission encourage all states, including federal default states, to adopt automatic enrollment as a means of certifying that consumers are eligible for Lifeline/ Link- Up. 97 They also recommended that consumers eligible for Lifeline/ Link- Up under an income- based criterion be required to present documentation of income eligibility prior to being enrolled in the program and to verify continued eligibility under any criterion. Finally, the Joint Board recommended adoption of a rule requiring Lifeline/ Link- Up applicants who qualify under the income- based criterion to certify, under penalty of perjury, the number of individuals in their household. 98 92 See infra paras. 28- 35. 93 See 47 C. F. R. § 54. 409( b). 94 47 C. F. R. § 54.409( a). 95 47 C. F. R. § 54.409( b). 96 Id. 97 The definition of automatic enrollment in the Lifeline/ Link- Up context is an “electronic interface between a state agency and the carrier that allows low- income individuals to automatically enroll in Lifeline/ Link- Up following enrollment in a qualifying public assistance program.” Recommended Decision, 18 FCC Rcd at 6608, para. 38. 98 Recommended Decision, 18 FCC Rcd at 6610, para. 44. 16 Federal Communications Commission FCC 04- 87 17 2. Discussion a. Automatic Enrollment 25. We agree with the Joint Board and encourage all states, including federal default states, to adopt automatic enrollment as a means of certifying that consumers are eligible for Lifeline/ Link- Up. 99 In its Recommended Decision, the Joint Board observed that participation rates for Lifeline/ Link- Up increased in states that employed automatic enrollment, aggressive outreach, and intrastate multi- agency cooperation. 100 In particular, the Joint Board highlighted three states that have adopted some form of Lifeline/ Link- Up automatic enrollment. 101 In two states, an affirmative act by the participant, such as authorization to release qualifying information and submission of letter indicating participation in the qualifying program, is needed to secure enrollment in Lifeline/ Link- Up. 102 In a third state, the state automatically enrolls the consumer in Lifeline/ Link- Up at the time of enrollment in a qualifying program, but offers the consumer an opt- out provision to cancel participation in Lifeline/ Link- Up. 103 Because we agree with the Joint Board that automatic enrollment may facilitate participation in Lifeline/ Link- Up, we adopt the Joint Board’s recommendation to encourage states to implement such measures. 26. We decline, however, to require states to adopt automatic enrollment at this time. 104 Instead, we encourage those states that currently do not employ automatic enrollment to consider states that operate automatic enrollment as a model for future implementation. 105 As the Joint Board noted, implementation of automatic enrollment could impose significant administrative, technological, and financial burdens on states and ETCs. 106 Although we recognize the benefits of automatic enrollment, we agree with the Joint Board that we should not force states that may be unable to afford to implement automatic enrollment to do so. 107 We also recognize arguments that requiring automatic enrollment may deter ETCs from participating in the Lifeline/ Link- Up 99 Id. at 6607- 08, para. 38. 100 Id. at 6608, para. 39. 101 See id. at 6608, 6625- 26, paras. 39- 40, Appendix E. 102 Recommended Decision, 18 FCC Rcd at 6625- 26, Appendix E. Massachusetts and North Dakota require an affirmative action by the enrollee. Id. 103 Id. at 6626, Appendix E. New York employed a confidentiality agreement between the state agency and the carrier to facilitate the release of qualifying information and safeguard consumer privacy rights. 104 See, e. g., ACORN Comments at 4; NASUCA Comments at 17- 20; NCLC Comments at 8; NCLC Reply Comments at 4- 5; NFFN Comments at 8, OK Corporation Commission Comments at 4; USCCB Comments at 9. 105 For example, in Texas, plans are underway to implement the state legislature’s determination that all utility discount plans should be administered by a third party, the Low Income Discount Administrator (LIDA). See NASUCA Reply Comments at 18- 19; see also . It is proposed that the LIDA will interface with state agencies and automatically enroll consumers that are eligible for utility discounts in various assistance programs, including Lifeline. 106 See Recommended Decision, 18 FCC Rcd 6608, para. 40. 107 Massachusetts, Texas, New York, New Jersey, Nevada, and Ohio are examples of states utilizing automatic enrollment in their Lifeline/ Link- Up programs. 17 Federal Communications Commission FCC 04- 87 18 program because of the technical requirements associated with interfacing with government agencies or third party administrators. 108 b. Certification of Program- based Eligibility 27. We agree with the Joint Board that the current certification procedures for program-based qualification are sufficient. 109 Current rules require self- certification, under penalty of perjury, for the federal default states, 110 and allow states operating their own Lifeline/ Link- Up programs to devise more strict measures as they deem appropriate. 111 We agree with the Joint Board that the ease of self- certification encourages eligible consumers to participate in Lifeline/ Link- Up. 112 In addition, self- certification imposes minimal burdens on consumers. Finally, we agree with the Joint Board that participation in need- based programs is easily verified. 113 Accordingly, we conclude, consistent with the views of the Joint Board, that certification of qualified program participation, under penalty of perjury, serves as an effective disincentive to abuse the system at this time. 114 c. Certification of Income- based Eligibility 28. We adopt the Joint Board’s recommendation to require all states, including federal default states, to adopt certification procedures to document income- based eligibility for Lifeline/ Link- Up enrollment. 115 Because it is easier to verify qualifying program enrollment, we share the Joint Board’s concerns that there may be a greater potential for fraud and abuse when an individual self- certifies his/ her income eligibility. 116 We agree with the many commenters that requiring documentation of income eligibility should protect against waste, fraud, and abuse and ensure that only qualified individuals receive Lifeline/ Link- Up assistance. 117 Some commenters, however, contend that self- certification of income, under penalty of perjury, at the enrollment stage is the most cost- effective method to deter abuse of the program. 118 The Florida PSC, on the other hand, notes that California’s Lifeline program, which utilizes self- certification of income- based eligibility, appears to have more households receiving the Lifeline discount 108 See e. g., AT& T Reply Comments at 4; BellSouth Comments at 4- 5; Verizon Comments at 8- 10. 109 See Recommended Decision, 18 FCC Rcd at 6606, para. 32. See also Consumer Coalition Comments at 1- 3. 110 47 C. F. R. § 54.409( b). 111 47 C. F. R. § 54.409( a). 112 See Recommended Decision, 18 FCC Rcd at 6606, paras. 32- 33. 113 See id. at 6606, para. 33. 114 See id.; see also 47 C. F. R. § 54. 409( b). 115 See Recommended Decision, 18 FCC Rcd at 6606- 07, para. 34. 116 See id. at 6606, para. 33; see also BellSouth Comments at 6; MCI Comments at 3; NCLC Comments at 4, Reply Comments at 4. 117 See BellSouth Comments at 6; FPSC Comments at 2, 4; MCI Comments at 3; NCLC Comments at 4, Reply Comments at 4. 118 See, e. g. ACORN Comments at 5; Consumer Coalition Comments at 2- 3; NASUCA Reply Comments at 21; USCCB Comments at 7; TX OPUC Comments at 3- 4, Reply Comments at 4- 5. 18 Federal Communications Commission FCC 04- 87 19 than the Current Population Survey of Households data would indicate are eligible for the discount. 119 We do not agree with these commenters that argue income certification from another means- tested program should be suitable documentation, 120 because it could be difficult to verify that the means- tested program utilizes the same income eligibility threshold. Therefore, because self- certification of income presents additional vulnerabilities to the Lifeline/ Link- Up program, we agree with the Joint Board and several commenters that certification of income-based eligibility must be accompanied by supporting documentation. 121 29. We agree with the Joint Board that states that operate their own Lifeline/ Link- Up programs should maintain the flexibility to develop their own certification procedures other than self- certification, including acceptable documentation to certify consumer eligibility under an income- based criterion, and to determine the certifying entity, whether it is a state agency or an ETC. 122 This flexibility will permit states to develop certification procedures that best accommodate their own Lifeline participants based on the available resources of ETCs and state commissions, each state’s eligibility criteria, and local conditions. When developing their certification procedures, we remind states that eligible consumers living on tribal lands may qualify for Lifeline support even if they do not satisfy that state’s eligibility criteria. 123 In addition, ETCs must be able to document that they are complying with state regulations and recordkeeping requirements. 30. For federal default states, we adopt rules reflecting the Joint Board’s recommendation that consumers must provide documentation of income eligibility at enrollment. 124 Specifically, we agree with the Joint Board’s recommendation that the prior year’s state, federal, or tribal tax return, current income statement from an employer or paycheck stub, a Social Security statement of benefits, a Veterans Administration statement of benefits, a retirement/ pension statement of benefits, an Unemployment/ Workmen’s Compensation statement of benefits, federal or tribal notice letter of participation in Bureau of Indian Affairs General Assistance, a divorce decree, or 119 See Florida PCS Comments at 4- 5. See also Recommended Decision, 18 FCC Rcd at 6650, 6668, Table 1. A, Appendix F. The Current Population Survey of Households is a monthly survey of households conducted by the Bureau of Census for the Bureau of Labor Statistics. It provides a comprehensive body of data on the labor force, employment, unemployment, and persons not in the labor force. See . 120 See NFFN Comments at 4; PULP Comments at 2. 121 See Recommended Decision, 18 FCC Rcd at 6606- 07, para. 34; Bell South Comments at 5- 6; MCI Comments at 3- 4; FPSC Comments at 4; NY Department of Public Service Comments at 1- 2. 122 See Recommended Decision, 18 FCC Rcd at 6606- 07, para. 34. 123 47 C. F. R. § 54.409( c) (consumers living on a reservation may qualify for Tiers One, Two and Four of Lifeline support if they satisfy the criteria in 54. 409( c) or (d) even if they do not satisfy state eligibility criteria); see also Federal- State Joint Board on Universal Service; Promoting Deployment and Subscribership in Unserved And Underserved Areas, Including Tribal and Insular Areas; Commonwealth of Northern Mariana Islands, CC Docket No. 96- 45, Twenty- Fifth Order On Reconsideration, Report and Order, Order, and Further Notice Of Proposed Rulemaking, 18 FCC Rcd 10958, 10970- 71, para. 24 (2003). 124 See Recommended Decision, 18 FCC Rcd at 6607, para. 35. 19 Federal Communications Commission FCC 04- 87 20 child support document serve as the types of documents acceptable for income verification. 125 We conclude that if a consumer chooses to proffer any document other than a previous year’s tribal, federal, or state income tax return as evidence of income, such as current pay stubs, the consumer must present three consecutive months worth of the same type of statements within that calendar year. Three consecutive months of income statements represent one quarter of the calendar year and better substantiate the yearly stated income, without overly burdening consumers. 31. For those states governed by the federal default Lifeline/ Link- Up rules, we require an officer of the ETC enrolling the consumer in Lifeline/ Link- Up to certify, under penalty of perjury, that the ETC has procedures in place to review income documentation and that, to the best of his or her knowledge, the company was presented with documentation that the consumer’s household income is at or below 135% of the FPG. Some commenters oppose certification procedures for income- based eligibility because, they insist, such procedures would be overly burdensome to ETCs. 126 AT& T argues that ETC employees are not trained to review and interpret complex government forms, such as tax forms, W- 2 statements, or pay stubs. 127 The rules we adopt today, however, do not require difficult computations or interpretations; rather, they require the ETC to compare the annual income represented in the provided documentation and the number of individuals in the household to a FPG chart posted on the Universal Service Administrative Company’s (USAC’s) website. 128 Moreover, our rules do not require ETCs to retain the consumer’s corroborating documentation. ETCs need only retain records of their self- certifications and those made by the applicant. 129 Where states operate their own Lifeline/ Link- Up programs, an officer of the ETC must certify that the ETC is in compliance with state Lifeline/ Link- Up income certification procedures and that, to the best of his or her knowledge, documentation of income was presented. 32. Finally, all consumers in all states qualifying under an income- based criterion must self- certify their eligibility to participate. Consumers must make this self- certification under penalty of perjury and must also present all required documentation. Specifically, consumers must self- certify, under penalty of perjury, that the presented documentation accurately represents their annual household income. Moreover, we adopt the Joint Board’s recommendation that Lifeline/ Link- Up applicants in all states qualifying under an income- based criterion should be required to self- certify, under penalty of perjury, the number of individuals in 125 Id. at 6607, paras. 35- 36. We note that if a consumer only provides one form of documentation, as we require here, that may not represent the household’s complete income as defined in our rules. See infra Appendix A, 47 C. F. R. § 54. 400( f). Accordingly, we require that the consumer self- certify that the documentation accurately represents the consumer’s total household income. See infra para. 32. 126 See AT& T Reply Comments at 5; OK Corporation Commission Comments at 3. 127 AT& T Reply Comments at 5. 128 If an applicant presents three months of payment statements, the carrier enrolling the consumer will have to multiply by four, the sum of the payments received in three months, to determine the applicant’s annual income. See infra Appendix D for estimated income requirements for various sizes of households at or below 135% of the FPG. 129 See 47 C. F. R. §§ 54. 407( c), 54. 413( c). See also infra paras. 37- 38. 20 Federal Communications Commission FCC 04- 87 21 their households. 130 Because the Federal Poverty Guidelines change depending upon the number of individuals in a household, this information is necessary to determine eligibility. d. Verification of Continued Eligibility Under Program- based and Income- based Eligibility 33. We adopt the Joint Board’s recommendation that all states, including federal default states, be required to establish procedures to verify consumers’ continued eligibility for the Lifeline/ Link- Up program under both program and income- based eligibility criteria. 131 Verification procedures could include random beneficiary audits, periodic submission of documents, or annual self- certification. We agree with those commenters that assert that verification of continued eligibility should ensure that the low- income support mechanism is updated, accurate, and carefully targeted to provide support only to eligible consumers. 132 We disagree with other commenters that argue that these benefits do not outweigh the burden associated with a verification requirement. 133 We agree with the Joint Board that verification is an effective way to prevent fraud and abuse and ensure that only eligible consumers receive benefits. 34. We also adopt the Joint Board’s recommendation to allow states that administer their own Lifeline/ Link- Up programs the flexibility to design and implement their own verification procedures to validate consumers’ continued eligibility. 134 We note that several states already engage in verification of continued eligibility for Lifeline/ Link- Up. For example, in some states, the ETC is responsible for verifying the consumer’s continued eligibility, 135 while other states require their state agencies to devise procedures for eligibility verification. 136 Another state establishes eligibility verification procedures that involve state agency and carrier participation. 137 This flexibility will permit states to develop verification procedures that best accommodate their own Lifeline participants based on the available resources of ETCs and state 130 See Recommended Decision, 18 FCC Rcd at 6607, para. 37. 131 Recommended Decision, 18 FCC Rcd at 6609, para. 41. 132 See, e. g. MCI Comments at 3- 4; Florida PSC Comments at 5; NASCUA Reply Comments at 17. 133 See, e. g. AT& T Comments at 7, Reply Comments at 5; Verizon Comments at 6- 7. 134 See Recommended Decision, 18 FCC Rcd at 6609, para. 41. 135 In Ohio, carriers perform verification audits to substantiate consumers’ continued eligibility. See Ohio PUC Comments at 7. In addition, the Ohio PUC provides that carriers may use W- 2s, pay- stubs, or employer verification as means of income verification. See Elective Alternative Regulatory Framework for Incumbent Local Exchange Companies, Entry on Rehearing, Case No. 00- 1532- TP- ALT, 2002WL1058559 (Ohio PUC) (April 25, 2002). 136 For program- based verification of continued eligibility, the North Dakota Department of Human Services sends an annual, qualifying certificate for Lifeline/ Link- Up support to consumers, which must be returned to the local telephone company. See Recommended Decision, 18 FCC Rcd at 6626, Appendix E. 137 In Pennsylvania, most ETCs use the Pennsylvania Department of Revenue database to verify income. See PaPUC Reply Comments at 5- 6. Another form of verification of continued eligibility used in North Dakota involves an annual list sent to the telephone companies by North Dakota Department of Human Services identifying eligible participants, which the company uses to update its eligible subscribers. See Recommended Decision, 18 FCC Rcd at 6626, Appendix E. 21 Federal Communications Commission FCC 04- 87 22 commissions, each state’s eligibility criteria, and local conditions. We also note that eligible consumers living on tribal lands may qualify for Lifeline support even if they do not satisfy that state’s eligibility criteria. 138 In addition, ETCs must be able to document that they are complying with state regulations and verification requirements. 35. With respect to federal default states, we adopt the Joint Board’s recommendation to require ETCs to verify annually the continued eligibility of a statistically valid sample of their Lifeline subscribers. 139 ETCs are free to verify directly with a state that particular subscribers continue to be eligible by virtue of participation in a qualifying program or income level. Alternatively, to the extent ETCs cannot obtain the necessary information from the state, they may survey the subscriber directly and provide the results of the sample to USAC. 140 Subscribers who are subject to this verification and qualify under program- based eligibility criteria must prove their continued eligibility by presenting in person or sending a copy of their Medicaid card or other Lifeline- qualifying public assistance card and self- certifying, under penalty of perjury, that they continue to participate in the Lifeline- qualifying public assistance program. Subscribers who are subject to this verification and qualify under the income- based eligibility criteria must prove their continued eligibility by presenting current documentation consistent with the federal default certification process, as detailed above. 141 These subscribers must also self- certify, under penalty of perjury, the number of individuals in their household and that the documentation presented accurately represents their annual household income. As with certification of income- based eligibility, ETCs need not retain documentation of income; however, an officer of the ETC must certify, under penalty of perjury, that the ETC has income verification procedures in place and that, to the best of his or her knowledge, the company was presented with corroborating documentation and retain these records. 142 36. In addition, we agree with the Joint Board that states should develop on- line verification systems. 143 Several commenters highlight the effectiveness and efficiency of verifying eligibility via on- line databases. 144 We agree with the Joint Board that an on- line verification process, where states can obtain and provide data to allow ETCs real- time access to a database of low- income assistance program participants or income reports, could be a quick, 138 47 C. F. R. § 54.409( c); see also Federal- State Joint Board on Universal Service; Promoting Deployment and Subscribership in Unserved And Underserved Areas, Including Tribal and Insular Areas; Commonwealth of Northern Mariana Islands, CC Docket No. 96- 45, Twenty- Fifth Order On Reconsideration, Report and Order, Order, and Further Notice Of Proposed Rulemaking, 18 FCC Rcd 10958, 10970- 71, para. 24 (2003). 139 See Recommended Decision, 18 FCC Rcd at 6610, para. 43. See Appendix J for a description of how ETCs may draw a statistically valid random sample. 140 See infra Appendix J. 141 See supra paras. 30- 31. ETCs should make arrangements to allow consumers to present their income documentation at local ETC stores or offices. 142 See 47 C. F. R. §§ 54. 407( c), 54. 413( c). See also infra paras. 37- 38. 143 See Recommended Decision, 18 FCC Rcd at 6609, para. 42. 144 See, e. g. BellSouth Comments at 5- 6; NCLC Reply Comments at 4; Commissioner Wilson PaPUC Reply Comments at 8; Rural Iowa Independent Telephone Association at 1- 2. 22 Federal Communications Commission FCC 04- 87 23 easy, and accurate solution. Nevertheless, we decline to require states to adopt on- line verification at this time. Despite the benefits of on- line verification, we recognize, as did the Joint Board, that current financial constraints may make it difficult for some states to implement on- line verification. D. Implementation and Recordkeeping 37. States and ETCs will be required to implement measures to certify income of consumers before enrollment in Lifeline/ Link- Up when income is the consumer’s basis for Lifeline/ Link- Up eligibility, and to implement measures to verify continued eligibility for Lifeline/ Link- Up under any criteria within one year from the publication of this Order in the Federal Register. Given the flexibility afforded states to develop certification and verification procedures, we conclude that one year should provide more than enough time to come into full compliance with the rules we adopt today. Indeed, we encourage states and ETCs to implement certification and verification measures as quickly as possible, but no later than one year. For federal default states, level of income will not be acceptable as a means of qualifying for Lifeline/ Link- Up until certification procedures are in place. 145 38. In addition, we specify that ETCs in federal default states must retain certifications regarding a consumer’s eligibility for Lifeline for as long as the consumer receives Lifeline service from that ETC or until the ETC is audited by the Administrator. Section 54.409 of the Commission’s rules requires ETCs to obtain a self- certification, under penalty of perjury, from a consumer that he or she receives benefits from one of the qualifying means- tested programs. 146 However, this rule does not specify how long ETCs must retain consumer self- certifications regarding eligibility. In this Order, we clarify our rules to require ETCs in federal default states to retain consumers’ self- certifications of eligibility, including self- certifications that income documentation accurately reflects household income, 147 for as long as the consumer receives Lifeline service from that ETC or until the ETC is audited by the Administrator. This requirement will strengthen the Commission’s ability to ensure program integrity without unduly burdening ETCs. For example, requiring an ETC to retain a single certification document per consumer will allow the Administrator to confirm in any audit that a consumer was properly enrolled in Lifeline, regardless of when he or she was enrolled. 39. Moreover, we codify the requirement that all ETCs must maintain records to document compliance with all Commission and state requirements governing the Lifeline/ Link-Up programs and provide that documentation to the Commission or Administrator upon request. These records could include, for example, self- certifications verifying consumers’ continued eligibility, documents demonstrating that ETCs have passed through the appropriate discounts to qualifying consumers, proof of advertising of Lifeline/ Link- Up service, and billing records for Lifeline customers. All ETCs must retain such documentation for the three full preceding calendar years, e. g., in December 2004, an ETC would maintain records for calendar years 2001- 145 See supra paras. 29- 31, 32. 146 See 47 C. F. R. § 54. 409( d), as modified herein. 147 See supra para. 32. 23 Federal Communications Commission FCC 04- 87 24 2003, but in January 2005, that ETC would only maintain records for calendar years 2002- 2004. 148 40. Finally, we clarify the recordkeeping obligations of non- ETC resellers that purchase Lifeline- discounted wholesale services from ETCs to offer discounted services to low- income consumers. In such instances, the ETC would have no information regarding the eligibility of the low- income consumer. Accordingly, in these circumstances, ETCs must obtain certifications from the non- ETC reseller that it is complying with the Commission’s Lifeline/ Link- Up requirements. 149 Moreover, non- ETC resellers providing discounted services to low- income customers must comply with the applicable federal or state Lifeline/ Link- Up requirements, including certification and verification procedures. Thus, such non- ETC resellers would be required to retain the required documentation to demonstrate that they are providing discounted services only to qualifying low- income consumers for the above- specified periods. E. Outreach 1. Background 41. In the NPRM, we sought comment on whether the Commission should provide outreach guidelines for the Lifeline/ Link- Up program to target more effectively low- income consumers. 150 Currently, there are no specific federal outreach guidelines. ETCs are, however, required to publicize the availability of Lifeline/ Link- Up in a manner reasonably designed to reach those likely to qualify for the service. 151 42. Effective outreach programs have been shown to improve Lifeline/ Link- Up participation. According to an August 2000 report by the Telecommunications Industries Analysis Project, the Lifeline/ Link- Up take rate almost tripled from 13.1% to 39.6% when states implemented outreach initiatives designed to increase telephone penetration and participation. 152 For example, Maine, a state with an aggressive outreach program, which includes coordinating with social service agencies and sending flyers and personal letters to eligible customers, reports that its penetration rate among low- income households increased from 90.5% in March 1997 to 96.5% in March 2002. 153 43. In July 2002, the Commission’s Consumer and Governmental Affairs Bureau (CGB) 148 As described in supra para. 38, however, self- certifications of eligibility must be retained for as long as the consumer receives Lifeline service from the ETC or until the ETC is audited by the Administrator. 149 In the event the Commission or Administrator finds an irregularity in the non- ETC reseller’s records, the Administrator may adjust the ETC’s low- income support payments. 150 See NPRM, 18 FCC Rcd at 11628, para. 1. 151 See 47 C. F. R. §§ 54. 405( b), 54. 411( d). See also Twelfth Report and Order, 15 FCC Rcd at 12250, para. 78 (amending sections 54. 405 and 54. 411 of the Commission’s rules). 152 Carol Weinhus, Tom Wilson, Gordon Calaway, et al., Telecommunications Industries Analysis Project, Calculations and Sources for Closing the Gap: Universal Service for Low- Income Households, August 1, 2000. 153 Telephone Penetration Report at table 4 (Ind. Anal. and Tech. Div. rel. May 2003), available at . 24 Federal Communications Commission FCC 04- 87 25 announced the kick- off of “Get Connected- Afford- A- Phone,” a national campaign designed to educate consumers, including tribal consumers, about the Lifeline/ Link- Up program. 154 CGB also engages in targeted outreach to tribal populations for certain federal programs, such as the availability of discounts for obtaining wireless licenses on tribal lands, in addition to Lifeline/ Link- Up benefits. In the Recommended Decision, the Joint Board recommended that the Commission provide outreach guidelines to states and carriers to improve Lifeline/ Link- Up subscribership. 155 2. Discussion 44. We agree with the Joint Board that more vigorous outreach efforts could improve Lifeline/ Link- Up subscribership and adopt the Joint Board’s recommendation to provide outreach guidelines to states and carriers. 156 We agree that we should not require specific outreach procedures, but should instead provide guidelines for states and carriers so that they can adopt their own specific standards and engage in outreach as they see fit. 157 Commenters were supportive of the proposed outreach guidelines, outlined in the Recommended Decision and detailed below. 158 We believe that encouraging states to establish partnerships with other state agencies and telephone companies will maximize public awareness and participation in the Lifeline/ Link- Up program. We do not believe it is necessary at this time to prescribe specific outreach procedures. 159 Instead, we set forth these guidelines in order to provide states and carriers with examples of how to reach those likely to qualify. States and carriers will still have the flexibility to determine the most appropriate outreach mechanisms for their consumers, as long as they are reasonably designed to reach those likely to qualify for Lifeline/ Link- Up. 160 45. Accordingly, we adopt the following outreach guidelines recommended by the Joint Board: (1) states and carriers should utilize outreach materials and methods designed to reach households that do not currently have telephone service; (2) states and carriers should develop outreach advertising that can be read or accessed by any sizeable non- English speaking populations within a carrier’s service area; and (3) states and carriers should coordinate their outreach efforts with governmental agencies/ tribes that administer any of the relevant government assistance programs. These guidelines are described in detail in the paragraphs 154 FCC Kicks Off Campaign To Educate Consumers About Phone Service Programs For Low- Income Consumers, Lifeline and Link- Up Programs Provide Discounted Phone Service To Eligible Consumers, News Release, July 22, 2002. 155 See Recommended Decision, 18 FCC Rcd at 6612, para. 50. 156 See Recommended Decision, 18 FCC Rcd at 6611, para. 50. 157 See Recommended Decision, 18 FCC Rcd at 6611, para. 50. 158 See Bell South Comments at 7- 9, Reply Comments at 3; Consumer Coalition Comments at 1- 3; Florida PSC Comments at 7; NASUCA Reply Comments at 25- 27; OH PUC Comments at 2- 3, 7; OK Corporation Commission Comments at 4- 5; PaPUC Reply Comments at 9- 10; Commissioner Wilson PaPUC Reply Comments at 12; Tribal Telecom Outreach Comments at 1; USCCB Comments at 10- 11; Verizon Reply Comments at 11- 12. 159 But see NCLC Comments at 8- 10; TX Legal Services Center Comments at 1. 160 See 47 C. F. R. § 54. 405( b). 25 Federal Communications Commission FCC 04- 87 26 below. An appendix compiling state practices was included in the Recommended Decision and is reproduced in this document. 161 State practices include establishing marketing boards to devise outreach materials, providing multi- lingual customer support, and implementing innovative tribal outreach practices. 46. The first recommended guideline is that states and carriers should utilize outreach materials and methods designed to reach households that do not currently have telephone service. 162 States or carriers may wish to send regular mailings to eligible households in the form of letters or brochures. 163 Posters could be placed in locations where low- income individuals are likely to visit, such as shelters, soup kitchens, public assistance agencies, and on public transportation. Multi- media outreach approaches could be utilized such as newspaper advertisements, articles in consumer newsletters, press releases, radio commercials, and radio and television public service announcements. 164 For low- income consumers that live in remote areas, including those living on tribal lands, traveling throughout an area or setting up an information booth at a central location may be more suitable outreach methods. States and carriers should ensure that outreach materials and methods accommodate low- income individuals with sight, hearing, and speech disabilities by producing brochures, mailings, and posters in Braille. We also encourage carriers to provide customer service to disabled program participants on an equal basis by using telecommunications relay services (TRS), text telephone (TTY), and speech- to- speech (STS) services. 165 States and carriers should also take into consideration that some low- income consumers may be illiterate or functionally illiterate, and therefore should consider how to supplement outreach materials and methods to accommodate those individuals. 166 States and carriers may post outreach material on the Internet to provide general information; however, the Internet should not be relied on as the sole or primary means of Lifeline/ Link- Up outreach. 167 Similarly, although advertising Lifeline/ Link- Up in carriers’ telephone books may be effective in reaching some low- income individuals, it will not be 161 See infra Appendix E; see generally Recommended Decision, Appendix E. 162 Accord Florida PSC Comments at 7; OH PUC Comments at 2- 3. 163 Bell South states that as part of the CALLS group, it has developed a brochure, available through the Federal Consumer Information Center entitled “A Smart Consumer’s Guide to Telephone Service” that includes information for consumers on how to obtain Lifeline information on a state and telephone company- specific basis (e. g., amount of discount, eligibility, program restrictions, application process). See Bell South Comments at 8- 9. 164 Accord OK Corporation Commission Comments at 4. 165 TRS are “telephone transmission services” that enable individuals with a hearing or speech disability to communicate “by wire or radio with a hearing individual in a manner that is functionally equivalent to the ability of an individual” without a hearing or speech disability to communicate over wire or radio. Examples of TRS include TTY and STS services. 47 C. F. R. § 64. 601( 7). TTY is “a machine that employs graphic communication in the transmission of coded signals through a wire or radio communication system.” 47 C. F. R. § 64. 601( 8). STS “allows people with speech disabilities to communicate with voice telephone users through the use of specially trained [communications assistants (CAs)] who understand the speech patterns of persons with disabilities and can repeat the words spoken by that person.” 47 C. F. R. § 64. 601( 10). 166 Accord OK Corporation Commission Comments at 5. 167 Useful website information may include the amount a consumer can save on their telephone bill, eligibility requirements, program restrictions, and instructions on how to apply for Lifeline/ Link- Up. We note that a lot of this information is currently available at . 26 Federal Communications Commission FCC 04- 87 27 effective for those without established phone service because carriers only distribute telephone books after phone service is established. States and carriers should also not rely on hotlines as a primary outreach method because many low- income individuals may not have access to a telephone from which to initiate an inquiry on Lifeline/ Link- Up benefits. 47. The second recommended guideline is that states and carriers should develop outreach advertising that can be read or accessed by any sizeable non- English speaking populations within the carrier’s service area. For example, many of the suggestions in the above paragraph can be implemented in languages other than English, including mailings, print advertisements, radio and television commercials, and posters. States with a large ethnically diverse population should have a toll- free call center to answer questions about Lifeline/ Link- Up in the low- income population’s native languages. 168 Similarly, enrollment applications should be made available in other languages. 48. The third recommended guideline is that states and carriers should coordinate their outreach efforts with governmental agencies that administer any of the relevant government assistance programs. 169 Coordination should also include cooperative outreach efforts with state commissions, tribal organizations, carriers, social service agencies, community centers, nursing homes, public schools, and private organizations that may serve low- income individuals, such as American Association for Retired Persons and the United Way. 170 Cooperative outreach among those most likely to have influential contact with low- income individuals will help to target messages about Lifeline/ Link- Up to the low- income community. For example, state agencies that conduct outreach efforts for a state’s “earned income tax credit,” an income tax credit for low- income working individuals and families, could conduct simultaneous outreach efforts for Lifeline/ Link- Up. Establishing a marketing or consumer advisory board with state, carrier, non-profit and consumer representatives may also be an effective way of developing outreach materials. 171 States and carriers could also issue a joint report to the Commission as to their outreach practices. 49. We also encourage states to utilize USAC as a resource for outreach to states and carriers, similar to USAC’s outreach efforts with regard to the Rural Health Care and Schools and Libraries programs. USAC currently engages in outreach for the Lifeline/ Link- Up program through its website, , which has information about state Lifeline/ Link- Up programs, eligibility criteria, and information for carriers. USAC also speaks about Lifeline/ Link- Up at public events such as the National Association of Regulatory Utility Commissioners (NARUC) conference and the National Congress of American Indians, where USAC staff also meets with tribal members and managers of tribally- owned telephone 168 See Recommended Decision, 18 FCC Rcd at 6628, Appendix E. 169 Accord Bell South Comments at 7; Florida PSC Comments at 7. 170 Accord Consumer Coalition Comments at 1 (citing as an example SBC’s partnership with community organizations that includes monthly meetings, Lifeline training sessions, and a system of collecting and receiving applications including grants to cover expenses); Tribal Telecom Outreach Comments at 1 (supporting coordination with tribal organizations that are conducting similar efforts). 171 Accord OH PUC Comments at 7. 27 Federal Communications Commission FCC 04- 87 28 companies. USAC distributes letters and emails to consumer groups, tribal leaders, and social service organizations to publicize the availability of Lifeline/ Link- Up and also sends letters to ETCs to remind them of their outreach obligations. USAC also frequently takes phone calls from consumers and others with questions about the Lifeline/ Link- Up program. Finally, we agree with the Joint Board that in addition to USAC’s current outreach efforts for Lifeline/ Link-Up, USAC should assist in additional outreach efforts for Lifeline/ Link- Up similar to what it currently does for the Rural Health Care and Schools and Libraries Programs. 172 F. Other Issues 1. Voluntary Survey 50. We agree with the Joint Board that gathering data and information about state Lifeline/ Link- Up programs through a voluntary survey will enable the Commission to make more informed decisions in any future Lifeline/ Link- Up orders. 173 In the NPRM, we sought comment on the survey’s format and questions to ask. 174 51. To obtain feedback on the success of the modified Lifeline/ Link- Up program, we adopt a voluntary information collection from the states. This voluntary survey form, as contained in Appendix C, asks states to provide information about the eligibility criteria, certification and verification procedures, and outreach efforts implemented as a result of the changes we adopt in this Order. 175 Collection of this survey will assist us in learning about the reasons for variations in participation rates between and among states, and as a result could help shape Commission policy in the future. 176 We agree with commenters that submission of this survey should be voluntary for states with the first survey due one year following the effective date of this Order. 177 We direct USAC to mail the voluntary survey form to states. We have expanded on some of the Joint Board’s recommended questions and added a few questions to the survey, at the suggestion of NCLC. 178 2. Unpaid Toll Charges 52. We adopt the Joint Board’s recommendation to encourage states to consider implementing rules that require ETCs to offer Lifeline service to consumers who may have been 172 See Recommended Decision, 18 FCC Rcd at 6615, para. 56; see also BellSouth Reply Comments at 3 (supporting additional USAC involvement in Lifeline/ Link- Up outreach). 173 See Recommended Decision, 18 FCC Rcd at 6595, para. 10. 174 See NPRM, 18 FCC Rcd at 11628- 29, para. 2. 175 See infra Appendix C. We note that some of the questions contained in the survey may refer to information that we may already have access to. For example, state- specific eligibility criteria are available on USAC’s website. We believe, however, that responses to the survey’s questions will assist us in developing a complete picture of a state’s Lifeline/ Link- Up program. 176 See NCLC Comments at 11. 177 See BellSouth Comments at 10; NCLC Comments at 10. We disagree with NASUCA that submission should be required for states. See NASUCA Reply Comments at 7. 178 See NCLC Comments at 12- 13; Appendix C. 28 Federal Communications Commission FCC 04- 87 29 previously disconnected for unpaid toll charges. 179 We acknowledge that ETCs often prohibit consumers who have prior outstanding balances for local and/ or long distance services, but who otherwise qualify for Lifeline/ Link- Up, from signing up for local telephone service. 180 As a result, these outstanding balances stand as a barrier to expanding subscribership among low-income consumers. However, the Fifth Circuit found that the Commission lacked jurisdiction to prohibit ETCs from disconnecting Lifeline customers for failure to pay toll charges. 181 In light of the Fifth Circuit ruling, we adopt the Joint Board’s recommendation and take no action on disconnection requirements at this time. We encourage states, however, to consider ways to address this issue. 3. Vertical Services 53. We adopt the Joint Board’s recommendation not to adopt rules prohibiting Lifeline/ Link- Up customers from purchasing vertical services, such as Caller ID, Call Waiting, and Three- way Calling. 182 Like the Joint Board, we believe any restriction on the purchase of vertical services may discourage qualified consumers from enrolling and may serve as a barrier to participation in the program. 183 No commenter supported prohibiting Lifeline/ Link- Up subscribers from purchasing vertical services. However, some expressed concern that ETCs may be marketing vertical services to low- income customers who may be unable to afford these features. 184 While we understand these concerns, we do not prohibit the marketing of vertical services to Lifeline/ Link- Up customers at this time. 4. Support for Non- ETCs 54. We agree with the Joint Board that we should decline to establish rules that would provide Lifeline/ Link- Up support directly to carriers that are not ETCs. 185 Contrary to AT& T’s assertion, establishing such rules would be inconsistent with section 254( e), which states that only ETCs may receive universal service support. 186 Extending Lifeline/ Link- Up universal service support to carriers that do not satisfy the requirements for designation as an ETC could 179 In its Recommended Decision, the Joint Board noted that Florida’s Lifeline/ Link- Up program prohibits disconnection of Lifeline service when the subscriber has not paid toll charges. See Recommended Decision, 18 FCC Rcd at 6616, para. 59. We note that consumers who have been disconnected from Lifeline service due to unpaid toll charges would not be able to receive Link- Up support again unless the consumer has moved to another residence. See 47 C. F. R. § 54.411( c). 180 See, e. g., NASUCA Reply Comments at 27; USCCB Comments at 11- 13; see also 1997 Universal Service Order, 12 FCC Rcd at 8793, para. 28 (stating that studies indicate that disconnection for non- payment of toll charges is a significant cause of low subscribership among low- income consumers). 181 TOPUC v. FCC, 183 F. 3d 393, 421- 25 (5 th Cir. 1999). 182 Recommended Decision, 18 FCC Rcd at 6618, para. 62 183 See id. 184 See, e. g., NASUCA Reply Comments at 29- 30. 185 See Recommended Decision, 18 FCC Rcd at 6617- 18, para. 61. 186 47 U. S. C. § 254( e). We note that section 254( h) provides exceptions to that requirement under the schools and libraries and rural health care programs. See 47 U. S. C. § 254( h). 29 Federal Communications Commission FCC 04- 87 30 also serve as a disincentive for other carriers to comply with their ETC obligations. 5. Minor Rule Changes 55. In the NPRM, the Commission identified various proposals to clarify and streamline our rules. Specifically, the Commission proposed to modify Part 54 to reference a provision in section 52.33( a)( 1)( i)( C) of the Commission’s rules that exempts Lifeline Assistance Program customers from monthly number- portability charges. 187 The Commission also solicited comment on whether section 54.401( c) should be amended by replacing “toll blocking” with “toll limitation” to accurately reflect the Commission’s determination in the 1997 Universal Service Order that ETCs may not impose service deposit requirements on Lifeline customers who accept toll limitation services. 188 Section 54.401( c) incorrectly limits the service deposit prohibition to customers who accept toll blocking. 189 Finally, the Commission sought comment on whether to delete Subpart G of Part 36, which states that “[ t] his subpart shall be effective through December 31, 1997. On January 1, 1998, Lifeline Connection Assistance shall be provided in accordance with part 54, subpart E of this chapter.” 190 We believe these changes will clarify and streamline our Lifeline/ Link- Up rules. Therefore, we adopt these minor rule changes as proposed in the NPRM. IV. FURTHER NOTICE OF PROPOSED RULEMAKING A. Income- based Criterion 56. We seek comment on whether the income- based criterion in the federal default eligibility criteria should be increased to 150% of the FPG to make phone service affordable to more low- income individuals and families. 191 Although most commenters supported adding an income- based criterion, a number of those commenters supported a higher income- based standard than the interim measure that we adopt above. 192 Specifically, those commenters preferred that a consumer whose household income is at or below 150% of the FPG should be eligible for Lifeline/ Link- Up support. 193 Commenters argue that adding a higher FPG level would bring Lifeline/ Link- Up support in line with LIHEAP, a current qualifying Lifeline/ Link- 187 See NPRM, 18 FCC Rcd at 11629, para. 3. BellSouth specifically supported the proposal to add the exemption from the number- portability charge, currently codified in section 52. 33( a)( 1)( i)( C), to Part 54. See BellSouth Comments at 10. 188 See NPRM, 18 FCC Rcd at 11629, para. 3. 189 See 47 C. F. R. § 54. 401( c). 190 NPRM, 18 FCC Rcd at 11629, para. 3. 191 See infra Appendix F. 192 See Acorn Comments at 4; Consumer Coalition Comments at 4; NASUCA Reply Comments at 5, 9; OH PUC Comments at 9; Commissioner Wilson PaPUC Reply Comments at 2- 3; TOPC Comments at 5- 6; USCCB Comments at 3- 4, 6. 193 See id. 30 Federal Communications Commission FCC 04- 87 31 Up program that uses an income- based standard of 150% as an eligibility criterion. 194 Commenters also point out the inequity that currently exists between a hypothetical low- income consumer who does not participate in LIHEAP and therefore does not qualify for Lifeline, and another hypothetical low- income consumer with the same income who participates in LIHEAP and Lifeline. 195 In particular, low- income consumers are not eligible for LIHEAP if they rent a house or apartment with utilities included, yet they may have essentially the same income as consumers who pay for utilities separately. It is possible that a non- trivial number of low-income consumers may fall into this category. 196 Furthermore, adding a higher FPG level may also help to increase participation among low- income consumers who do not currently qualify for Lifeline/ Link- Up because they are on waiting lists for Section 8 housing, are not eligible for SSI because they are not elderly or disabled, have been cut off from Food Stamps because of work requirements, or do not qualify for Medicaid due to complex eligibility requirements. 197 Adding a higher FPG level could also help respond to the decrease in participation rates prevalent in at least one current Lifeline/ Link- Up qualifying program and one adopted in this Order, Food Stamps and TANF, respectively. 198 57. Applying the same methodology used to analyze the 135% of the FPG income- based criterion, our staff analysis estimates that broadening the income- based criterion to 150% of the FPG may only have a minimal impact on national telephone penetration rates, but could add many new Lifeline subscribers; potentially resulting in an additional $200 million increase in 194 See (explaining that states may not set income level below 110% of FPG); Consumer Coalition Comments at 2; Commissioner Wilson PaPUC Reply Comments at 2- 3; TOPC Comments at 5- 6; USCCB Comments at 4- 5. 195 See, e. g., NCLC Comments at 6. 196 Our staff analysis estimates that there could be up to 150, 000 households that have incomes at 1.50 of the FPG, but are not eligible for LIHEAP. This estimate assumes that all states will implement the federal default criteria. According to the CPSH data, in 2002, there were about 685, 000 households that met the following three conditions: 1) they rented, not owned their dwelling; 2) they were between 1. 35 and 1. 50 of the FPG; and 3) they were not otherwise eligible for Lifeline under the default rules established in this Order. Presumably, these households would be eligible for LIHEAP, except for those in apartments where utilities are included in the rent. According to Consumer Expenditure Survey data, about 20% of all renting households pay nothing for electricity. See Table 1701 of the Consumer Expenditure Interview Survey, 2002. Presumably, most of these households have electricity included in their rent. Multiplying 685, 000 households by .20 yields 137,000 households. This amount is then multiplied by 1.077 to adjust for household formation between 2002 and 2005 (see Table 1. B of Appendix K). Multiplying 137, 000 * 1. 077 = 147,549. This number rounds to 150, 000 households. 197 See NCLC Comments at 6. In addition, one commenter notes that this expanded income- based criterion might allow low- income legal immigrants who may no longer be eligible to participate in certain Lifeline/ Link- Up qualifying programs due to restrictions imposed by PROWRA, to participate in Lifeline/ Link- Up. See NFFN Comments at 7, 14. 198 Food Stamps enrollment fell from 25.5 million recipients in FY 1996 to 21. 3 million recipients in FY 2003. See . TANF enrollment fell from 12. 6 million recipients in FY 1996 to 5.1 million recipients in FY 2002. See HHS/ ACF/ Office of Family Assistance/ Division of Data Collection and Analysis, ACF- 3637, Statistical Report on Recipients under Public Assistance (OMB Approval No. 0970- 008), ACF- 198, Emergency TANF Data Report (0970- 0164), ACF- 199, TANF Data Report (0970- 0199); . See also supra paras. 14- 15. 31 Federal Communications Commission FCC 04- 87 32 Lifeline expenditures over the levels predicted for implementation of a 135% standard. 199 We seek comment on this analysis. Commenters should discuss the staff analysis contained in Appendix K, the advantages and disadvantages of a broader income- based standard and the potential burden to the fund. When considering their response, commenters should refer to Appendix F for estimated income requirements for various sizes of households at or below 150% of the FPG. 200 B. Lifeline Advertising Requirements 58. Although we adopt the Joint Board’s recommendation to issue outreach guidelines, rather than specific requirements, 201 on further reflection, we think it would be beneficial to explore whether adoption of rules governing the advertisement of the Lifeline/ Link- Up program would strengthen the operation of these programs. 202 For instance, we seek comment on whether the Commission should require ETCs to print and distribute posters, flyers, or other print media advertising Lifeline/ Link- Up to state, federal, or tribal public assistance agencies in their service areas. If a percentage of the population in a given area speaks a language other than English, should ETCs be required to distribute materials in that language? If so, what should the benchmark percentage be? V. PROCEDURAL MATTERS A. Regulatory Flexibility Analysis 59. As required by the Regulatory Flexibility Act, 5 U. S. C. § 604, the Commission has prepared a Final Regulatory Flexibility Analysis (FRFA) for the Report and Order, set forth at Appendix H. The Commission has also prepared an Initial Regulatory Flexibility Analysis (IRFA) for the Further Notice of Proposed Rulemaking (Further Notice), set forth at Appendix I. Comments on the FRFA and IRFA should be labeled as IRFA or FRFA Comments, and should be submitted pursuant to the filing dates and procedures set forth in paragraphs 61- 67, infra. B. Paperwork Reduction Act Analysis 60. The action contained herein has been analyzed with respect to the Paperwork Reduction Act of 1995 and found to impose new or modified reporting and recordkeeping requirements or burdens on the public. Implementation of these new or modified reporting and recordkeeping requirements will be subject to approval by the Office of Management and Budget (OMB) as prescribed by the Act, and will go into effect upon announcement in the Federal Register of OMB approval. 199 See infra Appendix K at Table 3. B for 1.50 PGC and Table 3. B for 1. 35 PGC.; see also Table 2.H (estimating no increased telephone penetration rate with a 1. 50 PGC). 200 See infra Appendix F. 201 See infra at para. 45. 202 Currently, sections 54. 405 and 54. 411 of the Commission’s rules require all ETCs to publicize the availability of Lifeline and Link- Up in a manner reasonably designed to reach those likely to qualify for the service. 47 C. F. R. §§ 54. 405( b), 54. 411( d). 32 Federal Communications Commission FCC 04- 87 33 C. Filing Procedures 61. Pursuant to sections 1.415 and 1.419 of the Commission’s rules, 203 interested parties may file comments not later than 60 days after publication of the Further Notice in the Federal Register and may file reply comments not later than 105 days after publication of the Further Notice in the Federal Register. In order to facilitate review of comments and reply comments, parties should include the name of the filing party and the date of the filing on all pleadings. Comments may be filed using the Commission’s Electronic Comment Filing System (ECFS) or by filing paper copies. 204 62. Comments filed through the ECFS can be sent as an electronic file via the Internet to . Generally, only one copy of an electronic submission must be filed. In completing the transmittal screen, commenters should include their full name, U. S. Postal Service mailing address, and the applicable docket or rulemaking number. Parties may also submit an electronic comment by Internet e- mail. To get filing instructions for e- mail comments, commenters should send an e- mail to , and should include the following words in the body of the message, “get form.” A sample form and directions will be sent in reply. Or you may obtain a copy of the ASCII Electronic Transmittal Form (FORM- ET) at . 63. Parties that choose to file by paper must file an original and four copies of each filing. Filings can be sent by hand or messenger delivery, by commercial overnight courier, or by first-class or overnight U. S. Postal Service mail (although we continue to experience delays in receiving U. S. Postal Service mail). The Commission’s contractor, Natek, Inc., will receive hand- delivered or messenger- delivered paper filings for the Commission’s Secretary at a new location in downtown Washington, DC. The address is 236 Massachusetts Avenue, NE, Suite 110, Washington, DC 20002. The filing hours at this location will be 8: 00 a. m. to 7: 00 p. m. All hand deliveries must be held together with rubber bands or fasteners. Any envelopes must be disposed of before entering the building. 64. Commercial overnight mail (other than U. S. Postal Service Express Mail and Priority Mail) must be sent to 9300 East Hampton Drive, Capitol Heights, MD 20743. U. S. Postal Service first- class mail, Express Mail, and Priority Mail should be addressed to 445 12th Street, SW, Washington, D. C. 20554. All filings must be addressed to the Commission's Secretary, Office of the Secretary, Federal Communications Commission. If you are sending this type of document or using this delivery method… It should be addressed for delivery to… Hand- delivered or messenger- delivered paper filings for the Commission’s 236 Massachusetts Avenue, NE, Suite 110, 203 47 C. F. R. §§ 1.415, 1. 419. 204 See Electronic Filing of Documents in Rulemaking Proceedings, 13 FCC Rcd 11322, 11326 (1998). 33 Federal Communications Commission FCC 04- 87 34 Secretary Washington, DC 20002 (8: 00 to 7: 00 p. m.) Other messenger- delivered documents, including documents sent by overnight mail (other than United States Postal Service Express Mail and Priority Mail) 9300 East Hampton Drive, Capitol Heights, MD 20743 (8: 00 a. m. to 5: 30 p. m.) United States Postal Service first- class mail, Express Mail, and Priority Mail 445 12th Street, SW Washington, DC 20554 65. Parties who choose to file by paper should also submit their comments on diskette. These diskettes, plus one paper copy, should be submitted to: Sheryl Todd, Telecommunications Access Policy Division, Wireline Competition Bureau, Federal Communications, at the filing window at 236 Massachusetts Avenue, N. E., Suite 110, Washington, D. C. 20002. Such a submission should be on a 3.5- inch diskette formatted in an IBM compatible format using Word or compatible software. The diskette should be accompanied by a cover letter and should be submitted in “read only” mode. The diskette should be clearly labeled with the commenter’s name, proceeding (including the docket number, in this case WC Docket No. 03- 109, type of pleading (comment or reply comment), date of submission, and the name of the electronic file on the diskette. The label should also include the following phrase “Disk Copy - Not an Original.” Each diskette should contain only one party’s pleadings, preferably in a single electronic file. In addition, commenters must send diskette copies to the Commission’s copy contractor, Qualex International, Portals II, 445 12th Street, S. W., Room CYB402, Washington, D. C. 20554 (see alternative addresses above for delivery by hand or messenger). 66. Regardless of whether parties choose to file electronically or by paper, parties should also file one copy of any documents filed in this docket with the Commission’s copy contractor, Qualex International, Portals II, 445 12th Street S. W., CY- B402, Washington, D. C. 20554 (see alternative addresses above for delivery by hand or messenger) (telephone 202- 863- 2893; facsimile 202- 863- 2898) or via e- mail at qualexint@ aol. com. 67. The full text of this document is available for public inspection and copying during regular business hours at the FCC Reference Information Center, Portals II, 445 12th Street, SW, Room CY- A257, Washington, DC, 20554. This document may also be purchased from the Commission’s duplicating contractor, Qualex International, Portals II, 445 12th Street, SW, Room CY- B402, Washington, DC, 20554, telephone (202) 863- 2893, facsimile (202) 863- 2898, or via e- mail qualexint@ aol. com. D. Further Information 68. Alternative formats (computer diskette, large print, audio recording, and Braille) are available to persons with disabilities by contacting Brian Millin at (202) 418- 7426 voice, (202) 418- 7365 TTY, or bmillin@ fcc. gov. This Report and Order can also be downloaded in Microsoft Word and ASCII formats at . 69. For further information, contact Shannon Lipp or Karen Franklin at (202) 418- 7400 in the Telecommunications Access Policy Division, Wireline Competition Bureau. 34 Federal Communications Commission FCC 04- 87 35 VI. ORDERING CLAUSES 70. Accordingly, IT IS ORDERED that, pursuant to the authority contained in sections 1, 4( i), 201- 205, 214, 254, and 403 of the Communications Act of 1934, as amended, 47 U. S. C. §§ 1, 4( i), 201- 205, 214, 254, 403, this Order IS ADOPTED. 71. IT IS FURTHER ORDERED that Part 54 of the Commission’s rules, 47 C. F. R. Part 54, IS AMENDED as set forth in Appendix A attached hereto, effective thirty (30) days after publication of this Order in the Federal Register, unless otherwise indicated herein. 72. IT IS FURTHER ORDERED that, pursuant to the authority contained in sections 1, 4( i), 201- 205, 214, 254, and 403 of the Communications Act of 1934, as amended, 47 U. S. C. §§ 1, 4( i), 201- 205, 214, 254, 403, this Further Notice of Proposed Rulemaking IS ADOPTED. FEDERAL COMMUNICATIONS COMMISSION Marlene H. Dortch Secretary 35 Federal Communications Commission FCC 04- 87 A- 1 APPENDIX A FINAL RULES For the reasons discussed in the preamble, the Federal Communications Commission amends 47 C. F. R. Parts 36 and 54 as follows: PART 36 – JURISDICTIONAL SEPARATIONS PROCEDURES; STANDARD PROCEDURES FOR SEPARATING TELECOMMUNICATIONS PROPERTY COSTS, REVENUES, EXPENSES, TAXES AND RESERVES FOR TELECOMMUNICATIONS COMPANIES 1. Delete §§ 36.701- 36.741. PART 54 - UNIVERSAL SERVICE 2. The authority citation for Part 54 continues to read as follows: Authority: 47 U. S. C. §§ 1, 4( i), 201, 205, 214, and 254 unless otherwise noted. 3. Amend § 54.400 by adding paragraph (f) to read as follows: § 54.400 Terms and definitions. * * * (f) Income. “Income” is all income actually received by all members of the household. This includes salary before deductions for taxes, public assistance benefits, social security payments, pensions, unemployment compensation, veteran’s benefits, inheritances, alimony, child support payments, worker’s compensation benefits, gifts, lottery winnings, and the like. The only exceptions are student financial aid, military housing and cost- of- living allowances, irregular income from occasional small jobs such as baby- sitting or lawn mowing, and the like. 4. Amend § 54.401 by amending paragraph (c) and adding paragraph (e) to read as follows: § 54.401 Lifeline defined. * * * (c) Eligible telecommunications carriers may not collect a service deposit in order to initiate 36 Federal Communications Commission FCC 04- 87 A- 2 Lifeline service, if the qualifying low- income consumer voluntarily elects toll limitation service from the carrier, where available. If toll limitation services are unavailable, the carrier may charge a service deposit. * * * (e) Consistent with § 52.33( a)( 1)( i)( C), eligible telecommunications carriers may not charge Lifeline customers a monthly number- portability charge. 5. Amend § 54.405 by adding paragraphs (c) and (d) to read as follows: § 54.405 Carrier obligation to offer Lifeline. All eligible telecommunications carriers shall: (a) * * * (b) * * * (c) Notify Lifeline subscribers of impending termination of Lifeline service if the carrier has a reasonable basis to believe that the subscriber no longer meets the Lifeline- qualifying criteria, as described in § 54.409. Notification of impending termination shall be in the form of a letter separate from the subscriber’s monthly bill. A carrier providing Lifeline service in a state that has dispute resolution procedures applicable to Lifeline termination, that requires, at a minimum, written notification of impending termination, must comply with the applicable state requirements. (d) Allow subscribers 60 days following the date of the impending termination letter required in paragraph (c) in which to demonstrate continued eligibility. Subscribers making such a demonstration must present proof of continued eligibility to the carrier consistent with applicable state or federal verification requirements, as described in § 54.410( c). Carriers must terminate subscribers who fail to demonstrate continued eligibility within the 60- day time period. A carrier providing Lifeline service in a state that has dispute resolution procedures applicable to 37 Federal Communications Commission FCC 04- 87 A- 3 Lifeline termination must comply with the applicable state requirements. 6. Amend § 54.409 by amending paragraphs (b) and (c) and adding paragraph (d) to read as follows: § 54.409 Consumer qualification for Lifeline. (a) * * * (b) To qualify to receive Lifeline service in a state that does not mandate state Lifeline support, a consumer’s income, as defined in § 54.400( f), must be at or below 135% of the Federal Poverty Guidelines or a consumer must participate in one of the following federal assistance programs: Medicaid; Food Stamps; Supplemental Security Income; Federal Public Housing Assistance (Section 8); Low- Income Home Energy Assistance Program; National School Lunch Program’s free lunch program; or Temporary Assistance for Needy Families. (c) * * * Such qualifying low- income consumer shall also qualify for Tier- Three Lifeline support, if the carrier offering the Lifeline service is not subject to the regulation of the state and provides carrier- matching funds, as described in § 54.403( a)( 3). (d) In a state that does not mandate state Lifeline support, each eligible telecommunications carrier providing Lifeline service to a qualifying low- income consumer pursuant to paragraphs (b) or (c) must obtain that consumer’s signature on a document certifying under penalty of perjury that: (i) the consumer receives benefits from one of the programs listed in paragraphs (b) or (c), and identifying the program or programs from which that consumer receives benefits, or (ii) the consumer’s household meets the income requirement of paragraph (b), and that the presented documentation of income, as described in §§ 54.400( f), 54.410( a)( ii), accurately represents the consumer’s household income; and (iii) the consumer will notify the carrier if that consumer ceases to participate in the 38 Federal Communications Commission FCC 04- 87 A- 4 program or programs or if the consumer’s income exceeds 135% of the Federal Poverty Guidelines. 7. Create new § 54.410 to read as follows: §54.410 Certification and Verification of Consumer Qualification for Lifeline. (a) Certification of Income. Consumers qualifying under an income- based criterion must present documentation of their household income prior to enrollment in Lifeline. (i) By one year from the effective date of these rules, eligible telecommunications carriers in states that mandate state Lifeline support must comply with state certification procedures to document consumer income- based eligibility for Lifeline prior to that consumer’s enrollment if the consumer is qualifying under an income- based criterion. (ii) By one year from the effective date of these rules, eligible telecommunications carriers in states that do not mandate state Lifeline support must implement certification procedures to document consumer- income- based eligibility for Lifeline prior to that consumer’s enrollment if the consumer is qualifying under the income- based criterion specified in § 54.409( b). Acceptable documentation of income eligibility includes the prior year’s state, federal, or tribal tax return, current income statement from an employer or paycheck stub, a Social Security statement of benefits, a Veterans Administration statement of benefits, a retirement/ pension statement of benefits, an Unemployment/ Workmen’s Compensation statement of benefits, federal or tribal notice letter of participation in General Assistance, a divorce decree, child support, or other official document. If the consumer presents documentation of income that does not cover a full year, such as current pay stubs, the consumer must present three consecutive months worth of the same types of document within that calendar year. (b) Self- Certifications. After income certification procedures are implemented, eligible 39 Federal Communications Commission FCC 04- 87 A- 5 telecommunications carriers and consumers are required to make certain self- certifications, under penalty of perjury, relating to the Lifeline program. (i) An officer of the eligible telecommunications carrier in a state that mandates state Lifeline support must certify that the eligible telecommunications carrier is in compliance with state Lifeline income certification procedures and that, to the best of his/ her knowledge, documentation of income was presented. (ii) An officer of the eligible telecommunications carrier in a state that does not mandate state Lifeline support must certify that the eligible telecommunications carrier has procedures in place to review income documentation and that, to the best of his/ her knowledge, the carrier was presented with documentation of the consumer’s household income. (iii) Consumers qualifying for Lifeline under an income- based criterion must certify the number of individuals in their households on the document required in § 54.409( d). (c) Verification of Continued Eligibility. Consumers qualifying for Lifeline may be required to verify continued eligibility on an annual basis. (i) By one year from the effective date of these rules, eligible telecommunications carriers in states that mandate state Lifeline support must comply with state verification procedures to validate consumers’ continued eligibility for Lifeline. (ii) By one year from the effective date of these rules, eligible telecommunications carriers in states that do not mandate state Lifeline support must implement procedures to verify the continued eligibility of a statistically valid random sample of their Lifeline consumers to verify continued eligibility and provide the results of the sample to the Administrator. If verifying income, an officer of the eligible telecommunications carrier must certify, under penalty of perjury, that the eligible telecommunications carrier has income verification procedures in place and that, to the best of his/ her knowledge, the carrier was presented with 40 Federal Communications Commission FCC 04- 87 A- 6 corroborating income documentation. In addition, the consumer must certify, under penalty of perjury, that the consumer continues to participate in the Lifeline qualifying program or that the presented documentation accurately represents the consumer’s household income and the number of individuals in the household. 8. Create new § 54.416 to read as follows: § 54.416 Certification of Consumer Qualification for Link Up. Consumers qualifying under an income- based criterion must present documentation of their household income prior to enrollment in Link Up consistent with requirements set forth in §§ 54.410( a) and (b). 9. Create new § 54.417 to read as follows: § 54.417 Recordkeeping Requirements. (a) Eligible telecommunications carriers must maintain records to document compliance with all Commission and state requirements governing the Lifeline/ Link Up programs for the three full preceding calendar years and provide that documentation to the Commission or Administrator upon request. Notwithstanding the preceding sentence, eligible telecommunications carriers must maintain the documentation required in §§ 54.409( d) and 54.410( b)( iii) for as long as the consumer receives Lifeline service from that eligible telecommunications carrier or until audited by the Administrator. If an eligible telecommunications carrier provides Lifeline discounted wholesale services to a reseller, it must obtain a certification from that reseller that it is complying with all Commission requirements governing the Lifeline/ Link Up programs. (b) Non- eligible- telecommunications- carrier resellers that purchase Lifeline discounted wholesale services to offer discounted services to low- income consumers must maintain records to document compliance with all Commission requirements governing the Lifeline/ Link Up programs for the three full preceding calendar years and provide that documentation to the 41 Federal Communications Commission FCC 04- 87 A- 7 Commission or Administrator upon request. To the extent such a reseller provides discounted services to low- income consumers, it constitutes the eligible telecommunications carrier referenced in §§ 54.405( c), 54.405( d), 54.409( d), 54.410, and 54.416. 42 Federal Communications Commission FCC 04- 87 B- 1 APPENDIX B LIST OF PARTIES FILING COMMENTS IN RESPONSE TO THE NOTICE OF PROPOSED RULEMAKING Comments 1. ACORN 2. AT& T Corp. (AT& T) 3. BellSouth Corporation (BellSouth) 4. Empowerment Center of Greater Cleveland Consumers for Fair Utility Rates (Consumer’s Coalition) 5. Dobson Communications Corporation (Dobson) 6. Florida Public Service Commission (Florida PSC) 7. National Association of State Utility Consumer Advocates (NASUCA) 8. National Consumer Law Center on behalf of Massachusetts Union of Public Housing Tenants (NCLC) 9. National Fuel Funds Network (NFFN) 10. New York Department of Public Service (New York DPS) 11. Ohio Public Utilities Commission (Ohio PUC) 12. Oklahoma Corporation Commission (OCC) 13. WorldCom, Inc., d/ b/ a MCI (MCI) 14. Pennsylvania Utility Law Project (PULP) 15. People of the State of California and the California Public Utilities Commission (California PUC) 16. Texas Legal Services Center 17. Texas Office of Public Utility Counsel (Texas OPC) 18. Tribal Telecom Outreach 19. United States Conference of Catholic Bishops, Alliance for Community Media, Appalachian People’s Action Coalition, Center for Digital Democracy, Consumer Action, Consumer Federal of America, Edgemont Neighborhood Coalition, and Migrant Legal Action Program (USCCB) 20. United Utilities, Inc. (UUI) 21. Verizon Reply Comments 1. AT& T Corp. (AT& T) 2. BellSouth Corporation (BellSouth) 3. National Association of State Utility Consumer Advocates (NASUCA) 4. National Consumer Law Center on behalf of Massachusetts Union of Public Housing Tenants (NCLC) 5. Pennsylvania Public Utility Commission (PaPUC) 6. Commissioner Aaron Wilson Jr. of the Pennsylvania Public Utility Commission (Commissioner Wilson, PaPUC) 7. Rural Iowa Independent Telephone Association (RIITA) 8. Verizon 43 Federal Communications Commission FCC 04- 87 C- 1 APPENDIX C LIFELINE/ LINK- UP STATE SURVEY 1. What changes, if any, has the state implemented in its Lifeline/ Link- Up program due to changes in the federal Lifeline/ Link- Up program? Of those changes, which have been most effective in increasing the state’s telephone penetration rate? 2. Please provide any additional information the state wishes to submit regarding positive or negative results experienced due to adoption of new Lifeline/ Link- Up procedures during the past 12 months. 3. Please provide any additional information the state wishes to submit regarding any administrative burdens or inefficiencies that the state has experienced due to adoption of new Lifeline/ Link- Up procedures during the past 12 months. 4. What is the current level of Lifeline support in the state, and are any changes scheduled to be made in the future? 5. Describe the state’s Lifeline/ Link- Up eligibility requirements. 6. Describe the state’s Lifeline/ Link- Up procedures for enrollment and certification, including documentation requirements. Do any state agencies qualify applicants for the Lifeline/ Link- Up program? 7. Describe the state’s Lifeline/ Link- Up procedures for verification, including documentation requirements. If the state plans to implement a verification program, please describe. 8. Does the state now use, or is it considering implementing an electronic database to identify income- eligible households or facilitate verification or enrollment? If yes, please describe. 9. Describe the state’s outreach efforts. Which outreach efforts in particular have been the most successful in increasing participation? 10. List suggestions for improvements to the federal Lifeline/ Link- Up program. 11. Does the state require all incumbent LECs to provide Lifeline/ Link- Up Service to eligible subscribers? 12. Does the state require all competitive LECs to provide Lifeline/ Link- Up Service to eligible subscribers? 13. Does the state sponsor any other low- income assistance programs that may provide alternative means for low- income consumers to access the public switched telephone network? 44 Federal Communications Commission FCC 04- 87 D- 1 APPENDIX D ESTIMATED INCOME REQUIREMENTS FOR A HOUSEHOLD AT OR BELOW 135% OF THE FEDERAL POVERTY GUIDELINES Size of Family Unit 48 Contiguous States and D. C. Alaska Hawaii 1 $ 12,123 $15,134 $13,946 2 16,362 20,439 18,819 3 20,601 25,745 23,693 4 24,840 31,050 28,566 5 29,079 36,356 33,440 6 33,318 41,661 38,313 7 37,557 46,967 43,187 8 41,796 52,272 48,060 For each additional person, add 4,239 5,306 4,874 45 Federal Communications Commission FCC 04- 87 E- 1 APPENDIX E LIFELINE/ LINK- UP STATE PROCEDURES AS COMPILED BY THE FEDERAL- STATE JOINT BOARD ON UNIVERSAL SERVICE 1 I. ELIGIBILITY A. Self- Certification of Eligibility for Enrollment 1. California 2 In California, telephone companies must “immediately enroll” a customer who verbally certifies that he or she is eligible to participate in the Lifeline program. The company then sends the customer a self- certification form on which the customer affirms in writing that he or she is eligible for Lifeline and agrees that the company may verify his or her income. If the customer does not return the form within 30 days or if the company determines that the customer is not in fact eligible, the customer is removed from the program. B. Paperless Enrollment Application 1. Colorado 3 Colorado has implemented a paperless application process that allows potential recipients, after being notified of eligibility, to call their local telephone company to receive the discounts. There is no written application. This paperless application process makes it easier for the consumer to get the needed assistance and also enables low- income consumers to choose a competitive LEC that offers the assistance to eligible subscribers using the same paperless application process as the incumbent LEC. There is no paper application to keep track of and transfer from company to company. C. Automatic Enrollment 1. Massachusetts 4 In Massachusetts, households that qualify for LIHEAP can voluntarily give their permission, at the time of application, for the LIHEAP- administering agency to disclose information to Verizon that allows the household to be enrolled in Lifeline. Thus, enrollment is not “automatic” in the sense of being done without the household’s permission, but it is done 1 This is a reproduction of Appendix E to the Recommended Decision. See generally Recommended Decision, Appendix E. This information was compiled by the Joint Board from assertions of commenters in response to the Joint Board’s Public Notice. Federal- State Joint Board on Universal Service Seeks Comment on Review of Lifeline and Link- Up Service for All Low- Income Consumers, CC Docket 96- 45, Public Notice, 16 FCC Rcd 18407 (2001) (Public Notice). The Commission reproduces this appendix for illustrative purposes only and takes no position on any of the practices described herein. 2 See NCLC Comments at 5- 6. 3 See Colorado DHS/ OCC Comments at 4. 4 See NCLC Comments at 6. 46 Federal Communications Commission FCC 04- 87 E- 2 electronically in most cases. This facilitates enrollment, and the results are evident in the relatively high Lifeline subscription rate in Massachusetts. 2. New York 5 In New York State, the Public Utility Law Project (PULP) has spent several years working to increase participation rates in the Lifeline/ Link- Up programs. PULP represents low-income and rural consumers in utility, telephone and energy related matters. PULP worked with the New York Public Service Commission (NYPSC), the New York Department of Family Assistance (NYFDA), and NYNEX (now Verizon) to create an automatic enrollment database. The data transferred between the NYDFA and Verizon is confidential and cannot be used by Verizon or the state for any reason other than Lifeline assistance. Anytime an individual enrolls for a program administered by NYDFA they are automatically enrolled in Lifeline/ Link- Up, but are also given the option to opt- out of the Lifeline/ Link- Up program. Individuals who are not Verizon customers but have been identified by NYDFA as being eligible because of enrollment in a program administered by NYDFA are notified of their eligibility and given the opportunity to request Lifeline service by returning a pre- printed form. This system increased the number of people participating in Lifeline from 197,339 in 1987 to 703,001 in 1998. Lifeline consumers who have ceased receiving other assistance through NYDFA for four consecutive months are removed from Lifeline. 3. North Dakota 6 In North Dakota, when consumers go to the county office of the North Dakota Department of Human Services (NDHS) and are determined eligible for any of the qualifying programs in the North Dakota Lifeline and Link- Up program, they receive an information sheet about Lifeline/ Link- Up or enhanced Lifeline/ Link- Up. Each qualifying individual receives a certificate of eligibility in the mail from NDHS which states that the individual must return this certificate to the telephone company in order to receive Lifeline/ Link- Up. Once a year, all eligible North Dakotans receive a new qualifying certificate from the NDHS. The annual mailing of this certificate to eligible parties helps increase participation in Lifeline and Link- Up programs by providing an additional opportunity to sign up with the local telephone company. Qwest and some other North Dakota companies use a different method of verification. Through arrangements with NDHS, these companies receive an annual list of eligible participants to verify against their current participation list and delete unqualified participants based on this list. Participants with these companies do not need to send in a qualifying certificate annually. D. Paper- Proof Verification of Continued Eligibility 1. Tennessee 7 The process used in Tennessee initially requires the applicant requesting Link- Up and 5 See Civil Rights Forum Comments at 3. 6 See North Dakota Public Service Commissioner Comments at 1. 7 See Tennessee Regulatory Authority Comments at 11- 12. 47 Federal Communications Commission FCC 04- 87 E- 3 Lifeline to provide proof of the public assistance program they receive. Proof of benefits may be demonstrated by providing a copy of the approval letter to receive Food Stamps, Medicaid or TANF from the Tennessee Department of Human Services (TDHS) or a copy of the SSI benefit letter from the Social Security Administration. E. On- Line Verification of Continued Eligibility 1. Illinois 8 In Illinois, ETCs can perform on- line verification of a consumer’s eligibility by obtaining real- time access to a database of state low- income assistance program participants. The result is a streamlined process for both consumers and ETCs. 2. Minnesota 9 Minnesota verifies the income and/ or disability of all applicants. An enrollee’s continued participation in the program is also verified on an annual basis. Minnesota verifies 85% of its Telephone Assistance Program participants by the use of computer interfaces with the Minnesota Department of Revenue, public assistance databases, and LIHEAP databases. The remainder are contacted by mail and asked to provide proof of continuing eligibility. Due to these verification procedures, Minnesota is not aware of problems with ineligible or fraudulent individuals being enrolled in the Telephone Assistance Program. 3. Tennessee 10 In Tennessee, Lifeline applicants are required to certify eligibility by presenting documentation to their carrier of their participation in Food Stamps, Medicaid, TANF, or SSI. Documentation can be demonstrated by a copy of their approval letter to receive benefits through one of those programs. Self- certification is not permitted. Once the documentation is received by the carrier, the carrier then verifies the accuracy of the documentation with the Tennessee Department of Human Services (TDHS) client database. Verification of continued eligibility is also accomplished utilizing this electronic system. This has been the most efficient and effective way in which to verify and re- verify that a consumer is receiving public assistance. Tennessee requires re- verification of consumers on Lifeline no less than twice a year or every six months. II. OUTREACH A. Multi- Lingual Assistance 1. California 11 On December 11, 2001, the California PUC approved a one- year, $5 million contract to 8 See SBC Comments at 2. 9 See Minnesota DOC Comments at 4. 10 See Tennessee Regulatory Authority Comments at 11- 12. 11 See Civil Rights Forum Comments at 4; NCLC Comments at 5. 48 Federal Communications Commission FCC 04- 87 E- 4 design and implement a competitively neutral public awareness and outreach program in order to increase universal Lifeline telephone service subscribership. On the same date, the California PUC approved a three- year, $1.5 million contract for a multi- lingual toll- free call center that provides customer service information about Lifeline in Spanish, Korean, Laotian, Cambodian, Vietnamese, Tagalog, and Hmong, as well as English. As a result of California’s outreach efforts, Lifeline participation rates have increased from 1,467,859 in 1989 to 3,196,661 in 2000. 2. Florida 12 The Florida Public Service Commission sends eligible Florida consumers a postcard- size flier about the Lifeline/ Link- Up program. Approximately 35,000 of the fliers, which were written in English on one side and Spanish on the other, were mailed to consumers in 2000. 3. Minnesota 13 To accommodate the state’s increasingly diverse community, the Minnesota Department of Human Services currently makes Lifeline/ Link- Up applications available in Arabic, Hmong, Cambodian, Lao, Russian, Somali, Spanish and Vietnamese. 4. Tennessee 14 The Tennessee Regulatory Authority (TRA) has created four color posters in English and Spanish and posted them in locations frequented by low- income individuals, such as health care facilities, legal offices, churches, charitable organizations, and Human Services offices. To support this campaign, the TRA has established a toll- free hotline. The TRA has produced public service announcements for radio and television. B. Tribal Outreach 1. Arizona and New Mexico 15 In Arizona and New Mexico, Smith Bagley, a wireless carrier, conducts intensive advertising campaigns on tribal reservations in service areas where they are designated as an ETC. One of its most successful forms of outreach is its day- long event. Smith Bagley moves its storefront into town for a day and hosts a sign- up event where customers can learn about wireless service, determine their eligibility for Lifeline/ Link- Up, sign up for service, have car installations done, obtain training on using a cell phone, and ask Smith Bagley’s staff any questions they may have about Lifeline/ Link- Up or wireless service. This unique outreach event has led to an increase of 14,000 new Lifeline subscribers. 12 See Florida PSC Comments at 7. 13 See Minnesota DOC Comments at 5. 14 See Civil Rights Forum Comments at 5. 15 See Smith Bagley Reply Comments at 2, 7- 8. 49 Federal Communications Commission FCC 04- 87 E- 5 C. Agreement with ETC 1. Florida 16 The Florida Public Service Commission (Florida PSC) has recently approved a joint stipulation between the Florida Office of Public Counsel and BellSouth that established a Community Service Fund for use in educating customers and promoting BellSouth’s Lifeline/ Link- Up services. As part of the stipulation, BellSouth agreed to contribute $250,000 in 2002 and $150,000 in 2003. D. “Warm Transfer Line” 1. Florida 17 The Florida PSC has made consumer education about Lifeline a priority. The Florida PSC operates an innovative “warm transfer line” which allows consumers who call the agency with Lifeline/ Link- Up questions to be automatically transferred to the appropriate eligible telecommunications carrier providing phone service in their service area. The warm transfer line assures consumers that they will be in touch directly with the company who can initiate the service. E. Coordination with Organizations and Other Agencies 1. Florida 18 The Florida PSC also works closely with key state agencies, such as the Florida Department of Children and Families (DCF) and Department of Community Affairs, to ensure that the materials are received by the target population. For example, the Florida PSC created a postcard- sized flier to be sent to eligible Florida consumers using the DCF’s mailing lists and mail system. Approximately 35,000 of the fliers, which were written in English on one side and Spanish on the other, were mailed to consumers in 2000. Finally, the Florida PSC is partnering with the American Association of Retired Persons (AARP), the Florida Association of Counties, and the Florida League of Cities to further promote Lifeline/ Link- Up. F. Lifeline/ Link- Up Seminars 1. Rhode Island 19 In Rhode Island, consumer advocates hold annual forums and conferences, often consisting of panels in which local telephone company representatives speak about Lifeline and distribute brochures. 16 See Florida PSC Comments at 4. 17 See Florida PSC Comments at 7. 18 See Florida PSC Comments at 7. 19 See Universal Service Administrative Company Comments at 10 (USAC). 50 Federal Communications Commission FCC 04- 87 E- 6 2. Tennessee 20 The TRA has implemented several methods to promote Lifeline and Link- Up. It has created a Manager of Consumer Outreach position that concentrates on providing consumer information. This Manager conducts three or four Lifeline/ Link- Up seminars per month at nursing homes across Tennessee. At the seminar, brochures and applications are distributed, leading to numerous applications for Lifeline/ Link- Up. Brochures are also distributed at various public affairs events. G. Direct Mailings 1. Connecticut 21 The Connecticut Department of Social Services works in conjunction with ETCs to target eligible low- income consumers through the mail. 2. Idaho 22 The State of Idaho sends flyers and brochures printed by the Idaho Public Utilities Commission to eligible state residents. 3. Maine 23 In late 1999, the Maine State Housing Authority and the Maine Community Action Programs jointly carried out two major mass mailings to all eligible LIHEAP recipients notifying those consumers that they were also eligible for Lifeline. An estimated 134,000 letters and flyers were mailed, paid for by the Maine Telecommunications Education Fund. 4. New York 24 The Public Utility Law Project of New York sends annual personalized letters to all persons eligible for Lifeline, informing them about the program. 5. North Carolina 25 In North Carolina, an ad hoc committee comprised of staff members from the North Carolina Utilities Commission, the Attorney General’s Office, major telecommunications industries, and social services organizations have made major strides since 1998 in their Lifeline/ Link- Up outreach efforts with direct mailings and other forms of outreach. Since the 20 See Civil Rights Forum Comments at 5. 21 See USAC Comments at 14. 22 See USAC Comments at 14. 23 See USAC Comments at 9. 24 See USAC Comments at 12. 25 See Civil Rights Forum Comments at 4- 5. 51 Federal Communications Commission FCC 04- 87 E- 7 committee’s first meeting, 200,000 brochures have been printed and distributed to various organizations across the state that works with low- income families. The North Carolina Public Service Commission sent notices to everyone in North Carolina who was eligible for the programs. 6. Tennessee 26 The TRA works with the TDHS database to determine eligible individuals and then mails Lifeline/ Link- Up information to those people. H. Lifeline/ Link- Up Notification on Every Call 1. Maine 27 Maine’s public assistance agencies explain the Lifeline/ Link- Up program whenever a household applies for public assistance and the state’s telephone companies mention Lifeline/ Link- Up whenever a customer applies for telephone service. This way, a household can apply for Lifeline/ Link- Up by phone by simply stating that they receive one of the listed public benefits and providing either a social security number or welfare identification number. Maine credits its high penetration rates to this combination of innovative outreach and easy application methods. I. Tax Break for Lifeline/ Link- Up Telephone Companies 1. North Carolina 28 North Carolina provides for a tax break to Lifeline/ Link- Up telephone companies equal to the amount of money they are required to contribute for Lifeline/ Link- Up. According to FCC data, Lifeline enrollment in North Carolina increased from 29,640 in 1998 to 62,475 in 2000. J. Lifeline/ Link- Up Marketing Board 1. California 29 California created a Lifeline Marketing Board which promotes the Lifeline program beyond the typical telephone company policy of including information in their telephone bills. 26 See Civil Rights Forum Comments at 5. 27 See NCLC Comments at 7. 28 See North Carolina Utilities Commission Comments at 4- 5. 29 See Civil Rights Forum Comments at 4- 5. 52 Federal Communications Commission FCC 04- 87 F- 1 APPENDIX F ESTIMATED INCOME REQUIREMENTS FOR A HOUSEHOLD AT OR BELOW 150% OF THE FEDERAL POVERTY GUIDELINES Size of Family Unit 48 Contiguous States and D. C. Alaska Hawaii 1 $13,470 $16,815 $15,495 2 18,180 22,710 20,910 3 22,890 28,605 26,325 4 27,600 34,500 31,740 5 32,310 40,395 37,155 6 37,020 46,290 42,570 7 41,730 52,185 47,985 8 46,440 58,080 53,400 For each additional person, add 4,710 5,895 5,415 53 Federal Communications Commission FCC 04- 87 G- 1 APPENDIX G LIST OF CURRENT FEDERAL DEFAULT STATES Based on available information, the following states currently are “federal default states”: Seven States and/ or Territories with their own Lifeline/ Link- Up programs have adopted the federal default criteria Iowa Illinois Kentucky Minnesota Nebraska Nevada Puerto Rico Nine States and/ or Territories have not adopted their own Lifeline/ Link- Up Program American Samoa Delaware Guam Hawaii Indiana Louisiana New Hampshire Northern Mariana Islands U. S. Virgin Islands 54 Federal Communications Commission FCC 04- 87 H- 1 APPENDIX H FINAL REGULATORY FLEXIBILITY ANALYSIS (REPORT AND ORDER) 1. As required by the Regulatory Flexibility Act of 1980, as amended (RFA) 1 an Initial Regulatory Flexibility Analysis (IRFA) was incorporated in the NPRM. 2 The Commission sought comment on the proposals in the NPRM, including comment on the IRFA. The present Final Regulatory Flexibility Analysis (FRFA) conforms to the RFA. 3 A. Need for, and Objectives of, the Order 2. In this Order, we adopt rules that expand the federal default eligibility criteria for Lifeline/ Link- Up to include an income- based criterion of 135% of the Federal Poverty Guidelines and additional means- tested programs. We also adopt rules requiring certification and verification procedures for eligibility under certain circumstances. In addition, we provide outreach guidelines for carriers and states and a voluntary Lifeline/ Link- Up administrative survey to better target low- income consumers and improve program operation. Collectively, these rules will improve the effectiveness of the low- income support mechanism and ensure quality telecommunications services are available to low- income consumers at just, reasonable, and affordable rates. B. Summary of Significant Issues Raised by Public Comments in Response to the IRFA 3. There were no comments filed specifically in response to the IRFA. Nevertheless, the agency has considered the potential impact of the rules proposed in the IRFA on small entities. Adding two means- tested programs, Temporary Assistance to Needy Families (TANF) and National School Lunch’s free lunch program (NSL), and household income as a basis for Lifeline/ Link- Up eligibility does not raise significant issues for small business entities. Some commenters were concerned that certification and verification procedures might pose significant costs on small entities. However, the rules we adopt today strike a balance between minimizing compliance burdens and costs and preserving the integrity of the Lifeline/ Link- Up program. C. Description and Estimate of the Number of Small Entities To Which Rules Will Apply 4. The RFA directs agencies to provide a description of, and where feasible, an estimate of the number of small entities that may be affected by the proposed rules, if adopted. 4 The RFA generally defines the term “small entity” as having the same meaning as the terms “small 1 See 5 U. S. C. § 603. The RFA, see 5 U. S. C. §§ 601- 612, has been amended by the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), Pub. L. No. 104- 121, Title II, 110 Stat. 857 (1996). 2 NPRM, 18 FCC Rcd at 11630- 36, paras. 6- 22. 3 See 5 U. S. C. § 604. 4 5 U. S. C. § 603( b)( 3). 55 Federal Communications Commission FCC 04- 87 H- 2 business,” “small organization,” and “small governmental jurisdiction.” 5 In addition, the term “small business” has the same meaning as the term “small business concern” under the Small Business Act. 6 A “small business concern” is one which: (1) is independently owned and operated; (2) is not dominant in its field of operation; and (3) satisfies any additional criteria established by the Small Business Administration (SBA). 7 5. The Commission’s decision to adopt certification and verification requirements would apply to service providers that provide services to qualifying low- income consumers who receive Lifeline/ Link- Up support. According to the Universal Service Administrative Company’s (USAC) 2002 Annual Report, only local exchange carriers, cellular/ personal communications services (PCS) providers, and competitive access providers would be subject to these requirements. 8 Because many of these service providers could include small entities, we expect that the proposal in this proceeding could have a significant economic impact on local exchange carriers, small incumbent local exchange carriers, cellular/ PCS providers, and competitive access providers that are small entities. 9 6. We have included small incumbent local exchange carriers in this present RFA analysis. As noted above, a “small business” under the RFA is on that, inter alia, meets the pertinent small business size standard (e. g., a telephone communications business having 1,500 or fewer employees), and “is not dominant in its field of operation.” 10 The SBA’s Office of Advocacy contends that, for RFA purposes, small incumbent local exchange carriers are not dominant in their field of operation because any such dominance is not “national” in scope. 11 We have therefore included small incumbent local exchange carriers in this RFA analysis, although we emphasize that this RFA action has no effect on Commission analyses and determinations in other, non- RFA contexts. 7. Incumbent Local Exchange Carrier. Neither the Commission nor the SBA has developed a size standard specifically for small providers of local exchange services. The closest 5 5 U. S. C. § 601( 6). 6 5 U. S. C. § 601( 3) (incorporating by reference the definition of “small- business concern” in the Small Business Act, 15 U. S. C. § 632). Pursuant to 5 U. S. C. §601( 3), the statutory definition of a small business applies “unless an agency, after consultation with the Office of Advocacy of the Small Business Administration and after opportunity for public comment, establishes one or more definitions of such term which are appropriate to the activities of the agency and publishes such definition( s) in the Federal Register.” 5 U. S. C. § 601( 3). 7 15 U. S. C. § 632. 8 See USAC Annual Report 2002, Appendix B (2002). 9 The most reliable source of information regarding the total numbers of common carrier and related providers nationwide, including the numbers of commercial wireless entities, appears to be data the Commission publishes annually in its Trends in Telephone Service report. See Trends Report at Table 16.3. 10 15 U. S. C. § 632. 11 Letter from Jere W. Glover, Chief Counsel for Advocacy, SBA, to William E. Kennard, Chairman, FCC (May 27, 1999). The Small Business Act contains a definition of “small- business concern,” which the RFA incorporates into its own definition of “small business.” See 15 U. S. C. § 632( a) (Small Business Act); 5 U. S. C. § 601( 3) (RFA). SBA regulations interpret “small business concern” to include the concept of dominance on a national basis. 13 C. F. R. § 121.102( b). 56 Federal Communications Commission FCC 04- 87 H- 3 applicable size standard under the SBA rules is for wired telecommunications carriers. 12 This provides that a wired telecommunications carrier is a small entity if it employs no more than 1,500 employees. 13 According to Commission data, 1,337 incumbent carriers reported that they were engaged in the provision of local exchange services. Of these 1, 337 carriers, an estimated 1,032 have 1,500 or fewer employees and 305 carriers have more than 1,500 employees. Consequently, the Commission estimates that most providers of incumbent local exchange service are small businesses that may b affected by the rules and policies adopted herein. According to Commission data, 1,337 incumbent carriers reported that they were engaged in the provision of local exchange services. Of these 1, 337 carriers, an estimated 1032 have 1500 or fewer employees and 305 carriers have more than 1500 employees. Consequently, the Commission estimates that most providers of incumbent local exchange service are small businesses that may b affected by the rules and policies adopted herein. 8. Competitive Local Exchange Carriers, Competitive Access Providers, and Other Local Exchange Carriers. Neither the Commission nor the SBA has developed a size standard specifically for small providers of local exchange services. The closest applicable size standard under the SBA rules is for wired telecommunications carriers. 14 This provides that a wired telecommunications carrier is a small entity if it employs no more than 1,500 employees. 15 According to the most recent Commission data, 16 609 companies reported that they were engaged in the provision of either competitive access provider services or competitive local exchange carrier services. Of these 609 companies, an estimated 458 have 1,500 or fewer employees and 151 have more than 1,500 employees. 17 In addition, 35 carriers reported that they were “Other Local Exchange Carriers.” Of the 35 “Other Local Exchange Carriers,” an estimated 34 have 1,500 or fewer employees and one has more than 1,500 employees. 18 Consequently, the Commission estimates that most providers of competitive local exchange service, competitive access providers, and “Other Local Exchange Carriers” are small entities that may be affected by the rules and policies adopted herein. 9. Cellular and Other Wireless Telecommunications. The SBA has developed a small business size standard for Cellular and Other Wireless Telecommunications, which consists of all such firms having 1,500 or fewer employees. 19 According to data for 1997, a total of 977 such firms operated for the entire year. 20 Of those, 965 firms employed 999 or fewer persons for the year, and 12 firms employed of 1,000 or more. Therefore, nearly all such firms were small 12 13 C. F. R. § 121. 201, NAICS Code 517110. 13 Id. 14 13 C. F. R. § 121. 201, NAICS Code 517110. 15 Id. 16 FCC, Wireline Competition Bureau, Industry Analysis and Technology Division, “Trends in Telephones Service” at Table 5.3, Pate 5- 5 (Aug. 2003). 17 Id. 18 Id. 19 13 C. F. R. § 121. 201, NAICS code 517212. 20 U. S. Census Bureau, 1997 Economic Census, Subject Series; Information, Table 5, “Employment Size of Firms Subject to Federal Income Tax: 1997,” NAICS code 513322 (October 2000). 57 Federal Communications Commission FCC 04- 87 H- 4 businesses. In addition, we note that there are 1,807 cellular licenses; however, a cellular licensee may own several licenses. 21 According to Commission data, 858 carriers reported that they were engaged in the provision of cellular service, Personal Communications Service (PCS), or Specialized Mobile Radio telephony service, which are placed together in the data. 22 We have estimated that 291 of these are small under the SBA small business size standard. 23 10. Broadband Personal Communications Service (PCS). The broadband PCS spectrum is divided into six frequencies designated A through F, and the Commission has held auctions for each block. The Commission defined “small entity” for Blocks C and F as an entity that has average gross revenues of less than $40 million in the three previous calendar years. 24 For Block F, an additional classification for “very small business” was added and is defined as an entity that, together with their affiliates, has average gross revenues of not more than $15 million for the preceding three calendar years. 25 These regulations defining “small entity” in the context of broadband PCS auctions have been approved by the SBA. 26 No small businesses within the SBA- approved definition bid successfully for licenses in Blocks A and B. There were 90 winning bidders that qualified as small entities in the Block C auctions. A total of 93 small and very small business bidders won approximately 40% of the 1,479 licenses for Blocks D, E, and F. 27 On March 23, 1999, the Commission re- auctioned 347 C, D, E, and F Block licenses; there were 48 small business winning bidders. Based on this information, we conclude that the number of small broadband PCS licensees will include the 90 winning C Block bidders and the 93 qualifying bidders in the D, E, and F blocks, plus the 48 winning bidders in the re- auction, for a total of 231 small entity PCS providers as defined by the SBA and the Commission's auction rules. On January 26, 2001, the Commission completed the auction of 422 C and F Broadband PCS licenses in Auction No. 35. Of the 35 winning bidders in this auction, 29 qualified as small or very small businesses. D. Description of Projected Reporting, Recordkeeping, and Other Compliance Requirements for Small Entities 11. Expanding the eligibility criteria will not create additional reporting, recordkeeping, or other compliance requirements. 12. Several other requirements adopted in this Order, however, affect recordkeeping requirements. First, ETCs will be required to maintain records to document compliance with all 21 See Federal Communications Commission, Universal Licensing System, . 22 See Trends Report, Table 5.3 - Number of Telecommunications Service Providers that are Small Businesses. 23 Id. 24 See Amendment of Parts 20 and 24 of the Commission’s Rules – Broadband PCS Competitive Bidding and the Commercial Mobile Radio Service Spectrum Cap, FCC 96- 278, WT Docket No. 96- 59, Report and Order, Sections 57- 60 (released June 24, 1996), 61 FR 33859 (July 1, 1996) (Broadband PCS Order); see also 47 C. F. R. § 24. 720( b). 25 See Broadband PCS Order at Section 60. 26 See, e. g., Implementation of Section 309( j) of the Communications Act – Competitive Bidding, PP Docket No. 93- 253, Fifth Report and Order, 9 FCC Rcd 5532, 5581- 84 (1994). 27 FCC News, Broadband PCS, D, E and F Block Auction Closes, No. 71744 (released January 14, 1997). 58 Federal Communications Commission FCC 04- 87 H- 5 Commission requirements governing the Lifeline/ Link- Up programs, including numerous self-certifications, and provide that documentation to the Commission or Administrator upon request for the full three preceding calendar years. 28 Specifically, ETCs in federal default states must retain certifications that documentation of income eligibility was presented when the customer was initially enrolled in Lifeline and when the customer was subject to verification of continued eligibility. 29 ETCs in states operating their own Lifeline/ Link- Up program must document compliance with state Lifeline regulations and recordkeeping requirements, including state certification and verification procedures. 30 Second, non- ETC resellers must retain documentation to demonstrate that they are providing discounted services only to qualifying low-income customers. 31 Records of customer eligibility must be maintained for as long as the customer receives Lifeline service from that ETC or until that ETC is audited by the Administrator. 32 E. Steps Taken to Minimize the Significant Economic Impact on Small Entities, and Significant Alternatives Considered 13. Although self- certification of income may be easily administered, we conclude that self- certification of income could invite abuse of the Lifeline/ Link- Up program, because it is difficult to verify income. 33 Accordingly, to address concerns of potential waste, fraud, and abuse, we will require consumers qualifying under the income- based criterion to present documentation of income. 34 To minimize burdens on carriers, however, we do not require ETCs in federal default states to maintain this documentation of income. 35 Rather, an officer of the ETC need only self- certify, under penalty of perjury, that the carrier has procedures in place to review income documentation and that, to the best of his or her knowledge, income documentation was presented. 36 In addition, to ensure that only eligible consumers receive Lifeline/ Link- Up benefits, we require ETCs in federal default states to verify directly with a state that particular subscribers continue to be eligible or survey subscribers directly by sending annual verification forms to a statistically valid sample of Lifeline subscribers, providing the results of the sample to USAC. 37 14. We allow states operating their own Lifeline/ Link- Up programs flexibility to develop their own certification of income and verification procedures. 38 We note that resources of the 28 See supra para. 39. 29 See supra paras. 31, 35, 38, 39. 30 See supra paras. 29, 34, 39. 31 See supra para. 40. 32 See supra para. 38. 33 See supra para. 28. 34 Id. 35 See supra para. 31. 36 Id. 37 See supra para. 35. 38 See supra paras. 29, 34. 59 Federal Communications Commission FCC 04- 87 H- 6 carrier, among other things, should be taken into consideration when devising state certification and verification procedures. 39 In addition, an officer of an ETC in states that operate their own Lifeline/ Link- Up programs must certify, under of penalty of perjury, that the ETC complies with state certification procedures and that, to the best of his or her knowledge, documentation of income for consumers applying under an income- based criterion was presented. 15. Finally, we provide carriers options regarding retaining records of consumer eligibility. Carriers may either retain such records for as long as the carrier provides Lifeline service to that consumer or until it is audited by the Administrator. These requirements are necessary to ensure program integrity. However, we provide carriers flexibility to choose the more appropriate recordkeeping method. F. Report to Congress 16. The Commission will send a copy of the Order, including this FRFA, in a report to be sent to Congress pursuant to the Congressional Review Act, see 5 U. S. C. § 801( a)( 1)( A). In addition, the Commission will send a copy of the Order, including the FRFA, to the Chief Counsel for Advocacy of the Small Business Administration. A copy of the Order and FRFA (or summaries thereof) will also be published in the Federal Register. 39 See supra para. 29, 34. 60 Federal Communications Commission FCC 04- 87 I- 1 APPENDIX I INITIAL REGULATORY FLEXIBILITY ANALYSIS (FURTHER NOTICE OF PROPOSED RULEMAKING) 1. As required by the Regulatory Flexibility Act of 1980, as amended (RFA), 1 the Commission has prepared the present Initial Regulatory Flexibility Analysis (IRFA) of the possible significant economic impact on a substantial number of small entities by the policies and rules proposed in this Further Notice. Written public comments are requested on this IRFA. Comments must be identified as responses to the IRFA and must be filed by the deadlines for comments on the Further Notice as provided above in Section V( C). The Commission will send a copy of the Further Notice, including this IRFA, to the Chief Counsel for Advocacy of the Small Business Administration. 2 In addition, the Further Notice and IRFA (or summaries thereof) will be published in the Federal Register. 3 A. Need for, and Objectives of, the Proposed Rules 2. The Commission is required by section 254 of the Act to promulgate rules to implement the universal service provisions of section 254. 4 On May 8, 1997, the Commission adopted rules that reformed its system of universal service support mechanisms so that universal service is preserved and advanced as markets move toward competition. 5 Among other things, the Commission adopted a mechanism to provide discounted monthly telephone service and installation charges to low- income households. 6 Over the last few years, important changes in the low- income community and the Joint Board’s Recommended Decision prompt us to review the low- income universal service support mechanism. 7 3. In this Further Notice, we seek comment on whether the income- based criterion in the federal default eligibility criteria should be increased to 150% of the FPG to make phone service more affordable to more low- income individuals and families. 8 Applying the same methodology used to analyze the 135% of the FPG income- based criterion, the Commission staff analysis estimates that broadening the income- based criterion to 150% of the FPG may only have a minimal impact on national telephone penetration rates, but could add many new Lifeline subscribers. 9 Therefore, we seek comment on whether a broader income- based criterion should 1 See 5 U. S. C. § 603. The IRFA, see 5 U. S. C. §§ 601- 12, has been amended by the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA) Pub. L. No. 104- 121, Title II, 110 Stat 857 (1996). 2 See 5 U. S. C. § 603( a). 3 See id. 4 47 U. S. C. § 254. 5 See generally 1997 Universal Service Order. 6 See generally 1997 Universal Service Order, 12 FCC Rcd at 8973- 76, paras. 373- 78. 7 See supra para. 6. 8 See supra paras. 56- 57; Appendix F. 9 See generally Appendix K. 61 Federal Communications Commission FCC 04- 87 I- 2 be added even when there could be only a minimal impact to the national telephone penetration rate. 10 B. Legal Basis 4. This Further Notice is adopted pursuant to sections 1, 4( i), (4j), 201- 205, 251, 252, and 303 of the Communications Act of 1934, as amended, 47 U. S. C. §§ 151, 154( i), (j), 201- 205, 251, 252, and 303. C. Description and Estimate of the Number of Small Entities To Which Rules Will Apply 5. The RFA directs agencies to provide a description of, and, where feasible, an estimate of the number of small entities that may be affected by the rules adopted herein. 11 The RFA generally defines the term “small entity” as having the same meaning as the terms “small business,” “small organization,” and “small governmental jurisdiction.” 12 In addition, the term “small business” has the same meaning as the term “small business concern” under the Small Business Act, unless the Commission has developed one or more definitions that are appropriate to its activities. 13 Under the Small Business Act, a “small business concern” is one that: (1) is independently owned and operated; (2) is not dominant in its field of operation; and (3) meets any additional criteria established by the Small Business Administration (SBA). 14 6. We have described in detail, supra, in the FRFA, the categories of entities that may be directly affected by any rules or proposals adopted in our efforts to reform the universal service low- income support mechanism. 15 For this IRFA, we hereby incorporate those entity descriptions by reference. D. Description of Projected Reporting, Recordkeeping, and Other Compliance Requirements 7. The Further Notice seeks comment on potential changes to the federal default income- based eligibility criterion for the low- income support mechanism. This potential change will not impact reporting or recordkeeping requirements, however, it could impact the overall pool of eligible applicants. E. Steps Taken to Minimize Significant Economic Impact on Small Entities, and 10 See supra para. 57. 11 5 U. S. C. § 604( a)( 3). 12 5 U. S. C. § 601( 6). 13 5 U. S. C. § 601( 3) (incorporating by reference the definition of “small business concern” in 5 U. S. C. § 632). Pursuant to 5 U. S. C. § 601( 3), the statutory definition of a small business applies “unless an agency after consultation with the Office of Advocacy of the Small Business Administration and after opportunity for public comment, establishes one or more definitions of such term which are appropriate to the activities of the agency and publishes such definition in the Federal Register.” 14 15 U. S. C. § 632. 15 See supra Appendix H, paras. 5- 10. 62 Federal Communications Commission FCC 04- 87 I- 3 Significant Alternatives Considered 8. The RFA requires an agency to describe any significant alternatives that it has considered in reaching its proposed approach impacting small business, which may include the following four alternatives (among others): (1) the establishment of differing compliance and reporting requirements or timetables that take into account the resources available to small entities; (2) the clarification, consolidation, or simplification of compliance or reporting requirements under the rule for small entities; (3) the use of performance, rather than design, standards; and (4) an exemption from coverage of the rule, or part thereof, for small entities. 16 9. In this Further Notice, we seek comment on whether the Commission should adopt a broader income- based criterion. If a broader income- based criterion is adopted, this could change the size of the overall pool of eligible applicants for universal service support for low-income subscribers. F. Federal Rules that May Duplicate, Overlap, or Conflict with the Proposed Rules 10. None. 16 See 5 U. S. C. §§ 603( c)( 1)-( 4). 63 Federal Communications Commission FCC 04- 87 J- 1 APPENDIX J STATISTICALLY VALID SAMPLE Eligible Telecommunications Carriers (ETCs) subject to the federal default criterion will be required to verify the continued eligibility of a statistically valid sample of their Lifeline customers. The size of a statistically valid sample, however, varies based upon many factors, including the number of Lifeline subscribers (N) and the previously estimated proportion of Lifeline subscribers inappropriately taking Lifeline service (P). For the first year that ETCs verify subscribers’ continued eligibility, all ETCs should assume that the proportion P of subscribers inappropriately taking Lifeline service is .01, if there is no evidence to assume a different proportion. In subsequent years, ETCs should use the results of samples from previous years to determine this estimated proportion. In all instances, the estimated proportion P should never be less than .01 or more than .06. For ETCs with large numbers of Lifeline subscribers (more than 400,000), a statistically valid sample size must be calculated pursuant to the following formula: 1 Sample Size = 2.706 * P*( 1 – P) / .000625. For ETCs with 400,000 Lifeline subscribers or less, the above formula could yield a sample size that is larger than needed to be statistically valid. 2 To simplify the calculation of a statistically valid sample, a table of sample sizes based on two variables N (number of Lifeline subscribers) and P (previously estimated proportion of Lifeline subscribers inappropriately taking Lifeline service) is provided below. Various numbers of Lifeline subscribers N are listed in the left- most column. Various previously estimated proportions P are listed on the first row. To determine the sample size, find the box that matches your number of Lifeline subscribers N and proportion P. If the number of Lifeline subscribers is not listed and/ or the proportion is not listed, ETCs should use the next higher number for N and/ or P that is in the table, i. e. always round up to the next higher value for N and/ or P. For example, if 3.8 percent of 9,500 Lifeline subscribers inappropriately took Lifeline service, the ETC would use a sample size of 164 (value using 10,000 customers and proportion .04). Because the adjustment for the number of Lifeline subscribers is de minimus above 400,000 Lifeline subscribers, ETCs with more than 400,000 Lifeline subscribers must use the above formula to calculate the sample size. All ETCs must provide the estimated proportion for their samples to the Administrator, i. e., the proportion of sampled subscribers inappropriately taking Lifeline service. 1 The values 2.706 and .000625 in this formula are mandated by OMB. See Office of Management and Budget, Memorandum M- 03- 13 (May 21, 2003). 2 Sample sizes for ETCs with 400,000 Lifeline subscribers or less are calculated pursuant to the following formula: sample size = N/( 1+{[ N- 1]/ n}). N is the number of Lifeline subscribers and n = 2.706 * P*( 1 – P) / .000625, where P is the previously estimated proportion of Lifeline subscribers inappropriately taking Lifeline service. ETCs may choose to calculate their sample sizes using these formulas. 64 Federal Communications Commission FCC 04- 87 J- 2 Sample Size Table Previously Estimated Proportion of Subscribers Inappropriately Taking Lifeline Service (P) 1 (N) Number of Lifeline Subscribers 0.01 0.015 0.02 0.025 0. 03 0. 035 0.04 0.045 0. 05 0. 055 0.06 400,000 43 64 85 106 126 146 166 186 206 225 244 100,000 2 43 64 85 105 126 146 166 186 206 225 244 90,000 43 64 85 105 126 146 166 186 205 224 244 70,000 43 64 85 105 126 146 166 186 205 224 243 60,000 43 64 85 105 126 146 166 185 205 224 243 30,000 43 64 85 105 125 146 165 185 204 223 242 20,000 43 64 85 105 125 145 165 184 204 223 241 15,000 43 64 84 105 125 145 164 184 203 222 240 10,000 43 64 84 104 124 144 164 183 202 220 238 9,000 43 64 84 104 124 144 163 182 201 220 238 8,000 43 63 84 104 124 144 163 182 201 219 237 7,000 43 63 84 104 124 143 162 181 200 218 236 6,000 43 63 84 104 123 143 162 180 199 217 235 5,000 43 63 83 103 123 142 161 179 198 215 233 4,000 42 63 83 103 122 141 160 178 196 213 230 3,000 42 63 83 102 121 139 158 175 193 209 226 2,000 42 62 81 100 119 136 154 170 187 202 218 1 For the first year of verification, ETCs should assume that this percentage is .01, if there is no evidence to assume a different percentage. In subsequent years, ETCs should use the results of samples from previous years to determine this estimated percentage. 2 Sample sizes for ETCs with less than 400, 000 Lifeline subscribers are calculated pursuant to the following formula: sample size = N/( 1+{[ N- 1]/ n}). N is the number of Lifeline subscribers. n is (2. 706 * P*( 1 – P)) / .000625, where P is the estimated percentage of Lifeline subscribers inappropriately taking Lifeline service. ETCs may choose to calculate their sample sizes using these formulas . 65 Federal Communications Commission FCC 04- 87 J- 3 Sample Size Table Previously Estimated Proportion of Subscribers Inappropriately Taking Lifeline Service (P) (N) Number of Lifeline Subscribers 0.01 0.015 0.02 0.025 0. 03 0. 04 0. 04 0.045 0. 05 0. 06 0. 06 1,500 42 61 80 99 116 133 150 166 181 196 210 1,000 41 60 78 96 112 128 142 157 171 184 196 900 41 60 78 95 111 126 140 154 168 180 192 800 41 59 77 94 109 124 138 151 164 176 187 700 41 59 76 92 107 121 134 147 159 170 181 600 40 58 74 90 104 118 130 142 154 164 174 500 40 57 73 88 101 113 125 136 146 155 164 400 39 55 70 84 96 107 118 127 136 144 152 300 38 53 66 79 89 98 107 115 122 129 135 200 36 49 60 70 78 85 91 97 102 106 110 150 34 45 54 62 69 74 79 83 87 90 93 120 32 42 50 57 62 66 70 73 76 78 81 100 30 39 46 52 56 60 63 65 68 69 71 90 29 38 44 49 53 56 59 61 63 64 66 80 28 36 41 46 49 52 54 56 58 59 60 70 27 34 39 42 45 48 49 51 52 54 55 60 25 31 35 39 41 43 44 46 47 48 48 50 23 28 32 34 36 37 39 40 40 41 42 40 21 25 27 29 31 32 32 33 34 34 34 35 20 23 25 27 28 28 29 30 30 30 31 30 18 21 22 24 24 25 26 26 26 27 27 25 16 18 19 20 21 21 22 22 22 23 23 20 14 15 16 17 17 18 18 18 18 18 19 66 Federal Communications Commission FCC 04- 87 J- 4 Sample Size Table Previously Estimated Proportion of Subscribers Inappropriately Taking Lifeline Service (P) (N) Number of Lifeline Subscribers 0.01 0.015 0.02 0.025 0. 03 0. 04 0. 04 0.045 0. 05 0. 06 0. 06 17 12 14 14 15 15 15 16 16 16 16 16 15 11 12 13 13 13 14 14 14 14 14 14 13 10 11 11 12 12 12 12 12 12 12 12 11 9 10 10 10 10 10 10 10 10 11 11 10 8 9 9 9 9 9 9 10 10 10 10 9 8 8 8 8 8 9 9 9 9 9 9 8 7 7 7 8 8 8 8 8 8 8 8 7 6 6 7 7 7 7 7 7 7 7 7 6 5 6 6 6 6 6 6 6 6 6 6 5 5 5 5 5 5 5 5 5 5 5 5 4 4 4 4 4 4 4 4 4 4 4 4 3 3 3 3 3 3 3 3 3 3 3 3 2 2 2 2 2 2 2 2 2 2 2 2 1 1 1 1 1 1 1 1 1 1 1 1 67 Federal Communications Commission FCC 04- 87 Appendix K Lifeline Staff Analysis Quantifying the effects of adding an income criterion to the Lifeline eligibility criteria A Study for the Federal- State Joint Board on Universal Service Prepared by Craig Stroup Industry Analysis & Technology Division Wireline Competition Bureau 68 Federal Communications Commission FCC 04- 87 Table of Contents Section Page Executive Summary………………………………………………………… 1 Introduction ………..……………………………………………………… 3 Methodology Summary ………..…………………………………………… 5 Modeling Process ………..………………………………………………… 8 Methodology Detail ………….……………………………………………… 8 Step 1: Create Baselines …………………………………………………… 9 Step 2: Estimate Changes due to New Policy ……………………………… 11 Step 3: Apply Changes to Baseline to Compute New Program Levels …..… 12 Other Factors ……………………………………………………………… 13 Additional Assumptions …..………………………………………………… 13 Results ……………………………………………………………………… 14 Technical Appendix 1 ……………………………………………………… 47 Technical Appendix 2 ……………………………………………………… 54 69 Federal Communications Commission FCC 04- 87 K- 1 Executive Summary Lifeline Staff Analysis March 2004 Introduction This analysis updates the staff analysis presented in the Recommended Decision of the Federal-State Joint Board on Universal Service regarding the Lifeline/ Link- Up program. 1 The Joint Board recommended the Federal Communications Commission (FCC) add a federal default income- based criterion of at least 1.35 times the Federal Poverty Guidelines (FPG). This study analyzes the impact of a 1.35 FPG Criterion (FPGC). 2 To simplify charts and other materials, the staff analysis also refers to the 1.35 FPGC as a 1.35 Poverty Guidelines Criterion (PGC). The staff analysis in the Recommended Decision found that a 1.35 PGC would allow many additional low- income households in those states that utilize the federal default criteria to subscribe to the Lifeline program. This analysis updates the previous analysis by incorporating Year 2002 Current Population Survey of Households (CPSH) data. The regression and logit regression analyses were performed with the new data, with results similar to the previous study’s results. In addition, this study also examines the effects of a 1.50 PGC. Methodology There is a benefit to increasing the number of Lifeline participants, and also a cost. The obvious benefit would be that some of those added Lifeline subscribers would newly receive telephone service. The cost at the federal level would be the additional federal dollars spent on the additional Lifeline enrollees. This study uses economic methodologies to forecast the baselines, changes due to the new policy, and program levels after the implementation of the new policy. This means that first we estimate the number of Lifeline subscribers and the associated costs of the program to form the baseline, also known as the status quo. Second, we estimate the changes that would result from a nationwide implementation of a 1.35 PGC, assuming that all states adopt this criterion. 3 Third, we add (or apply) the changes to the baselines to the time period when the policy is expected to be implemented. This step provides an estimate of the number of Lifeline subscribers and costs that would result from the new policy. The same analysis also is presented for 1.50 PGC. This study examines only the effects of implementing an income criterion, and assumes that states do not otherwise alter their eligibility criteria. This study uses a combination of statistical regression analysis and simple math in a series of spreadsheet tables. The following equations form the basic structure of the spreadsheet model. 1 See Recommended Decision, 18 FCC Rcd at 6633, Appendix F. 2 But see supra note 41. 3 We recognize that our analysis could change significantly if not all states adopt a 1.35 PGC. Also, some states have a 1.50 PGC. This study assumes that those states with a 1.50 PGC keep it. 70 Federal Communications Commission FCC 04- 87 K- 2 New Lifeline households = New Lifeline- eligible households times predicted Lifeline subscription rate among newly- eligible households. Additional federal Lifeline expenditures = number of additional households that would take Lifeline times the amount of federal expenditures per household that takes Lifeline. In sum, the results of two regression models are used to predict the impact of a policy change, and these predictions are applied to the baseline to calculate the new level of Lifeline subscription and federal Lifeline expenditures. Results The results are summarized below: Summary information for Year 2005 if all states adopt a 1.35 PGC: Additional households that would take Lifeline: 1,167,000 to 1,292,000 Of the additional Lifeline subscribers, the number that would newly subscribe to telephone service because of the 1.35 PGC: 247,000 Of the additional Lifeline subscribers, the number that would already have telephone service: 920,000 to 1,045,000 Additional federal expenditures in 2005: Amount that federal expenditures would increase: $127,000,000 to $140,000,000 Additional federal expenditures per new telephone subscriber: $514 to $567 71 Federal Communications Commission FCC 04- 87 K- 3 Lifeline Staff Analysis Introduction Lifeline provides low- income consumers with discounts of up to $10.00 off of the monthly cost of telephone service for a single telephone line in their principal residence. States use different criteria for determining whether a household qualifies for Lifeline. Some states use the federal default eligibility criteria (set by the FCC), which enable households receiving Federal Public Housing Assistance (Section 8), Food Stamps, Low- Income Home Energy Assistance Program (LIHEAP), Medicaid, or Supplemental Security Income to receive Lifeline. Other states have set their own criteria. States setting their own criteria often use one or more of the programs from the federal criteria and sometimes include one or more of their own state- wide programs. Some states also use an income- based criterion, which is based on some multiple of the Federal Poverty Guidelines. In all cases, a household need meet only one of a state’s criteria to be eligible for Lifeline. The Joint Board recommended that the FCC add an income- based criterion to the federal eligibility criteria for Lifeline. The Joint Board also recommended that the income- based criterion be set at 1.35 times the Federal Poverty Guidelines. Thus, households with incomes at or below 1.35 times the Federal Poverty Guidelines would be eligible for Lifeline. Some commenters suggest raising the criterion to 1.50 times the Federal Poverty Guidelines (FPG), based on the observation that the LIHEAP uses a criterion of 1.50 times the FPG. The commenters argue that it would be logically inconsistent to use a multiple of 1.35 for Lifeline directly, but 1.50 indirectly, through LIHEAP. 4 This study examines the effect of using the 1.35 and the 1.50 mutiple. This study assumes that all states (not just those that currently utilize the federal default criteria) add an income- based criterion using a multiple of the Federal Poverty Guidelines. This analysis calls this income- based criterion a Poverty Guidelines Criterion (PGC). A nationwide implementation of a 1.35 PGC would increase the overall number of households eligible for Lifeline. 5 This would enable additional low- income households in many states to take the Lifeline program. (Households meeting at least one eligibility criterion are eligible for Lifeline, so adding an additional eligibility criterion increases the number of households that are eligible for Lifeline.) There is a benefit to increasing the number of participants, and also a cost. The obvious benefit would be the increase in the number of low- income households newly subscribing to telephone service. The cost at a federal level would be the additional federal dollars spent on the additional Lifeline enrollees. Because the study assumes that all states choose to adopt the recommended federal income- based eligibility criterion, the estimates presented are likely to represent the upper limit of both the potential new Lifeline subscribers and the potential number of new 4 Consumer Coalition Comments at 2; Commissioner Wilson Pa PUC Reply Comments at 2- 3; TOPC Comments at 5- 6; USCCB Comments at 4- 5. 5 This study assumes throughout that states with a 1.50 PGC continue to use a 1.50 PGC. 72 Federal Communications Commission FCC 04- 87 K- 4 telephone subscribers, as well as the corresponding impact on the fund as a result of a 1.35 PGC. If some states choose not to adopt the federal income- based standard, the number of new Lifeline and telephone subscribers, and additional cost would be correspondingly lower. The relationship between Lifeline eligibility, Lifeline subscribership, and telephone subscribership is as follows. A PGC would make many households eligible for Lifeline. A portion of those newly- eligible households will take Lifeline. Of those households that subscribe to Lifeline because of the new PGC, a portion will be new to telephone service because of the lower price. The other portion would already have telephone service, and would be taking the Lifeline just because they are newly- eligible. See the graphs on the next page. 73 Federal Communications Commission FCC 04- 87 K- 5 Methodology Summary This study uses economic methodologies to forecast baselines, changes to the baselines, and program levels after the implementation of the new policy. This means that first we estimate the number of Lifeline subscribers and the associated federal expenditures of the program to form the baseline numbers. Second, we estimate the changes that would result from a nationwide implementation of a 1.35 PGC. Third, we add (or apply) the changes to the baseline in the time period when the policy is expected to be implemented. This step provides an estimate of the number of Lifeline subscribers and costs under the new policy. 74 Federal Communications Commission FCC 04- 87 K- 6 In order to make projections for Year 2005, we examine data for Year 2002, and apply those inferences to our projections for 2005. We first estimate the percentage of households that were eligible for Lifeline in 2002, and compare that to the number of households that took Lifeline in 2002. This allows us to calculate a “Lifeline take rate” which can then be applied to 2005 data. We have chosen to estimate the baseline and changes for 2005 because that is the timeframe in which the proposed changes would be implemented. The second step uses demographic data available from 2002 data to model the effects that a 1.35 PGC would have had on Lifeline subscribership and telephone penetration in 2002. That increase (in percentage form) is then applied to 2005 data. For Lifeline subscribership, a regression model is constructed that predicts the increase in Lifeline subscribership as a function of increasing multiples of the Federal Poverty Guidelines. For instance, this model indicates that if Texas— which has a 1.25 PGC— had had a 1.35 PGC in 2002, it would have had 23,231 to 25,715 more households on Lifeline in 2002 (See Table 2. E). That increase (in percentage form) is used to predict the additional Lifeline subscribers Texas would have in 2005 (See Table 2. F). For telephone subscribership, a logistic regression is constructed that predicts the increase in telephone subscribership as a function of increasing multiples of the Federal Poverty Guidelines and other important factors, such as income and home ownership. The model predicts that if all states had had a 1.35 (or higher) PGC for Lifeline in 2002, then 229,000 additional households would have taken telephone service (See Table 2. I). Table 2. I also applies this increase (in percentage form) to 2005. In the third step, the estimated additional number of Lifeline subscribers is added to the baseline in 2005 to get the forecasted number of Lifeline subscribers that would exist in 2005 under a nationwide implementation of the new policy. The same is done for Lifeline expenditures in 2005. These steps are exhibited in the following graphs. The first graph shows the steps for predicting the number of Lifeline subscribers, and the second graph shows the amount of federal Lifeline expenditures. 75 Federal Communications Commission FCC 04- 87 K- 7 Lifeline Subscribers 0 1 2 3 4 5 6 7 8 9 Millions of Lifeline subscribers Baseline Change due to 1.35 PGC 2000 2002 2005 A (Baseline) B (Baseline) D (Baseline) E (Policy change) F (New level with change) C (Baseline) 1998 Federal Lifeline Expenditures $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 Millions of dollars Baseline Change due to 1.35 PGC 2000 2002 2005 A (Baseline) B (Baseline) D (Baseline) E (Policy change) F (New level with change) C (Baseline) 1998 76 Federal Communications Commission FCC 04- 87 K- 10 Lifeline. Each household is analyzed according to its state’s eligibility criteria, as reported by . 7 Only those households that meet at least one of the eligibility criteria are deemed eligible for Lifeline, the rest are deemed ineligible. 8 From these data, statewide estimates for the number of Lifeline eligible households are created. USAC data are then used to create the Lifeline subscription rate, which is the percentage of eligible households that subscribe to Lifeline. (See Table 1. A). Forecasted Baseline Lifeline subscription rates for 2005. We estimate that 118.0 million households will exist in 2005, and 6. 8 million of those households are expected to take Lifeline under existing rules. The results from the previous table are used to forecast the number of households, the number of Lifeline- eligible households, and the number of Lifeline subscribers in 2005. The number of households in 2005 is calculated by examining the growth rate of households between 2000 and 2002. The number of households qualifying for Lifeline in 2005 (July 1, 2005, to be exact) is simply calculated by multiplying the percentage of all households that are eligible for Lifeline in 2002 by the forecasted number of households in 2005. This calculation assumes that the same percentage of households will qualify for Lifeline in 2005 as did in 2002. The number of households that would take Lifeline in 2005 is calculated by multiplying the percentage of eligible households that took Lifeline in 2002 by the forecasted number of eligible households in 2005. This calculation assumes that the same percentage of Lifeline- eligible households will take Lifeline in 2005 as did in 2002. These predictions make two implicit assumptions: the number of households in each state increases at a constant rate, and the economy continues to grow at the same rate it did in 2002. (See Table 1. B). Forecasted Baseline federal Lifeline expenditures for 2005. Forecasted federal Lifeline expenditures under existing rules in 2005 are $706 million. The forecasted federal Lifeline expenditures are calculated by multiplying the forecasted number of Lifeline subscribers in each state times the expected federal expenditures per line in that state. The sum of state- by- state federal expenditures forms the national total. (See Table 1. C). 7 The website was viewed in early 2002. 8 This is accomplished electronically using Visual Basic for Applications for Microsoft Access. 79 Federal Communications Commission FCC 04- 87 K- 11 Step 2: Estimate Changes due to New Policy This section quantifies the number of additional households that would become eligible for Lifeline, the number of additional households that would subscribe to Lifeline, and the number of households that would newly subscribe to telephone service due to the implementation of a 1.35 PGC. (This analysis assumes that states without a PGC for Lifeline and states with a PGC below 1.35 adopt a 1.35 PGC. This analysis also assumes that states with a 1.50 PGC keep it, and that states don’t alter their other Lifeline criteria.) This section then calculates the increased federal Lifeline expenditures resulting from the increased number of households taking Lifeline due to the 1.35 PGC. CPSH data are used to determine the number of additional households that would become eligible for Lifeline. Two regression analyses are used to determine the number of additional households that would subscribe to Lifeline and the number of households that would take telephone service due to a 1.35 PGC. Change to Lifeline eligibility in 2002 and 2005 resulting from a 1.35 PGC. We predict that an additional 6.7 percent of total households would qualify for Lifeline under the 1.35 PGC. This translates into 7.4 million households in Year 2002 and 8.1 million households in 2005. The demographic data from each household in the CPSH data are examined to determine whether it was eligible for Lifeline in 2002 under existing rules, and whether it would have become eligible for Lifeline with a 1.35 PGC. This allows us to estimate the increase in Lifeline eligibility that results from a 1.35 PGC for 2002, which in turn, allows us to estimate the effects for 2005. Table 2. A presents the information for 2002 and 2. B presents the information for 2005. Change to Lifeline subscribership in 2002 and 2005 resulting from a 1.35 PGC. We predict that if states without a PGC (and states with PGCs at 1.25 or lower) adopted a 1.35 PGC, there would be a significant increase in the number of low- income households that would take Lifeline. Nationwide, for 2002, the number of additional Lifeline takers would be between 1.07 million and 1.18 million. For 2005, the number of additional Lifeline subscribers would be between 1.17 million and 1.29 million. Different states have different Lifeline eligibility criteria, so regression analysis can be employed to quantify the correlation between the use of a higher multiple of the poverty guidelines (i. e., a higher PGC) and the resulting higher Lifeline subscription rate. The Lifeline Regression Model predicts increased Lifeline subscribership that would have resulted from a nationwide 1.35 PGC in 2002. (See Tables 2. C and 2. D.) (At the end of this study is a technical appendix that more thoroughly discusses the regression analysis used for this model.) Tables 2. E and 2. F apply these results and show the number of additional Lifeline subscribers on a state- by- state basis for 2002 and 2005. Change to federal Lifeline expenditures for 2005 is forecasted. We predict that federal Lifeline expenditures would increase $127 million to $140 million if all states implemented a 1.35 PGC. The forecasted change to federal Lifeline expenditures is calculated by multiplying the forecasted change to the number of Lifeline subscribers in each state times the expected federal expenditures per Lifeline subscribers in that state. The state- by- state change in the amount of 80 Federal Communications Commission FCC 04- 87 K- 12 federal expenditures is then summed to form the national total. (See Table 2. G). Forecasted change to telephone subscribership for 2005. We predict that if all states adopted a 1.35 PGC, 247,000 households that do not have telephone service would take telephone service. The Telephone Subscribership Regression Model uses logistic regression to predict the increased telephone subscribership that would have resulted from a nationwide 1.35 PGC in 2002. (See Tables 2. H and 2. I). (At the end of this study is a technical appendix that more thoroughly discusses the logistic regression analysis used for this model.) Table 2. I also uses these results to quantify the number of households that would have newly taken telephone service in 2002 and that would newly take telephone service in 2005 because of a 1.35 PGC. For 2002 and 2005 respectively, Tables 2. J and 2. K break down the number of new Lifeline subscribers into two groups: those that would be new to telephone service, and those that already had telephone service, and who would subscribe to Lifeline simply because they would be newly eligible. Step 3: Apply Changes to Baselines to Compute New Program Levels The new levels of Lifeline subscribership and federal expenditures are shown in two tables. First, the new total of Lifeline subscribers is calculated, and then the increased federal Lifeline expenditures are calculated. Forecasted New Policy Levels for Lifeline subscribership in 2005. We predict that if all states implement a 1.35 PGC for Lifeline, an estimated 8 million households would subscribe to Lifeline. Here the forecasted increase in Lifeline subscribers is added to the forecasted baseline number of subscribers to create the new forecasted number of Lifeline subscribers in 2005 with the 1.35 PGC. (See Table 3. A). Forecasted New Policy Levels for federal Lifeline expenditures. We predict that if all states implement a 1.35 PGC for Lifeline, federal Lifeline expenditures are forecasted to be in the range of $833 million to $846 million. Here, the forecasted increase in federal Lifeline expenditures is added to the forecasted baseline federal Lifeline expenditures to create the new forecasted federal Lifeline expenditures in 2005 with the 1.35 PGC. (See Table 3. B). 81 Federal Communications Commission FCC 04- 87 K- 13 Other Factors This study cannot take several important factors into consideration, such as economic conditions and state outreach programs because there are not enough data to do so. Properly accounting for a fluctuating economy would require five or more decades of data. The Lifeline program started in 1984, so an analysis incorporating a fluctuating economy is not attempted in this study. Further, there are no comprehensive estimates quantifying state spending on outreach programs, or the effects the outreach programs have on Lifeline subscribership. By not accounting for these factors explicitly, this study assumes that these factors will remain constant between 2002 and 2005. Although changes in these factors can affect the forecasted baseline number of Lifeline subscribers (and therefore, baseline federal expenditures), those factors should have a relatively smaller effect on the forecasted number of households that will take Lifeline as a result of a 1.35 PGC. The number of households that would take Lifeline because of a 1.35 PGC is about 1/ 6 th of those that already take Lifeline. So, as the economy fluctuates, and more or less households take Lifeline, the number of households that would take Lifeline due to a 1.35 PGC will go up and down by 1/ 6 th as much as the number of households that would take Lifeline based on other eligibility criteria. Thus, the number of households taking Lifeline due to a 1.35 PGC will have 1/ 36 th the variance that the number of households taking Lifeline will have. 9 Additional Assumptions In addition to the factors discussed above, this study makes several assumptions that are needed to estimate the impact of the program: 1) All other Lifeline/ LinkUp eligibility criteria (and the qualifications for the underlying programs) stay constant over time. Aside from the addition of a 1.35 PGC, this model assumes that between 2002 and 2005, no other changes are made to the Lifeline/ LinkUp programs or to the programs that are frequently used as qualifying criteria for Lifeline between 2002 and 2005; 2) Data can be substituted. Several states have a 1.33 PGC in effect. This study treats states that have a 1.33 PGC as having a 1.35 PGC. This assumption is reasonable because the effects of a 1.33 PGC are statistically indistinguishable from a 1.35 PGC. 3) Rapid adoption and continuity. This model assumes that all states rapidly adopt a 1.35 PGC (and that states with a 1.50 PGC keep it). The model also assumes that households rapidly learn of the changes to the Lifeline program and expeditiously act on this new information. 9 See Henry Scheffe, The Analysis of Variance, at 8 (1959). 82 Federal Communications Commission FCC 04- 87 K- 14 Results The results are summarized below: Summary information for 2005: Household information: Forecasted households on Lifeline without 1.35 PGC: 6,775,000 Forecasted additional households on Lifeline with 1.35 PGC: 1,167,000 to 1,292,000 Forecasted households on Lifeline with 1.35 PGC: 7,942,000 to 8,067,000 Lifeline subscriber information: Households that would newly take telephone service due to the 1.35 PGC: 247,000 Households taking Lifeline that already have telephone service: 920,000 to 1,045,000 Federal Lifeline expenditures: Forecasted federal Lifeline expenditures without 1.35 PGC: $706,000,000 Forecasted amount federal expenditures would increase: $127,000,000 to $140,000,000 Forecasted federal Lifeline expenditures with 1.35 PGC: $833,000,000 to $846,000,000 Additional federal expenditures per new telephone subscriber: $514 to $567 83 Federal Communications Commission FCC 04- 87 K- 15 , Section 1: Baseline Information Table 1. A Baseline Lifeline subscription information (Year 2002) a (CPSH data) b (CPSH data) c= a* b d (USAC data) e= d/ c Percentage of Households that Households Percentage of HH that would qualify would qualify that took households that Households for Lifeline (LL) for Lifeline Lifeline took Lifeline State in 2002 under existing rules under existing rules in 2002 in 2002 Alabama 1, 752, 018 17.0% 297, 228 25, 403 8. 5% Alaska 224, 499 23.2% 52, 146 23, 302 44. 7% Arizona 1, 939, 473 14.4% 279, 334 73, 186 26. 2% Arkansas 1,059, 049 23.0% 243, 997 10, 100 4. 1% California 11, 935, 960 20.5% 2,451, 057 3, 232,732 131. 9% Colorado 1,690, 526 2.7% 45, 808 29, 709 64. 9% Connecticut 1, 381, 915 13.7% 188, 857 58, 056 30. 7% Delaware 310, 968 10.9% 33, 946 2,100 6. 2% DC 269, 356 23.5% 63, 327 13, 645 21. 5% Florida 6, 683, 618 15.8% 1,052, 902 142, 521 13. 5% Georgia 3, 172, 213 14.3% 452, 827 68, 266 15. 1% Hawaii 418,526 8. 6% 36,185 14,124 39.0% Idaho 495, 397 25.3% 125, 089 27, 660 22. 1% Illinois 4,836, 881 16.4% 793, 394 87, 188 11. 0% Indiana 2, 501, 325 12.4% 309, 568 40, 326 13. 0% Iowa 1,163, 128 14.6% 170, 241 17, 800 10. 5% Kansas 1,088, 752 12.3% 133, 747 13, 775 10. 3% Kentucky 1,583, 371 21.0% 332, 295 60, 739 18. 3% Louisiana 1, 668, 964 17.2% 287, 759 21, 265 7. 4% Maine 571, 277 22.5% 128, 698 85, 587 66. 5% Maryland 2,083, 956 2.8% 57, 849 4,022 7. 0% Massachusetts 2, 584, 626 16.4% 423, 706 164, 600 38. 8% Michigan 3,947, 084 26.2% 1,032, 526 118, 794 11. 5% Minnesota 1, 994, 754 14. 0% 278,453 47,554 17.1% Mississippi 1,097, 592 29.7% 326, 524 22, 566 6. 9% Missouri 2, 217, 997 14.6% 324, 392 33, 322 10. 3% Montana 379, 228 14.2% 53, 704 15, 815 29. 4% Nebraska 678, 736 13.1% 89, 251 15, 241 17. 1% Nevada 809, 411 19.8% 160, 611 37, 204 23. 2% New Hampshire 523, 968 12.3% 64, 338 7,253 11. 3% New Jersey 3,262, 561 13.3% 435, 283 46, 687 10. 7% New Mexico 698,282 21. 7% 151,749 47,356 31.2% New York 7,294, 127 21.6% 1,578, 737 500, 671 31. 7% North Carolina 3,217, 678 19.2% 616, 817 99, 510 16. 1% North Dakota 275, 725 13.7% 37, 712 19, 226 51. 0% Ohio 4,595, 674 15.8% 726, 907 279, 591 38. 5% Oklahoma 1,366, 274 17.7% 241, 259 117, 297 48. 6% Oregon 1,366, 819 25.0% 341, 162 36, 402 10. 7% Pennsylvania 4,863, 997 12.0% 584, 754 94, 846 16. 2% Rhode Island 428, 672 18.2% 78, 185 46, 189 59. 1% South Carolina 1, 574, 457 18.4% 289, 051 21, 809 7. 5% South Dakota 308, 026 17.6% 54, 211 27, 117 50. 0% Tennessee 2, 307, 548 33.1% 764, 595 49, 050 6. 4% Texas 7, 493, 242 25.4% 1,901, 378 429, 970 22. 6% Utah 716, 224 22.2% 159, 072 19, 652 12. 4% Vermont 259, 765 32.9% 85, 439 29, 911 35. 0% Virginia 2,759, 677 11.3% 312, 574 20, 730 6. 6% Washington 2,397, 497 16.4% 393, 513 83, 327 21. 2% West Virginia 759,332 19. 8% 150,381 4, 905 3.3% Wisconsin 2,181, 649 11.5% 250, 155 68, 333 27. 3% Wyoming 196, 973 15.0% 29, 449 2,126 7. 2% Nationwide 109, 388, 768 17.8% 19, 472, 000 6, 558,560 33. 7% Note: Some numbers in this table have been rounded. Source: Current Population Survey of Households (CPSH) March 2002 data. 84 Federal Communications Commission FCC 04- 87 K- 16 Section 1: Baseline Information Table 1. B Baseline Lifeline subscription information (Year 2005) a (Table 1. A) b (CPSH) c= a* b d= a+ c e (Table 1. A) f= d* e g (Table 1. A) h= f* g Growth (loss) Expected Percentage of Households that Lifeline take Expected HH 1/ 2002 - 7/ 2005 New (fewer) total HH that would would qualify rate for HH that that would take Households based on households households qualify for LL for Lifeline qualify under Lifeline under State 2002 1/ 2000 - 1/ 2002 1 in 2005 July 2005 under existing rules under existing rules existing rules existing rules Alabama 1, 752,018 0.8% 14,849 1,766, 868 17.0% 299,747 8. 5% 25, 618 Alaska 224,499 5.4% 12,185 236,684 23.2% 54, 977 44.7% 24, 567 Arizona 1,939,473 12. 7% 246,506 2, 185, 979 14.4% 314,837 26.2% 82, 488 Arkansas 1,059,049 5.5% 58,199 1,117, 248 23.0% 257,406 4. 1% 10, 655 California 11,935, 960 -2.2% -259,963 11,675,997 20.5% 2,397,673 131. 9% 3, 162,324 Colorado 1,690,526 9.6% 162,683 1, 853, 209 2.7% 50, 216 64.9% 32, 568 Connecticut 1,381,915 12. 9% 178,850 1, 560, 766 13.7% 213,300 30.7% 65, 570 Delaware 310,968 13. 8% 42,992 353,960 10.9% 38, 639 6. 2% 2,390 DC 269,356 21. 9% 59,075 328,431 23.5% 77, 216 21.5% 16, 638 Florida 6, 683,618 17. 8% 1, 191, 839 7,875, 457 15.8% 1,240,658 13.5% 167,936 Georgia 3, 172,213 13. 1% 416,286 3, 588, 499 14.3% 512,251 15.1% 77, 224 Hawaii 418,526 2.9% 12,305 430,831 8. 6% 37, 249 39.0% 14, 539 Idaho 495,397 5.2% 25,673 521,070 25.3% 131,572 22.1% 29, 093 Illinois 4, 836,881 10. 0% 485,999 5, 322, 880 16.4% 873,112 11.0% 95, 948 Indiana 2, 501,325 15. 2% 380,568 2, 881, 893 12.4% 356,667 13.0% 46, 461 Iowa 1,163,128 2.2% 25,853 1,188, 981 14.6% 174,025 10.5% 18, 196 Kansas 1,088,752 7.4% 80,504 1,169, 256 12.3% 143,636 10.3% 14, 794 Kentucky 1,583,371 3.9% 61,169 1,644, 539 21.0% 345,132 18.3% 63, 085 Louisiana 1, 668,964 6.5% 108,680 1, 777, 645 17.2% 306,498 7. 4% 22, 650 Maine 571,277 26. 1% 149,312 720, 589 22.5% 162,335 66.5% 107,956 Maryland 2,083,956 8.4% 174,235 2, 258, 191 2.8% 62, 685 7. 0% 4,358 Massachusetts 2,584,626 8.4% 217,343 2, 801, 968 16.4% 459,336 38.8% 178,441 Michigan 3,947,084 11. 1% 439,803 4, 386, 888 26.2% 1,147,575 11.5% 132,031 Minnesota 1,994,754 13. 8% 275,225 2, 269, 978 14.0% 316,872 17.1% 54, 115 Mississippi 1,097,592 9.7% 106,991 1, 204, 582 29.7% 358,353 6. 9% 24, 766 Missouri 2, 217,997 3.8% 84,088 2,302, 085 14.6% 336,690 10.3% 34, 585 Montana 379,228 10. 9% 41,387 420,615 14.2% 59, 565 29.4% 17, 541 Nebraska 678,736 6.7% 45,409 724,145 13.1% 95, 222 17.1% 16, 261 Nevada 809,411 32. 0% 259,081 1, 068, 492 19.8% 212,021 23.2% 49, 112 New Hampshire 523,968 22. 1% 115,836 639, 804 12.3% 78, 561 11.3% 8,856 New Jersey 3,262,561 12. 5% 408,819 3, 671, 381 13.3% 489,827 10.7% 52, 537 New Mexico 698,282 7.7% 54,043 752,325 21.7% 163,494 31.2% 51, 021 New York 7,294,127 6.4% 465,077 7, 759, 204 21.6% 1,679,398 31.7% 532,594 North Carolina 3,217,678 16. 0% 513,866 3, 731, 543 19.2% 715,324 16.1% 115,402 North Dakota 275,725 13. 0% 35,890 311,615 13.7% 42, 621 51.0% 21, 729 Ohio 4,595,674 2.9% 133,391 4, 729, 065 15.8% 748,006 38.5% 287,706 Oklahoma 1,366,274 4.2% 57,363 1,423, 636 17.7% 251,388 48.6% 122,222 Oregon 1,366,819 3.4% 45,970 1,412, 789 25.0% 352,636 10.7% 37, 626 Pennsylvania 4, 863,997 7.4% 357,618 5, 221, 614 12.0% 627,747 16.2% 101,819 Rhode Island 428,672 18. 6% 79,874 508,546 18.2% 92, 753 59.1% 54, 795 South Carolina 1, 574,457 3.5% 54,896 1,629, 353 18.4% 299,129 7. 5% 22, 569 South Dakota 308,026 16. 3% 50,279 358,305 17.6% 63, 060 50.0% 31, 543 Tennessee 2,307,548 13. 6% 313,658 2, 621, 206 33.1% 868,524 6. 4% 55, 717 Texas 7, 493,242 1.3% 100,170 7, 593, 412 25.4% 1,926,796 22.6% 435,718 Utah 716,224 9.7% 69,218 785,443 22.2% 174,445 12.4% 21, 551 Vermont 259,765 14. 3% 37,188 296,953 32.9% 97, 670 35.0% 34, 193 Virginia 2,759,677 7.1% 196,873 2, 956, 550 11.3% 334,873 6. 6% 22, 209 Washington 2,397,497 7.0% 168,037 2, 565, 534 16.4% 421,094 21.2% 89, 167 West Virginia 759,332 0.6% 4,808 764, 140 19.8% 151,333 3. 3% 4,936 Wisconsin 2,181,649 13. 3% 289,380 2, 471, 029 11.5% 283,336 27.3% 77, 397 Wyoming 196,973 3.7% 7,223 204, 196 15.0% 30, 529 7. 2% 2,204 Nationwide 109,388,768 7.7% 8, 657, 000 118, 045, 768 17.8% 21, 013, 000 33.7% 6,775,000 1 1. 75 times the 2- year growth (2000- 2002) equals the growth over 3.5 years. Note: Some numbers in this spreadsheet have been rounded. Source: Current Population Survey of Households (CPSH) March 2000 and 2002 data. 85 Federal Communications Commission FCC 04- 87 K- 17 Section 1: Baseline Information Table 1. C Forecasted baseline Lifeline expenditures (Year 2005) a (staff estimate) 1 b= a* 12 c (Table 1. B) d= b* c Monthly federal support Annual federal Expected Households taking Forecasted Lifeline expenditures State per line in 2005 support per line Lifeline under existing rules under existing rules Alabama $10.00 $120.00 25,618 $3,074,197 Alaska $10.00 $120.00 24,567 $2,948,007 Arizona $8.31 $99.67 82,488 $8,221,159 Arkansas $8.25 $99.00 10,655 $1,054,846 California $8.34 $100.02 3,162,324 $316,308,133 Colorado $10.00 $120.00 32,568 $3,908,155 Connecticut $8.02 $96.26 65,570 $6,312,049 Delaware $8.17 $98.04 2,390 $234,348 DC $7.32 $87.84 16,638 $1,461,447 Florida $10.00 $120.00 167,936 $20,152,282 Georgia $10.00 $120.00 77,224 $9,266,937 Hawaii $8.25 $99.00 14,539 $1,439,387 Idaho $9.91 $118.92 29,093 $3,459,726 Illinois $7.42 $89.01 95,948 $8,540,023 Indiana $7.45 $89.39 46,461 $4,153,300 Iowa $6.96 $83.48 18,196 $1,518,973 Kansas $8.82 $105.87 14,794 $1,566,265 Kentucky $9.86 $118.29 63,085 $7,462,594 Louisiana $8.25 $99.00 22,650 $2,242,338 Maine $9.93 $119.19 107,956 $12,867,569 Maryland $9.11 $109.33 4,358 $476,493 Massachusetts $9.92 $119.04 178,441 $21,241,723 Michigan $8.21 $98.54 132,031 $13,010,610 Minnesota $7.04 $84.44 54,115 $4,569,718 Mississippi $10.00 $120.00 24,766 $2,971,882 Missouri $7.08 $84.97 34,585 $2,938,649 Montana $10.00 $120.00 17,541 $2,104,915 Nebraska $9.43 $113.15 16,261 $1,839,924 Nevada $7.87 $94.49 49,112 $4,640,695 New Hampshire $8.17 $98.08 8,856 $868,626 New Jersey $7.95 $95.45 52,537 $5,014,836 New Mexico $10.00 $120.00 51,021 $6,122,532 New York $9.83 $117.99 532,594 $62,842,179 North Carolina $9.72 $116.61 115,402 $13,457,472 North Dakota $10.00 $120.00 21,729 $2,607,431 Ohio $7.33 $87.99 287,706 $25,315,775 Oklahoma $7.78 $93.36 122,222 $11,410,768 Oregon $10.00 $120.00 37,626 $4,515,156 Pennsylvania $9.03 $108.32 101,819 $11,028,901 Rhode Island $9.92 $119.04 54,795 $6,522,833 South Carolina $9.98 $119.72 22,569 $2,702,025 South Dakota $8.21 $98.47 31,543 $3,106,151 Tennessee $9.89 $118.70 55,717 $6,613,430 Texas $8.90 $106.81 435,718 $46,540,253 Utah $9.94 $119.22 21,551 $2,569,386 Vermont $9.93 $119.20 34,193 $4,075,759 Virginia $9.44 $113.22 22,209 $2,514,557 Washington $9.62 $115.40 89,167 $10,289,790 West Virginia $9.25 $111.00 4,936 $547,914 Wisconsin $7.72 $92.68 77,397 $7,173,137 Wyoming $10.00 $120.00 2,204 $264,475 Nationwide Not applicable Not applicable 6,775,000 $706,000,000 Note: Some numbers in this table have been rounded. 1 Estimate of monthly federal expenditures includes the Subscriber Line Charge (SLC), $1. 75, and any federal matching funds for that state. SLC amounts were estimated on a company- by- company basis, and are based on rules established by the CALLS and MAG proceedings. The SLC for each state is a weighted average based on the number of Lifeline subscribers served by each carrier in the state. 86 Federal Communications Commission FCC 04- 87 K- 18 Section 2: Change to baseline: effects from the new policy Table 2. A Estimated additional Lifeline- eligible households using a nationwide 1. 35 PGC (Year 2002) a (Table 1. A) b (CPSH data) c= b/ a Households Additional households that Additional households (%) that State in 2002 would qualify with a 1.35 PGC 1 would qualify with a 1.35 PGC Alabama 1, 752,018 215,207 12.3% Alaska 224,499 13,844 6.2% Arizona 1, 939,473 185,330 9.6% Arkansas 1,059,049 118,958 11.2% California 11,935,960 0 0.0% Colorado 1,690,526 186,613 11.0% Connecticut 1,381,915 89,134 6.5% Delaware 310,968 17,289 5.6% DC 269,356 0 0.0% Florida 6, 683,618 796,448 11.9% Georgia 3, 172,213 322,103 10.2% Hawaii 418,526 49,646 11.9% Idaho 495,397 0 0.0% Illinois 4,836,881 308,489 6.4% Indiana 2, 501,325 250,921 10.0% Iowa 1,163,128 86,702 7.5% Kansas 1,088,752 126,285 11.6% Kentucky 1,583,371 152,902 9.7% Louisiana 1, 668,964 224,683 13.5% Maine 571,277 47,531 8.3% Maryland 2,083,956 237,109 11.4% Massachusetts 2,584,626 210,387 8.1% Michigan 3,947,084 0 0.0% Minnesota 1,994,754 112,747 5.7% Mississippi 1,097,592 134,790 12.3% Missouri 2,217,997 85,800 3.9% Montana 379,228 47,148 12.4% Nebraska 678,736 48,833 7.2% Nevada 809,411 0 0.0% New Hampshire 523,968 30,006 5.7% New Jersey 3,262,561 269,354 8.3% New Mexico 698,282 82,183 11.8% New York 7,294,127 707,314 9.7% North Carolina 3,217,678 355,125 11.0% North Dakota 275,725 33,726 12.2% Ohio 4,595,674 347,706 7.6% Oklahoma 1,366,274 156,058 11.4% Oregon 1,366,819 0 0.0% Pennsylvania 4,863,997 259,911 5.3% Rhode Island 428,672 38,998 9.1% South Carolina 1,574,457 161,435 10.3% South Dakota 308,026 22,859 7.4% Tennessee 2, 307,548 20,150 0.9% Texas 7, 493,242 160,328 2.1% Utah 716,224 0 0.0% Vermont 259,765 0 0.0% Virginia 2,759,677 219,268 7.9% Washington 2,397,497 183,007 7.6% West Virginia 759,332 102,247 13.5% Wisconsin 2, 181,649 122,718 5.6% Wyoming 196,973 15,284 7.8% Nationwide 109,388,768 7,357,000 6. 7% 1 States that already have a 1.33 or a 1.50 PGC would not see increased Lifeline subscribership. Note: Some numbers in this table have been rounded. 87 Federal Communications Commission FCC 04- 87 K- 19 Section 2: Change to baseline: effects from the new policy Table 2. B Estimated additional Lifeline- eligible households using a nationwide 1. 35 PGC (Year 2005) a (Table 1. B) b (Table 2. A) c= a* b Forecasted Additional households (%) that Additional households that State Households in 2005 would qualify with a 1.35 PGC would qualify with a 1.35 PGC Alabama 1, 766, 868 12.3% 217, 031 Alaska 236, 684 6.2% 14, 595 Arizona 2, 185, 979 9.6% 208, 885 Arkansas 1, 117, 248 11.2% 125, 495 California 11,675,997 0. 0% 0 Colorado 1, 853, 209 11.0% 204, 571 Connecticut 1, 560, 766 6.5% 100, 670 Delaware 353, 960 5.6% 19, 679 DC 328, 431 0.0% 0 Florida 7, 875, 457 11.9% 938, 473 Georgia 3, 588, 499 10.2% 364, 372 Hawaii 430, 831 11.9% 51, 105 Idaho 521, 070 0.0% 0 Illinois 5, 322, 880 6.4% 339, 486 Indiana 2, 881, 893 10.0% 289, 098 Iowa 1, 188, 981 7.5% 88, 629 Kansas 1, 169, 256 11.6% 135, 622 Kentucky 1, 644, 539 9.7% 158, 809 Louisiana 1, 777, 645 13.5% 239, 314 Maine 720, 589 8.3% 59, 954 Maryland 2, 258, 191 11.4% 256, 934 Massachusetts 2, 801, 968 8.1% 228, 078 Michigan 4, 386, 888 0.0% 0 Minnesota 2, 269, 978 5.7% 128, 303 Mississippi 1, 204, 582 12.3% 147, 929 Missouri 2, 302, 085 3.9% 89, 053 Montana 420, 615 12.4% 52, 294 Nebraska 724, 145 7.2% 52, 100 Nevada 1, 068, 492 0.0% 0 New Hampshire 639, 804 5.7% 36, 640 New Jersey 3, 671, 381 8.3% 303, 106 New Mexico 752, 325 11.8% 88, 544 New York 7, 759, 204 9.7% 752, 412 North Carolina 3, 731, 543 11.0% 411, 839 North Dakota 311, 615 12.2% 38, 116 Ohio 4, 729, 065 7.6% 357, 799 Oklahoma 1, 423, 636 11.4% 162, 610 Oregon 1, 412, 789 0.0% 0 Pennsylvania 5, 221, 614 5.3% 279, 020 Rhode Island 508, 546 9.1% 46, 265 South Carolina 1, 629, 353 10.3% 167, 064 South Dakota 358, 305 7.4% 26, 591 Tennessee 2, 621, 206 0.9% 22, 889 Texas 7, 593, 412 2.1% 162, 471 Utah 785, 443 0.0% 0 Vermont 296, 953 0.0% 0 Virginia 2, 956, 550 7.9% 234, 910 Washington 2, 565, 534 7.6% 195, 834 West Virginia 764, 140 13.5% 102, 895 Wisconsin 2, 471, 029 5.6% 138, 995 Wyoming 204, 196 7.8% 15, 844 Nationwide 118, 045, 768 6.7% 8,054,000 Note: Some numbers in this table have been rounded. 88 Federal Communications Commission FCC 04- 87 K- 20 Section 2: Change to baseline: effects from the new policy Table 2. C Regression analysis: Would Lifeline take rates 1 increase due to a nationwide implementation of a 1.35 PGC? Regression Model Dependent variable: Lifeline take rat e Specific at ion 1 ( Low Range) Specific at io n 2 ( High Range) Independent variables Coefficient t- statistic Coefficient t- statistic Amount that state's PGC is above 1.25 3 0.554 1. 78 0. 612 1.99 California 0.990 5. 95 0. 992 5.96 Total support 0. 010 1. 02 Constant 0.082 0. 88 0. 173 7.69 Sample size: 51 R 2 = 0. 5636 0. 5539 Conclusion: Yes, for both specifications, the coefficient on "Amount that state's PGC is above 1. 25" is positive and statistically significant. Result Q: If a state without a PGC (or a state with a PGC below 1. 35) added a 1. 35 PGC, how much would the take rate increase? Increase in Amount 1.35 PGC portion that would Coefficient is above 1. 25 take Lifeline 4 Low range: 0.554 0. 1 0. 055 High range: 0.612 0. 1 0. 061 A: The take rate would rise by 5.5 to 6. 1 percentage points. Notes: 1 The Lifeline take rate is the number of households that take Lifeline divided by the number of households with 2 Significant at the 10% level in a two- tailed test. 3 For instance, if a state has a 1. 5 poverty guidelines criterion, then the variable has a value of .25 (= 1. 5 - 1. 25). If a state has no poverty guidelines criteria, or if the state's poverty guidelines criteria is at or below 1. 25, then the variable has a value of 0. 4 This means that if a state raised its PGC from 1.25 to 1.35, then, on average, the percentage of poor households that take Lifeline would rise by 5.5 to 6.1 percentage points. Similarly, on average, a state adding a 1.35 PGC where no PGC existed would increase its Lifeline take rate by 5. 5 to 6.1 percentage points. income at or belo w 1. 5 times the federal povert y guid elines. F or more informat ion on the regression, including why the number of households at or below 1.5 times the federal poverty guidelines is used, see "Addit ional I nfor mat ion on r egr es s ion specific at ion" in Technical Appendix 1. 89 Federal Communications Commission FCC 04- 87 K- 21 Section 2: Change to baseline: effects from the new policy Table 2.D Estimated additional Lifeline subscribership with a nationwide 1. 35 PGC a (CPSH data) b (Table 2.C) c= a* b Households with incomes at or below Additional households that Additional 1. 5 times the poverty guidelines in states would take Lifeline Lifeline takers with 1.33 or lower PGCs (Year 2002) 1 due to 1.35 PGC due to 1.35 PGC 2 Low range: 19,232,000 5.5% 1,066,000 High range: 19,232,000 6.1% 1,180,000 Q: Of the households that would become eligible to take Lifeline because of a 1. 35 PGC, what percentage would do so only because of the 1.35 PGC? A (Column c, above) B (Table 2. A) C= A/ B Additional households that Additional households that Percentage of newly eligible would have taken Lifeline would have become eligible households that would due to a 1. 35 PGC due to a 1.35 PGC take Lifeline with a 1.35 PGC Low range: 1,066, 000 7,357, 000 14.5% High range: 1,180, 000 7,357, 000 16.0% A: 14.5% to 16.0% of the households that would become eligible for Lifeline would subscribe. Notes: 1 2 Source: Current Population Survey of Households (CPSH) March 2002 data. The regression analysis presented in Table 2. C examined Lifeline take rates among households with incomes at or below 1.5 times the federal poverty guidelines. This value includes households in states without a poverty guidelines criterion for Lifeline. For more information on the regression, including why the number of households at or below 1. 5 times the federal poverty guidelines is used, see "Additional Information on regression specification" in Technical Appendix 1. Assumes that states with a Lifeline criterion of 1.5 PGC do not change their criteria. Also assumes that states with 1. 33 PGCs see no measurable effect from implementing a 1.35 PGC. 90 Federal Communications Commission FCC 04- 87 K- 22 Section 2: Change to baseline: effects from the new policy Table 2. E Estimated state- by- state additional Lifeline subscribers using a 1.35 PGC (Year 2002) Low range High range a (Table 2. A) b (Table 2.D) c= a* b d (Table 2. D) e= a* d Additional HH Take rate among Additional LL Take rate among Additional LL that would qualify if HH that qualify takers due to HH that qualify takers due to State 1.35 PGC were added due to 1.35 PGC 1.35 PGC due to 1.35 PGC 1.35 PGC Alabama 215,207 14.5% 31,183 16.0% 34,517 Alaska 13,844 14.5% 2,006 16.0% 2,220 Arizona 185,330 14.5% 26,854 16.0% 29,725 Arkansas 118,958 14.5% 17,237 16.0% 19,080 California 0 14.5% 0 16.0% 0 Colorado 186,613 14.5% 27,039 16.0% 29,931 Connecticut 89,134 14.5% 12,915 16.0% 14,296 Delaware 17,289 14.5% 2,505 16.0% 2,773 DC 0 14.5% 0 16.0% 0 Florida 796,448 14.5% 115,402 16.0% 127,744 Georgia 322,103 14.5% 46,671 16.0% 51,663 Hawaii 49,646 14.5% 7,193 16.0% 7,963 Idaho 0 14.5% 0 16.0% 0 Illinois 308,489 14.5% 44,699 16.0% 49,479 Indiana 250,921 14.5% 36,358 16.0% 40,246 Iowa 86,702 14.5% 12,563 16.0% 13,906 Kansas 126,285 14.5% 18,298 16.0% 20,255 Kentucky 152,902 14.5% 22,155 16.0% 24,524 Louisiana 224,683 14.5% 32,556 16.0% 36,037 Maine 47,531 14.5% 6,887 16.0% 7,624 Maryland 237,109 14.5% 34,356 16.0% 38,030 Massachusetts 210,387 14.5% 30,484 16.0% 33,744 Michigan 0 14.5% 0 16.0% 0 Minnesota 112,747 14.5% 16,337 16.0% 18,084 Mississippi 134,790 14.5% 19,530 16.0% 21,619 Missouri 85,800 14.5% 12,432 16.0% 13,762 Montana 47,148 14.5% 6,832 16.0% 7,562 Nebraska 48,833 14.5% 7,076 16.0% 7,832 Nevada 0 14.5% 0 16.0% 0 New Hampshire 30,006 14.5% 4,348 16.0% 4,813 New Jersey 269,354 14.5% 39,028 16.0% 43,202 New Mexico 82,183 14.5% 11,908 16.0% 13,182 New York 707,314 14.5% 102,487 16.0% 113,447 North Carolina 355,125 14.5% 51,456 16.0% 56,959 North Dakota 33,726 14.5% 4,887 16.0% 5,409 Ohio 347,706 14.5% 50,381 16.0% 55,769 Oklahoma 156,058 14.5% 22,612 16.0% 25,030 Oregon 0 14.5% 0 16.0% 0 Pennsylvania 259,911 14.5% 37,660 16.0% 41,687 Rhode Island 38,998 14.5% 5,651 16.0% 6,255 South Carolina 161,435 14.5% 23,391 16.0% 25,893 South Dakota 22,859 14.5% 3,312 16.0% 3,666 Tennessee 20,150 14.5% 2,920 16.0% 3,232 Texas 160,328 14.5% 23,231 16.0% 25,715 Utah 0 14.5% 0 16.0% 0 Vermont 0 14.5% 0 16.0% 0 Virginia 219,268 14.5% 31,771 16.0% 35,169 Washington 183,007 14.5% 26,517 16.0% 29,353 West Virginia 102,247 14.5% 14,815 16.0% 16,400 Wisconsin 122,718 14.5% 17,781 16.0% 19,683 Wyoming 15,284 14.5% 2,215 16.0% 2,451 Nationwide 7, 357,000 14.5% 1,066,000 16.0% 1,180,000 Note: Some numbers in this table have been rounded. 91 Federal Communications Commission FCC 04- 87 K- 23 Section 2: Change to baseline: effects from the new policy Table 2. F Estimated state- by- state additional Lifeline subscribers using a 1. 35 PGC (Year 2005) Low range High range a (Table 2. B) b (Table 2.D) c= a* b d (Table 2. D) e= a* d Additional HH Take rate among Additional LL Take rate among Additional LL that would qualify if HH that qualify takers due to HH that qualify takers due to State 1.35 PGC were added due to 1.35 PGC 1.35 PGC due to 1.35 PGC 1.35 PGC Alabama 217,031 14.5% 31,447 16. 0% 34,810 Alaska 14,595 14.5% 2,115 16. 0% 2, 341 Arizona 208,885 14.5% 30,267 16. 0% 33,503 Arkansas 125,495 14.5% 18,184 16. 0% 20,128 California 0 14. 5% 0 16. 0% 0 Colorado 204,571 14.5% 29,641 16. 0% 32,811 Connecticut 100,670 14.5% 14,587 16. 0% 16,147 Delaware 19,679 14.5% 2,851 16. 0% 3, 156 DC 0 14.5% 0 16.0% 0 Florida 938,473 14.5% 135,981 16.0% 150,523 Georgia 364,372 14.5% 52,796 16. 0% 58,442 Hawaii 51,105 14.5% 7,405 16. 0% 8, 197 Idaho 0 14. 5% 0 16. 0% 0 Illinois 339,486 14.5% 49,190 16. 0% 54,451 Indiana 289,098 14.5% 41,889 16. 0% 46,369 Iowa 88,629 14.5% 12,842 16. 0% 14,215 Kansas 135,622 14.5% 19,651 16. 0% 21,753 Kentucky 158,809 14.5% 23,011 16. 0% 25,472 Louisiana 239,314 14.5% 34,676 16. 0% 38,384 Maine 59,954 14.5% 8,687 16. 0% 9, 616 Maryland 256,934 14.5% 37,229 16. 0% 41,210 Massachusetts 228,078 14.5% 33,048 16. 0% 36,582 Michigan 0 14.5% 0 16.0% 0 Minnesota 128,303 14.5% 18,591 16. 0% 20,579 Mississippi 147,929 14.5% 21,434 16. 0% 23,726 Missouri 89,053 14.5% 12,903 16. 0% 14,283 Montana 52,294 14.5% 7,577 16. 0% 8, 387 Nebraska 52,100 14.5% 7,549 16. 0% 8, 356 Nevada 0 14.5% 0 16.0% 0 New Hampshire 36,640 14.5% 5,309 16. 0% 5, 877 New Jersey 303,106 14.5% 43,919 16. 0% 48,616 New Mexico 88,544 14.5% 12,830 16. 0% 14,202 New York 752,412 14.5% 109,022 16.0% 120,680 North Carolina 411,839 14.5% 59,674 16. 0% 66,055 North Dakota 38,116 14.5% 5,523 16. 0% 6, 113 Ohio 357,799 14.5% 51,844 16. 0% 57,388 Oklahoma 162,610 14.5% 23,562 16. 0% 26,081 Oregon 0 14.5% 0 16.0% 0 Pennsylvania 279,020 14.5% 40,429 16. 0% 44,752 Rhode Island 46,265 14.5% 6,704 16. 0% 7, 420 South Carolina 167,064 14.5% 24,207 16. 0% 26,796 South Dakota 26,591 14.5% 3,853 16. 0% 4, 265 Tennessee 22,889 14.5% 3,317 16. 0% 3, 671 Texas 162,471 14.5% 23,541 16. 0% 26,059 Utah 0 14.5% 0 16.0% 0 Vermont 0 14.5% 0 16.0% 0 Virginia 234,910 14.5% 34,038 16. 0% 37,678 Washington 195,834 14.5% 28,376 16. 0% 31,410 West Virginia 102,895 14.5% 14,909 16. 0% 16,503 Wisconsin 138,995 14.5% 20,140 16. 0% 22,294 Wyoming 15,844 14.5% 2,296 16. 0% 2, 541 Nationwide 8, 054,000 14. 5% 1, 167,000 16. 0% 1, 292, 000 Note: Some numbers in this table have been rounded. 92 Federal Communications Commission FCC 04- 87 K- 24 Section 2: Change to baseline: effects from the new policy Table 2. G Estimated increase in Lifeline expenditures (Year 2005) Low range High range a (Table 1. C) b (Table 2.F) c= a* b d (Table 2. F) e= a* d Annual federal Forecasted Forecasted Forecasted Forecasted support per additional HH increased federal additional HH increased federal State Lifeline subscr ib er taking Lifeline Lifeline expenditures taking Lifeline Lifeline expenditures Alabama $120. 00 31,447 $3,773,626 34,810 $4,177,184 Alaska $120. 00 2, 115 $253,772 2, 341 $280,911 Arizona $99.67 30,267 $3,016,523 33,503 $3,339,116 Arkansas $99.00 18,184 $1,800,188 20,128 $1,992,704 California $100. 02 0 $0 0 $0 Colorado $120. 00 29,641 $3,556,976 32,811 $3,937,366 Connecticut $96.26 14,587 $1,404,187 16,147 $1,554,353 Delaware $98.04 2,851 $279,548 3, 156 $309,443 DC $87.84 0 $0 0 $0 Florida $120. 00 135, 981 $16,317,721 150,523 $18,062,768 Georgia $120. 00 52,796 $6,335,533 58,442 $7,013,066 Hawaii $99.00 7,405 $733,088 8, 197 $811,486 Idaho $118. 92 0 $0 0 $0 Illinois $89.01 49,190 $4,378,232 54,451 $4,846,448 Indiana $89.39 41,889 $3,744,574 46,369 $4,145,026 Iowa $83.48 12,842 $1,072,049 14,215 $1,186,696 Kansas $105. 87 19,651 $2,080,563 21,753 $2,303,063 Kentucky $118. 29 23,011 $2,722,020 25,472 $3,013,118 Louisiana $99.00 34,676 $3,432,915 38,384 $3,800,037 Maine $119. 19 8, 687 $1,035,426 9, 616 $1,146,156 Maryland $109. 33 37,229 $4,070,235 41,210 $4,505,513 Massachusetts $119. 04 33,048 $3,934,001 36,582 $4,354,710 Michigan $98.54 0 $0 0 $0 Minnesota $84.44 18,591 $1,569,863 20,579 $1,737,748 Mississippi $120. 00 21,434 $2,572,113 23,726 $2,847,179 Missouri $84.97 12,903 $1,096,380 14,283 $1,213,629 Montana $120. 00 7, 577 $909,256 8, 387 $1,006,493 Nebraska $113. 15 7, 549 $854,199 8, 356 $945,549 Nevada $94.49 0 $0 0 $0 New Hampshire $98.08 5,309 $520,691 5, 877 $576,375 New Jersey $95.45 43,919 $4,192,190 48,616 $4,640,511 New Mexico $120. 00 12,830 $1,539,560 14,202 $1,704,203 New York $117. 99 109, 022 $12,863,739 120,680 $14,239,411 North Carolina $116. 61 59,674 $6,958,802 66,055 $7,702,989 North Dakota $120. 00 5, 523 $662,744 6, 113 $733,619 Ohio $87.99 51,844 $4,561,810 57,388 $5,049,659 Oklahoma $93.36 23,562 $2,199,741 26,081 $2,434,986 Oregon $120. 00 0 $0 0 $0 Pennsylvania $108. 32 40,429 $4,379,192 44,752 $4,847,511 Rhode Island $119. 04 6, 704 $797,991 7, 420 $883,330 South Carolina $119. 72 24,207 $2,898,061 26,796 $3,207,985 South Dakota $98.47 3,853 $379,405 4, 265 $419,980 Tennessee $118. 70 3, 317 $393,658 3, 671 $435,757 Texas $106. 81 23,541 $2,514,529 26,059 $2,783,437 Utah $119. 22 0 $0 0 $0 Vermont $119. 20 0 $0 0 $0 Virginia $113. 22 34,038 $3,853,841 37,678 $4,265,978 Washington $115. 40 28,376 $3,274,503 31,410 $3,624,684 West Virginia $111. 00 14,909 $1,654,941 16,503 $1,831,923 Wisconsin $92.68 20,140 $1,866,563 22,294 $2,066,177 Wyoming $120. 00 2, 296 $275,487 2, 541 $304,949 Nationwide Not applicable 1, 167, 000 $127, 000, 000 1, 292, 000 $140, 000, 000 Note: Some numbers in this table have been rounded. 93 Federal Communications Commission FCC 04- 87 K- 25 Section 2: Change to baseline: effects from the new policy Table 2. H Logit regression results: Would a 1.35 poverty guidelines criterion for Lifeline increase telephone penetration? Logistic regression analysis 1 Dependent side variable: Does the household have telephone service? Coefficient Wald Statistically Independent side variables value statistic P- Value significant State has 1.35 or higher poverty guidelines criterion for Lifeline 0.179 3. 37 0. 07 Yes Income (000s) 0. 035 69.99 0. 00 Yes Household is a mobile home -0. 757 71. 65 0. 00 Yes Household is owned, not rented 0.975 203. 71 0. 00 Yes Percentage of householders who have lived there one year 0.463 51. 65 0.00 Yes Someone in the household is on food stamps -0.245 17. 20 0. 00 Yes Household is in a state with a Medicaid criterion -0. 269 3. 48 0. 06 Yes 2 Household is in a state with a food stamp criterion -0. 101 0. 52 0.47 Yes 2 Household is in a state with a TANF criterion 0.105 3. 03 0. 08 Yes 2 Household is in a state with a LIHEAP criterion 0. 160 3. 19 0.07 Yes 2 Household is in a state with a Public Housing criterion -0. 077 1. 12 0.29 Yes 2 Household is in a state with a National School Lunch criterion 0. 019 0. 01 0. 91 Yes 2 Household is in a state with an SSI criterion 0.060 0. 35 0. 56 Yes 2 California 0. 495 6.87 0. 01 Yes Constant 1.241 90. 62 0.00 Yes Conclusion: Yes, the coefficient on "State has 1.35 poverty guidelines criterion for Lifeline" is statistically significant. 1 For more information on the logistic regression, see Technical Appendix 2. 2 Although some criteria variables are not significant by themselves, the variables as a set are significant. The nature of these variables is such that they should all be used together, or not at all. Because they are significant as a set, they should all be included in the logit regression. 94 Federal Communications Commission FCC 04- 87 K- 26 Section 2: Change to baseline: effects from the new policy Table 2. I Using the logit regression results: Calculating the number of households that would have taken telephone service with a nationwide 1. 35 PGC a (Table 2. G) b (CPSH) c= a* b d (CPSH) e= a* d Means for Means households (Same as column b Partial effect with income except assumes if all states Coefficient less than 1.35 Partial all states adopt implement 1.35 Variable value PLG effect 1.35 PGC 1 ) PGC for Lifeline State has 1.35 criteria for LL 0.179 0.180 0. 032 1.000 0. 179 Income (dollar values in 000s) 0. 035 11.208 0. 397 11.208 0. 397 Lives in a mobile home -0.757 0. 086 -0.065 0.086 -0. 065 Owns home 0.975 0.440 0. 429 0.440 0. 429 Percent HH lived there one year 0.463 0.820 0. 380 0.820 0. 380 On food stamps -0.245 0.265 -0.065 0.265 -0. 065 Medicaid criterion -0.269 0. 823 -0.221 0.823 -0. 221 Food stamp criterion -0.101 0. 781 -0.079 0.781 -0. 079 TANF criterion 0. 105 0.450 0. 047 0.450 0. 047 Energy Assistance criterion 0. 160 0.642 0. 103 0.642 0. 103 Public? Criterion -0.077 0. 423 -0.033 0.423 -0. 033 Hot lunch criterion 0. 019 0.028 0. 001 0.028 0. 001 SSI criterion 0. 060 0.770 0. 046 0.770 0. 046 California 0.495 0.075 0. 037 0.075 0. 037 Constant 1.241 1.000 1. 241 1.000 1. 241 Z = Sum of partial effects 2. 250 2.396 Penetration among HH with incomes below 1.35 PGC = 1/( 1+ e -z ): 90.5% 91. 7% Increase in penetration among HH at or below 1.35 times the poverty line = (90.5% - 91.7%) 1.2% A Year 2002: Households below 1. 35 times the poverty level. 19, 230, 000 B (CPSH) Year 2002: Households that would have taken phone service due to Lifeline change: 229, 000 C= A* B Year 2005: Households below 1. 35 times the poverty level. 2 20, 710, 000 D (CPSH) Year 2005: Households that would have taken phone service due to Lifeline change: 247, 000 E= A* D Notes: 1 Assumes that states with 1.5 PGC criteria keep it. 2 Forecasted using CPSH data. 95 Federal Communications Commission FCC 04- 87 K- 27 Section 2: Change to baseline: effects from the new policy Section 2: Estimate changes from new policy Table 2. J Breakdown of Lifeline subscribers with a nationwide 1.35 PGC (Year 2002) a (Table 2. E) b (Table 2. H) c= a- b Households that Households with would sign up for Households new to telephone service that Lifeline service telephone service would sign up for due to 1.35 PGC due to 1.35 PGC Lifeline due to 1.35 PGC Low range: 1,066,000 229, 000 837,000 High range: 1,180,000 229, 000 951,000 Section 2: Change to baseline: effects from the new policy Table 2.K Breakdown of Lifeline subscribers with a nationwide 1.35 PGC (Year 2005) a (Table 2. F) b (Table 2. H) c= a- b Households that Households with would sign up for Households new to telephone service that Lifeline service telephone service would sign up for due to 1.35 PGC due to 1.35 PGC Lifeline due to 1.35 PGC Low range: 1,167,000 247, 000 920,000 High range: 1,292,000 247, 000 1,045,000 96 Federal Communications Commission FCC 04- 87 K- 28 Section 3: New policy: new levels resulting from a 1.35 PGC (as of July 1, 2005) Table 3. A Forecasted new Lifeline subscribers (Year 2005) Low range High range a (Table 1. B) b (Table 1. B) c (Table 2. F) d= b+ c e (Table 2. F) f= b+ e Forecasted baseline Additional LL New total Additional LL New total Forecasted households taking takers due to households takers due to households State households Lifeline 1.35 PGC t aking Lifeline 1. 35 PGC taking Lifeline Alabama 1, 766,868 25, 618 31,447 57,065 34,810 60,428 Alaska 236,684 24, 567 2,115 26,681 2,341 26,908 Arizona 2, 185,979 82, 488 30,267 112,755 33,503 115,991 Arkansas 1,117,248 10, 655 18,184 28,839 20,128 30,783 California 11,675,997 3,162,324 0 3, 162,324 0 3, 162,324 Colorado 1,853,209 32, 568 29,641 62,209 32,811 65,379 Connecticut 1,560,766 65, 570 14,587 80,156 16,147 81,716 Delaware 353,960 2,390 2,851 5, 242 3,156 5,547 DC 328,431 16, 638 0 16,638 0 16,638 Florida 7, 875,457 167,936 135,981 303,917 150,523 318,459 Georgia 3, 588,499 77, 224 52,796 130,021 58,442 135,667 Hawaii 430,831 14, 539 7,405 21,944 8,197 22,736 Idaho 521,070 29, 093 0 29,093 0 29,093 Illinois 5,322,880 95, 948 49,190 145,139 54,451 150,399 Indiana 2, 881,893 46, 461 41,889 88,351 46,369 92,830 Iowa 1,188,981 18, 196 12,842 31,038 14,215 32,411 Kansas 1,169,256 14, 794 19,651 34,445 21,753 36,546 Kentucky 1,644,539 63, 085 23,011 86,096 25,472 88,557 Louisiana 1, 777,645 22, 650 34,676 57,325 38,384 61,034 Maine 720,589 107,956 8,687 116,643 9, 616 117,572 Maryland 2,258,191 4,358 37,229 41,587 41,210 45,568 Massachusetts 2,801,968 178,441 33,048 211,489 36,582 215,023 Michigan 4,386,888 132,031 0 132,031 0 132,031 Minnesota 2,269,978 54, 115 18,591 72,706 20,579 74,694 Mississippi 1,204,582 24, 766 21,434 46,200 23,726 48,492 Missouri 2,302,085 34, 585 12,903 47,489 14,283 48,869 Montana 420,615 17, 541 7,577 25,118 8,387 25,928 Nebraska 724,145 16, 261 7,549 23,810 8,356 24,617 Nevada 1,068,492 49, 112 0 49,112 0 49,112 New Hampshire 639,804 8,856 5,309 14,165 5,877 14,733 New Jersey 3,671,381 52, 537 43,919 96,456 48,616 101,153 New Mexico 752,325 51, 021 12,830 63,851 14,202 65,223 New York 7,759,204 532,594 109,022 641,616 120,680 653,275 North Carolina 3, 731,543 115,402 59,674 175,076 66,055 181,457 North Dakota 311,615 21, 729 5,523 27,251 6,113 27,842 Ohio 4,729,065 287,706 51,844 339,550 57,388 345,094 Oklahoma 1,423,636 122,222 23,562 145,783 26,081 148,303 Oregon 1,412,789 37, 626 0 37,626 0 37,626 Pennsylvania 5, 221,614 101,819 40,429 142,248 44,752 146,572 Rhode Island 508,546 54, 795 6,704 61,499 7,420 62,216 South Carolina 1,629,353 22, 569 24,207 46,776 26,796 49,365 South Dakota 358,305 31, 543 3,853 35,396 4,265 35,808 Tennessee 2,621,206 55, 717 3,317 59,034 3,671 59,388 Texas 7, 593,412 435,718 23,541 459,259 26,059 461,777 Utah 785,443 21, 551 0 21,551 0 21,551 Vermont 296,953 34, 193 0 34,193 0 34,193 Virginia 2,956,550 22, 209 34,038 56,246 37,678 59,886 Washington 2,565,534 89, 167 28,376 117,543 31,410 120,577 West Virginia 764,140 4,936 14,909 19,845 16,503 21,440 Wisconsin 2, 471,029 77, 397 20,140 97,537 22,294 99,691 Wyoming 204,196 2,204 2,296 4, 500 2,541 4,745 Nationwide 118,045,768 6,775,000 1,167,000 7,942,000 1, 292,000 8,067,000 Note: Some numbers in this table have been rounded. 97 Federal Communications Commission FCC 04- 87 K- 29 Section 3: New policy: new levels resulting from a 1.35 PGC (as of July 1, 2005) Table 3. B Forecasted new Lifeline expenditures (Year 2005) Low range High range a (Table 1.C) b (Table 2.K) c= a* b d (Table 2.K) e= a* d Annual federal Additional federal Total federal Additional federal Total federal Lifeline expenditures Lifeline expenditures Lifeline expenditures Lifeline expenditures Lifeline expenditures State without 1.35 PGC with 1.35 PGC with 1.35 PGC with 1. 35 PGC with 1.35 PGC Alabama $3,074, 197 $3, 773,626 $6,847,823 $4, 177, 184 $7,251, 381 Alaska $2,948, 007 $253,772 $3,201,779 $280,911 $3,228, 918 Arizona $8,221, 159 $3, 016,523 $11, 237,682 $3, 339, 116 $11,560,275 Arkansas $1,054, 846 $1, 800,188 $2,855,034 $1, 992, 704 $3,047, 550 California $316, 308, 133 $0 $316,308, 133 $0 $316,308, 133 Colorado $3,908, 155 $3, 556,976 $7,465,132 $3, 937, 366 $7,845, 521 Connecticut $6,312, 049 $1, 404,187 $7,716,236 $1, 554, 353 $7,866, 402 Delaware $234, 348 $279,548 $513,896 $309,443 $543,791 DC $1,461, 447 $0 $1,461,447 $0 $1,461, 447 Florida $20,152,282 $16,317, 721 $36, 470,003 $18,062,768 $38, 215,050 Georgia $9,266, 937 $6, 335,533 $15, 602,470 $7, 013, 066 $16,280,003 Hawaii $1,439, 387 $733,088 $2,172,474 $811,486 $2,250, 872 Idaho $3,459, 726 $0 $3,459,726 $0 $3,459, 726 Illinois $8,540, 023 $4, 378,232 $12, 918,255 $4, 846, 448 $13,386,471 Indiana $4,153, 300 $3, 744,574 $7,897,874 $4, 145, 026 $8,298, 326 Iowa $1,518, 973 $1, 072,049 $2,591,022 $1, 186, 696 $2,705, 669 Kansas $1,566, 265 $2, 080,563 $3,646,828 $2, 303, 063 $3,869, 327 Kentucky $7,462, 594 $2, 722,020 $10, 184,614 $3, 013, 118 $10,475,712 Louisiana $2,242, 338 $3, 432,915 $5,675,252 $3, 800, 037 $6,042, 374 Maine $12,867,569 $1, 035,426 $13, 902,994 $1, 146, 156 $14,013,725 Maryland $476, 493 $4, 070,235 $4,546,728 $4, 505, 513 $4,982, 006 Massachusetts $21,241,723 $3, 934,001 $25, 175,724 $4, 354, 710 $25,596,434 Michigan $13,010,610 $0 $13, 010,610 $0 $13,010,610 Minnesota $4,569, 718 $1, 569,863 $6,139,582 $1, 737, 748 $6,307, 466 Mississippi $2,971, 882 $2, 572,113 $5,543,994 $2, 847, 179 $5,819, 061 Missouri $2,938, 649 $1, 096,380 $4,035,029 $1, 213, 629 $4,152, 278 Montana $2,104, 915 $909,256 $3,014,171 $1, 006, 493 $3,111, 408 Nebraska $1,839, 924 $854,199 $2,694,123 $945,549 $2,785, 472 Nevada $4,640, 695 $0 $4,640,695 $0 $4,640, 695 New Hampshire $868, 626 $520,691 $1,389,317 $576,375 $1,445, 001 New Jersey $5,014, 836 $4, 192,190 $9,207,027 $4, 640, 511 $9,655, 347 New Mexico $6,122, 532 $1, 539,560 $7,662,091 $1, 704, 203 $7,826, 735 New York $62,842,179 $12,863, 739 $75, 705,918 $14,239,411 $77, 081,589 North Carolina $13,457,472 $6, 958,802 $20, 416,274 $7, 702, 989 $21,160,461 North Dakota $2,607, 431 $662,744 $3,270,175 $733,619 $3,341, 051 Ohio $25,315,775 $4, 561,810 $29, 877,585 $5, 049, 659 $30,365,434 Oklahoma $11,410,768 $2, 199,741 $13, 610,510 $2, 434, 986 $13,845,754 Oregon $4,515, 156 $0 $4,515,156 $0 $4,515, 156 Pennsylvania $11,028,901 $4, 379,192 $15, 408,093 $4, 847, 511 $15,876,412 Rhode Island $6,522, 833 $797,991 $7,320,824 $883,330 $7,406, 163 South Carolina $2,702, 025 $2, 898,061 $5,600,085 $3, 207, 985 $5,910, 009 South Dakota $3,106, 151 $379,405 $3,485,556 $419,980 $3,526, 131 Tennessee $6,613, 430 $393,658 $7,007,088 $435,757 $7,049, 187 Texas $46,540,253 $2, 514,529 $49, 054,782 $2, 783, 437 $49,323,690 Utah $2,569, 386 $0 $2,569,386 $0 $2,569, 386 Vermont $4,075, 759 $0 $4,075,759 $0 $4,075, 759 Virginia $2,514, 557 $3, 853,841 $6,368,398 $4, 265, 978 $6,780, 534 Washington $10,289,790 $3, 274,503 $13, 564,293 $3, 624, 684 $13,914,475 West Virginia $547, 914 $1, 654,941 $2,202,855 $1, 831, 923 $2,379, 837 Wisconsin $7,173, 137 $1, 866,563 $9,039,700 $2, 066, 177 $9,239, 314 Wyoming $264, 475 $275,487 $539,963 $304,949 $569,424 Nationwide $706, 000, 000 $127,000,000 $833,000, 000 $140,000,000 $846,000, 000 Note: Some numbers in this table have been rounded. 98 Federal Communications Commission FCC 04- 87 K- 30 Analysis II: Examination of a 1.50 PGC Introduction The Joint Board recommended the FCC add an income- based criterion to the federal eligibility criteria for Lifeline. The Joint Board also recommended that the income- based criterion be set at 1.35 times the Federal Poverty Guidelines. Thus, households with incomes at or below 1.35 times the Federal Poverty Guidelines would be eligible for Lifeline. Some commenters suggest raising the criterion to 1.50 times the Federal Poverty Guidelines (FPG), based on the observation that LIHEAP uses a criterion of 1.50 times the FPG. The commenters argue that it would be logically inconsistent to use 1.35 for Lifeline directly, but 1.50 indirectly, through LIHEAP. 10 This analysis examines the costs and benefits of a nationwide implementation of a 1.50 PGC. This study uses the same steps as the analysis of a 1.35 PGC. It is possible to calculate the number of additional Lifeline subscribers resulting from a 1.50 FPG with just a few tables, but this analysis includes the same tables as the preceding study on the effects of a 1.35 PGC so that the two analyses can be more easily compared. The nature of the telephone subscribership model is such that it must be rerun to examine whether a 1.50 FPG would increase telephone subscribership over a 1.35 FPG. The methodology used to examine the effects of a 1.50 FPG criterion for Lifeline remains the same. Step 1: Create Baselines The tables in this section examine the number of Lifeline subscribers, the number of households that are eligible for Lifeline, and the Lifeline subscription rate. These tables in Step 1 are the same as the tables in the main staff analysis. Baseline Lifeline subscription rates for Year 2002. Nationally, 17.8% of households are estimated to have been eligible for Lifeline. Of these eligible households, an estimated 33.7% subscribed to Lifeline. (See Table 1. A). Forecasted Baseline Lifeline subscription rates for 2005. There will be an estimated 118.0 million households in 2005, and 6.8 million of those households are expected to take Lifeline under existing rules. (See Table 1. B). Forecasted Baseline federal Lifeline expenditures for 2005. Forecasted federal Lifeline expenditures under existing rules in 2005 are $706 million. (See Table 1. C). 10 Consumer Coalition Comments at 2; Commissioner Wilson Pa PUC Reply Comments at 2- 3; TOPC Comments at 5- 6; USCCB Comments at 4- 5. 99 Federal Communications Commission FCC 04- 87 K- 31 Step 2: Estimate Changes due to New Policy This section quantifies the number of additional households that would become eligible for Lifeline, the number of households that would subscribe to Lifeline, and the number of additional households that would subscribe to telephone service due to the nationwide implementation of a 1.50 PGC. (This analysis assumes that states without a PGC for Lifeline and states with a PGC below 1.50 adopt a 1.50 PGC.) This section then calculates the increased federal Lifeline expenditures resulting from the increased number of households taking Lifeline due to the 1.50 PGC. CPSH data are used to determine the number of additional households that would become eligible for Lifeline. Two regression analyses are used to determine the number of additional households that would subscribe to Lifeline and the number of households that would take telephone service due to a 1.50 PGC. Change to Lifeline eligibility in 2002 and 2005 resulting from a 1.50 PGC. We predict that an additional 8.7 percent of total households would qualify for Lifeline under the 1.50 PGC, and this would qualify an additional 10.4 million households in 2005. The demographic data from each household in 2002 CPSH data are examined to determine eligibility with and without a 1.50 PGC. For 2002, the number of households that would have become eligible with a 1.50 PGC is calculated. These estimates are then used to determine the number of households that would become eligible for Lifeline with a 1.50 PGC in 2005. Table 2. A presents the information for 2002 and 2. B presents the information for the Year 2005. Change to Lifeline eligibility in 2002 and 2005 resulting from a 1.50 PGC. We predict that an additional 6.7 percent of total households would qualify for Lifeline under the 1.50 PGC. This translates into 7.4 million households in 2002 and 8.1 million households in 2005. The demographic data from each household in the CPSH data are examined to determine whether it was eligible for Lifeline in 2002 under existing rules, and whether it would have become eligible for Lifeline with a 1.50 PGC. This allows us to estimate the increase in Lifeline eligibility that results from a 1.50 PGC for 2002, which in turn, allows us to estimate the effects for 2005. Table 2. A presents the information for 2002 and 2. B presents the information for 2005. Change to Lifeline subscribership in 2002 and 2005 resulting from a 1.50 PGC. We predict that if states without a PGC (and states with PGCs at 1.33 or lower) adopted a 1.50 PGC, there would be a significant increase in the number of low- income households that would take Lifeline. Nationwide, for 2002, the number of additional Lifeline takers would be between 2.67 million and 2.94 million. For 2005, the number of additional Lifeline subscribers would be between 2.91 million and 3.22 million. Change to federal Lifeline expenditures for 2005 is forecasted. We predict that federal Lifeline expenditures would increase by $316 million to $348 million if all states implemented a 1.50 PGC. The forecasted change to federal Lifeline expenditures is calculated by multiplying the forecasted increase in the number of Lifeline subscribers in each state by the expected federal 100 Federal Communications Commission FCC 04- 87 K- 32 expenditures per Lifeline subscriber in that state. The sum of state- by- state changes in the amount of federal expenditures forms the national total. (See Table 2. G). Forecasted change to telephone subscribership for 2005. Unlike the regression model predicting the increase in Lifeline subscribership, the results from the model predicting the increase in telephone subscribership cannot be directly used to estimate increased telephone subscribership with a 1.50 PGC. The model must be rerun with slightly different variables. If a 1.50 PGC will increase telephone subscribership more than a 1.35 PGC, then it must do so for those households with incomes between 1.35 and 1.50 times the FPG. This study therefore examines whether households in that income range are more likely to take telephone service if they are in a state with a 1.50 PGC. This study uses the same methodology as is used in the preceding section. There are only three differences between this model and the one in the preceding section. First, the sample for this study is those households with incomes between 1.35 and 1.50 times the FPG. 11 Second, the variable “State has 1.50 poverty guidelines criterion” was used in lieu of “state has 1.33 or higher poverty guidelines criterion for Lifeline.” Third, some variables were excluded from this model. The eligibility variables were excluded because, as a whole, they were not statistically significant. The California variable was also excluded because the variable of interest, “State has 1.50 poverty guidelines criterion,” was negative when the variable “California” was included. As that result is implausible, the variable “California” was omitted. 12 Table 2. H shows the results of the model. The variable “State has 1.50 poverty guidelines criterion for Lifeline” is not significant. This suggests that raising the PGC criterion from 1.35 to 1.50 would not result in a statistically significant increase in the number of households that take telephone service. This result is somewhat surprising. A 1. 50 FPG lowers the cost of telephone service to these households, so logically, more of these households should take telephone service. The result suggests that the number of these households with incomes between 1.35 and 1.50 times the FPG that would newly take telephone service because of the new availability of Lifeline is too small to be measured. Because the logit- regression model indicates that no additional households would newly take telephone service due to a wide- spread adoption of a 1.50 PGC, Tables 2. I and 2. J, which would calculate the number of additional households taking telephone service due to the change, were not computed. 11 The model in the preceding section used households with incomes below 1.35 times the FPG. 12 The variable “California” was significant, however, so a strong case could be made not to drop it. Because neither specification produced a positive and statistically significant result on the variable “State has a 1. 50 PGC”, the issue is essentially moot. The only reason it is not entirely moot is that some might be inclined to attempt to use the coefficient on “State has a 1.50 PGC” as a best guess to calculate the number of additional households that might take telephone service with a 1.50 PGC. This would be incorrect, because when the variable “California” is included the coefficient on “State has a 1. 50 PGC” is negative, another indication that there is no benefit to a 1.50 PGC over a 1. 35 PGC. 101 Federal Communications Commission FCC 04- 87 K- 33 Step 3: Apply Changes to Baselines to Compute New Program Levels The new levels of Lifeline subscribership and federal expenditures are shown in two tables. First, the new total of Lifeline subscribers is calculated, and then the increased federal Lifeline expenditures are calculated. Forecasted New Policy Levels for Lifeline subscribership in 2005. We predict that if all states implement a 1.50 PGC for Lifeline, an estimated 10 million households would subscribe to Lifeline. Here the forecasted increase in Lifeline subscribers is added to the forecasted baseline number of subscribers to create the new forecasted number of Lifeline subscribers in 2005 with the 1.35 PGC. (See Table 3. A). Forecasted New Policy Levels for federal Lifeline expenditures. We predict that if all states implement a 1.50 PGC for Lifeline, federal Lifeline expenditures are forecasted to be in the range of $1.02 billion to $1.05 billion. Here the forecasted increase in federal Lifeline expenditures is added to the forecasted baseline federal Lifeline expenditures to create the new forecasted federal Lifeline expenditures in 2005 with the 1.50 PGC. (See Table 3. B). 102 Federal Communications Commission FCC 04- 87 K- 34 Section 1: Baseline Information Table 1. A Baseline Lifeline subscription information (Year 2002) a (CPSH data) b (CPSH data) c= a* b d (USAC data) e= d/ c Percentage of Households that Households Percentage of HH that would qualify would qualify that took households that Households for Lifeline (LL) for Lifeline Lifeline took Lifeline State in 2002 under existing rules under existing rules in 2002 in 2002 Alabama 1, 752,018 17.0% 297,228 25,403 8.5% Alaska 224,499 23.2% 52,146 23,302 44.7% Arizona 1,939,473 14.4% 279,334 73,186 26.2% Arkansas 1,059,049 23.0% 243,997 10,100 4.1% California 11,935,960 20.5% 2,451,057 3,232,732 131.9% Colorado 1,690,526 2.7% 45,808 29,709 64.9% Connecticut 1,381,915 13.7% 188,857 58,056 30.7% Delaware 310,968 10.9% 33,946 2,100 6.2% DC 269,356 23.5% 63,327 13,645 21.5% Florida 6, 683,618 15.8% 1,052,902 142,521 13.5% Georgia 3, 172,213 14.3% 452,827 68,266 15.1% Hawaii 418,526 8.6% 36,185 14,124 39.0% Idaho 495,397 25.3% 125,089 27,660 22.1% Illinois 4, 836,881 16.4% 793,394 87,188 11.0% Indiana 2, 501,325 12.4% 309,568 40,326 13.0% Iowa 1,163,128 14.6% 170,241 17,800 10.5% Kansas 1,088,752 12.3% 133,747 13,775 10.3% Kentucky 1,583,371 21.0% 332,295 60,739 18.3% Louisiana 1, 668,964 17.2% 287,759 21,265 7.4% Maine 571,277 22.5% 128,698 85,587 66.5% Maryland 2,083,956 2.8% 57,849 4,022 7.0% Massachusetts 2,584,626 16.4% 423,706 164,600 38.8% Michigan 3,947,084 26.2% 1,032,526 118,794 11.5% Minnesota 1,994,754 14.0% 278,453 47,554 17.1% Mississippi 1,097,592 29.7% 326,524 22,566 6.9% Missouri 2, 217,997 14.6% 324,392 33,322 10.3% Montana 379,228 14.2% 53,704 15,815 29.4% Nebraska 678,736 13.1% 89,251 15,241 17.1% Nevada 809,411 19.8% 160,611 37,204 23.2% New Hampshire 523,968 12.3% 64,338 7,253 11.3% New Jersey 3,262,561 13.3% 435,283 46,687 10.7% New Mexico 698,282 21.7% 151,749 47,356 31.2% New York 7,294,127 21.6% 1,578,737 500,671 31.7% North Carolina 3, 217,678 19.2% 616,817 99,510 16.1% North Dakota 275,725 13.7% 37,712 19,226 51.0% Ohio 4,595,674 15.8% 726,907 279,591 38.5% Oklahoma 1, 366,274 17.7% 241,259 117,297 48.6% Oregon 1,366,819 25.0% 341,162 36,402 10.7% Pennsylvania 4, 863,997 12.0% 584,754 94,846 16.2% Rhode Island 428,672 18.2% 78,185 46,189 59.1% South Carolina 1, 574,457 18.4% 289,051 21,809 7.5% South Dakota 308,026 17.6% 54,211 27,117 50.0% Tennessee 2,307,548 33.1% 764,595 49,050 6.4% Texas 7, 493,242 25.4% 1,901,378 429,970 22.6% Utah 716,224 22.2% 159,072 19,652 12.4% Vermont 259,765 32.9% 85,439 29,911 35.0% Virginia 2,759,677 11.3% 312,574 20,730 6.6% Washington 2,397,497 16.4% 393,513 83,327 21.2% West Virginia 759,332 19.8% 150,381 4,905 3.3% Wisconsin 2,181,649 11.5% 250,155 68,333 27.3% Wyoming 196,973 15.0% 29,449 2,126 7.2% Nationwide 109,388,768 17.8% 19,472,000 6,558,560 33.7% Note: Some numbers in this table have been rounded. Source: Current Population Survey of Households (CPSH) March 2002 data. 103 Federal Communications Commission FCC 04- 87 K- 35 Section 1: Baseline Information Table 1. B Baseline Lifeline subscription information (Year 2005) a (Table 1. A) b (CPSH) c= a* b d= a+ c e (Table 1. A) f= d* e g (Table 1. A) h= f* g Growth (loss) Expected Percentage of Households that Lifeline take Expected HH 1/ 2002 - 7/ 2005 New (fewer) total HH that would would qualify rate for HH that that would take Households based on households households qualify for LL for Lifeline qualify under Lifeline under State 2002 1/ 2000 - 1/ 2002 1 in 2005 July 2005 under exist ing rule s under existing rules exis t ing rule s exis t ing r ule s Alabama 1, 752, 018 0.8% 14,849 1,766, 868 17. 0% 299,747 8. 5% 25,618 Alaska 224,499 5.4% 12,185 236,684 23. 2% 54,977 44.7% 24,567 Arizona 1, 939, 473 12. 7% 246,506 2, 185, 979 14. 4% 314,837 26.2% 82,488 Arkansas 1, 059, 049 5.5% 58,199 1,117, 248 23. 0% 257,406 4. 1% 10,655 California 11,935,960 -2. 2% -259, 963 11,675,997 20. 5% 2, 397,673 131.9% 3,162,324 Colorado 1, 690, 526 9.6% 162,683 1, 853, 209 2.7% 50,216 64.9% 32,568 Connecticut 1, 381, 915 12. 9% 178,850 1, 560, 766 13. 7% 213,300 30.7% 65,570 Delaware 310,968 13. 8% 42,992 353,960 10. 9% 38,639 6. 2% 2,390 DC 269,356 21. 9% 59,075 328,431 23. 5% 77,216 21.5% 16,638 Florida 6, 683, 618 17. 8% 1, 191,839 7,875, 457 15. 8% 1, 240,658 13.5% 167,936 Georgia 3, 172, 213 13. 1% 416,286 3, 588, 499 14. 3% 512,251 15.1% 77,224 Hawaii 418,526 2.9% 12,305 430,831 8.6% 37,249 39.0% 14,539 Idaho 495,397 5.2% 25,673 521,070 25. 3% 131,572 22.1% 29,093 Illinois 4, 836, 881 10. 0% 485,999 5, 322, 880 16. 4% 873,112 11.0% 95,948 Indiana 2, 501, 325 15. 2% 380,568 2, 881, 893 12. 4% 356,667 13.0% 46,461 Iowa 1, 163, 128 2.2% 25,853 1,188, 981 14. 6% 174,025 10.5% 18,196 Kansas 1, 088, 752 7.4% 80,504 1,169, 256 12. 3% 143,636 10.3% 14,794 Kentucky 1, 583, 371 3.9% 61,169 1,644, 539 21. 0% 345,132 18.3% 63,085 Louisiana 1, 668, 964 6.5% 108,680 1, 777, 645 17. 2% 306,498 7. 4% 22,650 Maine 571,277 26. 1% 149,312 720,589 22. 5% 162,335 66.5% 107,956 Maryland 2, 083, 956 8.4% 174,235 2, 258, 191 2.8% 62,685 7. 0% 4,358 Massachusetts 2, 584, 626 8.4% 217,343 2, 801, 968 16. 4% 459,336 38.8% 178,441 Michigan 3, 947, 084 11. 1% 439,803 4, 386, 888 26. 2% 1, 147,575 11.5% 132,031 Minnesota 1, 994, 754 13. 8% 275,225 2, 269, 978 14. 0% 316,872 17.1% 54,115 Mississippi 1, 097, 592 9.7% 106,991 1, 204, 582 29. 7% 358,353 6. 9% 24,766 Missouri 2, 217, 997 3.8% 84,088 2,302, 085 14. 6% 336,690 10.3% 34,585 Montana 379,228 10. 9% 41,387 420,615 14. 2% 59,565 29.4% 17,541 Nebraska 678,736 6.7% 45,409 724,145 13. 1% 95,222 17.1% 16,261 Nevada 809,411 32. 0% 259,081 1, 068, 492 19. 8% 212,021 23.2% 49,112 New Hampshire 523,968 22. 1% 115,836 639,804 12. 3% 78,561 11.3% 8,856 New Jersey 3, 262, 561 12. 5% 408,819 3, 671, 381 13. 3% 489,827 10.7% 52,537 New Mexico 698,282 7.7% 54,043 752,325 21. 7% 163,494 31.2% 51,021 New York 7, 294, 127 6.4% 465,077 7, 759, 204 21. 6% 1, 679,398 31.7% 532,594 North Carolina 3, 217, 678 16. 0% 513,866 3, 731, 543 19. 2% 715,324 16.1% 115,402 North Dakota 275,725 13. 0% 35,890 311,615 13. 7% 42,621 51.0% 21,729 Ohio 4, 595, 674 2.9% 133,391 4, 729, 065 15. 8% 748,006 38.5% 287,706 Oklahoma 1, 366, 274 4.2% 57,363 1,423, 636 17. 7% 251,388 48.6% 122,222 Oregon 1, 366, 819 3.4% 45,970 1,412, 789 25. 0% 352,636 10.7% 37,626 Pennsylvania 4, 863, 997 7.4% 357,618 5, 221, 614 12. 0% 627,747 16.2% 101,819 Rhode Island 428,672 18. 6% 79,874 508,546 18. 2% 92,753 59.1% 54,795 South Carolina 1, 574, 457 3.5% 54,896 1,629, 353 18. 4% 299,129 7. 5% 22,569 South Dakota 308,026 16. 3% 50,279 358,305 17. 6% 63,060 50.0% 31,543 Tennessee 2, 307, 548 13. 6% 313,658 2, 621, 206 33. 1% 868,524 6. 4% 55,717 Texas 7, 493, 242 1.3% 100,170 7, 593, 412 25. 4% 1, 926,796 22.6% 435,718 Utah 716,224 9.7% 69,218 785,443 22. 2% 174,445 12.4% 21,551 Vermont 259,765 14. 3% 37,188 296,953 32. 9% 97,670 35.0% 34,193 Virginia 2, 759, 677 7.1% 196,873 2, 956, 550 11. 3% 334,873 6. 6% 22,209 Washington 2, 397, 497 7.0% 168,037 2, 565, 534 16. 4% 421,094 21.2% 89,167 West Virginia 759,332 0.6% 4,808 764,140 19. 8% 151,333 3. 3% 4, 936 Wisconsin 2, 181, 649 13. 3% 289,380 2, 471, 029 11. 5% 283,336 27.3% 77,397 Wyoming 196,973 3.7% 7,223 204,196 15. 0% 30,529 7. 2% 2,204 Nationwide 109,388,768 7.7% 8,657,000 118,045,768 17. 8% 21,013,000 33.7% 6,775,000 1 1.75 times the 2- year growth (2000- 2002) equals the growth over 3.5 years. Note: Some numbers in this table have been rounded. Source: Current Population Survey of Households (CPSH) March 2000 and 2002 data. 104 Federal Communications Commission FCC 04- 87 K- 36 Section 1: Baseline Information Table 1.C Forecasted baseline Lifeline expenditures (Year 2005) a (staff estimate) 1 b= a* 12 c (Table 1.B) d= b* c Monthly federal support Annual federal Expected Households taking Forecasted Lifeline expenditures State per line in 2005 support per line Lifeline under existing rules under existing rules Alabama $10.00 $120.00 25, 618 $3, 074, 197 Alaska $10.00 $120.00 24, 567 $2, 948, 007 Arizona $8.31 $99.67 82, 488 $8, 221, 159 Arkansas $8.25 $99.00 10, 655 $1, 054, 846 California $8.34 $100.02 3,162, 324 $316,308,133 Colorado $10.00 $120.00 32, 568 $3, 908, 155 Connecticut $8.02 $96.26 65, 570 $6, 312, 049 Delaware $8.17 $98.04 2,390 $234, 348 DC $7.32 $87.84 16, 638 $1, 461, 447 Florida $10.00 $120.00 167, 936 $20,152,282 Georgia $10.00 $120.00 77, 224 $9, 266, 937 Hawaii $8.25 $99.00 14, 539 $1, 439, 387 Idaho $9.91 $118.92 29, 093 $3, 459, 726 Illinois $7.42 $89.01 95, 948 $8, 540, 023 Indiana $7.45 $89.39 46, 461 $4, 153, 300 Iowa $6.96 $83.48 18, 196 $1, 518, 973 Kansas $8.82 $105.87 14, 794 $1, 566, 265 Kentucky $9.86 $118.29 63, 085 $7, 462, 594 Louisiana $8.25 $99.00 22, 650 $2, 242, 338 Maine $9.93 $119.19 107, 956 $12,867,569 Maryland $9.11 $109.33 4,358 $476, 493 Massachusetts $9.92 $119.04 178, 441 $21,241,723 Michigan $8.21 $98.54 132, 031 $13,010,610 Minnesota $7.04 $84.44 54, 115 $4, 569, 718 Mississippi $10.00 $120.00 24, 766 $2, 971, 882 Missouri $7.08 $84.97 34, 585 $2, 938, 649 Montana $10.00 $120.00 17, 541 $2, 104, 915 Nebraska $9.43 $113.15 16, 261 $1, 839, 924 Nevada $7.87 $94.49 49, 112 $4, 640, 695 New Hampshire $8.17 $98.08 8,856 $868, 626 New Jersey $7.95 $95.45 52, 537 $5, 014, 836 New Mexico $10.00 $120.00 51, 021 $6, 122, 532 New York $9.83 $117.99 532, 594 $62,842,179 North Carolina $9.72 $116.61 115, 402 $13,457,472 North Dakota $10.00 $120.00 21, 729 $2, 607, 431 Ohio $7.33 $87.99 287, 706 $25,315,775 Oklahoma $7.78 $93.36 122, 222 $11,410,768 Oregon $10.00 $120.00 37, 626 $4, 515, 156 Pennsylvania $9.03 $108.32 101, 819 $11,028,901 Rhode Island $9.92 $119.04 54, 795 $6, 522, 833 South Carolina $9.98 $119.72 22, 569 $2, 702, 025 South Dakota $8.21 $98.47 31, 543 $3, 106, 151 Tennessee $9.89 $118.70 55, 717 $6, 613, 430 Texas $8.90 $106.81 435, 718 $46,540,253 Utah $9.94 $119.22 21, 551 $2, 569, 386 Vermont $9.93 $119.20 34, 193 $4, 075, 759 Virginia $9.44 $113.22 22, 209 $2, 514, 557 Washington $9.62 $115.40 89, 167 $10,289,790 West Virginia $9.25 $111.00 4,936 $547, 914 Wisconsin $7.72 $92.68 77, 397 $7, 173, 137 Wyoming $10.00 $120.00 2,204 $264, 475 Nationwide Not applicable Not applicable 6,775, 000 $706,000,000 Note: Some numbers in this table have been rounded. 1 Estimate of monthly federal expenditures includes the Subscriber Line Charge (SLC), $1. 75, and any federal matching funds for that state. SLC amounts were estimated on a company- by- company basis, and are based on rules established by the CALLS and MAG proceedings. The SLC for each state is a weighted average based on the number of Lifeline subscribers served by each carrier in the state. 105 Federal Communications Commission FCC 04- 87 K- 37 Section 2: Change to baseline: effects from the new policy Table 2. A Estimated additional Lifeline- eligible households using a nationwide 1.50 PGC (Year 2002) a (Table 1.A) b (CPSH data) c= b/ a Households Additional households that Additional households (%) that State in 2002 would qualify with a 1.5 PGC would qualify with a 1.5 PGC Alabama 1, 752, 018 256,491 14.6% Alaska 224,499 16,090 7. 2% Arizona 1, 939, 473 235,401 12.1% Arkansas 1,059,049 154, 167 14. 6% California 11, 935, 960 0 0.0% Colorado 1,690,526 222, 464 13. 2% Connecticut 1,381,915 110, 365 8.0% Delaware 310,968 22,559 7. 3% DC 269,356 0 0. 0% Florida 6, 683, 618 981,969 14.7% Georgia 3, 172, 213 401,966 12.7% Hawaii 418,526 62,311 14.9% Idaho 495, 397 19, 115 3. 9% Illinois 4, 836, 881 414, 479 8. 6% Indiana 2, 501, 325 334,218 13.4% Iowa 1,163,128 114, 108 9.8% Kansas 1,088,752 148, 384 13. 6% Kentucky 1,583,371 203, 808 12. 9% Louisiana 1, 668, 964 278,378 16.7% Maine 571, 277 58,443 10.2% Maryland 2,083,956 277, 035 13. 3% Massachusetts 2,584,626 272, 646 10. 5% Michigan 3,947,084 0 0.0% Minnesota 1, 994, 754 137,500 6. 9% Mississippi 1, 097, 592 178,003 16.2% Missouri 2, 217, 997 132,829 6. 0% Montana 379, 228 60, 091 15. 8% Nebraska 678,736 62,530 9. 2% Nevada 809,411 0 0. 0% New Hampshire 523, 968 39,079 7. 5% New Jersey 3,262,561 347, 871 10. 7% New Mexico 698, 282 101, 850 14. 6% New York 7,294,127 831, 139 11. 4% North Carolina 3, 217, 678 425,055 13.2% North Dakota 275, 725 43,283 15.7% Ohio 4,595,674 429, 961 9.4% Oklahoma 1, 366, 274 202,226 14.8% Oregon 1,366,819 29, 048 2. 1% Pennsylvania 4,863,997 365, 771 7.5% Rhode Island 428,672 51,691 12.1% South Carolina 1, 574, 457 177,234 11.3% South Dakota 308,026 27,625 9. 0% Tennessee 2, 307, 548 61,918 2. 7% Texas 7, 493, 242 364,564 4. 9% Utah 716,224 19,425 2. 7% Vermont 259, 765 0 0. 0% Virginia 2,759,677 270, 158 9.8% Washington 2,397,497 236, 432 9.9% West Virginia 759,332 126, 545 16. 7% Wisconsin 2, 181, 649 167,455 7. 7% Wyoming 196, 973 21, 734 11. 0% Nationwide 109, 388, 768 9, 495, 000 8. 7% Note: Some numbers in this table have been rounded. 106 Federal Communications Commission FCC 04- 87 K- 38 Section 2: Change to baseline: effects from the new policy Table 2.B Estimated additional Lifeline- eligible households using a nationwide 1. 50 PGC (Year 2005) a (Table 1. B) b (Table 2. A) c= a* b Forecasted Additional households (%) that Additional households that State Households in 2005 would qualify with a 1.5 PGC would qualify with a 1.5 PGC Alabama 1, 766, 868 14.6% 258,665 Alaska 236,684 7. 2% 16,963 Arizona 2,185, 979 12.1% 265,320 Arkansas 1,117, 248 14.6% 162,639 California 11,675,997 0.0% 0 Colorado 1,853, 209 13.2% 243,872 Connecticut 1,560, 766 8.0% 124,648 Delaware 353,960 7. 3% 25,677 DC 328,431 0. 0% 0 Florida 7, 875, 457 14.7% 1,157,077 Georgia 3, 588, 499 12.7% 454,716 Hawaii 430,831 14.9% 64,143 Idaho 521,070 3. 9% 20,106 Illinois 5, 322, 880 8.6% 456,124 Indiana 2, 881, 893 13.4% 385,069 Iowa 1,188, 981 9.8% 116,644 Kansas 1,169, 256 13.6% 159,356 Kentucky 1,644, 539 12.9% 211,682 Louisiana 1, 777, 645 16.7% 296,506 Maine 720,589 10.2% 73,718 Maryland 2,258, 191 13.3% 300,198 Massachusetts 2,801, 968 10.5% 295,573 Michigan 4,386, 888 0.0% 0 Minnesota 2,269, 978 6.9% 156,472 Mississippi 1,204, 582 16.2% 195,354 Missouri 2, 302, 085 6.0% 137,865 Montana 420,615 15.8% 66,649 Nebraska 724,145 9. 2% 66,713 Nevada 1,068, 492 0.0% 0 New Hampshire 639,804 7. 5% 47,718 New Jersey 3,671, 381 10.7% 391,462 New Mexico 752,325 14.6% 109,732 New York 7,759, 204 11.4% 884,133 North Carolina 3,731, 543 13.2% 492,937 North Dakota 311,615 15.7% 48,917 Ohio 4,729, 065 9.4% 442,441 Oklahoma 1, 423, 636 14.8% 210,716 Oregon 1,412, 789 2.1% 30,025 Pennsylvania 5, 221, 614 7.5% 392,664 Rhode Island 508,546 12.1% 61,322 South Carolina 1, 629, 353 11.3% 183,413 South Dakota 358,305 9. 0% 32,135 Tennessee 2, 621, 206 2.7% 70,334 Texas 7, 593, 412 4.9% 369,437 Utah 785,443 2. 7% 21,303 Vermont 296,953 0. 0% 0 Virginia 2,956, 550 9.8% 289,431 Washington 2,565, 534 9.9% 253,003 West Virginia 764,140 16.7% 127,347 Wisconsin 2,471, 029 7.7% 189,667 Wyoming 204,196 11.0% 22,531 Nationwide 118,045,768 8.7% 10,382,000 Note: Some numbers in this table have been rounded. 107 Federal Communications Commission FCC 04- 87 K- 39 Section 2: Change to baseline: effects from the new policy Table 2. C Regression analysis: Would Lifeline take rates 1 increase due to a nationwide implementation of a 1.50 PGC? Regression Model Dependent variable: Lifeline take rate Specification 1 (Low Range) Specification 2 (High Range) Independent variables Coefficient t- statistic Coefficient t- statistic Amount that state's PGC is above 1.253 0.554 1.78 0. 612 1.99 California 0. 990 5.95 0. 992 5.96 Total support 0. 010 1.02 Constant 0.082 0.88 0. 173 7.69 Sample size: 51 R 2 = 0. 5636 0. 5539 Conclusion: Yes, for both specifications, the coefficient on "Amount that state's PGC is above 1. 25" is positive and statistically significant. Result Q: If a state without a PGC (or a state with a PGC below 1. 5) added a 1. 5 PGC, how much would the take rate increase? Increase in Amount 1.5 PGC portion that would Coefficient is above 1.25 take Lifeline 4 Low range: 0. 554 0. 25 0.139 High range: 0.612 0. 25 0.153 A: The take rate would rise by 13. 9 to 15. 3 percentage points. Notes: 1 The Lifeline take rate is the number of households that take Lifeline divided by the number of households with income at or below 1.5 times the poverty guidelines. For more information on the regression, see Technical Appendix 1. 2 Significant at the 10% level in a two- tailed test. 3 For instance, if a state has a 1.5 poverty guidelines criterion, then the variable has a value of .25 (= 1.5 - 1. 25). If a state has no poverty guidelines criteria, or if the state's poverty guidelines criteria is at or below 1. 25, then the variable has a value of 0. 4 This means that if a state raised its PGC from 1. 25 to 1. 50, then, on average, the percentage of poor households that take Lifeline would rise by 13. 9 to 15. 3 percentage points. Similarly, on average, a state adding a 1.50 PGC where no PGC existed would increase its Lifeline take rate by 13. 9 to 15. 3 percentage points. 108 Federal Communications Commission FCC 04- 87 K- 40 Section 2: Change to baseline: effects from the new policy Table 2.D Estimated additional Lifeline subscribership with a nationwide 1. 50 PGC a (CPSH data) b (Table 2.C) c= a* b Households with incomes at or below Additional households that Additional 1. 50 times the poverty guidelines in states would take Lifeline Lifeline takers with 1.33 or lower PGCs (Year 2002) 1 due to 1.50 PGC due to 1.50 PGC Low range: 19, 232, 000 13. 9% 2, 665,000 High range: 19,232,000 15. 3% 2,940, 000 Q: Of the households that would become eligible to take Lifeline because of a 1.5 PGC, what percentage would do so only because of the 1.5 PGC? A (Column c, above) B (Table 2. A) C= A/ B Additional households that Additional households that Percentage of newly eligible would have taken Lifeline would have become eligible households that would due to a 1.5 PGC due to a 1.5 PGC take Lifeline with a 1.5 PGC Low range: 2,665, 000 9,495,000 28. 1% High range: 2, 940, 000 9,495,000 31. 0% A: 28. 1% to 31. 0% of the households that would become eligible for Lifeline would subscribe. Notes 1 Source: Current Population Survey of Households (CPSH) March 2002 data. The regression analysis presented in Table 2. C examined Lifeline take rates among households with incomes at or below 1. 5 times the federal poverty guidelines. This value includes households in states without a poverty level criterion for Lifeline. 109 Federal Communications Commission FCC 04- 87 K- 41 Section 2: Change to baseline: effects from the new policy Table 2. E Estimated state- by- state additional Lifeline subscribers using a 1. 50 PGC (Year 2002) Low range High range a (Table 2. A) b (Table 2. D) c= a* b d (Table 2.D) e= a* d Additional HH Take rate among Additional LL Take rate among Additional LL that would qualify if HH that qualify takers due to HH that qualify takers due to State 1. 5 PGC were added due to 1.5 PGC 1.5 PGC due to 1.5 PGC 1.5 PGC Alabama 256, 491 28. 1% 71,990 31.0% 79, 419 Alaska 16, 090 28. 1% 4, 516 31. 0% 4, 982 Arizona 235, 401 28. 1% 66,071 31.0% 72, 889 Arkansas 154,167 28.1% 43, 271 31. 0% 47, 736 California 0 28. 1% 0 31. 0% 0 Colorado 222,464 28.1% 62, 440 31. 0% 68, 883 Connecticut 110,365 28.1% 30, 977 31. 0% 34, 173 Delaware 22, 559 28. 1% 6, 332 31. 0% 6, 985 DC 0 28. 1% 0 31.0% 0 Florida 981, 969 28. 1% 275, 613 31. 0% 304, 054 Georgia 401, 966 28. 1% 112, 821 31. 0% 124, 463 Hawaii 62, 311 28. 1% 17,489 31.0% 19, 294 Idaho 19,115 28.1% 5,365 31. 0% 5,919 Illinois 414, 479 28. 1% 116, 333 31. 0% 128, 338 Indiana 334, 218 28. 1% 93,806 31.0% 103,486 Iowa 114,108 28.1% 32, 027 31. 0% 35, 332 Kansas 148,384 28.1% 41, 648 31. 0% 45, 945 Kentucky 203,808 28.1% 57, 204 31. 0% 63, 106 Louisiana 278, 378 28. 1% 78,134 31.0% 86, 196 Maine 58,443 28.1% 16, 403 31. 0% 18, 096 Maryland 277,035 28.1% 77, 757 31. 0% 85, 780 Massachusetts 272,646 28.1% 76, 525 31. 0% 84, 421 Michigan 0 28.1% 0 31.0% 0 Minnesota 137,500 28.1% 38, 593 31. 0% 42, 575 Mississippi 178,003 28.1% 49, 961 31. 0% 55, 116 Missouri 132, 829 28. 1% 37,282 31.0% 41, 129 Montana 60,091 28.1% 16, 866 31. 0% 18, 606 Nebraska 62, 530 28. 1% 17, 551 31. 0% 19, 362 Nevada 0 28.1% 0 31. 0% 0 New Hampshire 39, 079 28. 1% 10, 968 31. 0% 12,100 New Jersey 347,871 28.1% 97, 638 31. 0% 107, 714 New Mexico 101,850 28.1% 28, 587 31. 0% 31, 536 New York 831,139 28.1% 233, 279 31. 0% 257, 351 North Carolina 425, 055 28. 1% 119, 302 31. 0% 131, 613 North Dakota 43, 283 28. 1% 12,148 31.0% 13, 402 Ohio 429,961 28.1% 120, 679 31. 0% 133, 132 Oklahoma 202, 226 28. 1% 56,760 31.0% 62, 616 Oregon 29, 048 28. 1% 8, 153 31. 0% 8, 994 Pennsylvania 365, 771 28. 1% 102, 662 31. 0% 113, 256 Rhode Island 51, 691 28. 1% 14,508 31.0% 16, 005 South Carolina 177, 234 28. 1% 49,745 31.0% 54, 878 South Dakota 27, 625 28. 1% 7, 754 31. 0% 8, 554 Tennessee 61,918 28.1% 17, 379 31. 0% 19, 172 Texas 364, 564 28. 1% 102, 324 31. 0% 112, 882 Utah 19, 425 28. 1% 5, 452 31. 0% 6, 015 Vermont 0 28. 1% 0 31. 0% 0 Virginia 270,158 28.1% 75, 826 31. 0% 83, 651 Washington 236,432 28.1% 66, 360 31. 0% 73, 208 West Virginia 126,545 28.1% 35, 518 31. 0% 39, 183 Wisconsin 167, 455 28. 1% 47,000 31.0% 51, 850 Wyoming 21,734 28.1% 6,100 31. 0% 6,730 Nationwide 9, 495,000 28.1% 2,665, 000 31. 0% 2, 940, 000 Note: Some numbers in this table have been rounded. 110 Federal Communications Commission FCC 04- 87 K- 42 Section 2: Change to baseline: effects from the new policy Table 2. F Estimated state- by- state additional Lifeline subscribers using a 1. 50 PGC (Year 2005) Low range High range a (Table 2. B) b (Table 2. D) c= a* b d (Table 2. D) e= a* d Additional HH Take rate among Additional LL Take rate among Additional LL that would qualify if HH that qualify takers due to HH that qualify takers due to State 1.5 PGC were added due to 1.5 PGC 1.5 PGC due to 1.5 PGC 1.5 PGC Alabama 258,665 28. 1% 72,600 31. 0% 80,092 Alaska 16,963 28. 1% 4, 761 31. 0% 5, 252 Arizona 265,320 28. 1% 74,468 31. 0% 82,153 Arkansas 162,639 28. 1% 45,649 31. 0% 50,359 California 0 28. 1% 0 31. 0% 0 Colorado 243,872 28. 1% 68,449 31. 0% 75,512 Connecticut 124,648 28. 1% 34,986 31. 0% 38,596 Delaware 25,677 28. 1% 7, 207 31. 0% 7, 951 DC 0 28.1% 0 31.0% 0 Florida 1, 157,077 28. 1% 324,761 31. 0% 358,273 Georgia 454,716 28. 1% 127,627 31. 0% 140,797 Hawaii 64,143 28. 1% 18,003 31. 0% 19,861 Idaho 20,106 28. 1% 5, 643 31. 0% 6, 226 I llinois 456,124 28. 1% 128,022 31. 0% 141,233 Indiana 385,069 28. 1% 108,079 31. 0% 119,231 Iowa 116,644 28. 1% 32,739 31. 0% 36,117 Kansas 159,356 28. 1% 44,727 31. 0% 49,342 Kentucky 211,682 28. 1% 59,414 31. 0% 65,544 Louisiana 296,506 28. 1% 83,222 31. 0% 91,809 Maine 73,718 28. 1% 20,691 31. 0% 22,826 Maryland 300,198 28. 1% 84,258 31. 0% 92,952 Massachusetts 295,573 28. 1% 82,960 31. 0% 91,520 Michigan 0 28.1% 0 31.0% 0 Minnesota 156,472 28. 1% 43,918 31. 0% 48,449 Mississippi 195,354 28. 1% 54,831 31. 0% 60,489 Missouri 137,865 28. 1% 38,695 31. 0% 42,688 Montana 66,649 28. 1% 18,707 31. 0% 20,637 Nebraska 66,713 28. 1% 18,725 31. 0% 20,657 Nevada 0 28. 1% 0 31. 0% 0 New Hampshire 47,718 28. 1% 13,393 31. 0% 14,775 New Jersey 391,462 28. 1% 109,873 31. 0% 121,211 New Mexico 109,732 28. 1% 30,799 31. 0% 33,977 New York 884,133 28. 1% 248,153 31. 0% 273,760 North Carolina 492,937 28. 1% 138,355 31. 0% 152,631 North Dakota 48,917 28. 1% 13,730 31. 0% 15,147 Ohio 442,441 28. 1% 124,182 31. 0% 136,996 Oklahoma 210,716 28. 1% 59,143 31. 0% 65,245 Oregon 30,025 28. 1% 8, 427 31. 0% 9, 297 Pennsylvania 392,664 28. 1% 110,210 31. 0% 121,583 Rhode Island 61,322 28. 1% 17,212 31. 0% 18,988 South Carolina 183,413 28. 1% 51,479 31. 0% 56,791 South Dakota 32,135 28. 1% 9, 019 31. 0% 9, 950 Tennessee 70,334 28. 1% 19,741 31. 0% 21,778 Texas 369,437 28. 1% 103,691 31. 0% 114,391 Utah 21,303 28. 1% 5, 979 31. 0% 6, 596 Vermont 0 28. 1% 0 31. 0% 0 Virginia 289,431 28. 1% 81,236 31. 0% 89,618 Washington 253,003 28. 1% 71,011 31. 0% 78,339 West Virginia 127,347 28. 1% 35,743 31. 0% 39,431 Wisconsin 189,667 28. 1% 53,235 31. 0% 58,728 Wyoming 22,531 28. 1% 6, 324 31. 0% 6, 976 Nationwide 10,382,000 28. 1% 2, 914,000 31. 0% 3,215, 000 Note: Some numbers in this table have been rounded. 111 Federal Communications Commission FCC 04- 87 K- 43 Section 2: Change to baseline: effects from the new policy Table 2. G Estimated increase in Lifeline expenditures (Year 2005) Low range High range a (Table 1.C) b (Table 2. F) c= a* b d (Table 2. F) e= a* d Annual federal Forecasted Forecasted Forecasted Forecasted support per additional HH increased federal additional HH increased federal State Lifeline subscriber taking Lifeline Lifeline expenditures taking Lifeline Lifeline expenditures Alabama $120.00 72, 600 $8, 712, 054 80, 092 $9,611, 046 Alaska $120.00 4,761 $571,334 5, 252 $630, 290 Arizona $99. 67 74,468 $7,421,900 82, 153 $8,187, 762 Arkansas $99.00 45, 649 $4, 519, 194 50, 359 $4,985, 527 California $100.02 0 $0 0 $0 Colorado $120.00 68, 449 $8, 213, 836 75, 512 $9,061, 418 Connecticut $96.26 34, 986 $3, 367, 877 38, 596 $3,715, 406 Delaware $98.04 7,207 $706,571 7, 951 $779, 481 DC $87.84 0 $0 0 $0 Florida $120.00 324,761 $38, 971,362 358, 273 $42, 992, 797 Georgia $120.00 127,627 $15, 315,227 140, 797 $16, 895, 598 Hawaii $99.00 18, 003 $1, 782, 313 19, 861 $1,966, 229 Idaho $118.92 5,643 $671,075 6, 226 $740, 323 Illinois $89.01 128,022 $11, 394,798 141, 233 $12, 570, 621 Indiana $89. 39 108,079 $9,661,413 119, 231 $10, 658, 369 Iowa $83.48 32, 739 $2, 733, 047 36, 117 $3,015, 069 Kansas $105.87 44, 727 $4, 735, 469 49, 342 $5,224, 119 Kentucky $118.29 59, 414 $7, 028, 232 65, 544 $7,753, 471 Louisiana $99. 00 83,222 $8,238,980 91, 809 $9,089, 156 Maine $119.19 20, 691 $2, 466, 169 22, 826 $2,720, 651 Maryland $109.33 84, 258 $9, 211, 947 92, 952 $10, 162, 523 Massachusetts $119.04 82, 960 $9, 875, 552 91, 520 $10, 894, 605 Michigan $98.54 0 $0 0 $0 Minnesota $84.44 43, 918 $3, 708, 590 48, 449 $4,091, 278 Mississippi $120.00 54, 831 $6, 579, 710 60, 489 $7,258, 667 Missouri $84. 97 38,695 $3,287,844 42, 688 $3,627, 115 Montana $120.00 18, 707 $2, 244, 788 20, 637 $2,476, 427 Nebraska $113.15 18, 725 $2, 118, 733 20, 657 $2,337, 364 Nevada $94.49 0 $0 0 $0 New Hampshire $98. 08 13,393 $1,313,584 14, 775 $1,449, 132 New Jersey $95.45 109,873 $10, 487,737 121, 211 $11, 569, 961 New Mexico $120.00 30, 799 $3, 695, 875 33, 977 $4,077, 250 New York $117.99 248,153 $29, 280,261 273, 760 $32, 301, 676 North Carolina $116.61 138,355 $16, 134,077 152, 631 $17, 798, 944 North Dakota $120.00 13, 730 $1, 647, 578 15, 147 $1,817, 590 Ohio $87.99 124,182 $10, 926,961 136, 996 $12, 054, 508 Oklahoma $93. 36 59,143 $5,521,621 65, 245 $6,091, 394 Oregon $120.00 8,427 $1,011,274 9, 297 $1,115, 627 Pennsylvania $108.32 110,210 $11, 937,808 121, 583 $13, 169, 664 Rhode Island $119.04 17, 212 $2, 048, 864 18, 988 $2,260, 285 South Carolina $119.72 51, 479 $6, 163, 141 56, 791 $6,799, 113 South Dakota $98.47 9,019 $888,163 9, 950 $979, 812 Tennessee $118.70 19, 741 $2, 343, 169 21, 778 $2,584, 960 Texas $106.81 103,691 $11, 075,569 114, 391 $12, 218, 451 Utah $119.22 5,979 $712,838 6, 596 $786, 395 Vermont $119.20 0 $0 0 $0 Virginia $113.22 81, 236 $9, 197, 758 89, 618 $10, 146, 870 Washington $115.40 71, 011 $8, 194, 635 78, 339 $9,040, 235 West Virginia $111.00 35, 743 $3, 967, 545 39, 431 $4,376, 954 Wisconsin $92. 68 53,235 $4,933,780 58, 728 $5,442, 894 Wyoming $120.00 6,324 $758,866 6, 976 $837, 173 Nationwide Not applicable 2,914,000 $316,000,000 3,215, 000 $348, 000, 000 Note: Some numbers in this table have been rounded. 112 Federal Communications Commission FCC 04- 87 K- 44 Section 2: Change to baseline: effects from the new policy Table 2. H Logit regression results: Would a 1.50 Poverty Guidelines Criterion for Lifeline increase telephone penetration? Logistic regression analysis 1 Dependent side variable: Does the household have telephone service? Coefficient Wald Statistically Independent side variables value statistic P- Value significant State has 1.50 poverty guidelines criterion for Lifeline 0.110 0. 21 0. 65 No Income (000s) 0. 027 4. 90 0. 03 Yes Household is a mobile home -1.137 24. 10 0. 00 Yes Household is owned, not rented 0.962 26. 60 0. 00 Yes Percentage of householders who have lived there one year 0.784 17. 66 0. 00 Yes Someone in the household is on food stamps -0. 456 3. 51 0. 06 Yes Constant 1.195 18. 23 0. 00 Yes Conclusion: No, the coefficient on "State has 1.5 poverty guidelines criterion for Lifeline" is not statistically significant. 1 For more information on the logistic regression, see Technical Appendix 2. 113 Federal Communications Commission FCC 04- 87 K- 45 Section 3: New policy: new levels resulting from a 1.50 PGC (as of July 1, 2005) Table 3. A Forecasted new Lifeline subscribers (Year 2005) Low range High range a (Table 1.B) b (Table 1.B) c (Table 2. F) d= b+ c e (Table 2. F) f= b+ e Forecasted baseline Additional LL New total Additional LL New total Forecasted households taking takers due to households takers due to households State households Lifeline 1.5 PGC taking Lifeline 1.5 PGC taking Lifeline Alabama 1, 766,868 25,618 72,600 98,219 80,092 105,710 Alaska 236,684 24,567 4,761 29,328 5,252 29,819 Arizona 2,185,979 82,488 74,468 156,956 82,153 164,641 Arkansas 1,117,248 10,655 45,649 56,304 50,359 61,014 California 11,675,997 3,162,324 0 3, 162,324 0 3, 162,324 Colorado 1,853,209 32,568 68,449 101,017 75,512 108,080 Connecticut 1,560,766 65,570 34,986 100,555 38,596 104,165 Delaware 353,960 2,390 7,207 9,597 7,951 10,341 DC 328,431 16,638 0 16,638 0 16,638 Florida 7, 875,457 167,936 324,761 492,697 358,273 526,209 Georgia 3, 588,499 77,224 127,627 204,851 140,797 218,021 Hawaii 430,831 14,539 18,003 32,542 19,861 34,400 Idaho 521,070 29,093 5,643 34,737 6,226 35,319 Illinois 5, 322,880 95,948 128,022 223,971 141,233 237,181 Indiana 2, 881,893 46,461 108,079 154,540 119,231 165,693 Iowa 1,188,981 18,196 32,739 50,935 36,117 54,313 Kansas 1,169,256 14,794 44,727 59,521 49,342 64,136 Kentucky 1,644,539 63,085 59,414 122,499 65,544 128,630 Louisiana 1, 777,645 22,650 83,222 105,871 91,809 114,459 Maine 720,589 107,956 20,691 128,647 22,826 130,782 Maryland 2,258,191 4,358 84,258 88,616 92,952 97,310 Massachusetts 2,801,968 178,441 82,960 261,401 91,520 269,962 Michigan 4,386,888 132,031 0 132,031 0 132,031 Minnesota 2,269,978 54,115 43,918 98,033 48,449 102,565 Mississippi 1,204,582 24,766 54,831 79,597 60,489 85,255 Missouri 2, 302,085 34,585 38,695 73,280 42,688 77,273 Montana 420,615 17,541 18,707 36,248 20,637 38,178 Nebraska 724,145 16,261 18,725 34,985 20,657 36,918 Nevada 1,068,492 49,112 0 49,112 0 49,112 New Hampshire 639,804 8,856 13,393 22,250 14,775 23,632 New Jersey 3,671,381 52,537 109,873 162,410 121,211 173,748 New Mexico 752,325 51,021 30,799 81,820 33,977 84,998 New York 7,759,204 532,594 248,153 780,747 273,760 806,354 North Carolina 3,731,543 115,402 138,355 253,756 152,631 268,033 North Dakota 311,615 21,729 13,730 35,458 15,147 36,875 Ohio 4,729,065 287,706 124,182 411,888 136,996 424,702 Oklahoma 1, 423,636 122,222 59,143 181,364 65,245 187,467 Oregon 1,412,789 37,626 8,427 46,054 9,297 46,923 Pennsylvania 5, 221,614 101,819 110,210 212,030 121,583 223,402 Rhode Island 508,546 54,795 17,212 72,007 18,988 73,783 South Carolina 1, 629,353 22,569 51,479 74,049 56,791 79,361 South Dakota 358,305 31,543 9,019 40,563 9,950 41,493 Tennessee 2,621,206 55,717 19,741 75,458 21,778 77,495 Texas 7, 593,412 435,718 103,691 539,409 114,391 550,109 Utah 785,443 21,551 5,979 27,530 6,596 28,147 Vermont 296,953 34,193 0 34,193 0 34,193 Virginia 2,956,550 22,209 81,236 103,445 89,618 111,827 Washington 2,565,534 89,167 71,011 160,179 78,339 167,506 West Virginia 764,140 4,936 35,743 40,679 39,431 44,367 Wisconsin 2,471,029 77,397 53,235 130,631 58,728 136,125 Wyoming 204,196 2,204 6,324 8,528 6,976 9,180 Nationwide 118,045,768 6, 775,000 2,914,000 9,689,000 3,215,000 9,990,000 Note: Some numbers in this table have been rounded. 114 Federal Communications Commission FCC 04- 87 K- 46 Section 3: New policy: new levels resulting from a 1.50 PGC (as of July 1, 2005) Table 3. B Forecasted new Lifeline expenditures (Year 2005) Low range High range a (Table 1. C) b (Table 2. K) c= a* b d (Table 2. K) e= a* d Annual federal Additional federal Total federal Additional federal Total federal Lifeline expenditures Lifeline expenditures Lifeline expenditures Lifeline expenditures Lifeline expenditures State without 1.5 PGC with 1.5 PGC with 1.5 PGC with 1.5 PGC with 1.5 PGC Alabama $3,074,197 $8,712,054 $11,786,251 $9,611,046 $12,685,243 Alaska $2,948,007 $571,334 $3,519,341 $630,290 $3,578,296 Arizona $8,221,159 $7,421,900 $15,643,060 $8,187,762 $16,408,922 Arkansas $1,054,846 $4,519,194 $5,574,040 $4,985,527 $6,040,373 California $316,308,133 $0 $316,308,133 $0 $316,308,133 Colorado $3,908,155 $8,213,836 $12,121,991 $9,061,418 $12,969,573 Connecticut $6,312,049 $3,367,877 $9,679,926 $3,715,406 $10,027,455 Delaware $234,348 $706,571 $940,918 $779,481 $1,013,829 DC $1,461,447 $0 $1,461,447 $0 $1,461,447 Florida $20,152,282 $38,971,362 $59,123,644 $42,992,797 $63,145,079 Georgia $9,266,937 $15,315,227 $24,582,164 $16,895,598 $26,162,535 Hawaii $1,439,387 $1,782,313 $3,221,699 $1,966,229 $3,405,615 Idaho $3,459,726 $671,075 $4,130,801 $740,323 $4,200,049 Illinois $8,540,023 $11,394,798 $19,934,821 $12,570,621 $21,110,644 Indiana $4,153,300 $9,661,413 $13,814,713 $10,658,369 $14,811,669 Iowa $1,518,973 $2,733,047 $4,252,020 $3,015,069 $4,534,042 Kansas $1,566,265 $4,735,469 $6,301,733 $5,224,119 $6,790,384 Kentucky $7,462,594 $7,028,232 $14,490,826 $7,753,471 $15,216,065 Louisiana $2,242,338 $8,238,980 $10,481,318 $9,089,156 $11,331,494 Maine $12,867,569 $2,466,169 $15,333,737 $2,720,651 $15,588,220 Maryland $476,493 $9,211,947 $9,688,440 $10,162,523 $10,639,016 Massachusetts $21,241,723 $9,875,552 $31,117,276 $10,894,605 $32,136,329 Michigan $13,010,610 $0 $13,010,610 $0 $13,010,610 Minnesota $4,569,718 $3,708,590 $8,278,308 $4,091,278 $8,660,996 Mississippi $2,971,882 $6,579,710 $9,551,592 $7,258,667 $10,230,549 Missouri $2,938,649 $3,287,844 $6,226,493 $3,627,115 $6,565,764 Montana $2,104,915 $2,244,788 $4,349,703 $2,476,427 $4,581,342 Nebraska $1,839,924 $2,118,733 $3,958,657 $2,337,364 $4,177,288 Nevada $4,640,695 $0 $4,640,695 $0 $4,640,695 New Hampshire $868,626 $1,313,584 $2,182,210 $1,449,132 $2,317,758 New Jersey $5,014,836 $10,487,737 $15,502,573 $11,569,961 $16,584,798 New Mexico $6,122,532 $3,695,875 $9,818,407 $4,077,250 $10,199,782 New York $62,842,179 $29,280,261 $92,122,439 $32,301,676 $95,143,854 North Carolina $13,457,472 $16,134,077 $29,591,549 $17,798,944 $31,256,416 North Dakota $2,607,431 $1,647,578 $4,255,009 $1,817,590 $4,425,022 Ohio $25,315,775 $10,926,961 $36,242,736 $12,054,508 $37,370,283 Oklahoma $11,410,768 $5,521,621 $16,932,389 $6,091,394 $17,502,162 Oregon $4,515,156 $1,011,274 $5,526,430 $1,115,627 $5,630,783 Pennsylvania $11,028,901 $11,937,808 $22,966,709 $13,169,664 $24,198,565 Rhode Island $6,522,833 $2,048,864 $8,571,697 $2,260,285 $8,783,118 South Carolina $2,702,025 $6,163,141 $8,865,166 $6,799,113 $9,501,137 South Dakota $3,106,151 $888,163 $3,994,314 $979,812 $4,085,963 Tennessee $6,613,430 $2,343,169 $8,956,599 $2,584,960 $9,198,389 Texas $46,540,253 $11,075,569 $57,615,822 $12,218,451 $58,758,704 Utah $2,569,386 $712,838 $3,282,223 $786,395 $3,355,781 Vermont $4,075,759 $0 $4,075,759 $0 $4,075,759 Virginia $2,514,557 $9,197,758 $11,712,315 $10,146,870 $12,661,427 Washington $10,289,790 $8,194,635 $18,484,425 $9,040,235 $19,330,025 West Virginia $547,914 $3,967,545 $4,515,460 $4,376,954 $4,924,869 Wisconsin $7,173,137 $4,933,780 $12,106,917 $5,442,894 $12,616,031 Wyoming $264,475 $758,866 $1,023,341 $837,173 $1,101,648 Nationwide $706,000,000 $316,000,000 $1,022,000,000 $348,000, 000 $1,054,000,000 Note: Some numbers in this table have been rounded. 115 Federal Communications Commission FCC 04- 87 K- 47 Technical Appendix 1 Background information for Table 2. C (Would Lifeline take rates increase due to a nationwide implementation of a 1.35 PGC?) Below are the two regression results that are used to determine the effect that a nationwide implementation of a 1.35 poverty guideline criterion would have on Lifeline subscribership. Regression 1 – Lifeline specification 1. The regression model calculated from the data is %HHBelow15OnLL= 0.08 + 0.55 x IncElgAbv125 + 0.99 x California + 0.01 x TotSup. Explanation of variables for Lifeline regression specification 1. The dependent variable is the number of households taking Lifeline divided by the number of households that are at or below 1.50 times the federal poverty guidelines. 13 This variable is abbreviated as “% HHBelow15OnLL” in the regressions below. For example, Texas had 429,970 Lifeline subscribers in 2002, and 1,789,726 households at or below 1.50 times the poverty line. The dependent variable data point for Texas therefore equals 0.24 (= 429,970/ 1,789,726). The first Independent Variable is IncEligAbv125. For each state, IncEligAbv125 equals that state’s income eligibility level (if it has one) minus 1.25. So, for California, which has an income eligibility criterion of 1.50 times the poverty guidelines, IncEligAbv125 equals 0.25 (= 1.5 – 1.25). For states with an income eligibility criterion at or below 1.25 times the poverty guidelines, or for states without an income criterion, IncEligAbv125 equals 0. So, for Texas, which has an income eligibility criterion of 1.25 times the poverty guidelines, IncEligAbv125 equals 0. The coefficient on this variable allows us to predict the percentage increase in the number of households that would take Lifeline if a 1.35 PGC were adopted. 13 The Department of Health and Human Services establishes the federal poverty guidelines, which is based on the number of people living in the household, and whether the household is in the mainland United States, Alaska, or Hawaii. 116 Federal Communications Commission FCC 04- 87 K- 48 So for Texas, and other states with a 1.25 PGC (and for states without an income- based criterion), the new policy would increase the independent variable from 0.25 to 0.35, or by 0.1, and the dependent variable would increase 5.5 percentage points. The percentage point increase in percentage of households at or below 1.50 times the poverty guidelines that take Lifeline because of a 1.35 PGC were implemented would be 5.5%. = 0.55 * 0.1 = 0.055 or 5.5%. 14 The second Independent Variable is “California”. In statistical terms, this is called a “dummy” variable, and equals 1 if the state is California, and is 0 otherwise. A dummy variable is often used in regression analysis to quantify specific effects. California is the only state using self-certification with an income- based criterion, and it appears to have more households taking Lifeline than the CPSH data would indicate are eligible for it. Therefore, singling out California with a dummy variable to measure a California- specific effect is warranted. The variable “TotSup” is the amount of monthly telephone service support that Lifeline subscribers in each state receive (TotSup). The amount of total support that households receive varies with the local telephone carrier. For each state, TotSup is the amount of support from the largest carrier in that state. For example, in Texas, Lifeline subscribers pay $11.35 per month less for telephone service than regular telephone subscribers. Therefore, the TotSup datapoint for Texas is $11.35. The more support that eligible households can receive, the more incentive they have to take Lifeline. 14 The coefficient 0.58 is used to calculate the number of additional households that would take Lifeline with a 1.35 PGC. It is multiplied by the number of households at or below 1. 50 times the poverty guidelines (i. e., from 0.0 to 1.50 times the poverty guidelines). Even though those households between 1.35 and 1.50 times the poverty guidelines would not actually qualify for Lifeline, the model coefficient is estimated in such a way that a correct prediction is made. 117 Federal Communications Commission FCC 04- 87 K- 49 Regression 2 – Lifeline specification 2. %HHBelow15OnLL = 0.17 + 0.61 x IncElgAbv125 + 0.99 x California When comparing the two specifications, this one suggests that more households would take Lifeline because the coefficient 0.61 is greater than the 0.55 coefficient in Regression 1. So for Texas, and other states with a 1.25 PGC, and for states without an income criterion, the percentage point increase in the percentage of households at or below 1.50 times the poverty guidelines that would take Lifeline because of a 1.35 PGC is 6.1%. = 0.61 *x 0.1 = 0.061 or 6.1%. Additional information about Lifeline regression specifications 1 and 2: Data sources. The data are from the Current Population Survey of Households (CPSH) (March 2002 data), USAC, Universal Service Monitoring Report (October 2002), and . The CPSH data are used to determine demographic data about households and whether they have telephone service. USAC provided data on the number of Lifeline subscribers in each state for 2002. The Universal Service Monitoring Report was used to determine the total support (number of dollars) that Lifeline subscribers received in each state. USAC’s website was used to determine which states had income criteria for Lifeline in 2002, and the multiple of the Federal Poverty Guidelines that was required to be eligible for Lifeline in those states. Data are aggregated to the state level. CPSH has data for thousands of households, including whether the household has telephone service or not. If it were possible to do so, it would be best to conduct the analysis at the household level to maximize the number of observations and to account for several demographic factors. Unfortunately, CPSH data do not report whether the household is receiving the Lifeline subsidy. Therefore, individual data observations could not directly be used for the estimation. The number of Lifeline subscribers for each state is available from the USAC, so the CPSH data are aggregated to the state level to match the USAC data. Thus, there is a single data point constructed for each state. The number of households that are at or below 1.50 times the poverty guidelines in a particular state is determined by summing the statistical weight of each household at or below 1.50 times the poverty guidelines (the statistical weight for each household is determined by the Bureau of Labor Statistics), and dividing by 100. (The statistical weights add up to 100 times the number of households in the state, so dividing by 100 is a necessary step.) 118 Federal Communications Commission FCC 04- 87 K- 50 Additional information on regression specification The dependent variable:% HHBelow15OnLL. As mentioned above, the dependent variable is the number of households taking Lifeline divided by the number of households that are at or below 1.50 times the poverty guidelines. The dependent variable should be a measure of participation rate, and this requires a measure of takers and a measure of eligibility. An ideal measure would have been the number of households taking Lifeline divided by the total number of households that are eligible. Obtaining a precise measure of number of eligible households in each state is not possible, as will be explained below, so a surrogate measure “number of households that are at or below 1.50 times the poverty guidelines” is used in its place. As long as the resulting surrogate participation rate is consistent across states, and used properly, the resulting analysis is correct. The surrogate is necessary because of a measurement problem. There are several states where it is difficult to measure the number of households that are eligible for Lifeline. This happens most often when states use state- specific programs as eligibility criteria. Because the CPSH survey does not ask about every possible welfare program, the CPSH data cannot always be used to determine if a household is eligible for Lifeline or not. Therefore, an alternative dependent variable was needed. The number of households below 1.50 times the poverty guidelines is a reasonable proximate measure of support need. So, instead of dividing the number of households taking Lifeline by the number of households eligible for Lifeline, the dependent variable in this analysis is the number of households taking Lifeline divided by the number of households that are at or below 1.50 times the federal poverty guidelines. The 1.50 multiple was chosen because it was the highest poverty guideline criterion used by any state, and it was used by several states. The principal independent variable: IncEligAbv125. As mentioned above, IncEligAbv125 equals that state’s income eligibility level (if it has one) minus 1.25. If the state has no income eligibility criterion, or if it has one that is less than 1.25 times the poverty guidelines, then the datapoint equals zero for that state. The main objective of the regression analysis is to quantify the number of additional households that will subscribe to Lifeline with the implementation of an income- based eligibility criterion. Generally, states using higher multiples of the poverty guidelines as an eligibility criterion have higher Lifeline participation rates than states using lower multiples of the poverty guidelines criteria (or states using no income based criterion at all). The coefficient on IncEligAbv125 is used to predict the number of households that would take Lifeline due to a 1.35 PGC. 119 Federal Communications Commission FCC 04- 87 K- 51 Preliminary modeling indicated that a nationwide implementation of an income criterion set at or below 1.25 times the poverty guidelines would not increase the number of households taking Lifeline by a statistically significant amount. Because some states use lower multiples of the poverty guidelines to determine Lifeline eligibility, one would expect that using a higher multiple of the poverty guidelines would increase the number of households eligible for Lifeline in those states. However, basing this independent variable on lower multiples of the poverty guidelines did not produce statistically significant results. Discussion Discussion of independent variables: The variable “California” is significant in both regressions (indeed, it was significant for all regression specifications in which it is included). “TotSup” is positive, but is not significant. It has a t- statistic greater than one, however, indicating that it still increases the adjusted R squared. Further, there is strong economic reason to include it, because it measures a household’s incentive to take Lifeline, so it should not be eliminated from the model without good reason. “IncEligAbv125” is significant in both regressions, but the size of the coefficient varies somewhat, and its significance drops somewhat when TotSup is included. Other specifications of the model were run that included whether each state had a particular program as an eligibility criteria. Throughout most of the trial specifications, the coefficient of IncEligAbv125 ranged between the two values presented in this report and remained significant. Therefore, the analyses presented in this report are very robust. Low- income Home Energy Assistance Program (LIHEAP) Other regression models using trial variables were tested, but for the reasons listed below, these models are not adopted. However, when the regression included whether the state had LIHEAP as a method for qualifying for Lifeline, the coefficient on IncEligAbv125 dropped 30% and was not significant. This trial regression model is unsound for two reasons. First, if the results were accurate, it would indicate that there would be no significant additional Lifeline subscribership with the implementation of a 1.35 PGC. This is not plausible, because the logistic regression analysis (see Appendix 2) indicates that a 1.35 PGC would significantly increase the number of households taking telephone service. Because we find strong evidence that a 1.35 PGC would increase telephone subscribership, a similar impact on Lifeline subscribership is also expected. Second, if the coefficient on IncEligAbv125 from the Lifeline Regression were inserted into the model, it would indicate that just 10% of those households that would become eligible would take Lifeline service, which seems far too low. Currently, well over 30% of eligible households take Lifeline service. While the percentage of eligible households that would take Lifeline would surely decrease as eligibility requirements were eased, there is no reason to believe that it 120 Federal Communications Commission FCC 04- 87 K- 52 would drop by more than 2/ 3. Thus, adding a variable quantifying whether the state has LIHEAP as an eligibility requirement leads to irrational results. That trial regression is therefore not used. 15 Given that the coefficient on IncEligAbv125 ranges between 0.554 and 0.612 in most trial regressions without the LIHEAP variable, that range is used in this study. Table 2. D uses the results from the regression analysis to quantify the number of households that would take Lifeline as a result of a 1.35 PGC. The statistical computer program Stata 8.0 was used to run the OLS regressions. The regression outputs (below) show the significance of each coefficient. 15 We note that there is some multicollinearity between the LIHEAP variable and TotSup. As a practical matter, if energy assistance is included in the regression and TotSup is removed, then the coefficient on IncElgAbv125 returns to normal levels and is significant. 121 Federal Communications Commission FCC 04- 87 K- 53 reg HHBelow15onLL totsup california incelgabv125 Source | SS df MS Number of obs = 51 -------------+------------------------------ F( 3, 47) = 20.24 Model | 1.36519991 3 .455066636 Prob > F = 0.0000 Residual | 1.05697291 47 .022488785 R- squared = 0.5636 -------------+------------------------------ Adj R- squared = 0.5358 Total | 2.42217282 50 .048443456 Root MSE = .14996 ------------------------------------------------------------------------------ Variables | Coef. Std. Err. t P>| t| [95% Conf. Interval] -------------+---------------------------------------------------------------- constant | .0818321 .092501 0.88 0.381 -. 1042558 .26792 incelgabv125 | .5543479 .3122355 1.78 0.082 -. 0737889 1.182485 california | .9900143 .1665154 5.95 0.000 .6550286 1.325 totsup | .0095577 .0093566 1.02 0.312 -. 0092652 .0283807 ------------------------------------------------------------------------------ reg %hhbelow15onll california incelgabv125 Source | SS df MS Number of obs = 51 -------------+------------------------------ F( 2, 48) = 29.80 Model | 1.34173373 2 .670866866 Prob > F = 0.0000 Residual | 1.08043909 48 .022509148 R- squared = 0.5539 -------------+------------------------------ Adj R- squared = 0.5354 Total | 2.42217282 50 .048443456 Root MSE = .15003 ------------------------------------------------------------------------------ Variables | Coef. Std. Err. t P>| t| [95% Conf. Interval] -------------+---------------------------------------------------------------- constant | .1734751 .0225442 7.69 0.000 .1281469 .2188033 incelgabv125 | .6119323 .3072435 1.99 0.052 -. 0058221 1.229687 california | .9924552 .1665736 5.96 0.000 .6575366 1.327374 ------------------------------------------------------------------------------ 122 Federal Communications Commission FCC 04- 87 K- 54 Technical Appendix 2 Background information for Table 2. G (Would a 1.35 PGC for Lifeline increase telephone penetration?) Below are the results of two logistic regressions. They show the effects that a 1.35 PGC for Lifeline has on telephone subscribership. Logistic regression 1 was used for the study. Logistic regression 2 was used to test whether the Lifeline eligibility variables were necessary. Logistic regression 1 — Telephone Specification 1: Y = 1 / (1 + e – [1. 24 + 0.179* X1 + 0.035* X2 -0.575* X3 + 0.975* X4 + 0.463* X5 - 0.245* X6 -0. 269* X7 -0. 101* X8 +0. 105* X9 + 0.160* X10 - 0.070* X11 + 0.019* X12+ 0.060* X13 + 0.495* X14] ) Explanation of variables for Telephone Specification 1. Dependent variable: Does the household have telephone service? (Y = H_ TELHHD) The dependent variable is whether the low- income household has telephone service. The data point for a household equals one if the household has telephone service, and equals zero otherwise. The dataset is comprised of data from only those households with incomes at or below 1.50 times the poverty guidelines. Independent variables: Is the household in a state with a 1.35 or less restrictive poverty guideline criterion? (X1 = SH135ORB) If the household is in a state that uses a 1.35 PGC for Lifeline (or if the state uses a higher multiple of the poverty guidelines), then SH135ORB equals one for that data point; otherwise, it equals zero. Because the sample is restricted to only those households that are at or below 1.35 times the poverty guidelines, all data points for this variable will be either a “0” or “1”. Of these low- income households, 18 percent live in a state with a 1.35 to 1.50 PGC, and the independent variable SH135ORB equals 1 for these households. For the other 82 percent, the independent variable SH135ORB value equals 0. 123 Federal Communications Commission FCC 04- 87 K- 55 This is the only independent variable used in the cost/ benefit analysis, and therefore the accuracy of its coefficient is of most concern. The coefficient on this variable (0.179) is later used to quantify the increased probability that a low- income household will take telephone service (or fraction of) as the result of a 1.35 PGC. 16 This quantification is accomplished as follows: When X1 is changed, Y will change. For an individual household, the change of X1 from 0 to 1 models the effect of implementing a 1.35 PGC for that particular household. When modeling the change nationally, X1 is changed from .18 (18%, which reflects the fact that 18 percent of the sample households already live in a state with a 1.35 PGC) to 1. 17 As a result, Y changes according to Logistic regression 1 above (Y is interpreted as a percentage— or probability— of households with telephone subscribership, and ranges from 0 to 1). When we change the “baseline” 18 percent of low- income households (living in a state with a 1.35 PGC) to the “new policy” 100 percent, then predicted telephone subscribership among sample households increases from 90.5 percent to 91.7 percent. Total value of household income (X2 = HTOTVAL) The data points for each household equal the household’s entire annual income, including any cash payments. Is the household a mobile home? (X3 = MOBILEH) If the household is a mobile home, then the MOBHOME equals one for that datapoint; otherwise, it equals zero. Is the household owned by the householders? (X4 = OWNHOME) If the householders own the home themselves, then OWNHOME for that data point equals 1; otherwise, it equals zero. Percentage of households who lived at that address for at least one year. (X5 = PCTONEYEAR) The data points for PCTONEYEAR equal the percentage of the adults in that household that have lived at that address for at least one year. 16 The numbers used in actual calculations are carried out to 6 significant digits. For ease of viewing, however, the data in Table 2. H are displayed to only 3 significant digits. 17 This number represents the portion of low income households that live in a state with a 1. 33 or 1.50 PGC for Lifeline. It should not be confused with the logistic regression coefficient of .179. The similarity of numbers is purely coincidental. 124 Federal Communications Commission FCC 04- 87 K- 56 Is someone in the household on Food Stamps? (X6 = HFOODSP) If someone in the household is on Food Stamps, then HFOODSP equals one for that data point; otherwise, it equals zero. Variables X7 through X13: X7 = State has Medicaid criterion X8 = State has Food Stamp criterion X9 = State has TANF criterion X10 = State has LIHEAP criterion X11 = State has FRHA (Section 8) X12 = State has National free lunch program criterion X13 = State has SSI criterion These variables indicate whether the household is in a state that uses a particular Lifeline eligibility criterion. If the state uses that criterion, then the data point equals 1; otherwise, it equals zero. For example, if a household is in a state that allows households in the LIHEAP program to qualify for Lifeline, then the data point for variable X10 equals 1. If the state does not use LIHEAP as a criterion, then the data point equals 0. Is the household in California (X14 =CALIFORNI) If the household is in California, then California equals one for that data point; otherwise, it equals zero. For the results of this specification, see page XX, below. Logistic regression 2 — Telephone Specification 2: Telephone Specification 2 includes all the variables from specification 1, except for the variables tracking state Lifeline eligibility requirements. This specification was run to determine if these variables, as a group, were significant. They are. 18 For the results of this specification, see page XX, below. Additional information about specifications 1 and 2 18 The significance of the eligibility requirements variables was determined using a chi squared test. The test is performed as follows. The logistic regression is run with the eligibility variables, and then without. The “- 2* log likelihood” for both models are then compared. If the difference is greater than the chi squared critical value, then the variables are significant. The difference in the “- 2* log likelihood” is 15.92. The critical value for a chi squared test at the 5% level for 7 degrees of freedom (the number of eligibility variables) is 14. 07. The difference is greater than the critical value, so we conclude that the eligibility variables are significant. 125 Federal Communications Commission FCC 04- 87 K- 57 Price None of the logistic regression specifications include the price of telephone service. This is because the price that each household faces is unknown. Different carriers offer service at different prices, and even within the same carrier, the price of telephone service varies from city to city. Because the carrier that would serve each household is unknown, price cannot be included in the logistic regressions. Earlier research has shown that omitting the price of telephone service does not affect the coefficients of the other variables in this logistic regression. This is because the coefficient on price would be tiny, so any “missing variable” bias would also be tiny. 19 Data sources The data in this analysis are from the Current Population Survey of Households (CPSH) from March 2002. CPSH data contain information on over 70,000 households. From these data, the relevant demographic information are extracted for analysis, including: 1) whether the household has telephone service, 2) household’s total income (including the value of transfer payments), 3) the state the household lives in, 4) whether the household dwelling is owned or rented, 5) whether the household is a mobile home, 6) the number of adult members that live in the household for at least one year, 7) the number of adults living in the household, and 8) the list of subsidies the household receives, which included Federal Public Housing Assistance (Section 8), Food Stamps, LIHEAP, Medicaid, and Supplemental Security Income. Household- level data are used All the information is available for each household, so the analysis is conducted at the household level; aggregating to the state level is unnecessary. Logistic regression preferred to “standard” OLS regression Because the dependent variable is binary (a household either has telephone service and is thereby assigned a values of one (1), or it does not and is thereby assigned a value of 0 (zero), logistic regression analysis is preferred to a Linear Probability model using Ordinary Least Squares (OLS). With binary dependent variables, linear regressions can produce erroneous results, such as a household having more than a 100% probability of taking telephone service, or a household 19 The formula for calculating the missing variable bias can be found in many textbooks, including William H. Greene, Econometric Analysis, at 402 (3 rd ed. 1997). Observation of the equation shows that if the missing variable is uncorrelated with an independent variable, then the coefficient on that independent variable is unbiased. A regression was run to see if telephone prices are correlated with the variable SH135ORB. The weighted average price for each of the 41 states for which price data are available was created. The variable price was then regressed on the variable SH135ORB. There was no correlation. (See Industry Analysis and Technology Division, Wireline Competition Bureau, Federal Communications Commission, Reference Book, at 7- 8 (2002). 126 Federal Communications Commission FCC 04- 87 K- 58 having a negative probability of taking telephone service. Both of these situations are impossible. Logistic regression analysis avoids this problem, and is appropriate for measuring saturation concepts such as telephone penetration. The following graph illustrates the difference between the two approaches. In the following graph (taken from the Internet), “linear probability model” refers to OLS regression results, and Y (ranging from 0 to 1) refers to probability. 20 Unfortunately, logistic regressions produce coefficients that are more difficult to interpret than the coefficients that OLS produces. A few additional computations are needed to use the coefficients in the cost- benefit analysis. Therefore, Table 2. H is created, which uses the coefficients from the logistic regression to determine the number of households that would have taken phone service in 2002 and 2005 if a 1.35 poverty guideline criterion were instituted nationally. The number of households that would take telephone service because of a 1.35 PGC is then compared to the number of households that would take Lifeline in Table 2. I. 20 For more information on logistic regression analysis, see Damodar Gujarati, Basic Econometrics at 481- 491 (2 nd ed. 1998). 127 Federal Communications Commission FCC 04- 87 K- 60 used in the calculation as before: Y= =1/( 1+ e -z ). The new value for Y is 91.7%. This means that if all states adopted a 1.35 PGC, then 91.7% of households with incomes at or below 1.35 times the poverty guidelines would have telephone service. This represents a 1.2 percentage point increase (91.7% - 90.5%) in telephone subscription rates. To determine the number of households in 2005 that would take phone service due to a 1.35 PGC, the difference in the Y’s (1.2%) is multiplied by the number of households that are at or below 1.35 times the poverty guidelines. Projections made using the CPSH data indicate that in 2005, there will be 20,710,000 households at or below 1.35 times the poverty guidelines. Thus, multiplying 1.2% (which equals 0.012) times 20,710,000 households equals 249,000 households. Thus, the model indicates that 249,000 households would take telephone service due to a 1.35 PGC in 2005. Restricted use of observations and variables The logistic regression analyses uses only selected observations and variables for good reason. One reason is to address a specific policy proposal from the Joint Board. The Joint Board is recommending using a 1.35 PGC. In order to determine how such a plan would affect households at or below 1.35 times the poverty guidelines, only those households with incomes at or below 1.35 times the poverty guidelines are included in this analysis. 21 There are 13,828 usable observations. The number of state specific variables that can be included in the analysis is limited because only 8 states have SH135ORB equal to one. Therefore, including additional state specific variables reduces the accuracy of the coefficient SH135ORB, the important policy variable used to quantify costs and benefits. Discussion of variables in the specifications Assumption that effects of a 1.33 PGC are indistinguishable from a 1.35 PGC As mentioned earlier, this study assumes that the effects of a 1.33 PGC are statistically indistinguishable from a 1.35 PGC. Therefore, SH135ORB equals one for the states that have 1.33 or 1.50 PGCs. There is no alternative to measuring the effect of a 1.35 PGC because no states use a 1.35 PGC. 21 Alternatively, the sample could be restricted to households at or below 1.33 times the FPG because there are three states that have a 1. 33 PGC. By including households at 1. 34 and 1.35 times the FPG, we are implicitly assuming that those households are eligible for Lifeline even though they just miss qualifying for it. On the other hand, restricting the sample to households at or below 1. 33 times the poverty line would exclude many more households from the sample in other states with a 1.50 PGC. It is not clear whether a 1.33 FPG restriction is better than a 1.35 FPG. Fortunately, the results are the same in either case. For both models, the coefficient on SH135ORB is virtually identical with either sample restriction. 129 Federal Communications Commission FCC 04- 87 K- 61 Further, the fact that this analysis treats states with a 1.50 PGC the same as states with a 1.33 PGC is not problematic. This is because the households in the sample are restricted to those that are at or below 1.35 times the poverty guidelines. Thus, all the households in the sample will make the same economic choice whether the state in which they live has a 1.33 (or 1.35) or 1.50 PGC, because the households qualify for Lifeline under either criterion. Inclusion of independent variables As was done in the first staff study, HFOODSP was included because it captures the concept of “poverty” in a way that income alone does not. Participation in the Food Stamps Program is an indicator of special household needs. CALIFORNIA- Unique Effects. The CALIFORNI (California) variable was included as a separate variable in the regression model because it was included in the Lifeline Model. The results indicate that a household in California is more likely to take telephone service. The same variable was not significant when the analysis was performed on year 2000 data, so it is unclear why it is significant when using 2002 data. The logistic regressions were run using the statistical computer program SPSS version 10. The regression analysis computer printouts are displayed below: 130 Federal Communications Commission FCC 04- 87 K- 62 Logistic Regression Case Processing Summary 13828 100.0 0 .0 13828 100.0 0 .0 13828 100.0 Unweighted Cases a Included in Analysis Missing Cases Total Selected Cases Unselected Cases Total N Percent If weight is in effect, see classification table for the total number of cases. a. Omnibus Tests of Model Coefficients 617.340 14 .000 617.340 14 .000 617.340 14 .000 Step Block Model Step 1 Chi- square df Sig. Model Summary 9123.395 .044 .086 Step 1 -2 Log likelihood Cox & Snell R Square Nagelkerke R Square Classification Table a 1 1558 .1 0 12269 100.0 88.7 Observed .00 1.00 H_ TELHHD Overall Percentage Step 1 .00 1.00 H_ TELHHD Percentage Correct Predicted The cut value is .500 a. 131 Federal Communications Commission FCC 04- 87 K- 63 Variables in the Equation .178692 .097 3.365 1 .067 1.196 .000035 .000 69.991 1 .000 1.000 -. 756729 .089 71.653 1 .000 .469 .974900 .068 203.709 1 .000 2.651 .463240 .064 51.652 1 .000 1.589 -. 245187 .059 17.204 1 .000 .783 -. 268743 .144 3.477 1 .062 .764 -. 101100 .140 .523 1 .470 .904 .104803 .060 3.031 1 .082 1.110 .159704 .089 3.191 1 .074 1.173 -. 077088 .073 1.121 1 .290 .926 .019298 .175 .012 1 .912 1.019 .060251 .102 .349 1 .555 1.062 .495371 .189 6.874 1 .009 1.641 1.241 .130 90.623 1 .000 3.461 SH133ORB HTOTVAL MOBILEH OWNHOME PCTONEYR HFOODSP SHMCAID SHFOODSP SHAFDCH SHENGAST SHPUBLIC SHHFLUNC SHSSI CALIFORN Constant Step 1 a B S. E. Wald df Sig. Exp( B) Variable( s) entered on step 1: SH133ORB, HTOTVAL, MOBILEH, OWNHOME, PCTONEYR, HFOODSP, SHMCAID, SHFOODSP, SHAFDCH, SHENGAST, SHPUBLIC, SHHFLUNC, SHSSI, CALIFORN. a. 132 Federal Communications Commission FCC 04- 87 K- 64 Case Processing Summary 13828 100.0 0 .0 13828 100.0 0 .0 13828 100.0 Unweighted Cases a Included in Analysis Missing Cases Total Selected Cases Unselected Cases Total N Percent If weight is in effect, see classification table for the total number of cases. a. Omnibus Tests of Model Coefficients 602.148 7 .000 602.148 7 .000 602.148 7 .000 Step Block Model Step 1 Chi- square df Sig. Model Summary 9138.587 .043 .084 Step 1 -2 Log likelihood Cox & Snell R Square Nagelkerke R Square Classification Table a 0 1559 .0 0 12269 100.0 88.7 Observed .00 1.00 H_ TELHHD Overall Percentage Step 1 .00 1.00 H_ TELHHD Percentage Correct Predicted The cut value is .500 a. Variables in the Equation .161 .093 3.008 1 .083 1.175 .000 .000 69.963 1 .000 1.000 -. 783 .088 78.773 1 .000 .457 .962 .068 200.282 1 .000 2.617 .476 .064 54.902 1 .000 1.610 -. 254 .059 18.562 1 .000 .776 .658 .165 15.975 1 .000 1.931 1.094 .072 231.366 1 .000 2.985 SH133ORB HTOTVAL MOBILEH OWNHOME PCTONEYR HFOODSP CALIFORN Constant Step 1 a B S. E. Wald df Sig. Exp( B) Variable( s) entered on step 1: SH133ORB, HTOTVAL, MOBILEH, OWNHOME, PCTONEYR, HFOODSP, CALIFORN. a. 133 Federal Communications Commission FCC 04- 87 STATEMENT OF CHAIRMAN MICHAEL K. POWELL Today’s Order will help improve the ability of low- income consumers to make and receive basic telephone calls from their homes. If estimates prove correct, the expanded eligibility criteria we adopt today should make telephone service more affordable for approximately 1.17 to 1.29 million Americans – roughly 234,000 of whom will have never had basic telephone service before in their lives. Since its inception, our Lifeline/ Link- Up programs have made basic telephone service affordable to millions of low- income consumers. These support measures – though often extremely modest on an individual level – have improved people’s lives by making everything from jobs, to healthcare to emergency services available to program participants. And while overall telephone penetration in the United States remains extremely high, too many people, particularly on tribal lands and in rural areas, forgo this essential connection. By expanding federal default eligibility criteria and encouraging greater community outreach, today’s Order improves the administration of the program. While this is an important step, we must remain vigilant to ensure that our statutory goals are met and that states utilize appropriate certification and verification requirements. In the future, the Commission must remain watchful for abuses of the self- certification rule and require underlying documentation where such abuse is demonstrated. This item could not have been possible but for the diligence and insight of the federal and state members of the Joint Board. I am confident that we will soon see the fruits of your efforts in the form of greater access to basic telephone service across America. 134 Federal Communications Commission FCC 04- 87 STATEMENT OF COMMISSIONER MICHAEL J. COPPS Congress defined universal service as an “evolving level of telecommunications services.” As times change, so must the Commission’s efforts to ensure that all Americans have access to services at just, reasonable and affordable rates. True to statutory intent, today we adjust and recalibrate some of our policies to improve the effectiveness of our low- income support mechanism. I support this action. I am pleased that for the first time we expand the federal default eligibility criteria to include income- based criterion. This should make it easier for households that no longer participate in qualifying assistance programs to participate in Lifeline and Link-Up. It also should make it simpler for households that are subject to the time limits associated with several federal public assistance programs under the Personal Responsibility and Work Opportunity Reconciliation Act. The potential of our Lifeline and Link- Up programs is bound closely to the combined outreach efforts of carriers, states and the Commission. Only one- third of the households currently eligible for Lifeline and Link- Up assistance subscribe to these programs. Although we enjoy a national telephone penetration rate of just below 95 percent, some areas of this country— especially tribal lands— have penetration rates that are inexcusably lower. And we must never forget that there are households in this country without access to basic telephone service. We are bound by the statute to do more. The enhanced guidelines for outreach provided by the Order are a good first step. And I am pleased that the Further Notice of Proposed Rulemaking seeks comment on the need for additional outreach requirements that would further strengthen the Lifeline and Link- Up programs. At present, the Commission’s rules require carriers to publicize the availability of these programs “in a manner reasonably designed to reach those likely to qualify for the service.” I worry that such a broad requirement is difficult to monitor, hard to enforce and puts beyond the reach of publicity those who would benefit most from these programs. The Joint Board’s Recommendation underlies the critical changes we make today. I thank them for their hard work and valuable efforts to ensure that Lifeline and Link- Up continue to play a role in keeping America connected. 136 Federal Communications Commission FCC 04- 87 STATEMENT OF COMMISSIONER KEVIN J. MARTIN Today the Commission takes steps to update and improve the effectiveness of its low- income support mechanism. The Commission’s statutory charge is to ensure that all Americans have access to quality services at just, reasonable and affordable rates. Because of policies like the Lifeline and Link- Up programs, today more than 95% of all U. S. households have basic telephone services. By expanding the Federal default eligibility criteria today, we make it easier for many households to participate and make support more easily available for thousands of Americans in need. 137 Federal Communications Commission FCC 04- 87 STATEMENT OF COMMISSIONER JONATHAN S. ADELSTEIN I am pleased to support this Order because it strengthens and enhances the Commission’s Lifeline and Link- Up programs. Together, the Lifeline and Link- Up programs form the backbone of our efforts to promote universal telephone service for low- income consumers. By providing discounts on telephone installation and monthly telephone service to low- income consumers, the Lifeline and Link- Up programs have been instrumental in helping us achieve extraordinarily high levels of telephone penetration in the U. S. Overall, more than 95 percent of households in the U. S. have telephone service. Indeed, for most of us, living without telephone service is almost unimaginable. Telephone service is considered a necessity for daily modern life. It is a link to our jobs, to commerce, to healthcare and emergency services, not to mention friends and family. Increasingly, telephone service is a baseline, upon which we are building a national communications infrastructure capable of supporting services that are transforming our economy and way of life. Despite our progress, consumers in over 5 million U. S. households lack even the most basic connectivity. For many of these consumers, the cost of activating and maintaining telephone service is prohibitively expensive, keeping even the most basic connections out of reach. This is particularly so for low income consumers, who are much less likely to have access to telephone service. So, I am pleased that this order strikes at that gap by introducing for the first time federal income- based criteria for the Lifeline and Link- Up programs. This Order recognizes that poverty rates are increasing, while participation in many public assistance programs is decreasing. I hope that the income- based criteria that we adopt in this Order will allow our valuable programs to reach more of the consumers who truly need this assistance, and I look forward to exploring the broader criteria proposed in the attached Notice. I am also pleased that this Order encourages states and carriers to do more to increase participation by eligible consumers. With less than half of all eligible households participating in these programs, it appears that many low income consumers are unaware that assistance is available to them. One significant step in this Order is the conclusion that we must do more to reach out to non- English speaking consumers. Through this approach, we recognize and foster the diversity of our communities. I would like to thank the members of the Federal- State Joint Board on Universal Service for their contributions on this issue. Their recommendations form the basis for this decision. I would also like to recognize our colleagues in the state public utility commissions who continue to work hard to implement these programs as efficiently and effectively as possible. All of us benefit from their efforts and success. 138