Federal Communications Commission FCC 11-32 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of Lifeline and Link Up Reform and Modernization Federal-State Joint Board on Universal Service Lifeline and Link Up ) ) ) ) ) ) ) ) WC Docket No. 11-42 CC Docket No. 96-45 WC Docket No. 03-109 NOTICE OF PROPOSED RULEMAKING Adopted: March 3, 2011 Released: March 4, 2011 Initial Comment Date: April 21, 2011 Reply Comment Date on Sections IV, V (Subsection A), VII (Subsection B & D): May 10, 2011 Reply Comment Date on the Remaining Sections: May 25, 2011 By the Commission: Chairman Genachowski and Commissioners Copps, McDowell, Clyburn and Baker issuing separate statements. TABLE OF CONTENTS Heading Paragraph # I. INTRODUCTION.................................................................................................................................. 1 II. BACKGROUND.................................................................................................................................. 13 III. ESTABLISHING PROGRAM GOALS AND MEASURING PERFORMANCE.............................. 28 IV. IMMEDIATE REFORMS TO ELIMINATE WASTE, FRAUD, AND ABUSE................................ 46 A. Duplicate Claims............................................................................................................................ 47 1. Background.............................................................................................................................. 47 2. Discussion................................................................................................................................ 52 B. Pro Rata Reporting Requirements.................................................................................................. 65 C. Eliminating Reimbursement for Toll Limitation Service .............................................................. 68 D. Customary Charges Eligible for Link Up ...................................................................................... 71 E. Customer Usage of Lifeline-Supported Service ............................................................................ 80 1. Background.............................................................................................................................. 80 2. Discussion................................................................................................................................ 82 F. De-Enrollment Procedures............................................................................................................. 93 G. Audits............................................................................................................................................. 95 V. CLARIFYING CONSUMER ELIGIBILITY RULES....................................................................... 103 A. One-Per-Residence....................................................................................................................... 103 1. Background............................................................................................................................ 103 2. Discussion.............................................................................................................................. 106 Federal Communications Commission FCC 11-32 2 a. Defining “Residence” ..................................................................................................... 111 b. Application of the One-Per-Residence Rule to Commercially Zoned Buildings ........... 117 c. Application of the One-Per-Residence Rule in Tribal Communities.............................. 119 d. Ensuring Access for Residents of Group Living Quarters.............................................. 121 B. Tribal Lifeline Eligibility............................................................................................................. 126 VI. CONSTRAINING THE SIZE OF THE LOW-INCOME FUND ...................................................... 142 VII.IMPROVING PROGRAM ADMINISTRATION ............................................................................. 150 A. Eligibility Criteria for Lifeline and Link Up................................................................................ 152 B. Certification and Verification of Consumer Eligibility for Lifeline ............................................ 158 1. Background............................................................................................................................ 160 2. Discussion.............................................................................................................................. 167 C. Coordinated Enrollment............................................................................................................... 199 1. Background............................................................................................................................ 199 2. Discussion.............................................................................................................................. 201 D. Database....................................................................................................................................... 205 1. Background............................................................................................................................ 205 2. Discussion.............................................................................................................................. 208 E. Electronic Signature..................................................................................................................... 223 VIII. CONSUMER OUTREACH & MARKETING............................................................................ 226 IX. MODERNIZING THE LOW INCOME PROGRAM TO ALIGN WITH CHANGES IN TECHNOLOGY AND MARKET DYNAMICS ............................................................................... 239 A. The Current Lifeline Program...................................................................................................... 239 1. Voice Services Eligible for Discounts................................................................................... 239 2. Support Amounts for Voice Service...................................................................................... 245 a. Background..................................................................................................................... 245 b. Discussion....................................................................................................................... 248 3. Minimum Service Requirements for Voice Service.............................................................. 252 4. Support for Bundled Services................................................................................................ 255 B. The Transition to Broadband ....................................................................................................... 266 1. Background............................................................................................................................ 266 2. Support for Broadband .......................................................................................................... 275 3. Broadband Pilot..................................................................................................................... 279 C. Eligible Telecommunications Carrier Requirements ................................................................... 303 X. OTHER MATTERS ........................................................................................................................... 313 XI. PROCEDURAL MATTERS.............................................................................................................. 314 A. Paperwork Reduction Act Analysis ............................................................................................. 315 B. Initial Regulatory Flexibility Analysis......................................................................................... 316 C. Ex Parte Presentations ................................................................................................................. 317 D. Comment Filing Procedures......................................................................................................... 318 XII.ORDERING CLAUSES..................................................................................................................... 324 APPENDICES APPENDIX A – Proposed Rules APPENDIX B – Current Verification Methodology - Statistically Valid Sample APPENDIX C – Proposed Verification Methodology - Sample Size and Margin of Error APPENDIX D – List of Commenters APPENDIX E – Initial Regulatory Flexibility Analysis Federal Communications Commission FCC 11-32 3 I. INTRODUCTION 1. Lifeline and Link Up are a critical part of the Commission’s universal service mission, ensuring that we implement Congress’s directive to ensure the availability of basic communications services to all Americans, including low-income consumers.1 For more than two decades, Lifeline and Link Up (together, “Lifeline/Link Up” or “the program”) have helped tens of millions of Americans afford basic phone service, providing a “lifeline” for essential daily communications as well as emergencies. But recent technological, market, and regulatory changes have put increasing strain on the program. Today, we begin to comprehensively reform and modernize the Lifeline and Link Up program. Building on proposals from the National Broadband Plan,2 as well as recent recommendations from the Federal-State Joint Board on Universal Service (“Joint Board”) and the Government Accountability Office (GAO),3 the reforms proposed here will significantly bolster protections against waste, fraud, and abuse; control the size of the program; strengthen program administration and accountability; improve enrollment and outreach efforts; and support pilot projects that would assist the Commission in assessing strategies to increase broadband adoption, while not increasing overall program size. 2. Our effort is consistent with the Commission’s ongoing commitment to re-examine and modernize all components of USF to increase accountability and efficiency, while supporting broadband deployment and adoption. The Commission has already made important strides in this area: We have modernized our E-rate program so schools and libraries can get faster Internet connections and access 21st century learning tools.4 We have proposed changes to our rural health care program so patients at rural clinics can benefit from broadband-enabled care such as remote consultations with specialists anywhere in the country.5 And we have proposed a Mobility Fund and a Connect America Fund to spur the build out of broadband networks, both mobile and fixed, in areas of the country that are uneconomic to serve.6 3. The Commission has not systematically re-examined Lifeline/Link Up since the passage 1 See Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56 (1996) (1996 Act); see also 47 U.S.C. § 254(b)(1), (3) (services should be available at “affordable” rates and “consumers in all regions of the nation, including low-income consumers, . . . should have access to telecommunications and information services”). 2 See FEDERAL COMMUNICATIONS COMMISSION, OMNIBUS BROADBAND INITIATIVE, CONNECTING AMERICA: THE NATIONAL BROADBAND PLAN (2010) (NATIONAL BROADBAND PLAN), available at http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-296935A1.pdf. 3 Federal-State Joint Board on Universal Service, Lifeline and Link Up, CC Docket No. 96-45, WC Docket No. 03- 109, Recommended Decision, 25 FCC Rcd 15598 (Jt. Bd. 2010) (2010 Recommended Decision); U.S. GOVERNMENT ACCOUNTABILITY OFFICE, REPORT TO CONGRESSIONAL REQUESTERS, GAO 11-11, TELECOMMUNICATIONS: IMPROVED MANAGEMENT CAN ENHANCE FCC DECISION MAKING FOR THE UNIVERSAL SERVICE FUND LOW-INCOME PROGRAM (2010) (2010 GAO REPORT). 4 Schools and Libraries Universal Service Support Mechanism, A National Broadband Plan For Our Future, CC Docket No. 02-6, GN Docket No. 09-51, Sixth Report and Order, 25 FCC Rcd 18762 (2010) (E-rate Sixth Report and Order). 5 Rural Health Care Universal Service Support Mechanism, WC Docket No. 02-60, Notice of Proposed Rulemaking, 25 FCC Rcd 9371 (2010) (Rural Health Care NPRM). 6 See Connect America Fund, WC Docket Nos. 10-90, 07-135, 05-337, 03-109, GN Docket No. 09-51, CC Docket Nos. 01-92, 96-45, Notice of Proposed Rulemaking and Further Notice of Proposed Rulemaking, FCC 11-13, para. 487 (rel. Feb. 9, 2011) (USF/ICC Transformation NPRM); Universal Service Reform, Mobility Fund, WT Docket No. 10-208, Notice of Proposed Rulemaking, 25 FCC Rcd 14716 (2010). Federal Communications Commission FCC 11-32 4 of the 1996 Act.7 During this period, consumers have increasingly turned to wireless service, and Lifeline/Link Up now provides many participants discounts on wireless phone service. In the last several years, Lifeline/Link Up has grown significantly, from an inflation-adjusted $667 million in 20008 to $1.3 billion in 2010,9 with new participation by firms, such as pre-paid wireless providers, that focus on serving low-income consumers. The time has come to review the program holistically, address the risks and challenges it now presents, and ensure that it is on a firm footing to efficiently and effectively achieve its statutory purpose. 4. Accordingly, last year the Commission asked the Joint Board to recommend reforms focused on eliminating waste, fraud, and abuse; controlling costs; and improving program performance and accountability.10 In response, the Joint Board recommended that the Commission: (1) encourage automatic enrollment as a best practice for all states; (2) adopt uniform minimum verification procedures and sampling criteria that would apply to all ETCs in all states; (3) allow states to utilize different and/or additional verification procedures so long as these procedures are at least as effective in detecting waste, fraud, and abuse as the uniform minimum required procedures; (4) require all ETCs in all states to submit the data results of their verification sampling to the Commission, the states, and the Universal Service Administrative Company and make the results publicly available; and (5) adopt mandatory outreach requirements for all ETCs that receive low-income support and maintain advisory guidelines for states with respect to performing low-income outreach.11 We seek comment on the Joint Board’s recommendations here. The Wireline Competition Bureau has also taken a number of steps to combat waste, fraud, and abuse, including requiring one provider to contact annually all of its Lifeline subscribers to ensure those customers are only receiving one benefit per household12 and requiring another provider to remove customers from its Lifeline roster if they do not use their phones for sixty days.13 And late last 7 In 2000, the Commission established enhanced benefits for households on Tribal lands. 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, 12231-32, paras. 42-43 (2000) (Tribal Order). In 2004, the Commission made a number of discrete changes to the program, including changing eligibility criteria for qualifying households in certain states and adopting outreach guidelines for carriers, but did not examine the overall program structure. See Lifeline and Link-Up, WC Docket No. 03-109, Report and Order and Further Notice of Proposed Rulemaking, 19 FCC Rcd 8302 (2004) (2004 Lifeline and Link Up Order/FNPRM). 8 See Universal Service Administrative Company, Quarterly Administrative Filings for 2001, Second Quarter (2Q), Appendices at LI04 (filed Jan. 15, 2001) (USAC 2Q 2001 FILING), available at http://usac.org/about/governance/fcc- filings/2001/quarter2/default.aspx. Adjustments for inflation were calculated using the Bureau of Labor Statistics’ Consumer Price Index Inflation Calendar. See http://www.bls.gov/data/inflation_calculator.htm (last visited Mar. 1, 2011). 9 This figure is based on USAC disbursements in 2010, which may be adjusted by true-ups. See UNIVERSAL SERVICE ADMINISTRATIVE COMPANY, QUARTERLY ADMINISTRATIVE FILINGS FOR 2011, SECOND QUARTER (2Q), APPENDICES AT M04 (filed Jan. 31, 2011) (USAC 2Q 2011 FILING), available at http://www.usac.org/about/governance/fcc-filings/2011/quarter-2.aspx. 10 See Federal-State Joint Board on Universal Service, Lifeline and Link Up, CC Docket No. 96-45, WC Docket No. 03-109, Order, 25 FCC Rcd 5079, 5079, para. 1 (2010) (2010 Joint Board Referral Order). 11 2010 Recommended Decision, 25 FCC Rcd at 15599, para. 2. 12 Federal-State Joint Board on Universal Service; TracFone Wireless, Inc. Petition for Designation as an Eligible Telecommunications Carrier in the State of New York et al., CC Docket No. 96-45, Order, 23 FCC Rcd 6206 (2008) (TracFone ETC Designation Order). 13 Telecommunications Carriers Eligible for Universal Service Support; Virgin Mobile USA, L.P. Petitions for Designation as an Eligible Telecommunications Carrier in the States of Alabama, Connecticut, District of (continued….) Federal Communications Commission FCC 11-32 5 year, the GAO issued a report with recommendations for program reforms,14 which also inform our proposals here. 5. This Notice of Proposed Rulemaking (NPRM) puts forward a set of proposals to reform and modernize Lifeline/Link Up, including recommendations of the Joint Board, GAO, and the National Broadband Plan. 6. We begin by proposing specific performance goals for the program, and metrics to measure its performance in advancing the universal service objectives established by Congress. We then propose immediate steps to address waste, fraud, and abuse and to bolster mechanisms to detect and deter rule violations. In particular, we propose to strengthen our rules and improve the incentives of program participants to ensure that the program does not provide multiple, duplicative discounts to the same residential address. We also propose to eliminate reimbursement for certain services, including initiation fees that may be inflated or selectively applied only to low-income households. To reduce waste by ensuring that the program supports only communications services that consumers actually use, we propose to eliminate funding for services that go unused for more than sixty days. We seek comment on expanding oversight, including through more extensive audits. We also seek comment on a proposal to impose an annual funding cap on Lifeline/Link Up, either temporarily—until implementation of the reforms proposed in this Notice—or permanently. 7. This NPRM also addresses the unique situations facing residents on Tribal lands, who historically have had phone penetration substantially below the national average. We propose to clarify eligibility requirements for low-income Tribal households, and to permit Tribal enrollment based on participation in the Food Distribution Program on Indian Reservations. 8. This NPRM also seeks comment on a number of proposals to streamline and improve overall program administration. We ask whether the current system—in which responsibility for enrolling customers and ensuring their continued eligibility is split among carriers, state agencies, and third-party administrators—provides the right framework for prudent management of public resources and effective program administration. We propose to require all states to utilize the same baseline eligibility requirements that exist in our federal rules, which could streamline enrollment and facilitate verification of ongoing eligibility, and seek comment on allowing states to use eligibility standards that supplement the minimum federal uniform standards. Consistent with the recommendation of the Joint Board, we propose uniform national standards for the minimum verification of ongoing customer eligibility to stay enrolled in Lifeline and seek comment on whether states should be permitted to impose additional verification requirements beyond that federal standard. We also seek comment on a proposal to use an automated information management system to prevent duplicate claims for support, provide real-time electronic verification of consumer eligibility, and provide a means of ongoing verification of eligibility 9. We also ask how the program should be modernized in light of significant marketplace changes in the last fifteen years. We seek to develop a record on what basic services the program should support, and we seek comment on whether the current framework for determining reimbursement levels remains appropriate in an environment when many service offerings are not rate regulated. 10. We also propose reforms to put Lifeline/Link Up on a more solid footing to achieve Congress’s goal of addressing the 21st century challenge of helping low-income households adopt (Continued from previous page) Columbia, Delaware, New Hampshire, WC Docket No. 09-197, Order, DA 10-2433, at para. 24 (rel. Dec. 29, 2010) (Virgin Mobile 2010 ETC Order) 14 See 2010 GAO REPORT at 3. Federal Communications Commission FCC 11-32 6 broadband. Although access to affordable voice service remains vital to consumers,15 supporting basic voice service alone may no longer be adequate to meet the basic communications needs of low-income Americans. Broadband is becoming an essential communications platform. Broadband can help working parents stay involved in their child’s education, enroll in and complete a distance-learning class to improve professional skills, and complete everyday tasks like paying bills and shopping for necessities. Broadband can help children in inner-city neighborhoods and remote rural towns access high-quality online educational content that might not otherwise be available to them. Broadband can help the unemployed search for jobs and apply for job postings, many of which are simply not available offline. 11. But many low-income Americans cannot afford a home broadband connection. Our 2010 Broadband Consumer Survey found that while 93 percent of households with incomes greater than $75,000 have broadband at home, only 40 percent of adults with household incomes less than $20,000 have broadband at home.16 And consumers cited cost as a primary obstacle to adoption.17 This gap in broadband adoption is significantly greater than the gap in telephone penetration rates.18 While Lifeline and Link Up have significantly narrowed the telephone subscribership gap between low-income households and the national average, a new divide has emerged for broadband. 12. Consistent with our statutory obligation to ensure access to quality, affordable communications, we seek comment on proposals to ensure Lifeline and Link Up meet the modern communications needs of low-income consumers. In particular, we propose that eligible households be permitted to use Lifeline discounts on bundled voice and broadband service offerings. We also seek comment on how best to design a broadband pilot program that will help inform the Commission’s inquiry into meeting the 21st century communications needs of low-income consumers. II. BACKGROUND 13. History. Universal service has been a national objective since the Communications Act of 1934, in which Congress stated its intention to “make available, so far as possible, to all the people of the United States . . . a rapid, efficient, Nation-wide, and world-wide wire and radio communication service with adequate facilities at reasonable charges.”19 In 1996, Congress codified the Commission’s and the states’ commitment to advancing the availability of telecommunications services to all 15 See Letter from Mitchell F. Brecher, Greenberg Traurig, to Marlene H. Dortch, Secretary, Federal Communications Commission, WC Docket No. 03-109, Enclosure 2 (filed Dec. 7, 2010) (TracFone Dec. 7, 2010 Ex Parte Letter) (providing statements of Catholic Charities USA and the Hispanic Federation discussing the importance of the Lifeline program). 16 See John B. Horrigan, PhD, Broadband Adoption and Use in America 13, Exhibit 1 (Fed. Comm. Comm’n, OBI Working Paper Series, Working Paper No. 1, 2010) (Broadband Adoption and Use in America), available at http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-296442A1.pdf. 17 Broadband Adoption and Use in America at 5; see also U.S. DEP’T OF COMMERCE, NAT’L TELECOMM. & INFO. ADMIN., DIGITAL NATION: EXPANDING INTERNET USAGE 5 (2011) (NTIA DIGITAL NATION), available at http://www.ntia.doc.gov/reports/2011/NTIA_Internet_Use_Report_February_2011.pdf (presenting a more up-to- date, but less detailed, analysis of the reasons why consumers have not adopted broadband at home and finding cost to be the most important factor among Internet users who do not have broadband at home, but finding “don’t need/not interested” the leading reason among consumers who do not use the Internet anywhere). 18 As of March 2009, 90% of low-income households subscribed to telephone service in their home, compared to a national average of 96 percent. See Universal Service Monitoring Report, CC Docket No. 98-202, Prepared for the Federal-State Joint Board on Universal Service in CC Docket No. 96-45, Table 2-2 (2010) (2010 Universal Service Monitoring Report), available at http://www.fcc.gov/Daily_Releases/Daily_Business/2010/db1230/DOC- 303886A4.pdf; see infra paras. 25-27 (trends). 19 47 U.S.C. § 151 (creating the Federal Communications Commission). Federal Communications Commission FCC 11-32 7 Americans, and established principles upon which the Commission shall base policies for the preservation and advancement of universal service.20 Among other things, Congress articulated national goals that services should be available at “affordable” rates and that “consumers in all regions of the nation, including low-income consumers, . . . should have access to telecommunications and information services.”21 14. Lifeline was originally implemented in 1985 to ensure that the increase in local rates that occurred in the aftermath of the breakup of AT&T would not put local phone service out of reach for low- income households. Support for low-income households has long been a partnership between the states and the federal government, and the universal service program historically was administered in cooperation with state regulators through the ratemaking process.22 The program originally was designed to allow companies to be made whole for foregone revenues associated with discounts provided to eligible Lifeline/Link Up consumers. The program was never intended to provide a profit for service providers. 15. The program was revised and expanded after passage of the Telecommunications Act of 1996, based on recommendations of the Joint Board.23 After the 1996 Act, all states participated in the program, and the level of federal Lifeline/Link Up support increased. The Commission broadened participation to all Eligible Telecommunications Carriers (ETCs), making the provision of Lifeline service a condition of being an ETC.24 The program is administered by the Universal Service Administrative Company (USAC) under Commission direction, although many key attributes of the program still are implemented at the state level. 16. Funding is not provided directly to the low-income consumers it benefits. Rather, ETCs provide discounts to eligible households and receive reimbursement from the Universal Service Fund for the provision of such discounts.25 Today, Lifeline provides discounts of up to $10 on monthly telephone 20 47 U.S.C. § 254(b). 21 See 47 U.S.C. § 254(b)(1),(3); see also 47 U.S.C. § 151. 22 In particular, the Commission waived the federal subscriber line charge – which enabled telephone companies to increase local rates – in those states which provided some level of matching support. The Commission originally established the Lifeline and Link Up programs pursuant to its general authority under sections 1, 4(i), 201, and 205 of the Communications Act of 1934. 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) (subsequent history omitted) (Universal Service First Report and Order). 23 See Universal Service First Report and Order, 12 FCC Rcd at 8952, paras. 326-28. The Joint Board is comprised of FCC commissioners, state utility commissioners, and a consumer advocate representative. See 47 U.S.C. §§ 254(a)(1), 410(c). 24 Section 214(e)(2) of the Act gives state commissions the primary responsibility for performing ETC designations. 47 U.S.C. § 214(e)(2); see Tribal Order, 15 FCC Rcd at 12255, para. 93. Section 214(e)(6) directs the Commission to, on request, designate as an ETC “a common carrier providing telephone exchange service and exchange access that is not subject to the jurisdiction of a State commission.” 47 U.S.C. § 214(e)(6); see Tribal Order, 15 FCC Rcd at 12255, para. 92. 25 Carriers file FCC Forms 497 to receive reimbursement for providing Lifeline/Link Up support to eligible subscribers. USAC, Low Income, Step 6: Submit Lifeline and Link Up Worksheet, http://usac.org/li/telecom/step06/default.aspx (last visited Mar. 1, 2011). ETCs may file their Forms 497 on either a monthly or quarterly basis, and are reimbursed by USAC on a monthly basis. Id.; USAC, Low Income, Step 7: Payment Process and Status, http://usac.org/li/telecom/step07/default.aspx (last visited Mar. 1, 2011). Federal Communications Commission FCC 11-32 8 charges,26 and Link Up provides a discount of up to $30 on the cost of commencing telephone service for qualifying low-income households.27 These amounts may be supplemented by additional funding provided from state universal service funds in some states. Discounts are available for one telephone line, either fixed (typically wireline) or mobile (wireless), per eligible household. 17. Characteristics of the Marketplace. Much of the structure of the current program reflects its origins, even though the communications marketplace has changed dramatically in the last fifteen years. When the program was first established, mobile phones did not exist as a consumer product, only incumbent telephone companies provided local telephone service, and the program was designed for carriers whose rates were regulated. Today, consumers have various options for fixed or mobile voice services, many of which are not rate regulated. Mobile phone service is vastly more prominent than even a few years ago—more than 25 percent of adults in the general population live in households with only wireless phones, while 40 percent of 18-24 year olds have “cut the cord.”28 Furthermore, consumers today often purchase packages of services that allow them to call anywhere in the country, with no additional charge for long distance calling. 18. Bifurcated Federal and State Responsibilities. The current federal-state structure of the program presents challenges in managing the program’s size and preventing waste, fraud, and abuse. Although Lifeline/Link Up is a federal program, its administration varies significantly among the states for such key questions as who is eligible for benefits, how eligible consumers are enrolled, what certifications of eligibility are required, and how ongoing eligibility is verified. 19. States that do not maintain their own low-income programs are known as federal default states. There currently are ten default states (eight states and two territories).29 The remaining states do not follow all federal rules. 20. Discounts are available to households that qualify as “low-income,” but there is no uniform national definition for that term. Instead, when the Commission implemented the 1996 Act, it chose not to disturb the framework already in place under which states with their own programs determined qualifications for Lifeline. States must base eligibility criteria solely on income or factors directly related to income, but within that general rule states take varying approaches.30 For instance, of the twenty-two states that allow participation based on income alone, some have established an income threshold that is higher than the Commission’s, which enables more low-income households to enroll, 26 As discussed infra, Lifeline support amounts vary from state to state, depending on various factors affecting the tiers of support established in section 54.403 of the Commission’s rules. For eligible consumers living on tribal lands, the monthly discount is up to $25. See infra Section IX.A.2. 27 In addition, carriers may be reimbursed for their provision of Toll Limitation Service to eligible households, which enables those consumers to obtain toll blocking or toll control at no cost. 47 C.F.R. § 54.403(c). 28 STEPHEN J. BLUMBERG AND JULIAN V. LUKE, CENTERS FOR DISEASE CONTROL AND PREVENTION, NATIONAL CENTER FOR HEALTH STATISTICS, WIRELESS SUBSTITUTION: EARLY RELEASE OF ESTIMATES FROM THE NATIONAL HEALTH INTERVIEW SURVEY, JANUARY - JUNE 2010 2-3 (2010) (WIRELESS SUBSTITUTION SURVEY), available at http://www.cdc.gov/nchs/data/nhis/earlyrelease/wireless201012.pdf. 29 The current federal default states are Delaware, Hawaii, Indiana, Iowa, Louisiana, New Hampshire, North Dakota, South Dakota, American Samoa, and the Northern Mariana Islands. See Universal Service Administrative Company (USAC) website, Low Income, Frequently Asked Questions, http://www.universalservice.org/li/tools/frequently- asked-questions/faq-lifeline-linkup-order.aspx#q1 (last visited Mar. 1, 2011). 30 See 47 C.F.R. §§ 54.409 (consumer qualification for Lifeline), 54.410 (certification and verification of consumer qualification for Lifeline), 54.415 (consumer qualification for Link Up), 54.416 (certification of consumer qualification for Link Up). States must base eligibility criteria solely on income or factors directly related to income. 47 C.F.R. §§ 54.409(a), 54.415(a). Federal Communications Commission FCC 11-32 9 while others have established a lower threshold.31 21. The Commission’s eligibility criteria encompass households at or below 135 percent of the federal poverty guidelines, and households that participate in various income-based public-assistance programs, such as Medicaid, Food Stamps, and Federal Public Housing Assistance.32 As shown below in Chart 1, a family of three would be eligible to receive low-income benefits under the Commission’s rules if total household income were less than $25,016 per year. Chart 1 135% of Federal Poverty Guidelines in 48 Contiguous States & D.C.33 Persons in Family or Household Income Threshold 1 $ 14,702 2 $ 19,859 3 $ 25,016 4 $ 30,173 22. Practices also differ from state to state regarding how the program is administered. In the federal default states, and in many states that have their own low-income program, ETCs are responsible for processing applications, certifying that applicants are eligible for benefits, and verifying ongoing eligibility.34 In other states, some or all of these functions may be performed by the state public utility commission, another state agency, or a third-party administrator.35 23. Administrative processes to mitigate waste, fraud and abuse are also inconsistent. For 31 2010 GAO REPORT at 50. 32 47 C.F.R. § 54.409(b). If a consumer’s eligibility is based on income, the consumer must provide acceptable documentation of income eligibility including, among other things, the prior year’s state, federal, or tribal tax return and a current income statement from an employer. 47 C.F.R. §§ 54.410(a)(2), 54.416. 33 Annual Update of the U.S. Dep’t. of Health and Human Servs. Poverty Guidelines, 76 Fed. Reg. 3,367, 3,637-38 (Jan. 20, 2011). 34 See 47 C.F.R. §§ 54.409, 54.410, 54.415, 54.416. In contrast, consumers seeking social service benefits from other federal programs such as the Low Income Home Energy Assistance Program (LIHEAP), Temporary Assistance for Needy Families (TANF), or the Supplemental Nutrition Assistance Program (SNAP) typically file an application with a state social services office, which then verifies the consumer’s eligibility for the program. See, e.g., Nevada Division of Welfare, Energy Assistance Program – How to Apply, https://dwss.nv.gov/index.php?option=com_content&task=view&id=120&Itemid=286 (last visited Mar. 1, 2011); Virginia Department of Social Services, Temporary Assistance for Needy Families, http://www.dss.virginia.gov/benefit/tanf/index.cgi (last visited Mar. 1, 2011); Oregon Department of Human Services, SNAP Applicant and Recipient Information, http://www.oregon.gov/DHS/assistance/foodstamps/snap- info.shtml#apply (last visited Mar. 1, 2011). 35 As of a 2006 survey conducted by the National Regulatory Research Institute, in twelve states the program was administered by the public utility commission, in twelve states the program was administered by another state agency, in eight states the program was administered by a third party, and in six states the program was administered by the telecommunications carrier. For instance, California, Oklahoma and Texas use a third party administrator to perform these functions. In Montana, the Department of Public Health and Human Services certifies and verifies eligibility, while the public utility commission sets the discount and approves tariff rates for Lifeline service. NATIONAL REGULATORY RESEARCH INSTITUTE (NRRI), STATE UNIVERSAL SERVICE FUNDING MECHANISMS: RESULTS OF NRRI’S 2005-2006 SURVEY 55, Table 34 (2006) (NRRI STUDY). Federal Communications Commission FCC 11-32 10 instance, while twenty-two states permit enrollment based on income, not all require documentation of income. Six states permit self-certification of income under penalty of perjury. Fourteen states conduct random audits of Lifeline recipients, while ten states conduct audits of ETCs.36 24. Carriers offering Lifeline services in the ten federal default states must verify annually the continued eligibility of a statistically valid random sample of their Lifeline subscribers.37 According to GAO, seventeen of the other states require verification of a statistically valid sample of low-income households, and thirteen have an online verification system that uses databases from public assistance programs or income reports.38 Only federal default states and a handful of other states require ETCs to submit the results of annual verifications to USAC,39 providing the Commission with an incomplete picture of whether there is waste, fraud and abuse in the program. 25. Trends. There is significant variation among the states in the percentage of eligible households participating in the program, which may be due to state eligibility requirements, the extent of outreach, the process for enrolling customers, the number and type of ETCs in the state, support levels, and other factors.40 In 2009, 8.6 million eligible households participated in Lifeline nationwide, which represented 33 percent of the 25.7 million low-income households at the time.41 Chart 2 below illustrates the variation in estimated participation rates among the states. 36 2010 GAO REPORT at 51, Table 6. 37 47 C.F.R. § 54.410(c)(2). In a February 2010 declaratory ruling, the Commission found that when a state commission mandates Lifeline support, but does not impose certification and verification requirements on certain carriers within the state, the affected carriers must follow federal default certification and verification requirements. Lifeline and Link Up; Petitions for Declaratory Ruling and Requests for Waiver by US Cellular Corporation, et al., WC Docket No. 03-109, Order and Declaratory Ruling, 25 FCC Rcd 1641, 1645, para. 9 (2010). 38 2010 GAO REPORT at 51. 39 Non-default states that require ETCs to submit their verification results to USAC include Alabama, Arkansas, Arizona, New York, North Carolina, Pennsylvania, and West Virginia. 40 See NATIONAL BROADBAND PLAN at 172 (citing Mark Burton et al., Understanding Participation in Social Programs: Why Don’t Households Pick up the Lifeline?, 7 B.E. J. ECON. ANAL. & POL’Y 57 (2007), available at http://faculty.msb.edu/jtm4/Papers/BEJEAP.2007.pdf; Janice A. Hague et al., Whose Call Is It? Targeting Universal Service Programs to Low-Income Households’ Telecommunications Preferences, 33 TELECOMM. POL’Y 129, 136-38 (2009), available at http://warrington.ufl.edu/purc/purcdocs/papers/0805_Hauge_Whose_Call_Is.pdf. 41 See 2010 Universal Service Monitoring Report at Table 2.1; see also USAC 2009 Lifeline Participation Rate Data, http://www.usac.org/li/about/participation-rate-information.aspx (last visited Mar. 1, 2011). Federal Communications Commission FCC 11-32 11 Chart 2 26. Telephone subscribership among low-income Americans has grown significantly since 1984. Eighty percent of low-income households had telephone service in 1984, compared to a national average of 92 percent at that time. The gap has narrowed considerably since the inception of Lifeline/Link Up: As of March 2009, 90 percent of low-income households subscribed to telephone service in their home, compared to a national average of 96 percent. 42 Moreover, states with higher dollar amounts of Lifeline support exhibited higher growth in phone subscribership from 1997 to the 42 2010 Universal Service Monitoring Report at 2-2. The Commission’s current telephone subscription penetration rate is based on the Census Bureau’s Current Population Survey (CPS), which does not specifically break-out wireless, VoIP, or over-the-top voice options available to consumers. FEDERAL COMMUNICATIONS COMMISSION, WIRELINE COMPETITION BUREAU, INDUSTRY ANALYSIS AND TECHNOLOGY DIVISION, TELEPHONE SUBSCRIBERSHIP IN THE UNITED STATES 1 (2010) (WCB SUBSCRIBERSHIP REPORT). The specific questions asked in the CPS are: “Does this house, apartment, or mobile home have telephone service from which you can both make and receive calls? Please include cell phones, regular phones, and any other type of telephone.” And, if the answer to the first question is “no,” this is followed up with, “Is there a telephone elsewhere on which people in this household can be called?” If the answer to the first question is “yes,” the household is counted as having a telephone “in unit.” If the answer to either the first or second question is “yes,” the household is counted as having a telephone “available.” Id. at 3. Federal Communications Commission FCC 11-32 12 present. 43 27. The amount of support has also grown significantly. The program provided $1.3 billion in support in 2010,44 compared to an inflation-adjusted $221 million in support to low-income households in 1997.45 The initial growth in Lifeline/Link Up after the implementation of the 1996 Act was due in large part to the expansion of the program to all fifty states and the increased level of support provided compared to levels prior to the 1996 Act.46 In 2000, the Commission provided enhanced support to households on Tribal lands.47 The program continued to grow between 2001 and 2004 due in part to increases in the federal subscriber line charge, which determines Lifeline support levels.48 Meanwhile, over the years, wireless companies increasingly sought ETC designations, providing additional options for Lifeline service. In the last several years, a number of pre-paid wireless providers have become Lifeline-only ETCs,49 fiercely competing for the business of low-income consumers by marketing “free” 43 States that have provided a full or high level of Lifeline support for telephone service for low-income consumers experienced an average growth in telephone penetration rates for low-income households of 4.6% from March 1997 to March 2009. The states are divided into three groups: “Full or High Assistance” states providing at least $3.00 of state support to get federal matching support of at least $1.50 per line per month; “Intermediate Assistance” states providing between $0.50 and $3.00 of state support, and receiving between $0.25 and $1.50 federal matching support per line per month; “Basic or Low Assistance” states providing less than $0.50 of state support, and receiving less than $0.25 federal matching support per line per month. See 2010 Universal Service Monitoring Report at 6-8. In contrast, during the same time period, states that provided a basic or low level of Lifeline support experienced an average increase in telephone penetration rates of only 2.9%. 44 This figure is based on USAC estimates. See UNIVERSAL SERVICE ADMINISTRATIVE COMPANY, QUARTERLY ADMINISTRATIVE FILINGS FOR 2011, SECOND QUARTER (2Q), APPENDICES AT M04 (filed Jan. 31, 2011) (USAC 2Q 2011 FILING), available at http://www.usac.org/about/governance/fcc-filings/2011/quarter-2.aspx. 45 See 2010 Universal Service Monitoring Report at Chart 2-2. Adjustments for inflation were calculated using the Bureau of Labor Statistics’ Consumer Price Index Inflation Calendar. See http://www.bls.gov/data/inflation_calculator.htm (last visited Mar. 1, 2011). 46 Support levels grew from an inflation-adjusted $231 million in 1996 to $621 million in 1998, the first year after implementation of section 254. See 2010 Universal Service Monitoring Report at Chart 2-2. 47 In 2010, $101 million was provided to households on Tribal lands (estimated based on annualizing claims for the first 9 months of 2010). 2Q USAC filing appendix LI07 – Low Income Support Distributed by State in 2007 through 3Q2010, available at: http://www.usac.org/about/governance/fcc- filings/2011/Q2/LI07%20%20Low%20Income%20Support%20Distributed%20by%20State%20in%202007%20and %20through%203Q2010.xls. 48 Support levels grew from an inflation-adjusted $819 million in 2002 to $927 million in 2004. See 2010 Universal Service Monitoring Report at Chart 2-2. 49 See, e.g., Petition of TracFone Wireless, Inc. for Forbearance from 47 U.S.C. § 214(e)(1)(A) and 47 C.F.R. § 54.201(i), CC Docket No. 96-45, Order, 20 FCC Rcd 15095 (2005) (TracFone Forbearance Order); TracFone ETC Designation Order, 23 FCC Rcd at 6206; Virgin Mobile USA, L.P. Petition for Forbearance from 47 U.S.C. § 214(e)(1)(A); Petition for Designation as an Eligible Telecommunications Carrier in the State of New York; Petition for Designation as an Eligible Telecommunications Carrier in the Commonwealth of Virginia; Petition for Limited Designation as an Eligible Telecommunications Carrier in the State of North Carolina; Petition for Limited Designation as an Eligible Telecommunications Carrier in the State of Tennessee, CC Docket No. 96-45, Order, 24 FCC Rcd 3381 (2009) (Virgin Mobile Forbearance Order); Federal-State Joint Board on Universal Service; Telecommunications Carriers Eligible for Universal Service Support; i-wireless, LLC Petition for Forbearance from 47 U.S.C. § 214(e)(1)(A), CC Docket No. 96-45, WC Docket No. 09-197, Order, 25 FCC Rcd 8784 (2010) (i- wireless Forbearance Order); Telecommunications Carriers Eligible for Universal Service Support; Federal-State Joint Board on Universal Service; Head Start Petition for Forbearance; Consumer Cellular Petition for Forbearance; Midwestern Telecommunications Inc. Petition for Forbearance; Line Up, LLC Petition for Forbearance, WC Docket No. 09-197, CC Docket No. 96-45, Order, 25 FCC Rcd 10510 (2010) (Global (continued….) Federal Communications Commission FCC 11-32 13 phone service.50 This development has expanded choices in many states for low-income consumers who may have been unlikely to subscribe to wireline voice service,51 but it has also led to significant growth in the fund. Pre-paid wireless ETCs now account for one-third of all Lifeline reimbursements.52 III. ESTABLISHING PROGRAM GOALS AND MEASURING PERFORMANCE 28. As we move forward to reform and modernize the Commission’s low-income support mechanisms, we seek comment on the program’s performance goals, consistent with our statutory obligations, and on how best to measure the program’s performance in achieving those goals. 29. In establishing performance goals, we are guided in the first instance by the Act. Section 254(b) outlines the principles upon which the Commission and the Joint Board are to base policies for the “preservation and advancement of universal service.” These principles include the notion that quality services should be available at “just, reasonable and affordable” rates, and 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 services in urban areas at reasonably comparable rates.53 The statute specifies that there should be specific, predictable, and sufficient federal and state mechanisms to preserve and advance universal service. Section 254(c)(1) of the Act also sets forth certain criteria that we should consider when deciding what services are eligible for universal service support, including the extent to which those services are “essential to education, public health, or public safety;” and “consistent with the public interest, convenience, and necessity.”54 30. Historically, the primary goal for the Lifeline/Link Up program has been to facilitate the availability of affordable phone service to low-income households. Over time, telephone penetration rates for low-income consumers have increased, although they still remain below the national average and a six percent gap has remained relatively stable in recent years.55 31. In 2007, the Commission took initial steps to improve the management of the low-income (Continued from previous page) Forbearance Order). 50 For example, TracFone noted that the initial SafeLink Wireless offering was 68 free minutes per month until a competitor offered 200 free minutes, to which TracFone responded with its 250-minute offer. See TracFone Dec. 7, 2010 Ex Parte Letter, at 5. 51 NATIONAL BROADBAND PLAN at 173. According to some, mobile phones are becoming more essential than landline phones for low-income consumers. See, e.g., Janice A. Hauge, Eric P. Chiang & Mark A. Jamison, Whose Call is It? Targeting Universal Service Programs to Low-Income Households’ Telecommunications Preferences, 33 TELECOMM. POL’Y 129, available at http://ssrn.com/abstract=1324281. Pre-paid wireless offerings are often ideal for low-income or unemployed/under-employed consumers because they enable consumers to better manage expenses. See, e.g., Nexus TracFone Link Up Comments, at Attach. 1, 6 (Declaration of August Ankum and Olesya Denney, QSI Consulting). 52 See USAC 2Q 2011 FILING, Appendices at LI04 (Quarterly Low Income Disbursement Amounts by Company (4Q2010)), available at http://www.usac.org/about/governance/fcc-filings/2011/quarter-2.aspx. 53 See 47 U.S.C. § 254(b)(1),(3). 54 See 47 U.S.C. § 254(c)(1)(A),(D). 55 We note, however, that the disparity in penetration rates for low-income households living on Tribal lands compared to the national average has been significantly higher. See U.S. GOVERNMENT ACCOUNTABILITY OFFICE, REPORT TO CONGRESSIONAL REQUESTERS, GAO 06-189, TELECOMMUNICATIONS: CHALLENGES TO ASSESSING AND IMPROVING TELECOMMUNICATIONS FOR NATIVE AMERICANS ON TRIBAL LANDS 2 (2006) (2006 GAO REPORT), available at http://www.gao.gov/new.items/d06189.pdf. Federal Communications Commission FCC 11-32 14 program by adopting measures of efficiency and effectiveness.56 At that time, however, the Commission concluded that it did not have sufficient data to determine appropriate performance goals.57 In 2010, GAO noted that while the Commission had developed performance measures, it had not quantified its goal of increased telephone subscribership among low-income households.58 GAO also noted the importance of developing baseline and trend data for past performance, and of identifying target performance levels for multi-year goals. 32. Clear performance goals and measures should enable the Commission to determine not just whether federal funding is used for intended purposes, but whether that funding is accomplishing the program’s ultimate objectives.59 We now propose to establish explicit performance goals in order to provide a basis for determining whether Lifeline/Link Up is successfully promoting and advancing the availability of quality services at just, reasonable, and affordable rates for low income consumers.60 33. Consistent with the Act and GAO’s recommendations, we seek comment on three specific goals and related performance measures for the Lifeline/Link Up program. 34. We propose that our first performance goal be to preserve and advance the availability of voice service for low-income Americans.61 We note the vital role that voice telephony continues to play for consumers, particularly for public safety and public health. We propose to define “availability” of voice service for purposes of Lifeline/Link Up to mean that low-income households have access to that service. We propose to adopt a goal of eliminating any difference in the availability of voice service for low-income consumers compared to non-low-income consumers. 35. We seek comment on how to measure availability of voice services for low-income 56 In 2007, the Commission noted the goal of increasing phone service subscribership among low-income households. Comprehensive Review of the Universal Service Fund Management, Administration, and Oversight; Federal-State Joint Board on Universal Service; Schools and Libraries Universal Service Support Mechanism; Rural Health Care Support Mechanism; Lifeline and Link-Up, Changes to the Board of Directors for the National Exchange Carrier Association, Inc., WC Docket Nos. 05-195, 02-6, 02-60, 03-109, CC Docket Nos. 96-45, 97-21, Report and Order, 22 FCC Rcd 16372, 16394-95, para. 50 (2007) (2007 Comprehensive Review Order). 57 2007 Comprehensive Review Order, 22 FCC Rcd at 163955, para. 51. The Commission noted that it would continue to evaluate the effectiveness of the performance measures adopted for the low-income program by monitoring the number of program beneficiaries (carriers), the number of low-income customers for which each carrier receives low-income support, and the number of connections supported. The Commission committed to looking at other measurements as well, such as the time it takes USAC to process support payments and authorize disbursements, the average (mean) and median support amount awarded per carrier, and total amount of support disbursed. The Commission also required USAC to report annually to the Commission on the Lifeline annual verification results filed by Qwest, Verizon, and AT&T. Id. at 16395, para. 52. 58 2010 GAO REPORT at 24. 59 The Government Performance and Results Act (GPRA) of 1993 established statutory requirements for federal agencies to engage in strategic planning and performance measurement. See Government Performance and Results Act of 1993, Public Law No. 103-62. GPRA is intended to improve efficiency and effectiveness of federal programs through the establishment of specific goals for program performance. Id. GPRA requires federal agencies to: (1) develop strategic plans with long-term, outcome-related goals and objectives; (2) develop annual goals linked to the long-term goals; and (3) measure progress toward the achievement of those goals in annual performance plans and report annually on their progress in program performance reports. See 5 U.S.C. § 306; 31 U.S.C. §§ 1115 – 1116. 60 47 U.S.C. §254(b)(1). 61 See 47 U.S.C. § 254(b); see also Qwest Communications Comments, WC Docket No. 05-195 (filed Nov. 14, 2008). Federal Communications Commission FCC 11-32 15 households. The Commission has historically measured telephone penetration, which measures voice service subscriptions, as a proxy for availability.62 We propose to establish as an outcome measure the difference between voice service subscribership rates for low-income households eligible for the Lifeline and Link Up program and voice service subscribership rates for the households in the next higher income level as defined in the CPS.63 Based on the most recent information this would suggest a target subscribership rate for low-income households of 96.9 percent, which is the subscribership rate for households with incomes in the $35,000-$39,999 range.64 We seek comment on whether we should use another measure of availability.65 We seek comment on how we should define “low-income household” for the purpose of this performance goal in light of the differing eligibility standards that exist today from state to state. For instance, for simplicity, should we use 135% of the Federal Poverty Guidelines for a family of four as the threshold for monitoring program performance? We seek comment on whether we should instead compare subscribership rates for eligible low-income households with some other measure, such as the mean or median subscribership rate for all non-low income households. 36. We propose as our second performance goal to ensure that low-income consumers can access supported services at just, reasonable, and affordable rates. 66 We have concluded in the past that the concept of affordability has both an absolute and a relative component.67 The absolute component takes into account whether an individual has enough money to pay for a service, and the relative component takes into account whether the cost of a service would require a consumer to spend a disproportionate amount of his or her income on that service.68 Comparing subscribership or adoption rates among low-income households to nationwide subscribership and adoption rates may be useful in evaluating whether supported services are available to low-income households and affordable in absolute terms, but those comparisons may not be dispositive in evaluating whether low-income households can afford those services in relative terms.69 We seek comment on whether an appropriate performance measure for this goal would be to compare the percentage of low-income household income spent on a voice service to the percentage of household income spent on voice service for the next highest income range as identified by the Bureau of Labor Statistics. 37. As our third performance goal, we propose to ensure that our universal service policies provide Lifeline/Link Up support that is sufficient but not excessive to achieve our goals.70 62 See WCB SUBSCRIBERSHIP REPORT at 1-3. 63 WCB SUBSCRIBERSHIP REPORT at Table 4. 64 Id. 65 See Modernizing the FCC Form 477 Data Program, Development of Nationwide Broadband Data to Evaluate Reasonable and Timely Deployment of Advanced Services to All Americans, Improvement of Wireless Broadband Subscribership Data, and Development of Data on Interconnected Voice over Internet Protocol (VoIP) Subscribership, Service Quality, Customer Satisfaction, Infrastructure and Operating Data Gathering, Review of Wireline Competition Bureau Data Practices, WC Docket Nos. 11-10, 07-38, 08-190, 10-132, Notice of Proposed Rulemaking, FCC 11-14, paras. 32-33, 77 (rel. Feb. 8, 2011) (Broadband Data NPRM). 66 See 47 U.S.C. § 254(b)(1). When the Commission initially implemented the 1996 Act, it noted that a variety of factors may impact affordability of phone service, including non-rate factors such as income levels, cost of living, population density, and the size of the customer’s local calling area. Universal Service First Report and Order, 12 FCC Rcd at 8840-42, paras. 114-17. 67 Universal Service First Report and Order, 12 FCC Rcd at 8837-38, para. 110. 68 Id. at 8837-38, para. 110. 69 Id. at 8839, para. 113. 70 See 47 U.S.C. § 254(b)(5). Federal Communications Commission FCC 11-32 16 Administering USF requires balancing competing demands, recognizing that increased demand for funds imposes a greater contribution burden on consumers and businesses. As we have noted previously, the principles outlined in section 254 require us to ensure that quality services are affordable for all consumers but we must also be “mindful of the effects that expanded universal service mechanisms may have on consumers.”71 This goal includes ensuring that the Lifeline/Link Up program is accountable and fiscally responsible, with support disbursed efficiently and effectively only to those who need it. 38. In the Connect America Fund Notice, we sought comment on measuring the relative contribution burden on consumers over time, defined as total inflation-adjusted expenditures of the Fund each year, divided by the number of American households.72 We seek comment here on whether a similar measure would be appropriate for Lifeline/Link Up, specifically tracking whether the inflation-adjusted Lifeline/Link Up expenditure per American household is increasing or decreasing over time. In 2010, the contribution burden for Lifeline/Link Up was equivalent to approximately $0.95 per U.S. household per month.73 39. We also recognize that a key component of achieving our goal of providing support that is sufficient but not excessive is to protect the universal service fund against waste, fraud, and abuse. That benefits consumers and keeps rates more affordable for all consumers by reducing the need to collect funds for the program that are not appropriately utilized. We propose a number of rule changes in this Notice that would reduce waste, fraud, and abuse in the program. We seek comment on whether we should establish as a performance measure keeping erroneous payments in the program below a specified level, for instance by reducing levels of ineligible recipients to a specified percentage.74 40. We also seek comment on appropriate efficiency metrics. For example, is there a way to measure increases in the percentage of low-income household subscribership relative to the amount of funding spent per household receiving Lifeline/Link Up? We seek comment on this and other measures of efficiency. 41. Although we are committed to taking all necessary steps to eliminate reduce waste, fraud, and abuse, we also recognize the potential negative impact of increased government regulatory burden, especially on small companies, of some of the measures that can assist in detecting and deterring waste, fraud and abuse. We seek comment on how best to balance these competing interests. 42. We seek comment on whether these three goals and associated performance measures are appropriate for the Lifeline/Link Up program and ask that commenters consider the reform proposals below in light of the proposed goals and performance measures outlined here. Are there additional or 71 See, e.g., Universal Service First Report and Order, 12 FCC Rcd at 8845-46, para. 125; see also High-Cost Universal Service Support; Federal-State Joint Board on Universal Service, CC Docket No. 96-45, Order on Remand and Memorandum Opinion and Order, 25 FCC Rcd 4072, 4087, para. 28 (2010) (Tenth Circuit Remand Order) (stating that “if the universal service fund grows too large, it will jeopardize other statutory mandates, such as ensuring affordable rates in all parts of the country”). 72 USF/ICC Transformation NPRM, FCC 11-13, at para. 487. 73 This figure is derived by dividing the total projected disbursements for Lifeline/Link Up for 2010 ($1.3 billion) by the total number of households with telephone service (113.6 million). See USAC 2Q 2011 FILING, Appendices at M04, available at http://www.usac.org/about/governance/fcc-filings/2011/quarter-2.aspx; see also WCB SUBSCRIBERSHIP REPORT at Table 1. We note that contributions to USF are assessed on services provided to businesses as well as residential households; this calculation includes business contributions to the USF, so the amount per month on the phone bills of individual households is less. 74 See generally http://paymentaccuracy.gov/ (showing the level of improper payments made by federal agencies for various programs since 2009) (last visited Mar. 1, 2011). Federal Communications Commission FCC 11-32 17 alternative goals and performance measures that we should consider? To the extent that these three goals and performance measures, or any others that the Commission may adopt, may be in tension with each other, commenters should suggest how we should prioritize among competing goals. 43. Last month we sought comment on whether broadband should be a supported service. If broadband becomes a supported service, should we adopt a performance goal of advancing the availability of broadband to low-income households? Analogous to our proposal in the voice context, we seek comment on whether the Commission should establish as an outcome measure the difference between the broadband penetration rates for low-income households and non-low-income households in the next higher income level as defined in the CPS, if broadband becomes a supported service. Should we consider broadband usage in addition to broadband adoption? Unlike voice service, there is a much larger gap in penetration rates for broadband between low-income households and the general population. Should we establish a specific numerical target for narrowing that gap over a particular time period? 44. If Lifeline is modernized to support broadband, how should we measure affordability for broadband? Should we measure affordability separately for voice, broadband, and bundled offerings? We seek comment on what data we would need to monitor the program’s progress if we were to adopt such a performance measure, and the least burdensome means of obtaining such data.75 45. We invite commenters to propose additional or alternative goals and measures for the program. We also seek comment on how our performance measures should take into account the actions of other governmental agencies, such as state regulators, that may impact the Commission’s ability to meet its universal service goals. We note that developing the record on these issues is consistent with GAO’s suggestions.76 IV. IMMEDIATE REFORMS TO ELIMINATE WASTE, FRAUD, AND ABUSE 46. We are committed to eliminating waste, fraud, and abuse in Lifeline/Link Up, and to identifying and penalizing program violations when they occur. We recognize that the recent expansion in program demand, as well as marketplace developments, present increased concerns about potential waste and misconduct. We propose to strengthen our rules to more rigorously ensure that the program subsidizes no more than one subscription per eligible residential address, and to improve audits of the program. We also propose rule changes to ensure that carriers are reimbursed only for the provision of Lifeline services to current customers. Finally, we propose to modify our rules to the extent that they offer unnecessary reimbursement to carriers for expenses that may be inflated or unjustified. The continued success of Lifeline/Link Up depends on targeting support to those who qualify, and ensuring that support does not extend beyond the confines of our rules. A. Duplicate Claims 1. Background 47. To achieve the statutory goal of providing telecommunications access to low-income subscribers, while at the same time controlling the growth of the universal service fund and preventing waste, fraud, and abuse, both the Commission and the Joint Board have consistently stated that Lifeline support is limited to a single line per residence.77 In a series of orders granting wireless ETCs forbearance 75 See Broadband Data NPRM, FCC 11-14, at para. 103. 76 See 2010 GAO REPORT at 30. 77 Lifeline and Link-Up, WC Docket No. 03-109, Report and Order and Further Notice of Proposed Rulemaking, 19 FCC Rcd 8302, 8306 para. 4 (2004) (“Lifeline provides low-income consumers with discounts of up to $10.00 off the monthly cost of telephone service for a single telephone line in their principal residence.”); Federal-State Joint Board on Universal Service, CC Docket No. 96-45, Report and Order, 12 FCC Rcd 8776, 8957 para. 341 (1997) (continued….) Federal Communications Commission FCC 11-32 18 from other program rules, the Commission required those ETCs to take specific steps to further compliance with this requirement. Specifically, the Commission required each wireless ETC granted forbearance to obtain certifications from Lifeline customers at the time of service activation and annually thereafter that they receive Lifeline service from that ETC only, and to establish safeguards to prevent customers from receiving multiple Lifeline subsidies from that ETC at the same address.78 48. Recently, however, evidence has come to light suggesting that in many cases multiple ETCs are seeking reimbursement for Lifeline service provided to the same residence. For example, an audit by USAC found a significant duplication rate between certain ETCs in two states.79 In response to that finding, on January 21, 2011, the Commission’s Wireline Competition Bureau sent a letter to USAC providing direction for resolving duplicate Lifeline claims.80 On February 22, 2011, a group of industry associations filed a petition for reconsideration and request for stay of the January 21st letter.81 49. In addition, parties have raised concerns about the scope and enforceability of the single line per residence rule. In 2009, TracFone Wireless filed a letter requesting that the Commission clarify the scope of the rule as applied to group living facilities, such as nursing homes, and the Commission sought comment on that request.82 In their petition for reconsideration and request for stay of the Bureau’s January 21, 2011 letter to USAC, the industry associations acknowledge evidence of duplicate claims,83 but contend that the Commission has never promulgated a legally binding one line per household rule.84 (Continued from previous page) (First Report and Order) (“qualifying subscribers may receive assistance for a single telephone line in their principal residence”); Federal-State Joint Board on Universal Service, Lifeline and Link-Up, CC Docket No. 96-45, WC Docket No. 03-109, 2010 WL 4390131, para. 34 (Joint Board 2010) (“the Joint Board agrees with commenters that suggest it is important to verify whether Lifeline recipients are receiving support in compliance with the Commission’s one Lifeline-supported line per household rule”); Federal-State Joint Board on Universal Service, CC Docket No. 96-45, 18 FCC Rcd 6589, 6592 para. 4 (Joint Board 2003) (“Lifeline provides low-income consumers with monthly discounts on the cost of receiving telephone service for a single telephone line in their principal residence.”). 78 See Federal-State Joint Board on Universal Service; Telecommunications Carriers Eligible for Universal Service Support; i-wireless Forbearance Order, 25 FCC Rcd at 8790, para. 16; Virgin Mobile Forbearance Order, 24 FCC Rcd at 3387, 3392, paras. 12, 25; TracFone Forbearance Order, 20 FCC Rcd at 15099, 15103, paras. 6, 18. 79 USAC Independent Auditor’s Report, Audit No. LI2009BE006 (December 3, 2010) (TracFone Audit). 80 Letter from Sharon Gillett, Chief, Wireline Competition Bureau, Federal Communications Commission, to Richard Belden, Chief Operating Officer, Universal Service Administration Company, DA 11-110 (Wireline Comp. Bur. 2011), available at http://www.fcc.gov/Daily_Releases/Daily_Business/2011/db0209/DA-11-110A1.pdf. 81 See Petition for Reconsideration of the Wireline Competition Bureau’s January 21, 2011 Letter to the Universal Service Administrative Company, CC Docket No. 96-45, WC Docket No. 03-109 (Feb. 22, 2011) (Petition for Reconsideration); Request for Stay of the Wireline Competition Bureau’s January 21, 2011 Letter to the Universal Service Administrative Company, CC Docket No. 96-45, WC Docket No. 03-109 (February 22, 2011) (Request for Stay). 82 See Comment Sought on TracFone Request for Clarification of Universal Service Lifeline Program “One-Per- Household” Rule As Applied to Group Living Facilities, WC Docket No. 03-109, Public Notice, 24 FCC Rcd 12788 (Wireline Comp. Bur. 2009) (One-Per-Household” Public Notice). 83 See Request for Stay, Declaration of Dewey E. Alexander III, Director Product Marketing, AT&T Services, at para. 3 (noting a USAC finding that in one state, more than 30,000 Lifeline subscribers were receiving support from both AT&T and another ETC) (AT&T Affidavit). 84 See Petition for Reconsideration at 12-13. Federal Communications Commission FCC 11-32 19 50. The Lifeline/Link Up program provides support for “a single telephone line in a Lifeline subscriber’s principal residence.”85 As previously noted, when the program rules were initially adopted, most customers had only one option for telephone service: their incumbent LEC’s wireline service. Today, most low-income households have a choice of voice service from one or more wireline providers and potentially multiple mobile wireless providers.86 These expanded service offerings create greater risks that multiple Lifeline discounts may be provided to a single residence. Notwithstanding existing program protections, including verification and certification requirements,87 a subscriber may apply for and obtain universal service support from more than one provider, either knowingly or unwittingly. The risk of consumers inadvertently obtaining duplicate supported services is aggravated by the fact that some Lifeline providers brand their program offerings with names that do not necessarily make clear that the offerings are supported by Lifeline, e.g., “Assurance” or “SafeLink Wireless.” As a result, consumers may not be aware that they are improperly obtaining duplicate benefits for a given residence. In addition, multiple carriers may seek reimbursement for services provided to a single subscriber, potentially unaware that a supported service is duplicative. 51. Competition among ETCs offering Lifeline-supported services in the same service territory has also exacerbated the potential for duplicative support. For example, with a pre-paid wireless service offering, the consumer pays for service in advance and does not receive a monthly bill at a fixed address. This may make it difficult to determine whether the Lifeline support for the pre-paid service is being provided to an address that is also receiving another Lifeline-subsidized service. Although the Commission has taken significant steps to mitigate this risk,88 concerns remain about supporting multiple Lifeline services when the customer is not associated with a specific residential address. 2. Discussion 52. We propose rules that will reduce the likelihood that residents of a single address will 85 2004 Lifeline and Link Up Order/FNPRM, 19 FCC Rcd at 8306, para. 4; see also Universal Service First Report and Order, 12 FCC Rcd at 8957, para. 341. A similar requirement applies to Link Up. See 47 C.F.R. § 54.411(a)(1). 86 The Commission’s 2010 Telephone Trends Report indicates nearly 60% of households have both a landline and a wireless telephone. FEDERAL COMMUNICATIONS COMMISSION, WIRELINE COMPETITION BUREAU, INDUSTRY ANALYSIS AND TECHNOLOGY DIVISION, TRENDS IN TELEPHONE SERVICE at Table 7.4 (2010) (TRENDS IN TELEPHONE SERVICE), available at http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-301823A1.pdf. The Universal Service Monitoring Report also shows that telephone penetration rates for low-income households was 90.4% in March 2009 as compared with 88% in March 2004. 2010 Universal Service Monitoring Report at 2-2; Universal Service Monitoring Report, CC Docket No. 98-202, Prepared for the Federal-State Joint Board on Universal Service in CC Docket No. 96-45, Table 2-2 (2005), available at http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-262986A4.pdf. CTIA reports that wireless penetration across the United States is approximately 93% in June 2010 as compared with 11% in June 1995. CTIA Media, Industry Info, U.S. Wireless Quick Facts, available at http://www.ctia.org/media/industry_info/index.cfm/AID/10323 (last visited Mar. 1, 2011) (CTIA Quick Facts). 87 See 47 C.F.R. §§ 54.409, 54.410. For example, currently, certification rules applicable in federal default states require consumers that receive income-based support to provide certification under penalty of perjury as to their qualification to receive support and as to the number of individuals in their household. See 47 C.F.R. § 54.410(b). 88 The Commission has conditioned forbearance from the facilities requirement for limited ETC designation upon the carrier requiring its customers to self-certify at time of service activation and annually thereafter that they are head of household and receive Lifeline-supported service only from that carrier. See TracFone Forbearance Order, 20 FCC Rcd at 15095; Virgin Mobile Forbearance Order, 24 FCC Rcd at 3381. Federal Communications Commission FCC 11-32 20 receive more than one subsidized service through the program.89 We understand that there may be reasons to create limited exceptions to the one-per-residential-address rule that we propose in Section V. In this proceeding, we plan to develop a full record to craft appropriately narrow exceptions to application of this proposed rule. We intend to consult with ETCs, Tribal communities, the states, and other interested parties to devise a rule that maximizes the number of Americans with access to communications services, but also protects the fund from waste, fraud, and abuse. 53. In addition, it may be necessary for the Commission to take action on an interim basis while this proceeding is pending to address immediately the harm done to the Fund by USAC reimbursing ETCs for duplicate claims.90 The purpose of the Lifeline program is to provide telecommunications access to low-income subscribers. Recent audit results indicate there is a risk that a significant number of Lifeline consumers may be unnecessarily and improperly receiving support for more than one service per residential address.91 To address the problem of wasteful, duplicate Lifeline support, it may soon be necessary to adopt interim rules in this area while the record develops on the issues on which we are seeking comment. 54. To ensure that Lifeline support is limited to the amount necessary to provide access to telecommunications service for low-income subscribers, we propose several approaches to address duplicative support. We propose to adopt a new section 54.408 and to adopt several amendments to sections 54.400, 54.405, and 54.410 that would facilitate the enforcement of a one-per-residential address limitation.92 We also propose to amend section 54.410 to require ETCs to submit to USAC unique household-identifying information for every supported household to help determine whether two or more ETCs are providing Lifeline-supported service to the same residential address.93 We also propose remedies to address situations in which a consumer has received duplicate support and to deter such abuses. These proposals are a first step in deterring waste, fraud, and abuse, and we recognize there may be other appropriate actions that would take longer to implement, such as the creation of a database. 55. With these proposed rules, we seek to create incentives for carriers to avoid requesting support for duplicative services, and to impose penalties for those who continue to do so. We also seek to ensure that our rules protect subscribers’ privacy and service providers’ proprietary business information. 56. Measures To Assist in Detecting Duplicate Claims. A unique household identifier may be helpful to ensure that a residential address does not receive more than one subscription that is subsidized by the program. Specifically, we seek comment on amending section 54.410 by requiring ETCs to provide such information as customer names, addresses, social security numbers (either the full number or the last four digits), birthdates, or other unique household-identifying information to USAC on their Forms 497.94 Would the benefits of requiring subscribers to provide such information outweigh the burdens, including possibly deterring some households from applying for benefits? 57. We seek comment on the best way to accomplish this efficiently and effectively 89 See discussion supra Section IV.A (One-Per-Residence); discussion infra paras. 167-69 (One-per-residential address certification and verification); see also Appendix A. 90 See discussion supra paras. 48-51. 91 See TracFone Audit; AT&T Affidavit. 92 See Appendix A, 47 C.F.R. §§ 54.400, 54.405, 54.408, 54.410. 93 See Appendix A, 47 C.F.R. § 54.410; see also discussion of Tribal households at infra paras. 119-20. 94 See Appendix A, 47 C.F.R. §§ 54.400, 54.405, 54.410. Federal Communications Commission FCC 11-32 21 consistent with privacy statutes, such as the Electronic Communications Privacy Act (ECPA)95 and section 222 of the Communications Act.96 For example, what information could an ETC be required to provide to USAC on its Form 497 that would ensure that a household is not receiving multiple subsidized subscriptions at the residence? What measures could USAC put in place to ensure compliance with ECPA or other applicable laws, such as requiring ETCs first to obtain subscriber consent to share information?97 To the extent that use of customer proprietary network information (CPNI) is needed to ensure that a subscriber at a single residential address is not receiving multiple subsidized subscriptions, how do commenters suggest we ensure compliance with section 222 of the Communications Act and our implementing rules?98 Are there other laws we need to consider and address? We also seek comment on how best to address any other concerns about privacy, security, or proprietary data issues resulting from collection of this data.99 To streamline enforcement, we propose to require all ETCs to provide USAC with data in a consistent electronic format to facilitate USAC’s detection of duplicate claims. We seek comment on the burdens this would impose on carriers participating in the program. 58. Remedies To Address Duplicate Claims. On January 21, 2011, the Wireline Competition Bureau provided guidance to USAC on how to resolve duplicate subsidies when more than one ETC seeks support from USAC for the same subscriber.100 We propose to amend section 54.405 to codify this guidance.101 We propose that when a duplicate subsidy is discovered, USAC is to notify the ETCs to discontinue including the duplicate subscriber in their list of subscribers for which the ETCs are claiming Lifeline support on the FCC Form 497.102 ETCs must notify the subscriber by phone, and in writing where possible, and explain that the subscriber has 30 days to select one Lifeline provider or face de- enrollment from the program. Once the subscriber selects a single Lifeline provider for the household by signing a new certification, the chosen ETC must so notify USAC and the other ETC. The selected ETC may then seek reimbursement for the subscriber going forward, while the other ETC must de-enroll the household from its Lifeline service and may not seek reimbursement for that subscriber going forward.103 We seek comment on this proposal. 95 18 U.S.C. § 2702(a)(3) (prohibiting a provider of “electronic communication service to the public” from divulging a “record or other information pertaining to a subscriber” to any governmental entity unless otherwise permitted by ECPA). 96 47 U.S.C. § 222. 97 See 18 U.S.C. § 2702(c)(2) (permitting a provider to divulge a record or other information pertaining to a subscriber “with the lawful consent of the customer or subscriber”); 47 U.S.C. § 222(c)(1). 98 47 U.S.C. § 222(a) (imposing on every carrier a “duty to protect the confidentiality of proprietary information”), (c)(1) (restricting use or disclosure of CPNI “[e]xcept as required by law or with the approval of the customer”), (d)(2) (permitting a carrier’s use and disclosure of CPNI “to protect the rights or property of the carrier, or to protect users of those services and other carriers from fraudulent, abusive, or unlawful use of, or subscription to, such services”). 99 Id.; see also Sprint Joint Board Reply Comments at 5; Database discussion infra Section VII.D at paras. 220-21. 100 Letter from Sharon Gillett, Chief, Wireline Competition Bureau, Federal Communications Commission, to Richard Belden, Chief Operating Officer, Universal Service Administration Company, DA 11-110 (Wireline Comp. Bur. Jan. 21, 2011), available at http://www.fcc.gov/Daily_Releases/Daily_Business/2011/db0209/DA-11- 110A1.pdf. 101 See Appendix A, 47 C.F.R. § 54.405. 102 Id. 103 However, a customer may choose to re-enroll in the low-income program with the non-chosen ETC’s Lifeline program at a later point in time. See 47 C.F.R. § 54.405(c), (d) (requiring 60 days notice for termination). Federal Communications Commission FCC 11-32 22 59. Several ETCs and trade associations have suggested an alternative duplicate resolution process to the Commission.104 Under their proposal, USAC would send written notification, approved by the Commission, to all subscribers it identifies as receiving duplicate Lifeline subsidies. Such notice would require them to select one Lifeline provider from a list of providers on a form, which the subscriber would send back to USAC within 30 days.105 USAC would, in turn, notify the affected ETCs about the written notification to the subscriber, and the ETCs would continue to provide Lifeline-supported service to the subscriber and seek reimbursement from the Fund until the USAC resolution process is complete.106 When USAC receives a completed form from the customer with its selection, it would notify only the ETC not selected by the subscriber, and that ETC would be required to de-enroll the subscriber from its Lifeline service. Under this proposal, if USAC does not receive a completed form from the customer, USAC would be instructed to either notify both ETCs to de-enroll the subscriber, or contact the subscriber by phone to determine the subscriber’s provider selection.107 We seek comment on this proposal. Specifically, we seek comment on the advantages and disadvantages of USAC notifying the subscribers receiving duplicate support, as opposed to requiring ETCs to do so. Would subscribers be more or less likely to respond to an inquiry from USAC (an entity they likely are unfamiliar with) as opposed to their service provider? Would the form that USAC sends to the subscriber include every ETC serving the area or just the two ETCs involved with the request for duplicative support? To what extent would implementation of such a proposal increase administrative costs for USAC, and thereby impact the size of the Fund? 60. In the alternative, we could adopt a rule that when duplicate payments are identified, ETCs must notify the customer that they have 30 days to select a single ETC to provide Lifeline service going forward. If the customer makes a timely selection, the carrier not selected will no longer receive Lifeline support for that customer. If the customer fails to make a timely selection, the carrier that has provided continuous Lifeline service to the customer for the longest period of time would continue to receive Lifeline support and the other carrier would no longer receive support for that customer. We seek comment on this proposal. 61. We also seek comment on whether consumers receiving duplicative support should be de-enrolled in Lifeline after violating the one-per-residential-address requirement one or more times. After more than one duplicate subsidy is discovered, should the consumer listed as the subscriber, or the entire household, be de-enrolled from Lifeline? If de-enrollment is temporary, for how long should the exclusion from the program last? If permanently, on what basis? Should we deny eligibility only if there is evidence of intent to violate the “single support per residential address” provision, or if this is not the subscriber or household’s first such violation? Should we impose stricter penalties on a consumer or household with multiple violations? Should we impose stricter penalties on a household receiving more than two Lifeline/Link Up subsidies? Should we first provide an opportunity for the subscriber to demonstrate that the household’s dual enrollment was due to an inadvertent mistake or misunderstanding of applicable requirements? What information would need to be collected and maintained by USAC in 104 Letter from United States Telecom Association, CTIA, Independent Telephone and Telecommunications Alliance, National Telecommunications Cooperative Association, Organization for the Promotion and Advancement of Small Telecommunications Companies, Rural Cellular Association, AT&T, Western Telecommunications Alliance, CenturyLink, Qwest, Tracfone Wireless, Inc, Windstream Communications, Inc and Verizon to Marlene H. Dortch, Secretary, Federal Communications Commission, WC Docket No. 03-109 (February 15, 2011) (ETC Duplicate Letter). 105 Id. 106 Id. 107 Id. Federal Communications Commission FCC 11-32 23 order to ensure that certain subscribers are prohibited from participating in the program in the future? If we do not permanently or temporarily bar such subscribers, what would be an appropriate remedy? Finally, we seek comment the potential impact on the telephone penetration rate among low-income households if this proposal were adopted. 62. We also propose a mechanism for reimbursing the Universal Service Fund in the event of duplicate claims. Our rules currently direct USAC to suspend or delay discounts, offsets, and support amounts provided to a carrier if the carrier fails to provide adequate verification of those discounts, offsets, or support amounts upon reasonable request, or “if directed by the Commission to do so.”108 We propose that USAC be required to seek recovery for funds from all ETCs with duplicates for the applicable period—i.e., if one or more individual residing at the same address have been obtaining Lifeline support from two or more providers simultaneously, USAC would be required to seek recovery from all implicated providers for all support received during the period of duplicative service, which we propose to define as the period beginning at the time a duplicate is identified until the time at which it can be demonstrated that the consumer or household is no longer receiving duplicate benefits. This approach would create appropriately strong incentives for providers to take measures to ensure that they are not seeking excessive support. We note that in this situation support would have been provided in contravention of our “single support per residential address” rule, and thus, arguably, neither ETC should have received support during the period of duplicative support. Further, if the customer does not reply to the notice and is terminated from Lifeline by both ETCs, we propose that USAC recover all Lifeline support sought for that subscriber from both ETCs for the period of time between when the duplicate was first identified to the point at which the customer is terminated from the Lifeline program. We seek comment on this proposal. We also seek comment on, alternatively, requiring that USAC seek recovery only from the ETC that is not chosen by the consumer for the period of time over which duplicate Lifeline support was provided. We seek comment on this proposal. Further, we seek comment on whether we should enable ETCs to avoid reimbursement obligations if they demonstrate responsible efforts to avoid duplicative funding. What would those efforts be and how could they be shown? Should we establish certain minimum safeguards that could act as a safe harbor for ETCs? Should we restrict recovery only upon a showing of negligence by the ETC? Should the ETCs be permitted to seek reimbursement for any recovered funds from the subscriber? For all of the above proposals, and any other approaches suggested by commenters, we seek comment on how we should determine the period of duplicative coverage. 63. Addresses. Several stakeholders have noted that customers have not been permitted to obtain Lifeline or Link Up service when using a P.O. Box as their mailing address.109 Rather, ETCs have required applicants seeking support to provide a unique residential address. This practice has been used to ensure that the subscriber is eligible for supported service and is not receiving more than one subsidized service. We note that the other information we propose to collect—such as name, birth date, and social security number—are unique to individuals but do not fully address concerns that different members of the same household are receiving subsidized service. In contrast, address information might be particularly suitable to prevent that situation. We seek comment on whether to codify as a rule the current practice of requiring unique residential addresses, in order to assist both ETCs and USAC in determining whether an applicant is already receiving Lifeline- or Link Up-supported services. Under such a rule, ETCs would be required to collect the residential addresses of their Lifeline and Link Up applicants before they provided discounted service. Even if a customer receives mail at a P.O. Box, the customer would have to provide a residential address to which its service would be tied. 108 47 C.F.R. § 54.707. 109 See, e.g., City of Cambridge TracFone One-Per-Household Clarification Comments at 2; NNEDV TracFone One-Per-Household Clarification Reply Comments at 2; SBI TracFone One-Per-Household Clarification Comments at 4-5; POTS TracFone One-Per-Household Clarification Comments at 2. Federal Communications Commission FCC 11-32 24 64. We seek comment on this proposal. Are there circumstances where a residential address could not be provided? Are there privacy concerns that we should take into account when requiring customers to provide a residential address? How should we treat transient applicants who do not have a fixed address, or consumers who use rural route addresses, for whom there may be no other U.S. Postal Service address?110 Is there substitute information that we should require in the event that no residential address is available? B. Pro Rata Reporting Requirements 65. Background. An ETC may receive Lifeline program support only for active subscribers. If a customer stops receiving service from the ETC, or if the customer no longer satisfies the eligibility criteria, the ETC is not eligible for support for that customer.111 ETCs submit FCC Form 497 to USAC when seeking reimbursement for eligible consumers.112 Form 497 includes a line for ETCs to report pro rata funds for Lifeline customers who enrolled or disconnected during the month. The instructions for Line 9 of FCC Form 497 currently state: “If claiming partial or pro-rata dollars, check the box on line 9. Enter the dollar amount (if applicable) for all partial or pro-rated subscribers.”113 66. Some ETCs have asserted that these instructions are ambiguous. For example, some ETCs contend that they are permitted, but not required, to report, and seek pro rata recovery for, customers that did not subscribe for the full month. They claim that the phrasing in Form 497 (“If claiming partial or pro rata dollars”) indicates that such submissions are optional, and does not require the ETC to report partial or prorated subscribers. Some ETCs, including Qwest and Verizon, argue that reporting partial-month subscription data would be overly burdensome.114 USAC has sought Commission guidance on this issue.115 67. Discussion. We propose to codify the rule that all ETCs must report partial or pro rata dollars when claiming reimbursement for Lifeline customers who receive service for less than a month. 110 See infra paras. 119-20 (application of the One-Per-Residence Rule in Tribal Communities). 111 See, e.g., 47 C.F.R. § 54.405(c). 112 See FCC Form 497, available at http://www.universalservice.org/_res/documents/li/pdf/Form-497-FCC-OMB- USAC—NO-calculations.pdf. 113 See FCC Form 497, available at http://www.universalservice.org/_res/documents/li/pdf/Form-497-FCC-OMB- USAC—NO-calculations.pdf. 114 See Qwest Communications Reply Comments, WC Docket No. 03-109 (filed April 23, 2010); see also Verizon and Verizon Wireless Comments, WC Docket No. 03-109 (filed April 9, 2010). 115 See Letter from Richard A. Belden, Chief Operating Officer, Universal Service Administrative Company to Sharon Gillett, Chief, Wireline Competition Bureau, Federal Communications Commission, WC Docket No. 03-109 (filed Feb. 23, 2010) (USAC Letter). Specifically, USAC notes that audits of the low-income program have identified carriers that have not prorated requests for Lifeline support amounts for customers whose Lifeline service is initiated or terminated mid-month, and asks the Commission what recovery action, if any, USAC should take against an ETC that has failed to pro-rate support claims for partial-month Lifeline customers. See USAC Letter at 1-2; see also Comment Sought on AT&T Request for Review of a Decision of the Universal Service Administrative Company Concerning Audit Findings Relating to the Low-Income Program, WC Docket No. 03-109, Public Notice, 24 FCC Rcd 7679 (2009); Comment Sought on AT&T Request for Review of a Decision of the Universal Service Administrative Company Concerning Audit Findings Relating to the Low-Income Program, WC Docket No. 03-109, Public Notice, 23 FCC Rcd 13497 (2008); Comment Sought on Qwest Request for Review of a Decision of the Universal Service Administrative Company Concerning Audit Findings Relating to the Low-Income Program, WC Docket No. 03-109, Public Notice, 23 FCC Rcd 7845 (2008); Comment Sought on AT&T Request for Review of a Decision of the Universal Service Administrative Company Concerning FCC Form 497, WC Docket No. 03-109, Public Notice, 23 FCC Rcd 6407 (2008). Federal Communications Commission FCC 11-32 25 Such a rule would ensure that all ETCs comply with the requirement that support may only be claimed for active subscribers, and thereby minimize waste of Lifeline funds. Carriers routinely bill customers for partial months, and should have the capacity in their billing systems to determine whether a customer is a Lifeline subscriber for the full billing period. We seek comment on our proposal. C. Eliminating Reimbursement for Toll Limitation Service 68. Background. Toll limitation services (TLS) include both toll blocking, which prevents the placement of all long distance calls for which the subscriber would be charged, and toll control, which limits to a preset amount the long-distance charges a subscriber can incur during a billing period.116 In the Universal Service First Report and Order, the Commission required ETCs to provide TLS to low-income subscribers. At the time, consumers typically purchased long distance service separately from local service, and rates for long distance were considerably higher than they are today.117 The Commission was concerned at the time about studies demonstrating that the primary reason subscribers lost access to telephone service was failure to pay long distance bills.118 69. Our rules currently allow Lifeline support to compensate ETCs for the costs of offering toll limitation service at no charge to eligible low-income consumers.119 ETCs’ recovery of costs for providing TLS to Lifeline consumers is based on the costs that ETCs would otherwise not incur if they did not provide TLS to a given customer.120 70. Discussion. We propose amending our rules to eliminate Lifeline support for the costs of providing TLS to Lifeline customers. This rule, adopted more than a decade ago, may have outlived its usefulness, given reductions in long-distance calling rates. We also note that there is great variance in TLS costs claimed by ETCs seeking reimbursement, ranging from $0 to $36 per Lifeline customer per month.121 Such variance may be due in part to the ambiguity of our rule governing TLS support, which states that support for TLS will be equal to the ETC’s incremental costs, but does not define incremental TLS costs eligible for Lifeline reimbursement. It is unclear, however, whether providing TLS imposes any incremental costs on carriers, since a number of ETCs do not seek any reimbursement for TLS costs, despite providing TLS to their subscribers.122 Moreover, the wide variance in support sought by ETCs suggests that some may be inflating their true costs. Elimination of Lifeline support for TLS could save the program roughly $23 million in 2011,123 which, in turn, could be used to conduct pilot programs to 116 47 C.F.R. § 54.400(d). 117 Section 271 of the Telecommunications Act of 1996 prohibited the regional Bell operating companies (RBOCs) from offering most long-distance services until the Commission found that they had opened their local market to competition. See 47 U.S.C. § 271. Between 1999 and 2003, the Commission found that each of the RBOCs had satisfied the statutory criteria and accordingly was eligible to compete in the long-distance market. See TRENDS IN TELEPHONE SERVICE at 9-3. Since then, “the distinctions between the two markets have become blurred as customers acquired the ability to select among competing carriers” for all markets. See id. at 9-2. 118 Universal Service First Report and Order, 12 FCC Rcd at 8980, para. 385. 119 47 C.F.R. § 54.403(c). 120 Id. 121 See Letter from Karen Majcher, Vice President, Universal Service Administrative Company to Trent Harkrader, Chief, Telecommunications Access Policy Division, Wireline Competition Bureau, Federal Communications Commission, CC Docket No. 96-45 (filed Feb. 25, 2011). 122 Id. 123 USAC 2Q 2011 FILING, at 17. Federal Communications Commission FCC 11-32 26 provide broadband support or otherwise utilized to provide eligible households with Lifeline discounts.124 We seek comment on this proposal. In the alternative, should we adopt a flat amount of reimbursement for TLS, and if so, what would be an appropriate amount? D. Customary Charges Eligible for Link Up 71. Background. Link Up support reimburses wireline and wireless ETCs for the revenue they forgo in reducing their customary charge for commencing telecommunications service and in deferring charges assessed for commencing service.125 Link Up provides qualifying consumers with discounts of up to $30.00 of the initial costs of installing a single telecommunications connection at a consumer’s principal place of residence;126 qualifying residents of Tribal lands are eligible for additional Link Up support.127 A consumer may not receive more than one Link Up discount and may be eligible for Link Up again only upon a change of his or her principal place of residence.128 72. Link Up disbursements vary across ETCs and are not proportionate to Lifeline reimbursements.129 In December 2010, TracFone filed a Petition for Declaratory Ruling with the Commission seeking a ruling that ETCs are not eligible to receive Link Up reimbursements from the federal Universal Service Fund unless the ETC imposes on all of its customers a customary charge for commencing telecommunications service.130 TracFone notes that providing Link Up subsidies for activation charges that are not routinely imposed on customers violates the purpose of the Link Up program and constitutes a waste of USF funds.131 Several commenters agree, and suggest that the only charges eligible for Link Up reimbursement should be charges imposed on all customers, rather than charges fabricated by carriers for the purpose of receiving USF.132 73. Defining Customary Charge. We seek to eliminate any incentive or opportunity for carriers to impose charges on program participants in order to increase universal service support, as that would represent a waste of funds. We therefore propose to amend our rules to define “customary charge for commencing telecommunications service” as the ordinary initiation charge that an ETC routinely 124 See infra Section IX.B.3 (Broadband Pilot). 125 47 C.F.R. §§ 54.411, 54.413. Most pre-paid wireless ETCs do not receive Link Up support. See, e.g., TracFone Forbearance Order, 20 FCC Rcd at 15098, para. 6 (2005). 126 47 C.F.R. § 54.411. 127 See 47 C.F.R. § 54.411(a)(3). 128 47 C.F.R. § 54.411(c). 129 For example, some ETCs are receiving a significant amount of Link Up while other ETCs with similar Lifeline expenditures are not. See USAC 2Q 2011 FILING, Appendices at LI04 (Quarterly Low Income Disbursement Amounts by Company (4Q2010)), available at http://www.usac.org/about/governance/fcc-filings/2011/quarter- 2.aspx (showing that Link Up disbursements vary significantly by ETCs and do not correspond with the amount of Lifeline support sought by the ETCs). 130 TracFone Wireless Inc. Petition for Declaratory Ruling, WC Docket No. 09-197, CC Docket No. 96-45 (filed Dec. 1, 2010) (TracFone Link Up Petition) (arguing that at least one ETC is imposing a customary charge only on low income consumers but not other consumers). 131 Id at 8-9. 132 AT&T TracFone Link Up Petition Comments at 3 (agreeing that an ETC cannot impose a service activation fee on low-income consumers only); Budget PrePay, Inc and Great Call, Inc. TracFone Link Up Petition Comments at 3-4; Ohio TracFone Link Up Petition Comments at 3. Federal Communications Commission FCC 11-32 27 imposes on all customers within a state.133 We seek comment on our proposed amendment. 74. We also propose that Link Up rules make clear that activation charges that are waived, reduced, or eliminated when activation is accompanied by purchase of additional products, services, or minutes are not customary charges eligible for universal service support. TracFone’s petition indicates that it supports this proposal, but other ETCs disagree, arguing that there are legitimate reasons for an ETC to waive customary activation charges for low-income consumers, including compliance with some state requirements.134 For instance, some commenters suggest we create an exception to the proposed rule in instances where a state commission has ordered ETCs to waive the remainder of the connection charge not reimbursed by USF.135 We seek comment on whether, if we amend our rules as described, we should recognize exceptions for certain categories or types of fee waivers or reductions. 75. We also seek to develop a record regarding the prevalence of situations in which ETCs seek reimbursement for connecting the same customer more than one time, at the same location. For example, if a customer’s service was disconnected for non-payment, do ETCs ever impose another connection charge to resume service to that address? Do they do so frequently, or as a matter of course? How would we evaluate whether such charges are reasonable? We seek comment on whether our rules should be clarified to prohibit ETCs from seeking more than one Link Up subsidy for the same customer at the same location. 76. We seek comment on whether our Link Up rules should be further amended to address concerns with waste, fraud and abuse in this area. For example, one commenter suggests that we require each ETC to certify that its activation charge is equally applicable to all customers.136 We seek comment on whether such a certification process would effectively prevent waste, and how burdensome such a certification requirement would be. In addition, we seek comment on whether we should adopt a rule that prohibits resellers from imposing a connection charge on consumers when the underlying wholesale provider has not assessed a similar connection charge on the reseller. 77. Link Up Support Amount. Historically, incumbent telephone companies incurred costs in initiating service, such as the cost of visiting the housing unit to physically connect a telephone line to initiate service. In contrast, today, service initiation in virtually all instances for both wireless and wireline providers is done remotely via software, with the actual costs of installation likely to be significantly lower than several decades ago. 78. Our rules specifying Link Up amounts have not been updated to reflect the changes in the industry that have occurred relating to service initiation. We seek comment on what the typical service initiation fee is for non-Lifeline subscribers and ask whether we should reduce the current $30 cap on Link Up support to some lower figure. 79. Our current rules specify that ETCs may receive Link Up support for the revenue they forgo in reducing their customary charge for commencing telecommunications service.137 In order to receive Link Up support, ETCs are required to keep accurate records of the revenues they forgo in reducing their customary charge for commencing service.138 The forgone revenues for which the ETCs 133 See Appendix A at 47 C.F.R. § 54.400(e). 134 Id. 135 AT&T TracFone Link Up Petition Comments at 3; Competitive Eligible Telecommunications Carriers TracFone Link Up Petition Comments at 4. 136 Budget PrePay, Inc. and GreatCall, Inc. TracFone Link Up Petition Comments at 4. 137 47 C.F.R. § 54.413. 138 Id. Federal Communications Commission FCC 11-32 28 may receive reimbursement shall include only the difference between the carrier’s customary connection and the charges actually assessed to the participating low-income consumer. Moreover, the reduction shall be half of the customary charge or $30, whichever is less.139 As discussed above, there is concern that some ETCs may be inflating connection charges in an effort to collect money from the Fund. In order to make Link Up reimbursement more transparent and limit potential waste of funds, we seek comment on whether we should require all ETCs seeking Link Up reimbursement to submit cost support to USAC for the revenues they forgo in reducing their customary charges. Since ETCs are required to keep accurate records of the revenues they forgo for Link Up, it may not be too burdensome to require the ETCs to submit such data to USAC. We seek comment on this proposal and whether there are alternative ways to ensure that Link Up reimbursement is based on actual revenues forgone as a result of connecting low-income consumers. We also seek comment on what underlying costs may be recovered through Link Up. For instance, should Link Up be provided for costs associated with marketing and customer acquisition, or limited to costs associated with activating a phone line or establishing a billing relationship? E. Customer Usage of Lifeline-Supported Service 1. Background 80. ETCs receive Lifeline support on a per-subscriber basis. As discussed above, ETCs may therefore have incentives to delay notifying USAC promptly when a subscriber has discontinued service. Pre-paid wireless ETCs do not assess a monthly charge on customers and, therefore, do not bill their customers for Lifeline-supported service, even though they report such lines to USAC for reimbursement. The pre-paid wireless ETC thus could potentially continue to receive Lifeline support for a customer who abandoned the service months before.140 Moreover, because the pre-paid wireless ETC does not receive monthly payment from the subscriber, it may not even be aware when the subscriber has discontinued service. Even carriers that assess monthly charges may also have disincentives to identify discontinued customers in a timely fashion.141 The Universal Service Fund should not be used to provide Lifeline support to ETCs to subsidize customers who are not utilizing supported communications services. 81. Some states have imposed “non-usage” procedures on pre-paid wireless ETCs.142 These 139 47. C.F.R. § 54.411(a)(1). 140 There are many reasons why a consumer may not use his or her Lifeline-supported service. For example, some customers may have lost or abandoned their wireless devices, or may lack a readily accessible source of electricity to charge the device. In other cases, the consumer may have given or sold the phone to another person, in violation of the ETCs’ terms of service. 141 For example, if a wireline ETC charges $12 a month for Lifeline service, and receives $10 from the USF and $2 from the subscriber, if the universal service payment compensates the ETC for its costs of providing service to that subscriber, it still would be financially advantageous for the ETC to report the subscriber as active, even if the subscriber does not pay his bills. 142 See, e.g., Petition of TracFone Wireless, Inc. for Designation as an Eligible Telecommunications Carrier in the State of Wisconsin, 9385-TI-100, Wisconsin Public Service Commission Final Decision, May 21, 2009 (Wisconsin Non-Usage Order); Application of Nexus Communications, Inc. for Designation as an Eligible Telecommunications Carrier in the State of Georgia for the Limited Purpose of Offering Wireless Lifeline and Link Up Service to Qualified Households (Docket No. 19664), Application of TracFone Wireless, Inc. for Designation as an Eligible Telecommunications Carrier in Georgia for the Limited Purpose of Offering Lifeline Service to Qualified Households (Docket No. 26282), Georgia Public Service Commission Order Amending ETC Designations, October 20, 2010 (Georgia Non-Usage Order); Application of TracFone Wireless, Inc. for Designation as an Eligible Telecommunications Carrier in the State of Kansas for the Limited Purpose of Offering Lifeline Service to Qualified Households, Docket No. 09-TFWZ-945-ETC, Kansas State Corporation Commission Order Granting in Part and (continued….) Federal Communications Commission FCC 11-32 29 procedures are designed to minimize payments from the Universal Service Fund for enrolled Lifeline customers who are no longer using the service.143 Both TracFone and Virgin Mobile have implemented a policy of de-enrolling Lifeline customers who have not used their wireless phones for 60 days.144 2. Discussion 82. We want to ensure that Lifeline support is used for the benefit of low-income subscribers that are actually using the supported service,145 and we propose to amend our rules to prevent ETCs from obtaining Lifeline support for inactive consumers. Specifically, we propose to prohibit ETCs from seeking reimbursement from the Universal Service Fund for any Lifeline customer who has failed to use his or her service for 60 consecutive days.146 We seek comment on whether a customer’s failure to use service for a specific period of time may reasonably demonstrate, or serve as a proxy for, service discontinuation. If so, we seek comment on whether 60 days is a reasonable period, or whether the period of inactivity should be shorter (e.g., 30 days) or longer (e.g., 90 days). 83. The proposed rule is intended to (1) prevent subsidies going to ETCs for customers that are not using the service; and (2) eliminate incentives that carriers might have to ignore or fail to report that a customer has (or appears to have) discontinued service. We do not seek to penalize subscribers for non-usage, and our proposed rule would not affect the terms or conditions of service that might exist between the ETC and the customer. Nor do we propose to require ETCs to disconnect subscribers for non-usage. We recognize that some customers may use their telephones sparingly, for emergencies or occasional communication. To protect consumers, we propose to require ETCs to alert customers if the ETC imposes any obligation to use service during a specified period of time in order to maintain subsidized service. We seek comment on how ETCs can best inform their Lifeline customers of any requirement to use the phone during a specified period of time. We also seek comment on whether our proposed rules could affect access to 911 services, and if so, how we can ensure that consumers maintain access to emergency services. We note that the Commission’s rules require commercial mobile radio service (CMRS) providers subject to the Commission’s 911 rules to transmit all wireless 911 calls, including those from non-service initialized phones, to Public Safety Answering Points (PSAPs).147 We do not seek to modify this rule and our proposed rule would still require ETCs to transmit a Lifeline customer’s wireless 911 calls, even if the ETC is no longer providing service to that customer. 84. Although the concern that ETCs may continue to count subscribers that have stopped using service appears greatest with respect to pre-paid wireless service, those concerns are not limited to pre-paid wireless service. We seek comment on whether the rules we propose in this subsection should be limited to particular types of service, or should apply to all types of service. 85. Minimum Consumer Charges. In the 2010 Recommended Decision, the Joint Board (Continued from previous page) Denying in Part Amended Application of TracFone for Designation as ETC for Limited Purpose of Offering Lifeline Service to Qualified Households, December 14, 2010 (Kansas Non-Usage Order). 143 See Wisconsin Non-Usage Order; Georgia Non-Usage Order; Kansas Non-Usage Order. 144 Virgin Mobile 2010 ETC Order, DA 10-2433, at para. 24 (requiring Virgin Mobile to adopt a 60-day usage requirement); Letter from Mitchell F. Brecher, Counsel to TracFone, to Marlene H. Dortch, Secretary, Federal Communications Commission, CC Docket No. 96-45 (filed Oct. 22, 2010). 145 Wisconsin Non-Usage Order at 8; Georgia Non-Usage Order at 2; Kansas Non-Usage Order at 6. 146 GAO recognized this general approach as one step toward improving the integrity of the Lifeline program. 2010 GAO REPORT at 36. 147 See 47 C.F.R. § 20.18(b). Federal Communications Commission FCC 11-32 30 expressed concern about consumers receiving Lifeline service offerings that are offered at no cost to the subscriber.148 In particular, the Joint Board raised concerns about prepaid wireless ETCs, which do not provide a monthly bill and, in some cases, provide handsets and service at no charge to consumers.149 The Joint Board recommended that, to guard against waste, fraud, and abuse in the Lifeline program, the Commission consider whether a minimum monthly rate should be paid by all Lifeline subscribers, including eligible Tribal subscribers.150 86. We seek comment on how best to prevent waste of universal service funds without creating unnecessary obstacles for low-income households to obtaining vital communications services. For instance, one option would be to adopt a rule requiring all ETCs in all states to collect some minimum monthly amount from participating households.151 If we were to adopt such a rule, what should that monthly amount be–e.g., $1 or some other amount? Alternatively, should we consider requiring ETCs to assess a monthly fee on all Lifeline consumers equivalent to half of the customary monthly Lifeline charges or half of the maximum subsidy provided for under our rules, whichever is less? Would either of these requirements, if adopted, appropriately balance the need to guard against waste, fraud, and abuse in the Lifeline program by ensuring that low-income households have the incentive to make appropriate use of their Lifeline-supported services, with the need to avoid deterring eligible consumers from participating in the program? 87. Another option would be to require ETCs to collect some amount, such as $10 or $15, on a one-time basis from each Lifeline household prior to commencing Lifeline service.152 Such a rule could create appropriate incentives to ensure that Lifeline consumers genuinely want phone service and should deter situations in which Lifeline-supported service has been activated on a phone that is unused or improperly transferred to third parties. 88. Would either of these proposals create an unreasonable barrier to enrollment for households that need support but cannot afford to pay any fee? What would be the proper amount of financial contribution from low-income consumers that would appropriately balance our dual objectives of deterring waste, fraud, and abuse, while enabling those in need to obtain phone service? Should this amount vary based on the income of the qualifying low-income household? 89. We seek comment on the administrative burdens for ETCs of a requirement to collect a minimal amount, such as $1 per month, from participating consumers. We acknowledge that in other, non-Lifeline contexts, carriers may choose not to bill their customers monthly, and it may not be cost- effective to send a bill to collect such a small amount. Should we allow ETCs to collect a monthly fee on a bi-monthly basis? If we were to adopt a program-wide monthly fee requirement, should we explicitly prohibit carriers from waiving the fee? How can we adopt an approach that is technologically neutral and can be implemented easily by ETCs with diverse business models? 90. Application of Minimum Charge to Tribal Consumers. The Commission’s rules currently 148 2010 Recommended Decision, 25 FCC Rcd at 15626-27, para. 79. 149 Id. See, e.g., Assurance Wireless Lifeline Program, Program Description, http://www.assurancewireless.com/Public/MorePrograms.aspx (last visited Mar. 1, 2011); SafeLink Wireless, Lifeline/SafeLink Fact Sheet, https://www.safelinkwireless.com/EnrollmentPublic/benefits.aspx (last visited Mar. 1, 2011). 150 2010 Recommended Decision, 25 FCC Rcd at 15626-27, para. 79. 151 See id. 152 We note that while a consumer may obtain Link-Up support for service installation, the fund only pays half of that charge, up to $30. If, for instance, the carrier were to charge $60 to initiate service, the consumer would be paying $30 and the fund would be paying $30. Federal Communications Commission FCC 11-32 31 require that the basic local residential rate for Tier 4 subscribers (i.e., eligible low-income households residing on Tribal lands) may not fall below $1 per month.153 We have learned anecdotally that some carriers do not currently collect the $1 from their Tribal customers. While the Commission’s current rules specify what the carrier must charge the Tribal subscriber, they do not explicitly require the ETC to collect such amounts, thereby allowing ETCs to waive the $1 per month fee.154 91. If we adopt a proposal to require all ETCs to collect a minimum monthly fee from subscribers, we seek comment on whether to amend section 54.403(a)(4)(i) of the Commission’s rules to specifically require a $1 monthly payment to be provided by each participating household to their ETC. Would this proposal, if adopted, adequately balance our objective of ensuring affordable service for eligible Tribal consumers while also guarding against waste, fraud, and abuse in the Lifeline program? 92. How would any of these proposals impact subscribership for low-income households on Tribal lands, which continue to lag significantly behind subscribership for the nation as a whole? F. De-Enrollment Procedures 93. We propose rules requiring ETCs to de-enroll their Lifeline customers or households from the program under specified circumstances. Specifically, we propose to require ETCs to de-enroll their Lifeline subscribers when: (1) the subscriber is receiving duplicate support and fails to select one ETC in the allotted time after being notified of a duplicate claim; (2) the subscriber does not use his or her Lifeline-supported service for 60 days and fails to confirm continued desire to maintain the service; or (3) the customer does not respond to the eligibility verification survey. Under our proposed rules, the subscriber would receive notice that they could be de-enrolled from the program if they did not take action by a specified date. Should that time frame be 60 days? 94. Some ETCs have argued that section 54.405(d) of our rules requires that they give customers 60-days’ notice prior to terminating their Lifeline benefits.155 In addition, some state laws may require similar notice provisions.156 The notice provisions currently set forth in section 54.405(d) of our rules are tied to consumer eligibility for Lifeline, and are not applicable to situations involving subscriber non-responsiveness as a result of a duplicate claim or non-usage of the Lifeline service. For administrative simplicity, should the same time frame be adopted for mandatory de-enrollment in the circumstances described above, or should we adopt a shorter period, such as de-enrollment within a 30- day period? We seek comment on our proposal to require ETCs to de-enroll Lifeline subscribers involved in the three scenarios described above. Would a shorter period be consistent with specific state notification requirements that may exist in non-default states? To the extent that commenters object to our proposal for mandatory de-enrollment, they should offer specific alternative solutions to protect the fund against waste, fraud, and abuse. G. Audits 95. Background. Audits are an essential tool for the Commission and USAC to ensure program integrity and to detect and deter waste, fraud, and abuse. Commission rules authorize USAC to conduct audits of carriers that receive USF monies, and to suspend payments in situations where the carrier has failed to provide adequate verification for those discounts.157 The 2008 FCC-USAC 153 47 C.F.R. § 54.403(a)(4)(i). 154 See 47 C.F.R. § 54.403(a)(4). 155 ETC Duplicate Letter at 5. 156 Id. 157 47 C.F.R. § 54.707. Federal Communications Commission FCC 11-32 32 Memorandum of Understanding requires USAC to conduct audits, including audits of Fund beneficiaries,158 in accordance with generally accepted government auditing standards, as required by section 54.702(n) of our rules.159 USAC’s audit program consists of audits by USAC’s internal audit division staff as well as audits by independent auditors under contract with USAC.160 96. In a 2009 Executive Order regarding Improper Payments Information Act (IPIA) of 2002, President Obama stated that when making payments to program beneficiaries, federal government agencies “must make every effort to confirm the right recipient is receiving the right payment for the right reason at the right time.”161 Consistent with this directive and guidance from the Office of Management and Budget, in 2010 the Commission directed USAC to implement a new initiative, Payment Quality Assurance, to improve both the IPIA assessment program and compliance audit programs of the Universal Service Fund. For the low-income program alone, the FCC directed USAC to undertake 600 IPIA assessments (Payment Quality Assurance or PQA assessments) and 48 compliance audits (Beneficiary/Contributor Audit Program or BCAP audits).162 USAC has already initiated 11 Lifeline and 158 See Memorandum of Understanding Between the Federal Communications Commission and the Universal Service Administrative Company, at 7 (Sept. 9, 2008) (2008 FCC-USAC MOU), available at http://www.fcc.gov/omd/usac-mou.pdf; see also Letter from Dana R. Shaffer, Deputy Managing Director, Federal Communications Commission, to Scott Barash, Acting CEO, Universal Service Administrative Company (dated Oct. 13, 2010), available at http://www.fcc.gov/omd/usac-letters/2010/101310CPA-USAC.pdf. 159 47 C.F.R. § 54.702(n). 160 In addition, in the past, the Commission’s OIG has conducted audits of USF program beneficiaries. See Office of Inspector General, Semiannual Report to Congress, October 1, 2009 through March 31, 2010 at 17-20. In a February 12, 2010, letter to USAC, OMD directed USAC to separate its two audit objectives into distinct programs – one focused on Improper Payments Information Act (“IPIA”) assessment and the second on auditing compliance with all four USF programs. Improper Payments Information Act of 2002, Pub. L. No. 107-300, 116 Stat. 2350 (2002). In addition to providing guidance on the implementation of the IPIA assessment program and compliance audit program, the letter informed USAC that OMD would assume responsibility for oversight of USAC’s implementation of both programs. Letter from Steven Van Roekel, Managing Director, Federal Communications Commission, to Scott Barash, Acting CEO, Universal Service Administrative Company (dated Feb. 12, 2010), available at http://www.fcc.gov/omd/usac-letters/2010/021210-ipia.pdf. 161 President Obama further emphasized that the federal government must intensify efforts to eliminate payment error while “continuing to ensure that Federal programs serve and provide access to their intended beneficiaries.” Executive Order No. 13,520, 74 Fed. Reg. 62,201 (Nov. 20, 2009) (IPIA Executive Order); Letter from Steven Van Roekel, Managing Director, Federal Communications Commission, to Scott Barash, Acting CEO, Universal Service Administrative Company (dated Feb. 12, 2010) (FCC IPIA Letter), available at http://www.fcc.gov/omd/usac- letters/2010/021210-ipia.pdf; Letter from Steven Van Roekel, Managing Director, Federal Communications Commission, to Scott Barash, Acting CEO, Universal Service Administrative Company (dated Oct. 13, 2010), available at http://www.fcc.gov/omd/usac-letters/2010/101310CPA-USAC.pdf. 162 FCC IPIA Letter; OFFICE OF MGMT. & BUDGET, EXECUTIVE OFFICE OF THE PRESIDENT, OMB CIRCULAR A-123, MANAGEMENT’S RESPONSIBILITY FOR INTERNAL CONTROL (2004). The Compliance Audit program is known as Beneficiary/Contributor Compliance Audit Program The IPIA assessment program was developed with the following objectives: (1) separately cover all four USF programs; (2) measure the accuracy of the Administrator’s payments to program applicants; (3) evaluate the eligibility of program applicants who have received payments; (4) include high-level testing of information obtained from program participants; and (5) tailor scope of procedures to ensure reasonable cost while meeting IPIA requirements for sample size and precision. The compliance audit program was developed with the following objectives: (1) cover all four programs and contributors; (2) tailor audit type and scope to program risk elements, size of disbursement, audit timing and other specific factors; (3) keep costs reasonable in relation to overall program disbursements, amount disbursed to beneficiary being audited, and USF administrative costs; (4) spread audits throughout the year; and (5) retain capacity and capability for targeted and risk-based audits. See FCC IPIA Letter at 2, 4. Federal Communications Commission FCC 11-32 33 Link Up BCAP compliance audits in 2011. 97. Discussion. Waste, fraud, and abuse in the universal service program jeopardizes the availability of funds for supported services and imposes unjustifiable costs on carriers and ratepayers. We therefore seek to ensure there is a focused and effective system for identifying and deterring program abuse. We seek comment on ways to improve the current low-income audit program in light of growing concerns about such issues as duplicate payments and consumer ineligibility.163 In particular, we seek comment on ways to improve the audit process to reduce improper payments and assess risks. In doing so, how can audits be targeted to better uncover the scope of errors associated with improper payments? What additional measures should be taken to mitigate the potential for program violations?164 Are there additional measures or incentives, beyond those that currently exist, that we should implement to encourage people to report abuses? Should we impose additional penalties, beyond de-enrollment from the program, to discourage program abuse? 98. With the growth of newly designated ETCs in a number of states, there may be a need for a more rigorous audit program to provide assurance that new participants have established adequate internal controls to meet their obligations. For that reason, we propose that all new ETCs be audited after the first year of providing Lifeline-supported service. We seek comment on the appropriate geographic scope of the initial audit. How should such audits be designed to ensure that any problem areas are easily and thoroughly identified? Most audits examine an ETC’s compliance with a wide variety of Commission requirements. Should initial audits focus on a smaller number of more important requirements, and if so, which ones? Although we seek comment on more rigorous, focused audits for new program participants, we note that we will also continue to direct USAC to conduct random audits to ensure ongoing compliance with our rules.165 99. We also seek comment on how to improve the Commission’s directive to USAC to establish a systematic approach to assessing internal controls and learning from audit findings.166 For example, we propose that negative audit findings above a specified dollar threshold, or impacting a specific percentage of an ETC’s Lifeline customers, trigger shorter intervals between audits, an expanded audit for the company at issue, and/or an additional audit the following year in the relevant study area. What should that dollar threshold be? Would the cost associated with such audits outweigh the benefits that would accrue? What follow-up should the Commission require of USAC in light of negative Lifeline/Link Up audit findings? 100. We also seek comment on appropriate Commission responses to multiple findings of non-compliance, including repeated non-compliance above the specified thresholds or multiple findings 163 The 2010 GAO Report also expressed concern about the increased risk of waste, fraud, and abuse due to consumers simultaneously receiving Lifeline discounts on both a wireline and wireless phone. 2010 GAO REPORT at 35. 164 Whistleblower Protection Act of 1989, Pub. L. No. 101-12, 103 Stat. 16 (codified at 5 U.S.C. §§ 1211–1219, 1221, 1222, 3352). 165 See, e.g,. 47 C.F.R. §§ 54.413(b), 54.417 (specifying recordkeeping requirements for ETCs seeking universal service Lifeline and Link Up reimbursement). 166 Letter from Steven Van Roekel, Managing Director, Federal Communications Commission, to Scott Barash, Acting CEO, Universal Service Administrative Company (dated Jan. 25, 2011), available at http://www.fcc.gov/Daily_Releases/Daily_Business/2011/db0210/DA-11-128A1.pdf; Letter from Steven Van Roekel, Managing Director, Federal Communications Commission, to Scott Barash, Acting CEO, Universal Service Administrative Company (dated Oct. 13, 2010), available at http://www.fcc.gov/omd/usac- letters/2010/101310CPA-USAC.pdf. Federal Communications Commission FCC 11-32 34 of non-compliance with Lifeline or Link Up requirements in a single audit. 101. The Commission’s rules already direct USAC to “suspend or delay discounts, offsets and support amounts provided to a carrier if the carrier fails to provide adequate verification of discounts, offsets and support amounts provided upon reasonable request.”167 Should we establish a threshold (either aggregate dollar amount or percentage of support payments) that would automatically result in a freeze on future payments from the program until the carrier remediates identified issues? Under what circumstances should we consider revoking an ETC’s grant of forbearance or designation as an ETC? We seek comment on other consequences that should result from negative audit findings. 102. In 2005, the Commission sought comment on subjecting all USF recipients to independent audits, but ultimately did not adopt any such requirement.168 In light of increased concerns about potential waste, fraud, and abuse in the program, we again seek comment on whether to require some or all ETCs in the program to engage an independent firm to assess compliance with the program’s requirements. If we were to impose such a requirement, how often should we require the review (e.g., annually, or every few years)? Should all ETCs that participate in the program be subject to the requirement, or only some? If we were to limit this requirement to only certain ETCs, what would be the appropriate criteria for imposing such a requirement? For example, we might impose the requirement on ETCs that have been found to have committed violations in the past, that receive more than a particular amount of program support, or that have experienced significant increases in program support. Audits paid for by the ETCs could create a self-policing environment that would guard against waste, fraud, and abuse, but would also impose an expense on providers. We seek comment on the advantages and disadvantages of such a system, and on the burden of such a requirement on different carriers, including small ETCs. Commenters should discuss whether a lack of negative audit findings, or alternatively, proof of resolution of all negative findings, should impact the scope or frequency of future audits. We also seek comment on what type of audit engagements should be required, if we were to adopt such a requirement. If we were to adopt such a requirement, we propose to mandate that covered ETCs provide audit reports to the FCC, USAC, and relevant states, and that the FCC and USAC should be deemed authorized users of such reports. 167 47 C.F.R. § 54.707. 168 In the 2005 Program Management NPRM, the Commission sought comment on whether recipients of funds from any or all of the support mechanisms should be subject to an independent audit requirement that would be paid for by the recipients, and, if so, whether only recipients above a set amount of USF support in a given fiscal year should be subject to this requirement. See Comprehensive Review of the Universal Service Fund Management, Administration, and Oversight; Federal-State Joint Board on Universal Service;, Schools and Libraries Universal Service Support Mechanism;, Rural Health Care Support Mechanism, WC Docket No. 02-60, Lifeline and Link-Up; Changes to the Board of Directors for the National Exchange Carrier Association, Inc., WC Docket Nos. 05-195, 02-6, 02-60, 03-109, CC Docket Nos. 96-45, 97-21, Notice of Proposed Rulemaking and Further Notice of Proposed Rulemaking, 20 FCC Rcd 11308, 11340, para. 77 (2005) (2005 Program Management NPRM). The Commission also sought comment on the costs of such audits; the appropriate scope and methodology of targeted independent audits that would be performed at the recipients’ expense; and whether, in the event that waste, fraud, or abuse was detected, recipients that were not required to pay for their audits should be required to reimburse USAC or the Commission for the cost of the audit, or to pay other penalties. See id. at 11340-41, para. 77. The Commission has previously required regulated entities to obtain an independent auditor to confirm compliance with statutory or regulatory obligations, such as our cost allocation rules and rules requiring the Bell Operating Companies to have separate affiliates upon entry into the long-distance marketplace. Federal Communications Commission FCC 11-32 35 V. CLARIFYING CONSUMER ELIGIBILITY RULES A. One-Per-Residence 1. Background 103. As previously noted, the Commission has stated that eligible consumers may receive universal service low-income support for “a single line in their principal residence.”169 This requirement historically was intended to target support where it was needed most and to maximize the number of Americans with access to the telephone network. In practice, this requirement has been implemented by providing one Lifeline/Link Up discount per residential address. This practice reflects the fact that in the immediate wake of the 1996 Act, the program provided support predominantly for wireline service. 104. The Commission promulgated rules under the 1996 Act that enabled competitive wireless and wireline carriers to be designated as ETCs eligible for federal universal service support.170 Since that time, the marketplace has changed significantly, with a wide array of wireline and wireless services that compete with traditional incumbent LECs. As of June 2010, 93 percent of Americans subscribed to wireless phone services,171 and more than 25 percent of households were wireless-only.172 This increase in wireless subscriptions comes in tandem with a rise in the telephone penetration rates among low- income consumers, many of whom use wireless service.173 In recent years, the Commission and states have designated several wireless carriers as ETCs for the purpose of providing Lifeline support.174 These designations have enabled carriers to provide a variety of competitive services to low-income consumers in several states. The emergence of competing carriers and multiple services has enhanced consumer choice, and led to an increase in the average number of monthly minutes included in a Lifeline wireless plan at no charge to the consumer, from about 60 minutes in 2008 to 250 minutes today.175 105. But the increasing availability of wireless Lifeline services has also made it more difficult to limit low-income support to a single line per residence. While a fixed wireline connection is often shared by all household residents, mobile service is more often used on an individual basis. It is now common for non-Lifeline consumers that can afford to do so to purchase both wireline and wireless telephone services, and each member of a residential household may have his or her own wireless phone.176 With greater availability of services from wireless Lifeline providers comes increased 169 2004 Lifeline and Link Up Order, 19 FCC Rcd at 8306, para. 4; Universal Service First Report and Order, 12 FCC Rcd at 8957, para. 341. 170 See Universal Service First Report and Order, 12 FCC Rcd at 8969-73, paras. 364-72; infra section IX.C (Eligible Telecommunications Carrier Requirements). 171 See CTIA Quick Facts, http://www.ctia.org/media/industry_info/index.cfm/AID/10323 (last visited Mar. 1, 2011). 172 See WIRELESS SUBSTITUTION SURVEY at 1. 173See WCB SUBSCRIBERSHIP REPORT at 1, Chart 4, Table 4; see also supra note 86 and paras. 26-27 (providing background information illustrating the growth in wireless penetration, particularly in low-income households). 174 See infra section IX.C (eligible telecommunications carrier requirements). 175 Compare, e.g., TracFone Wireless, Inc.’s Petition for Waiver of 47 C.F.R. § 54.403(a)(1), CC Docket No. 96-45, at 9 (filed May 4, 2009) (noting that TracFone’s past offerings of between 55 and 68 free minutes per month to Lifeline customers), with Letter from F.J. Pollak, President and Chief Executive Officer, TracFone Wireless, Inc., to Hon. Julius Genachowski, Chairman, Federal Communications Commission, CC Docket No. 96-45, at 1 (filed Aug. 30, 2010) (noting that TracFone now offers 250 free minutes per month to Lifeline customers). 176 See supra note 86 (stating that nearly 60% of households have both a wireless and a wireline telephone). Federal Communications Commission FCC 11-32 36 likelihood that a residence may receive Lifeline-supported telephone service from multiple sources.177 And carrier practices of providing handsets to program participants at no cost and marketing Lifeline- supported services under different trade names increases the likelihood that a household and even a particular individual may sign up for multiple Lifeline services. New service features, such as calling plans that include additional handsets at no additional charge, also present challenges for the application of our existing requirements. 2. Discussion 106. In this NPRM, we propose to adopt a one-per-residential address requirement in section 54.408 of our rules.178 We seek comment on whether codifying this requirement as "one-per-residence" would aid in administration of the requirement by providing a bright line that could be determined by reference to external sources. The Commission has not codified any definition of a "household" for purposes of Lifeline and Link Up, and various qualifying programs may utilize different definitions of households. We also note that in other contexts, consumers seeking benefits from state or other federal assistance programs may undergo a more robust process to qualify for benefits, such as an interview by social service agencies to determine eligibility, which may provide an additional level of assurance that the applicant in fact complies with relevant program criteria. We seek to adopt a rule that provides a bright line that is easy for USAC and ETCs to administer. 107. The one-per-residential address rule that we propose to adopt is consistent with our existing single-line per residence requirement.179 But some ETCs dispute the validity of the single-line- per residence limitation,180 which raises concern that they are not adhering to an existing requirement that is designed to minimize waste, fraud and abuse; target support where it is needed most; and maximize the number of Americans with access to communications services. As noted above, it may be necessary for the Commission to take action on an interim basis while this proceeding is pending to address concerns with USAC reimbursing ETCs for duplicate claims.181 108. We understand that there may be situations – such as residents of commercially zoned buildings, those living on Tribal lands, and group living facilities – where application of the one-per- residential address rule may produce unintended consequences that would deprive deserving low-income consumers of the support that they otherwise would be entitled to. We encourage ETCs, Tribal Communities, the states and other interested parties to provide input on a rule that maximizes the number of Americans with access to communications services, but also protects the fund from waste, fraud and abuse. 109. We seek comment on how best to achieve the purposes for which the single line per residence requirement was designed. We propose to maintain this longstanding requirement, which 177 In 2008, the Commission first designated a wireless reseller as a limited ETC for the purpose of receiving Lifeline support. See TracFone ETC Designation Order, 23 FCC Rcd at 6206. That reseller, TracFone, offers handsets and wireless service at no cost to qualifying low-income households. Other ETCs have followed suit, and low-income households now benefit from a number of competitive offerings. See, e.g., Virgin Mobile Forbearance Order, 24 FCC Rcd at 3381. 178 Appendix A at 47 C.F.R. § 54.408. 179 See 2004 Lifeline and Link Up Order, 19 FCC Rcd at 8306, para. 4 (specifying that support for Lifeline subscribers is for “a single telephone line in their principal residence”); see also Universal Service First Report and Order, 12 FCC Rcd at 8957, para. 341. 180 Petition for Reconsideration (arguing that the Commission has never adopted a generally- applicable one-per- household rule). 181 See discussion supra paras. 48-51. Federal Communications Commission FCC 11-32 37 balances our statutory obligation to ensure that low-income consumers have access to phone service at reasonable rates and to ensure that support is sufficient, but not excessive.182 We seek comment below on how to define a “residential address” for the purposes of the Lifeline and Link Up programs. We also seek comment on how best to interpret the one-per-residential address restriction in light of current service offerings and in the context of group living arrangements or other situations that may pose unique circumstances.”183 110. In addition, we seek input on whether a different approach would better serve the needs of low-income consumers in light of our statutory obligations, as well as the changing communications marketplace. We note that several commenters in the Joint Board proceeding suggested that the Lifeline/Link-Up program should provide support for one wireless service per eligible adult, rather than one service per residential address, with some suggesting that would be in keeping with the statutory principle that low-income consumers should have access to services that are reasonably comparable to the services enjoyed in urban areas.184 This approach would take into account the fact that telephone use has changed since we first implemented the 1996 Act. Fifteen years ago, wireless service was not a mainstream consumer offering; today, 93 percent of the general population has wireless service.185 At the same time, providing support to each low-income adult rather than to each residential address could significantly increase the size of the program. Would allowing support for one wireless subscription per eligible adult be inconsistent with our statutory obligation to ensure that support is sufficient, but not excessive?186 We seek comment on whether the benefit that wireless service affords low-income consumers outweighs concerns associated with growth of the fund. If the funding dedicated to the program were capped, as discussed more fully below, a one-per-adult rule would likely mean that a much smaller benefit would be available to each program participant than under a one-per-residential address rule. We seek comment on these issues. 182 See 47 U.S.C. § 254(b)(1), (3), (5). 183 In an October 2009 Public Notice, the Bureau sought comment on how to apply the one-per-household rule in the context of group living facilities, such as assisted-living centers, Tribal residences, and apartment buildings. See One-Per-Household” Public Notice, 24 FCC Rcd at 12788; Letter from Mitchell F. Brecher, Counsel for TracFone, to Marlene H. Dortch, Secretary, Federal Communications Commission, WC Docket No. 03-109 (filed July 17, 2009). We seek to refresh the record on the issues raised in the One-Per-Household Public Notice and seek comment on other related issues. 184 See, e.g., GCI TracFone One-Per-Household Clarification Comments at 7; SBI TracFone One-Per-Household Clarification Comments at 12 (stating that “[r]eplacing the one-per-household rule with eligibility standards that permit a single household to receive Lifeline assistance for more than one telephone, subject to appropriate certification requirements, would be more in keeping with the Commission’s commitment and more reflective of the choices and opportunities that consumers expect in today’s telecommunications marketplace”); MFY Legal Services TracFone One-Per-Household Clarification Comments at 2-3 (recommending that the Commission “change the identification of households within private apartment buildings so that each qualified household, including single individuals who may live with roommates, is able to apply for and receive Safelink service”); NASUCA TracFone One-Per-Household Clarification Comments at 2 (agreeing that the Commission “should revisit its position and clarify that a person or a family may constitute a household and need telecommunications service, without having a private home or apartment”); AT&T TracFone One-Per-Household Clarification Comments at 1-2 (stating that ETCs should be permitted to provide Lifeline services to any qualifying individual residing in a group living facility). 185 See CTIA Quick Facts, http://www.ctia.org/media/industry_info/index.cfm/AID/10323 (last visited Mar. 1, 2011). 186 See 47 U.S.C. § 254(b)(5). Federal Communications Commission FCC 11-32 38 a. Defining “Residence” 111. We propose a rule in section 54.408 to limit program support to a single subscription per U.S. Postal Service address, and seek comment on whether this approach would promote affordable access to telephone service consistent with the goals of section 254.187 Under this proposal, where unrelated individuals and/or families share a U.S. Postal Service address, such individuals and/or families would be limited to one subscription for that “residence.” 188 We seek comment on whether this approach best serves program goals. The program was established to ensure that all consumers, even those of limited means, would have a “lifeline”—a basic telephone service to connect them to the rest of society. Supporting one service at each residential address may effectively fulfill this goal, and may also help prevent waste and abuse of program resources. Moreover, this approach may be more administratively feasible than other options for defining who is eligible for support, such as family-based definitions that require an accurate determination of whether people living together are independent or related. 112. Pursuant to this proposal, upon receiving an application for Lifeline support, an ETC could use the U.S. Postal Service residential address as a proxy to determine whether the ETC is already providing Lifeline support to that address. If so, the ETC would reject the application for support. Additionally, as discussed infra, we propose to require that Lifeline subscribers initially certify when applying for service, and thereafter verify annually, that they are receiving support for only one line per residential address (defined for these purposes as all of the persons who reside at a unique U.S. Postal Service address).189 113. We recognize that there may be some residences for which there is no unique U.S. Postal Service address. For example, we understand that there are apartment buildings where the residents live separately, but their units lack distinct identifiers and mail is delivered to and distributed by a single point of contact such as the building manager. Similarly, when multiple persons or families share a residence, unique addresses may not be available. Customers in rural areas may share a rural route address. We seek comment on what actions could be taken in such situations to ensure that Lifeline and Link Up benefits are available to eligible consumers. Is there other information that a carrier could collect to verify that the residence does not already receive support from the program? Alternatively, if one subsidized service were available for such locations, would that satisfy the congressional goal of ensuring affordable access to telephone service? 114. As noted above, some customers rely on a P.O. Box rather than a U.S. Postal Service residential address. How should we determine eligibility in those situations? Should we require ETCs to collect additional verifying information, and if so, what? 115. Our rules also limit support to the subscriber’s principal residence.190 We seek comment on how to ensure that a subscriber does not obtain support at more than one location. We propose that each subscriber provide unique identifying information (as discussed in Section IV) to prevent the same subscriber from receiving support at multiple locations. We seek comment on this proposal. We also seek comment on whether we should require subscribers to certify that the address provided is their 187 See Appendix A, 47 C.F.R. § 54.408(a)(1). 188 See id. To the extent that the Lifeline/Link Up provider could demonstrate that an applicant possesses a distinct unit number, as would be the case for individuals residing in an apartment building, for example, this would be sufficient to establish a unique address. 189 See infra paras. 167-69 (One-per-residential address certification and verification). 190 See Appendix A, 47 C.F.R. § 54.408(a)(2). Federal Communications Commission FCC 11-32 39 principal residence, in order to receive Lifeline and Link Up support.191 116. We seek comment on whether our U.S. Postal Service address-based proposal should be modified to accommodate different types of living situations, and if so, how. For example, should the proposed definition of “residential address” be modified to accommodate certain living arrangements? Should there be an exception for unrelated adult roommates or multiple families sharing a residence? Should we allow more than one discount per residence in the case of multi-generational families, for example if the low-income family includes an eligible adult child or elderly relative? Commenters that propose a different definition of “residence” from the one we propose above, or exceptions to that definition, should explain how the Commission could ensure, in administratively feasible ways, that support is being provided appropriately, however that term is defined. b. Application of the One-Per-Residence Rule to Commercially Zoned Buildings 117. Although the Commission’s rules provide low income support for residential customers, the Commission has learned of instances where otherwise eligible applicants have been denied Lifeline and Link Up service because they live in facilities that are zoned for commercial, rather than residential use. This may occur, for example, when individuals reside in single-room occupancy buildings, lodging houses, rooming houses, shelters, and other group quarters.192 This appears to be a particular problem in urban areas.193 118. We seek comment on how we can ensure that consumers have access to low-income support even if they reside in a commercially-zoned location. We note that commercial residences tend to be group living facilities rather than individual residences. If the Commission adopted special rules for group living facilities, would those rules resolve concerns about providing support to eligible subscribers who live in commercially-zoned areas? Are there additional steps we should take to verify that Lifeline and Link Up subsidies are not being provided to commercial entities? c. Application of the One-Per-Residence Rule in Tribal Communities 119. On some Tribal lands, several households may occupy a single housing unit.194 We seek comment on whether we should adopt a special definition of “residence” on Tribal lands that will ensure that Lifeline and Link Up service is provided to eligible consumers. For example, to the extent there are multi-generational families sharing a residence in Tribal communities, should there be an exception to our proposed one-per-residence rule? How can the Commission ensure that the program does not provide duplicative support to households on Tribal lands? In order to craft a rule that appropriately takes into account conditions on Tribal lands, we seek additional information about housing arrangements in Tribal areas. 120. Some commenters responding to the “One-Per-Household” Public Notice state that residents of Tribal Lands frequently lack unique U.S. Postal Service addresses, and instead receive mail at 191 See id. 192 See, e.g., Manhattan Legal Services TracFone One-Per-Household Clarification Comments at 2; NCLC TracFone One-Per-Household Clarification Comments at 4-5; NNEDV TracFone One-Per-Household Clarification Reply Comments at 2; MDTC TracFone One-Per-Household Clarification Reply Comments at 3 n.9. 193 See Manhattan Legal Services TracFone One-Per-Household Clarification Comments at 2; NCLC TracFone One- Per-Household Clarification Comments at 4-5. 194 See, e.g., NCLC TracFone One-Per-Household Clarification Reply Comments at 6; SBI TracFone One-Per- Household Clarification Comments at 6, 10. Federal Communications Commission FCC 11-32 40 communal P.O. boxes.195 We thus seek comment on how to apply the “one-per-residence” rule to Tribal lands if we were to adopt the proposal generally to define residential address on the basis of a U.S. Postal Service address. Given the very low telephone penetration rate on Tribal lands, we do not want our rules to impose barriers to consumers or households living on Tribal lands that are eligible for, and desperately need, Lifeline discounts. At the same time, we must act as responsible stewards of the Fund. If the Commission were to exempt Tribal members from providing a unique U.S. Postal Service address, what measures should the Commission adopt to guard against the possibility of waste, fraud, and abuse? d. Ensuring Access for Residents of Group Living Quarters 121. Some commenters have suggested that the Commission should consider how better to ensure that the program is effectively serving low-income residents of group living quarters, such as residential facilities for seniors or for victims of domestic violence.196 We seek comment on how eligibility should be defined for residents of group living quarters, including the effects on eligibility when a resident moves out of a group living facility, and what measures are necessary to prevent waste, fraud, and abuse.197 122. Under the proposed rule, related or unrelated, living together at a single postal address, residents of a group living facility—which could be dozens or even hundreds of individuals—would be eligible for only a single Lifeline supported service. Is this approach adequate to ensure availability of basic communications services to all Americans, including low-income consumers, as section 254 requires? If not, how should the program support service to low-income consumers residing in group living facilities? Should the program provide support to each separate and unrelated individual or family (e.g., a married couple living together at a nursing home) living in group facilities? 123. Alternatively, should we create an exception to our proposed one-per-residence rule for eligible consumers in a group living facility to obtain Lifeline or Link Up service?198 Is there an 195 See SBI TracFone One-Per-Household Clarification Comments at 4-5. 196 See, e.g., Florida PSC & OPC TracFone One-Per-Household Clarification Comments at 3; NCLC TracFone One- Per-Household Clarification Comments at 5; HAP TracFone One-Per-Household Clarification Comments at 2; Manhattan Legal Services TracFone One-Per-Household Clarification Comments at 1-2; MDTC TracFone One-Per- Household Clarification Reply Comments at 4; NASUCA TracFone One-Per-Household Clarification Comments at 2; SBI TracFone One-Per-Household Clarification Comments at 2; TracFone TracFone One-Per-Household Clarification Reply Comments at 7; NNEDV TracFone One-Per-Household Clarification Reply Comments at 2; GCI TracFone One-Per-Household Clarification Comments at 6; AT&T TracFone One-Per-Household Clarification Comments at 1-2; MFY Legal Services TracFone One-Per-Household Clarification Comments at 2. The U.S. Census Bureau defines “group living quarters” as: [a] place where people live or stay, in a group living arrangement, that is owned or managed by an entity or organization providing housing and/or services for the residents. This is not a typical household-type living arrangement. These services may include custodial or medical care as well as other types of assistance, and residency is commonly restricted to those receiving these services. People living in group quarters are usually not related to each other. 2010 Decennial Census Local Update of Census Addressees (LUCA) Program, Frequently Asked Questions February 2008, www.census.gov/geo/www/luca2010/luca_faq.htm#WhatistheCensusBureaudefinitionofagroupquarters (last visited Mar. 2, 2011). Some examples of group quarters include: nursing homes; hospitals with long-term care facilities; dormitories for workers; religious group quarters; and shelters. Id. 197 2010 Recommended Decision, 25 FCC Rcd at 15602, para. 12. 198 See, e.g., AT&T TracFone One-Per-Household Clarification Comments at 1-2; Florida PSC & OPC TracFone One-Per-Household Clarification Comments at 3-4; GCI TracFone One-Per-Household Clarification Comments at 6; Manhattan Legal Services TracFone One-Per-Household Clarification Comments at 1-2; MDTC TracFone One- (continued….) Federal Communications Commission FCC 11-32 41 administratively feasible way to approach this challenge that also provides protections against waste, fraud, and abuse? For instance, should we require the administrator of group living facilities to certify to ETCs and/or USAC the number of separate and unrelated individuals or families in the facility? In that situation, the facility would be responsible for applying for Lifeline/Link Up support on behalf of its residents.199 Under this approach, how could our rules ensure verification of the income eligibility of the subscribers for which a group facility is seeking support? Should the facility be required to provide the ETC documentation of the residents’ eligibility? 124. Should we require that consumers residing in group facilities provide certification from facility staff that corroborates applicants’ residence in a group living facility, as well as information about the number and types of persons served by the facility? Should the Commission set different eligibility criteria for permanent and temporary residents of group living facilities?200 125. We seek comment on the feasibility of making Lifeline funding available to agencies or non-profit organizations that are able to provide communications services to residents of group living facilities.201 As the Joint Board acknowledged, such institutions do not qualify as ETCs eligible for support, and we therefore seek comment on the application of section 254(e) of the Act, which limits the recipients of universal service support to ETCs.202 If funding were made available to such organizations, what if any additional measures would be needed to guard against waste, fraud, and abuse? For example, in a situation where the applicant lacks a residential or mailing address, how would the ETC verify the customer’s initial and ongoing eligibility for Lifeline services? B. Tribal Lifeline Eligibility 126. It is well established that federally recognized Tribes have sovereignty, and exercise jurisdiction over their members and territory with the obligation to “maintain peace and good order, (Continued from previous page) Per-Household Clarification Reply Comments at 4; NASUCA TracFone One-Per-Household Clarification Comments at 2; NCLC TracFone One-Per-Household Clarification Comments at 8; NNEDV TracFone One-Per- Household Clarification Reply Comments at 2; TracFone TracFone One-Per-Household Clarification Reply Comments at 7; SBI TracFone One-Per-Household Clarification Comments at 12. 199 See, e.g., City of Cambridge – CoC TracFone One-Per-Household Clarification Comments at 3 (proposing that a group living quarters would apply for a “waiver” of the one-per-household policy by filing a form with ETCs establishing its group facility status. Thereafter, “residents at the named facility would be entitled to receiving Lifeline telephone service, as if they had their own private residence.”); cf. Ohio Commission TracFone One-Per- Household Clarification Comments at 10 (proposing that the FCC consider providing each group living facility with a phone with a specified number of minutes per month to be allocated between the residents of the facility). 200 See, e.g., Benton Joint Board Comments at 6; Consumer Advisory Committee Joint Board Reply Comments at 9- 10; Ohio Commission Joint Board Comments at 7; Smith Bagley Joint Board Comments at 4; Smith Bagley Joint Board Reply Comments at 8; TracFone Joint Board Comments at 4-5. Certain commenters acknowledged the unique challenges faced by residents of group housing. Benton, the Consumer Advisory Committee, and Consumer Groups assert that low-income support should be extended to residents of group housing, though not necessarily automatically. Benton Joint Board Comments at 6; Consumer Advisory Committee Joint Board Reply Comments at 9; Consumer Groups Joint Board Comments at 12-14; Consumer Groups Joint Board Reply Comments at 5; FPSC Joint Board Comments at 4. 201 2010 Recommended Decision at 15602, para. 12. Pursuant to section 254(e) of the Act, only eligible telecommunications carriers may receive universal service funding. 47 U.S.C. § 254(e). Thus, to the extent that we adopt a proposal permitting non-profit group living facilities to apply for Lifeline and Link Up discounts on their residents’ behalf, Lifeline and Link Up support could be distributed to the eligible telecommunications carrier which, in turn, would provide billing discounts to the group living facility. 202 See 47 U.S.C. § 254(e). Federal Communications Commission FCC 11-32 42 improve their condition, establish school systems, and aid their people” within their jurisdictions.203 In 2000, the Commission formally recognized Tribal sovereignty in its Statement of Policy on Establishing a Government-to-Government Relationship with Indian Tribes.204 The federal government also has a trust relationship with Indian Tribes, as reflected in the Constitution of the United States, treaties, federal statutes, Executive orders, and numerous court decisions.205 Consistent with this relationship, the Commission, in its June 2000 Tribal Order, adopted measures to promote telecommunications subscribership and infrastructure deployment within American Indian and Alaska Native Tribal communities.206 Accordingly, in the Tribal Order, the Commission modified its rules to create enhanced Lifeline and Link Up programs intended to provide access to telecommunications services for low- income consumers living on Tribal lands.207 127. Income-based eligibility. The Commission’s current rules regarding Tribal eligibility for Lifeline support have been subject to differing interpretations. Specifically, ETCs, USAC, and Tribal groups have indicated there has been inconsistency and confusion among federal default and non-default states regarding whether residents of Tribal lands may qualify for participation in the program based on income, even though there is language in Commission orders so indicating.208 128. We propose to revise sections 54.409(a) and 54.409(c) to more clearly reflect that residents of Tribal lands are eligible for Lifeline and Link Up support based on: (1) income; (2) participation in any Tribal-specific federal assistance program identified in our rules; or (3) any other program identified in subsection 54.409(b) of our Lifeline and Link Up rules.209 We seek comment on 203 Policies to Promote Rural Radio Service and to Streamline Allotments and Assignment Procedures, MB Docket No. 09-52, First Report and Order and Further Notice of Proposed Rulemaking, 25 FCC Rcd 1583, 1585 (2010) (Rural Radio Order) (internal citations omitted). 204 Statement of Policy on Establishing a Government-to-Government Relationship with Indian Tribes, Policy Statement, 16 FCC Rcd 4078, 4080 (2000) (Tribal Policy Statement). 205 See, e.g., Seminole Nation v. United States, 316 U.S. 286, 297 (1942) (citing Cherokee Nation v. State of Georgia, 30 U.S. 1 (1831)); United States v. Kagama, 118 U.S. 375 (1886); Choctaw Nation v. United States, 119 U.S. 1 (1886); United States v. Pelican, 232 U.S. 442 (1914); United States v. Creek Nation, 295 U.S. 103 (1935); Tulee v. State of Washington, 316 U.S. 681 (1942); The Indian Self-Determination and Education Assistance Act of 1975, 25 U.S.C. § 450 (2006). 206 See generally Tribal Order. 207 See Tribal Order, 15 FCC Rcd at 12219-12252, paras. 20-85. Enhanced Lifeline support, otherwise known as Tier 4 support, provides up to an additional $25 per month in federal Lifeline support to eligible low-income consumers living on Tribal lands, as long as that amount does not bring the basic local residential telephone rate below one dollar. See 47 C.F.R. § 54.403(a)(4). Enhanced Link Up support provides up to an additional $70 in federal Link Up support to eligible low-income consumers living on Tribal lands. See 47 C.F.R. § 54.411(a)(3). 208 See Letter from Melissa E. Newman, Vice President Federal Regulatory, Qwest Communications International, Inc. to Marlene H. Dortch, Secretary, Federal Communications Commission, CC Docket No. 96-45, WC Docket No. 03-109 (filed Dec. 16, 2010) (Qwest Dec. 16, 2010 Ex Parte Letter); Letter from Darrell Gerlaugh, Board of Directors, Gila River Telecommunications, Inc., to Geoffrey Blackwell, Chief, Office of Native Affairs and Policy, Federal Communications Commission, WC Docket No. 03-109 (filed Feb. 24, 2011) (Gila River Feb. 24, 2011 Ex Parte Letter); Letter from Susie Allen, Member, Colville Business Council, The Confederated Tribes of the Colville Reservation, to Rebekah Bina, Attorney Advisor, Wireline Competition Bureau, Federal Communications Commission, WC Docket No. 03-109 (filed Feb. 25, 2011) (Colville Feb. 25, 2011 Ex Parte Letter). See Federal- State Joint Board on Universal Service; Promoting Deployment and Subscribership in Unserved and Underserved Areas, Including Tribal and Insular Areas, Twenty-Fifth Order on Reconsideration, Report and Order, Order, and Further Notice of Proposed Rule Making, CC Docket No. 96-45, 18 FCC Rcd 10958, 10970-71, paras. 23-24 (2003) (Second Tribal Order). 209 See Appendix A, 47 C.F.R. § 54.409. Federal Communications Commission FCC 11-32 43 this proposal. 129. Program-based eligibility. Under section 54.409 of the Commission’s rules, participation in the federal Food Stamp Program (or the Supplemental Nutrition Assistance Program (SNAP) as it is currently named), qualifies residents of Tribal lands for Lifeline/Link Up support.210 The Lifeline/Link Up rules do not, however, grant eligibility based on participation in the Food Distribution Program on Indian Reservations (FDPIR), a federal program that provides food to low-income households living on Indian reservations, and to Native American families residing in designated areas near reservations and in the State of Oklahoma.211 As discussed more fully below, eligible residents of Tribal lands for the purposes of the Lifeline/Link Up program are qualifying low-income households on a reservation, where “reservation” is defined as any federally-recognized Indian tribe’s reservation, pueblo, or colony, including former reservations in Oklahoma, and Alaska Native regions.212 130. The service and eligibility criteria for FDPIR are similar to those of SNAP, and are based on income levels that must be recertified on a periodic basis.213 A household may not participate in both FDPIR and SNAP, and any given reservation could have certain households participating in FDPIR and others participating in SNAP.214 Approximately 276 tribes currently receive benefits under FDPIR,215 suggesting that there are households on Tribal lands that are not be served by the Lifeline/Link Up program simply because they have chosen to receive FDPIR benefits instead of SNAP benefits. Further, we understand that Tribal elders, a particularly vulnerable population, often seek FDPIR benefits rather than SNAP benefits.216 As such, allowing residents on Tribal lands to qualify for low-income support based on participation in FDPIR is consistent with the purpose of the current tribal eligibility criteria, furthers the goal of providing access to telecommunications services by low-income households on Tribal lands, and the goal of targeting those in the greatest need. 131. Accordingly, we propose to amend section 54.409(c) of the Commission’s rules to allow program eligibility for residents of Tribal lands participating in FDPIR.217 We seek comment on this proposal. We also seek comment on whether there are any other federally- or Tribally-administered, income-based assistance programs, such as those focused on the elderly, which should be included in our 210 See 47 C.F.R. § 54.409. See also United States Department of Agriculture, Supplemental Nutrition Assistance Program (SNAP), Eligibility Criteria, http://www.fns.usda.gov/snap/applicant_recipients/eligibility.htm (last visited Mar. 4, 2011). 211 See United States Department of Agriculture, FD Programs, About FDPIR, http://www.fns.usda.gov/fdd/programs/fdpir/about_fdpir.htm (last visited Dec. 20, 2010); see also Food Distribution Fact Sheet, October 2010, available at http://www.fns.usda.gov/fdd/programs/fdpir/pfs-fdpir.pdf (last visited Mar. 3, 2011). 212 See 47 C.F.R. § 54.400(e); see also supra paras. 129 (discussing the definition of Tribal lands). 213 Food Distribution Fact Sheet, October 2010, available at http://www.fns.usda.gov/fdd/programs/fdpir/pfs- fdpir.pdf (last visited Mar. 3, 2011); see also FOOD & NUTRITION SERV., U.S. DEP’T OF AGRIC., FOOD DISTRIBUTION ON INDIAN RESERVATIONS, NET MONTHLY INCOME STANDARDS, FNS HANDBOOK EXHIBIT M (2010), http://www.fns.usda.gov/fdd/hdbks-instruct/FNS501-Changes/ExhibitM_FY2011.pdf; see also United States Department of Agriculture, Food & Nutrition Service, Supplemental Nutrition Assistance Program, Eligibility, http://www.fns.usda.gov/snap/applicant_recipients/eligibility.htm (last visited Mar. 2, 2011). 214 Gila River Feb. 24, 2011 Ex Parte Letter. 215 See supra note 211 (Food Distribution Fact Sheet); see also U.S. Department of the Interior, Bureau of Indian Affairs, What We Do, http://www.bia.gov/WhatWeDo/index.htm (last visited Mar. 2, 2011). 216 Colville Feb. 25, 2011 Ex Parte Letter. 217 See Appendix A, 47 C.F.R. § 54.409. Federal Communications Commission FCC 11-32 44 program eligibility rules for residents of Tribal lands. 132. Location-based conditions. In the Tribal Order, the Commission defined the terms “Tribal lands,” “reservation,” and “near reservation” for the purposes of establishing eligibility for the Tribal Lifeline and Link-Up programs.218 Specifically, the Commission modified its rules to provide support to individuals residing on “any federally recognized Indian [T]ribe’s reservation, Pueblo, or Colony, including former reservations in Oklahoma, Alaska Native regions established pursuant to the Alaska Native Claims settlement Act (85 Stat. 688), and Indian allotments,”219 as well as those residing in “those areas or communities adjacent or contiguous to reservations that are designated as such by the Department of Interior’s Commissioner of Indian Affairs, and whose designations are published in the Federal Register.”220 133. In its August 2000 Tribal Stay Order and Further Notice, however, the Commission stayed implementation of the Tribal Lifeline and Link Up programs as they applied to qualified low- income households “near reservations.”221 The Commission noted that, after its adoption of the definition of “Tribal lands” in the Tribal Order, it learned that the term “near reservation,” as defined by the Bureau of Indian Affairs (BIA), might include “wide geographic areas that do not possess the characteristics that warranted the targeting of enhanced Lifeline and Link[-]Up support to reservations, such as geographic isolation, high rates of poverty, and low telephone subscribership.”222 Accordingly, in its Tribal Stay Order and Further Notice and its May 2003 Second Tribal Order, the Commission sought comment on how to identify geographic areas adjacent to reservations that share similar characteristics with the reservations.223 Since then, the Commission has not taken further action regarding the definition of “near reservation,” and currently provides enhanced low-income support only to those living on, not near, Tribal lands. 134. We now propose to amend section 54.400(e) of our rules to remove the term and definition of “near reservation,” as its inclusion in the rules creates confusion.224 We also propose to adopt a new rule section 54.402 to adopt a designation process for those Tribal groups and communities seeking designation as Tribal lands under the Commission’s rules.225 We seek comment on this proposal. The designation process we propose is consistent with the process recently proposed by the Commission in the Rural Radio Service Second R&O.226 That Order addresses the definitions of “Tribal lands” and 218 See Tribal Order, 15 FCC Rcd at 12217-19, paras. 16-19; see also 47 C.F.R. § 54.400(e). 219 Tribal Order, 15 FCC Rcd at 12218, para. 17 (defining “reservation”). 220 Id. (defining “near reservation”). 221 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, Order and Further Notice of Proposed Rulemaking, 15 FCC Rcd 17112, 17112-13, para. 1 (2000) (Tribal Stay Order and Further Notice). 222 Id. at 17113, para. 3. 223 Id. at 17114-15, paras. 5-6; Second Tribal Order, 18 FCC Rcd at 10974-77, paras. 33-38. In the Second Tribal Order, the Commission also declined to adopt changes to the definition of “reservation” made by the BIA, noting that “[t]o alleviate the potential for ongoing administrative uncertainty . . . any future modifications to the definition of ‘reservation’ or ‘near reservation’ will take effect in the context of the universal service programs only upon specific action by the Commission.” Second Tribal Order, 18 FCC Rcd at 10967, para. 17. 224 See Appendix A, 47 C.F.R. § 54.400(c). 225 See Appendix A, 47 C.F.R. § 54.402. 226 Policies to Promote Rural Radio Service and to Streamline Allotment and Assignment Procedures, Second Report and Order, First Order on Reconsideration, and Second Further Notice of Proposed Rule Making, MB Docket No. 09-52, FCC 11-28 at paras. 6-11 (rel. Mar. 3, 2011) (Rural Radio Service Second R&O). (continued….) Federal Communications Commission FCC 11-32 45 “near reservation areas” for the purpose of determining whether a radio station application seeking to serve a Tribal community of license is a “licensable community” that qualifies for special consideration.227 The Commission adopted a process whereby an applicant seeking to establish eligibility may submit any probative evidence of a connection between a defined community or area and the Tribe itself.228 We propose to adopt a similar process for Tribal groups and communities seeking to receive Lifeline and Link Up support, but whose land is not defined by section 54.400(e).229 Use of such a process would serve the public interest by affording flexibility to Tribes in non-landed situations, particularly given that the circumstances of such Tribes are so varied. 135. We propose to delegate authority to resolve such designations to the Wireline Competition Bureau. We propose that such a request to designate an area as a Tribal land for purposes of Lifeline and Link Up should be formally requested by an official of a federally recognized Tribe who has proper jurisdiction. The request should explain why the communities or areas associated with the Tribe do not fit the definition of Tribal lands set forth in the Commission’s Lifeline/Link Up program rules, but which are regions so Native in their character or location, as to support the purpose of providing enhanced Tribal Lifeline/Link Up program support.230 A showing should also detail how providing program support to the area would aid the Tribe in serving the needs and interests of its citizens in that community, and thus further the Commission’s goals of providing Tribal support. Most probative would be evidence that a Tribe delivers services to the area at issue. However, the Tribe could offer other evidence, including the federal government’s provision of services to Tribal members in the identified area. Probative evidence might also include a showing that the Census Bureau defines the area as a Tribal service area that is used by agencies like the Department of Housing and Urban Development.231 Further, persuasive evidence of a nexus between a community and a Tribe might also include showings that a Tribal government has a defined seat, such as a headquarters or office, in the area, combined with evidence that Tribal citizens live and/or are served by the Tribal government in the area at issue. A Tribe might also provide evidence that a majority of members of the Tribal council or board live within a certain radius of the area. An applicant might also show that more than 50 percent of Tribal members live exclusively in the geographical area. Additionally, tribes might provide other indicia of a connection, such as Tribal institutions (e.g., hospitals or clinics, museums, businesses) or activities (e.g., conferences, festivals, fairs). We seek comment on any other factors that could help determine whether a geographical area is predominantly Tribal, such that low-income residents in the area should receive the benefits of enhanced Tribal program support. 136. In addition to the showing required, it is important that an applicant seeking to take advantage of enhanced Tribal program support set forth a clearly defined area to be covered. The need for such a demonstration is in line with the purposes of enabling Tribes to serve their citizens, to perpetuate Tribal culture, and to promote self-government. In evaluating such requests, we propose to delineate the “Tribal Lands” equivalents as narrowly as possible and view most favorably proposals that (Continued from previous page) 227 Rural Radio Service Second R&O at paras. 6 n. 13, 7 n.19. The Media Bureau’s decision to adopt a waiver process is informed by the comments of a few parties. Id. at para. 8; see also Koahnic Broadcast Corporation Comments, MB Docket No. 09-52 (filed May 4, 2010); Native Public Media & National Congress of American Indians Comments, MB Docket No. 09-52 (filed May 4, 2010) (NPM/NCAI Comments); Catholic Radio Association Comments, MB Docket No. 09-52 (filed May 4, 2010). 228 Rural Radio Service Second R&O at paras. 9-10. 229 See Appendix A, 47 C.F.R. § 54.400(c). 230 See Appendix A, 47 C.F.R. §§ 54.403(a)(4), 54.409(c). 231 See NPM/NCAI Comments at 8-10. Federal Communications Commission FCC 11-32 46 describe narrowly defined Tribal lands, to enable the provision of services to Tribal citizens rather than to non-Tribal members living in adjacent areas or communities. We seek comment on this proposal. 137. ETC Designation on Tribal lands. Additionally, we acknowledge that carriers serving households residing on Tribal lands could benefit from greater clarity regarding the ETC designation process for Tribal lands. However, as this issue has broader applicability beyond just the Lifeline/Link Up program, the corresponding issues and request for comment are addressed in the Office of Native Affairs and Policy’s Native Nations Notice of Inquiry.232 For example, the Notice of Inquiry seeks comment on how specific an ETC designation including Tribal lands should be, particularly for carriers seeking designation for the sole purpose of participating in the Lifeline program.233 The Notice of Inquiry also seeks comment on the nature of consultation with Tribal governments that should be included in the ETC designation process and whether carriers and Tribal governments should be required to file a proposed plan to serve with the Tribal lands.234 Finally, the Notice of Inquiry seeks comment on whether varying amounts of Lifeline support should be available on Tribal lands.235 We also seek comment on these issues and on the Lifeline program proposals contained in the Native Nations Notice of Inquiry. 138. Self-Certification of Tribal land residence. Section 54.409(c) of the Commission’s rules require that ETCs offering Lifeline services to residents of Tribal lands must obtain the consumer’s signature on a document certifying that the consumer receives benefits from at least one of the qualifying programs and lives on a reservation.236 On April 25, 2008, Qwest Communications International Inc. (Qwest) filed a request for review of certain USAC audit findings.237 The USAC audit found that, among other things, Qwest provided Tier 4 support for subscribers who were not residing on eligible Tribal lands and did not provide Tier 4 support to subscribers who were eligible residents of Tribal lands.238 Qwest asked the Commission to find that USAC erred when it concluded that Qwest is inappropriately seeking enhanced Lifeline support for customers that do not reside on Tribal lands.239 Qwest argued that it has fulfilled its obligation to ascertain whether a customer lives on a reservation by obtaining a signed certifications stating that the customer lives on a reservation.240 USAC responded that Qwest should establish additional controls.241 The Commission sought comment on the Qwest Petition in 2008.242 232See Improving Communications Services for Native Nations, CG Docket No. 11-41, Notice of Inquiry, FCC 11-30 at paras. 23-32 (rel. Mar. 4, 2011) (Native Nations NOI). 233 Native Nations NOI at paras. 28-29. 234 Native Nations NOI at paras. 30. 235 Native Nations NOI at paras. 32. 236 See 47 C.F.R. § 54.409(c). 237 Request for Review by Qwest Communications International, Inc. of the Decision of the Universal Service Administrator, WC Docket No. 03-109 (filed Apr. 25, 2008) (Qwest Petition). 238 See Qwest Petition at Attachment 3 (Results of Low Income Limited Review of Qwest Colorado, at 10-11, Finding 4) and Attachment 4 (Results of Low Income limited Review of Qwest Idaho, at 11-12, Finding 4). 239 Qwest Petition at 6-9. 240 Id. 241 Qwest Petition at Attachment 3 (Results of USAC 2006 Low Income Limited Review of Qwest Colorado, Finding 4). 242 See Comment Sought on Qwest Request for Review of a Decision of the Universal Service Administrative Company, WC Docket No. 03-109, Public Notice, 23 FCC Rcd 7845 (Wireline Comp. Bur. 2008) (Qwest Public Notice). Federal Communications Commission FCC 11-32 47 139. As discussed above, Tribal land addresses are often not straightforward.243 AT&T and the US Telecom Association (USTelecom) filed comments supporting Qwest, stating that the Commission did not intend ETCs to take additional steps beyond obtaining a self-certification, to determine whether an applicant lives on Tribal lands.244 Alltel Communications, LLC (Alltel, which subsequently was acquired by Verizon), Rural Cellular Corporation (Rural Cellular), and Smith Bagley, Inc. (SBI) also filed reply comments supporting Qwest. 245 Alltel acknowledged that Tribal lands are historically underserved areas in which residents and experience very low telephone penetration rates.246 Alltel argued that an increased burden on ETCs to verify Tribal residency would not improve service on Tribal lands, but would only serve to discourage ETCs from serving these areas as conducting additional verification procedures is very challenging due to the unique living arrangements and identification practices of many Tribes.247 For example, the Rosebud Sioux Tribe acknowledged that there are no physical addresses on the Rosebud Indian Reservation.248 Additionally, the Spirit Lake Tribe stated that all mail sent to the reservation is addressed to P.O. Boxes or General Delivery.249 140. We propose to amend section 54.409(c) of the Commission’s rules to disallow self- certification of income or program eligibility for residents of Tribal lands receiving Lifeline/Link Up support, consistent with our proposal below to require all Lifeline/Link Up recipients to provide proof of income or participation in a qualifying program.250 We propose to require a consumer receiving low- income support and living on Tribal lands to show documented proof of participation in an eligible program or eligibility based on income, like all other low-income consumers as there do not appear to be unique reasons why Tribal households should be exempt from a general requirement to produce documentation of qualification for program support. We seek comment on this proposal. 141. We do, however, recognize there may be challenges in verifying Tribal residency due to unique living arrangements on Tribal lands, and therefore maintain the self-certification requirement as to Tribal land residence.251 We propose to clarify that receipt of self-certification of residence on Tribal lands, along with documentation of income or participation in an eligible program, is sufficient documentation for an ETC to provide enhanced Lifeline support. The current rules do not require the ETC to establish further verification processes or controls to ascertain that the customer is a Tribal 243 See Tribal Addresses discussion supra at paras. 119-20. 244 See AT&T Comments, WC Docket No. 03-109, at 2-4 (filed Jun. 16, 2008); United States Telecom Association Comments, WC Docket No. 03-109, at 7-9 (filed Jun. 16, 2008). 245 See Alltel Communications, LLC Reply Comments, WC Docket No. 03-109 (filed Jul. 1, 2008) (Alltel Reply Comments); Rural Cellular Corporation Reply Comments, WC Docket No. 03-109, at 2-3 (filed Jul. 1, 2008) (Rural Reply Comments); Smith Bagley Reply Comments, WC Docket No. 03-109, at 2-3 (filed Jul. 1, 2008) (SBI Reply Comments). 246 See Alltel Reply Comments. As of 2006, the telephone penetration rate on Tribal lands in the lower 48 states was about 67.9% and in Alaska Native villages was about 87%. See 2006 GAO REPORT; see also FEDERAL COMMUNICATIONS COMMISSION, INDUSTRY ANALYSIS AND TECHNOLOGY DIVISION, TELEPHONE SUBSCRIBERSHIP ON AMERICAN INDIAN RESERVATIONS AND OFF-RESERVATION TRUST LANDS (2003). 247 Alltel Reply Comments at 1, 3-4, Attachment (stating that multiple customers often identify a common billing address or P.O. Box which may be outside the reservation boundaries). 248 See Alltel Reply Comments at Attachment. 249 See Alltel Reply Comments at Attachment (this tribe also acknowledged that it does not have access to a 911 system). 250 See Appendix A, 47 C.F.R. § 54.409(c). 251 See Appendix A, 47 C.F.R. § 54.409(c)(2). Federal Communications Commission FCC 11-32 48 member or lives on Tribal lands before providing enhanced Lifeline support.252 We seek comment on this proposed clarification.253 VI. CONSTRAINING THE SIZE OF THE LOW-INCOME FUND 142. Background. The Commission has a statutory obligation to create specific, predictable, and sufficient universal service support mechanisms.254 As noted in the National Broadband Plan, unconstrained growth of the Universal Service Fund would jeopardize universal service by increasing the contribution burden on American consumers and businesses, thereby discouraging adoption and use of communications services.255 Certain USF programs are capped, including the schools and libraries and rural health care support mechanisms.256 With the implementation of the interim competitive ETC cap for the high-cost program in 2008, the only major components of the fund that remain uncapped are the low- income program and the interstate common line support mechanism in the high-cost program, which provided $1.7 billion in 2010 to rate-of-return carriers in rural, Tribal, and insular areas and has been growing. The Connect America Fund Notice sought comment on limiting the total size of the high-cost program and on capping interstate common line support.257 143. As noted above, the size of the low-income program has grown significantly in recent years, from a roughly inflation-adjusted $667 million in 2000 to $1.3 billion in 2010.258 According to GAO’s recent report, the low-income fund grew in 2009 primarily due to the emergence of pre-paid wireless, Lifeline-only ETCs.259 USAC projects that the low-income program fund will be $1.5 billion in 2011.260 In its recent 2010 Recommended Decision, the Joint Board recommended that the Commission develop a full record on the recent growth in low-income program support.261 144. Discussion. We are mindful of the impact of the growth in the program on the consumers and businesses that ultimately support USF through fees on their phone bills. As we undertake 252 However, the ETC is still required to adopt a process for verification of income or program eligibility. See Verification discussion supra Section VII.B. 253 We note that should we adopt these proposals, there are other outstanding issues preventing the complete resolution of the Qwest Petition during this proceeding. 254 See 47 U.S.C. §§ 254(b)(5). 255 See NATIONAL BROADBAND PLAN at 149 (Recommendation 8.11); see also High-Cost Universal Service Support; Federal-State Joint Board on Universal Service, WC Docket No. 05-337, CC Docket No. 96-45, Recommended Decision, 22 FCC Rcd 20477, 20484, para. 25 (Jt. Bd. 2007) (2007 Recommended Decision). 256 See, e.g., 47 C.F.R. § 32.9000 (defining mid-sized incumbent local exchange carrier with annual revenue indexed for inflation as measured by the Department of Commerce Gross Domestic Product Chain-type Price Index (GDPCPI)); Schools and Libraries Universal Service Support Mechanism, A National Broadband Plan for our Future, CC Docket No. 02-6, GN Docket No. 09-51, Sixth Report and Order, 25 FCC Rcd 18762, 18781, para. 36 (2010) (E-Rate Sixth Report and Order) (amending Commission rules to index the E-rate program funding cap to the rate of inflation on a going-forward basis). 257 USF/ICC Transformation NPRM, FCC 11-13, at paras. 394-97. 258 Adjustments for inflation were calculated using the Bureau of Labor Statistics’ Consumer Price Index Inflation Calendar. See http://www.bls.gov/data/inflation_calculator.htm (last visited Mar. 2, 2011). 259 2010 GAO REPORT at Exec. Summary. As discussed above, pre-paid wireless Lifeline service now accounts for one-third of Lifeline support. 260 See USAC 2Q 2011 FILING, at 16. 261 See Joint Board Recommended Decision, 25 FCC Rcd at 15630, para. 91. Federal Communications Commission FCC 11-32 49 comprehensive reform and modernization of USF, we are committed to controlling costs and constraining the overall size of the Fund.262 Many of the proposals contained herein to eliminate waste, fraud, and abuse and improve program administration could reduce expenditures and the size of the program. For example, eliminating duplicate claims and tightening our rules on customary charges eligible for Link Up support should result in reduced expenditures. We note that fund growth is not necessarily indicative of waste, fraud, and abuse.263 We recognize that demand for low-income support fluctuates based on a number of factors, including changes in qualifying assistance programs and macroeconomic conditions. We also note that the program has an ultimate cap in that only a defined population of eligible low- income households may participate in the program, and support is limited to a maximum of $10 per month per household (other than on Tribal lands). We seek comment generally on how to balance these principles, while retaining our commitment to enabling households in economic distress to obtain access to essential communications services.264 145. In light of concerns about the growth of Lifeline/Link Up, we seek comment on a proposal to cap the size of the Lifeline/Link Up program, for example at the 2010 disbursement level of $1.3 billion.265 We ask whether and how a capped fund could continue to ensure telephone access for low-income households266 and support potential expansion for broadband as discussed below.267 We seek comment on whether any cap should be permanent or temporary, perhaps lasting for a set period of years or until the implementation of structural reforms proposed in this Notice. 146. If the Commission were to cap the program, either as an interim measure or permanently, what would be an appropriate cap level? How should such a level be determined? For example, should it be higher or lower than the 2010 size of the program? Should a cap be indexed to inflation, similar to other USF program funds subject to caps, or adjusted based on unemployment rates?268 We seek comment on whether there should be exceptions to a cap. For example, should low-income support for eligible residents of Tribal lands be exempt, given the very low telephone penetration rate on Tribal lands, as well as the unique circumstances and challenges faced by residents of Tribal lands?269 If we were to 262 As we stated in the USF/ICC Transformation NPRM, the Commission “plans to be guided by the following four principles [including] . . . Control the size of USF as it transitions to support broadband, including by limiting waste and inefficiency.” See USF/ICC Transformation NPRM, FCC 11-13, para. 10. 263 See 2010 Recommended Decision, 25 FCC Rcd at 15647-48 (statement of Senior Assistant Attorney General ffitch). 264 As the United States Court of Appeals for the Fifth Circuit held in Alenco, “[t]he agency’s broad discretion to provide sufficient universal service funding includes the decision to impose cost controls to avoid excessive expenditures that will detract from universal service.” Alenco Commc’ns, Inc. v. FCC, 201 F.3d 608, 620–21 (5th Cir. 2000) (Alenco). The Alenco court also found that “excessive funding may itself violate the sufficiency requirements.” Id. at 620. The United States Court of Appeals for the Tenth Circuit has stated that “excessive subsidization arguably may affect the affordability of telecommunications services, thus violating the principle in [section] 254(b)(1).” Qwest Comm’ns Int’l Inc. v. FCC, 398 F.3d 1222, 1234 (10th Cir. 2005). 265 This figure is based on USAC estimates. See USAC 2Q 2011 FILING, Appendices at M04. 266 The Commission has had a long-standing commitment to providing support that is sufficient but not excessive. See Tenth Circuit Remand Order, 25 FCC Rcd at 4088, para. 29 (concluding that a determining the sufficiency of support must also take into account the Commission’s generally applicable responsibility to be a prudent guardian of the public’s resources); see also discussion supra Section III (discussing the balancing of these objectives). 267 See infra Section IX.B (The Transition to Broadband). 268 See, e.g., 47 C.F.R. § 32.9000; E-Rate Sixth Report and Order, 25 FCC Rcd at 18781, para. 36. Federal Communications Commission FCC 11-32 50 adopt a cap, should that cap be adjusted, for instance, if national or local unemployment exceeded a specified level? 147. We also seek comment on the appropriate way to administer a cap. Is a national cap more efficient, or would a state-by-state cap be a more equitable way to administer the Low Income program fund? As noted above, the Act contemplates achieving reasonably comparable access in all regions of the country.270 Should regional differences be accounted for under a cap?271 148. If the Commission were to cap the program, we may also need to implement methods for prioritizing support among potential recipients. Should current participants in the program receive priority funding within a capped system? Alternatively, should funding be available on a first-come, first- served basis after a specified date for re-enrollment in the program? If so, given that disbursements vary monthly, how could ETCs be notified when the cap had been reached? If a participant loses services for any reason, such as non-use, should that participant necessarily receive funding upon re-enrollment, or would that person potentially have to wait until the next funding year? Should monthly benefits be reduced to ensure that all eligible households that seek to participate in the program can do so, even if they would receive a smaller benefit than program participants currently receive? We seek comments on these issues and other practical and operational issues that would need to be addressed if the program were capped. 149. If the Commission adopts a rule capping the low-income fund, should that cap be maintained if the Commission decides to support broadband with program funds? Would the inclusion of broadband necessitate different a different approach to prioritizing benefit allocations? VII. IMPROVING PROGRAM ADMINISTRATION 150. In this section, we seek comment on how to improve key aspects of the current administration of Lifeline/Link Up, consistent with our goals of reducing waste, fraud, and abuse and modernizing the program. As discussed above, the Commission has historically provided considerable discretion to the states to administer key aspects of the program, such as eligibility, enrollment, and ongoing verification of eligibility. In order to bolster oversight of this federal program, we propose a core set of federal eligibility, certification, and verification requirements that would apply in all states, while seeking comment on allowing states to adopt additional measures that could complement the federal standards. Specifically, we propose to eliminate the option of self-certifying eligibility and to require all consumers in all states to present documentation of program eligibility when enrolling. We propose to increase sample sizes for ongoing verification and to require ETCs in all states to submit verification data to USAC and the Commission. 151. We also seek comment on ways to reduce barriers to participation in the program by service providers and low-income households, specifically through the use of coordinated enrollment with other social service assistance programs and the development of a national database that could be used for enrollment and verification of ongoing eligibility. These proposals are intended to improve (Continued from previous page) 269 In imposing an interim cap on one component of the high-cost fund, the Commission created an exception for competitive ETCs serving tribal lands. In the Matter of High-Cost Universal Service Support Federal-State Joint Board on Universal Service; Alltel Communications, Inc., et al.Petitions for Designation as Eligible Telecommunications Carriers RCC Minnesota, Inc. and RCC Atlantic, Inc. New Hampshire ETC Designation Amendment, WC Docket No. 05-337, CC Docket 96-45, Order, 23 FCC Rcd 8834 (2008). 270 See supra Section III (Establishing Program Goals and Measuring Performance) (citing 47 U.S.C. § 254(b)(1), (3)). 271 See supra para. 36 (noting that affordability has both an absolute and a relative component). Federal Communications Commission FCC 11-32 51 administrative efficiency, improve service delivery, and protect and improve program access for eligible beneficiaries.272 A. Eligibility Criteria for Lifeline and Link Up 152. Background. As discussed, eligibility requirements for the Lifeline and Link Up programs vary from state to state. Currently, Lifeline and Link Up eligibility is based upon participation in certain means-tested programs and, in some states, upon income. The federal default Lifeline and Link Up eligibility criteria—which apply in eight states and two territories—require consumers to either: (1) have a household income at or below 135 percent of the Federal Poverty Guidelines;273 or (2) participate in at least one of a number of federal assistance programs.274 Our rules allow the 42 remaining states with their own Lifeline and Link Up programs flexibility in establishing their own eligibility criteria. 153. During its most recent deliberations, the Joint Board recommended that the Commission seek comment on whether to adopt for all states uniform minimum income- and program-based eligibility standards.275 Although the Joint Board supports the concept of minimum uniform eligibility requirements, it acknowledges the need to explore more fully the potential burdens and benefits.276 154. Discussion. We propose to amend our rules to require all states to utilize, at a minimum, the program criteria currently utilized by federal default states.277 We further propose to allow states to maintain existing state-specific eligibility criteria that supplement the federal criteria. Currently, some states’ criteria are more permissive than the federal criteria.278 For example, Georgia extends program eligibility to senior citizens participating in low-income discount plans offered by local power and gas 272 We note that in other contexts, the federal government is working to improve the delivery of federal assistance programs administered through state and local governments or where federal-state cooperation is beneficial. See Partner4Solutions, The Partnership Fund for Program Integrity Innovation, http://www.partner4solutions.gov/. The Partnership Fund for Program Integrity Innovation was established by the Consolidated Appropriations Act of 2010, Pub. L. No. 111-117, 123 Stat. 3034 (to be codified as scattered statutes). 273 47 C.F.R. § 54.409(b). Based on the current federal poverty guidelines for the 48 contiguous states and Washington, DC, annual income of 135% of the guidelines is $14,702 for a one-person household or family; $19,859 for a two-person household or family; $25,016 for a three-person household or family; and $30,173 for a four-person household or family. Annual Update of the U.S. Dep’t. of Health and Human Servs. Poverty Guidelines, 76 Fed. Reg. 3,367, 3,637-38 (Jan. 20, 2011). 274 Federal programs qualifying consumers for the low-income program are: Medicaid; Supplemental Nutrition Assistance Program (SNAP), formerly known as Food Stamps; Supplemental Security Income (SSI); Federal Public Housing Assistance; Low-Income Home Energy Assistance Program (LIHEAP); National School Lunch Program’s free lunch program; and Temporary Assistance for Needy Families (TANF). Low-income consumers living on Tribal lands may qualify by participation in one of several additional assistance programs: Bureau of Indian Affairs general assistance; Tribally-administered TANF; or Head Start (only those meeting its income-qualifying standards). See 47 C.F.R. § 54.409(c). 275 2010 Recommended Decision, 25 FCC Rcd at 15601, paras. 8-9. 276 Id. 277 See 47 C.F.R. § 54.409(a), (b). 278 See Georgia Public Service Commission – Lifeline Assistance Program & Link-Up Georgia, http://www.psc.state.ga.us/consumer_corner/cc_telecom/advisory/lifeline.asp (last visited March 1, 2011); see also Florida Public Service Commission – Lifeline Assistance and Link-Up Florida Brochure, http://www.floridapsc.com/utilities/telecomm/lifeline/engbrochure.aspx (last visited March 1, 2011); Kansas Corporation Commission – Kansas Lifeline Program, http://www.kcc.state.ks.us/pi/lifeline.htm (last visited March 1, 2011). Federal Communications Commission FCC 11-32 52 companies.279 If we were no longer to allow states to utilize these existing state-specific eligibility criteria, current subscribers would become ineligible for Lifeline benefits, which could result in considerable consumer disruption. We seek comment on whether, going forward, states should be able to impose additional permissive eligibility criteria they deem appropriate, so long as these additional eligibility criteria are reasonably tied to income and the state in question provides additional monetary support to supplement the federal support.280 We recognize that more permissive eligibility criteria could increase the number of Lifeline subscribers, and seek comment on how to strike the right balance between national uniformity and state flexibility to address local circumstances. We further seek comment on the nature and magnitude of the potential impact, costs, and benefits of imposition of our proposed minimum eligibility requirements.281 155. Today, ETCs operating in multiple states have to develop state-specific policies and procedures to assure compliance with state-specific program eligibility requirements. More uniform eligibility requirements could potentially lead to more streamlined and effective enrollment of eligible consumers, while lessening regulatory burdens on service providers. Moreover, as we explore cost- effective ways to strengthen the process of certification and validation of household eligibility,282 more uniform requirements could also lessen administrative costs for the program and facilitate more effective monitoring and auditing. We ask whether requiring all states to utilize the federal eligibility criteria would simplify ETC processes for enrolling eligible households and verifying ongoing eligibility. 156. Would establishing a federal baseline of eligibility criteria place any burdens upon the states? What administrative changes would be required in those states where enrollment and ongoing verification of eligibility functions are performed by a state governmental agency or third-party administrator? Would any such burdens be justified by the benefits of a minimum uniform system? From the perspective of states or service providers, what are the benefits or burdens of maintaining the current system in which requirements vary from state to state? We ask whether allowing states to maintain and add permissive eligibility criteria beyond any minimum uniform criteria would prevent existing eligible Lifeline customers from losing Lifeline support. Finally, we ask whether a federal baseline of eligibility criteria would increase program participation. 157. In its 2010 Recommended Decision, the Joint Board also recommended that we seek comment on raising the program’s income eligibility criteria of 135 percent or below of Federal Poverty Guidelines to 150 percent or below of the FPGs.283 We seek comment on raising the federal income threshold for program participation to 150 percent or below of the Federal Poverty Guidelines. Some federal programs linked by the low-income program, such as LIHEAP, already have a 150 percent threshold.284 A number of commenters in the Joint Board proceeding urged that the income eligibility standard be increased in 150 percent.285 The FPG formula has been criticized as dated and inaccurate, 279 Georgia Public Service Commission – Lifeline Assistance Program & Link-Up Georgia, http://www.psc.state.ga.us/consumer_corner/cc_telecom/advisory/lifeline.asp (last visited March 1, 2011). 280 See 47 C.F.R. § 54.409(a); see also 2010 Recommended Decision, 25 FCC Rcd at 15601, paras. 8-9. 281 2010 Recommended Decision, 25 FCC Rcd at 15601, paras. 8-9; see infra Section VII.D (seeking comment on the development and implementation of a centralized database, including the costs of constructing and maintaining a database). 282 See infra Section VII.D.2 (database). 283 2010 Recommended Decision, 25 FCC Rcd at 15601, para. 10. 284 Benton Joint Board Comments at 5-6. 285 See, e.g., NASUCA Joint Board Comments at 7. Federal Communications Commission FCC 11-32 53 with the Consumer Groups noting that some studies have suggested income levels for economic “self- sufficiency” at 161 percent of the poverty level.286 In 2004, the Commission sought comment on whether the income-based criteria for federal default states should be increased to 150 percent of the Federal Poverty Guidelines. At that time, the Commission presented a staff analysis that concluded that raising the income threshold might only have minimal on telephone penetration rates, but could result in many new Lifeline subscribers, potentially resulting in an additional $200 million in demand for Lifeline.287 We seek to update the record on this issue. We also seek comment on lowering the threshold from the current level (135 percent of the FPG). B. Certification and Verification of Consumer Eligibility for Lifeline 158. The applicability of federal and state rules governing initial certification and ongoing verification of consumers’ eligibility for support currently depends on whether the customer resides in a federal default state or non-federal default state.288 Accordingly, ETCs providing service in multiple states may be required to comply with various state and/or federal certification and verification procedures.289 “Certification” refers to the initial determination of eligibility for the program; “verification” refers to subsequent determinations of ongoing eligibility.290 159. We believe it is time to take a fresh look at these rules, taking into account both our experience with the program over the past 15 years and the many changes in service offerings since the program began. Our analysis is informed by the Joint Board’s Recommended Decision, and by the recent GAO review of the program.291 According to GAO, some states find that consumers are deterred from enrolling by the difficulty of certification and verification procedures.292 GAO also notes that there are risks associated with the self-certification of subscriber eligibility and the accuracy of amounts claimed by ETCs for reimbursement.293 Our proposals are intended to improve the integrity of the program by improving federal requirements and introducing greater consistency throughout the country. We seek to balance the need to ensure that the program supports only intended beneficiaries, with the need for administratively workable requirements that do not impose excessive burdens or costs. 286 Consumer Groups Joint Board Comments at 7-8. 287 2004 Lifeline and Link Up Order, 19 FCC Rcd at 8332-8333, Appendix K. 288 See generally 47 C.F.R. §§ 54.410(a), (c). As explained above, states with their own low-income programs may establish their own eligibility, certification, and verification requirements and are referred to as “non-federal default states.” States without their own low-income programs must follow the federal eligibility, certification, and verification requirements and are referred to as “federal default states.” See Eligibility discussion at supra paras. 152-53. 289 See 47 C.F.R. § 54.410(c)(1),(2). A few states face even more complicated verification procedures due to the limitation of their jurisdiction over certain carriers. The Commission recently concluded that when a state commission mandates Lifeline support but does not impose certification and verification requirements on certain carriers within the state, the affected carriers must follow federal default criteria for certification and verification purposes. See Lifeline and Link-Up, WC Docket No. 03-109, Order and Declaratory Ruling, 25 FCC Rcd 1641, 1641, 1645, paras. 1, 9 (2010) (Lifeline Declaratory Ruling). 290 See Verification discussion at supra paras. 160-66; see also 2010 Recommended Decision, 25 FCC Rcd at 15606- 15611, paras. 23-34. 291 See generally 2010 Recommended Decision, 25 FCC Rcd at 15606-11, paras. 23-34; 2010 GAO REPORT at Figure 2, Appendix II, Table 7 (Administrative Processes and Responsibilities). 292 See 2010 GAO REPORT at 23, Figure 2. 293 See 2010 GAO REPORT at 37. Federal Communications Commission FCC 11-32 54 1. Background 160. Initial certification. Currently, in order to qualify for service through the program, a consumer must first demonstrate that he or she meets eligibility criteria established under either federal or state rules. Pursuant to our rules, the eligibility criteria are based “solely on income or on factors directly related to income.”294 161. Section 54.409(d) of the Commission’s rules permits consumers in federal default states to prove eligibility for Lifeline by either: (1) self-certifying that they are eligible for Lifeline support based on participation in certain federal programs; or (2) providing documentation showing that they meet the income threshold requirements set forth in our rules.295 162. Certification practices vary among the non-federal-default states. According to GAO, 16 states permit self-certification under penalty of perjury, 25 states require documentation of enrollment in a qualifying program, and 9 states have in place automatic enrollment of eligible consumers.296 163. Verification of continued eligibility. Currently, in the federal default states, ETCs must annually verify the continued eligibility for a statistically valid random sample of their customers.297 Specifically, those subscribers that are sampled must present or submit a copy of their Lifeline-qualifying public assistance card and self-certify under penalty of perjury that they continue to participate in that program. Subscribers qualifying based on income must present documentation of income, and self-certify the number of individuals in the household and that the documentation presented accurately represents their household income. ETCs are required to retain copies of the self-certifications (but not the underlying documentation of income). 164. Currently, each non-federal-default state may adopt its own method for verifying continued eligibility. According to GAO, 14 states conduct random audits of Lifeline recipients, 20 states require periodic submission of supporting documents, 13 states require an annual self-certification, 13 states use an online verification system using databases of public assistance participants or income reports, and 17 states conduct verification by confirming the continued eligibility of a statistically valid sample of Lifeline recipients.298 165. This variability across states is potentially problematic for consumers, ETCs, and the Commission. State-by-state differences can complicate ETC compliance and USAC auditing, confuse consumers who may be more transient in residence than the general population, and increase the potential for abuse. Additionally, as more fully described below, the Commission currently has access to verification results only from the federal default states and a handful of states that voluntarily offer their verification results,299 giving the Commission an incomplete view of verification results and what improvements can be made to decrease the potential for waste, fraud, and abuse. 166. The Joint Board recommended that the Commission adopt a “floor,” or minimum set of 294 47 C.F.R. § 54.409(a); see also 47 C.F.R. §§ 54.409(b), (c); 54.515. 295 47 C.F.R. § 54.409(d)(1), (2). 296 2010 GAO REPORT at 51. 297 47 C.F.R. § 54.410(c). 298 2010 GAO REPORT at 51. 299 In addition to the federal default states, the following non-federal-default states require ETCs to submit their verification results to USAC: Alabama, Arkansas, Arizona, New York, North Carolina, Pennsylvania, and West Virginia. Federal Communications Commission FCC 11-32 55 requirements, for verification procedures, upon which the states may impose additional procedures.300 The Joint Board noted that uniform, minimum verification procedures and sampling criteria could help resolve the current confusion and practical difficulties that have arisen from inconsistent methods. 2. Discussion 167. One-per-residential address certification and verification. We propose to amend section 54.410 of our rules to require that all ETCs obtain a certification when initially enrolling a subscriber in Lifeline that only one Lifeline service will be received at that address.301 We also propose to amend section 54.410 of our rules to require that all ETCs obtain a certification from every subscriber verified during the annual verification process that the subscriber is receiving Lifeline support for only one line per residence.302 Requiring “one-per-residence” certification initially at sign-up and then on an ongoing basis should highlight and remind the consumer that support is available for only one line per residence and reduce inadvertent program violations. We seek comment on these proposals. 168. The form used for such certification shall explain in clear and simple terms that this federal benefit is available for only one line per residence, and that consumers are not permitted to receive benefits from multiple providers. Further, the certification form shall contain language stating that violation of this requirement would constitute a violation of the Commission’s rules and may constitute the federal crime of fraud, which will be prosecuted to the fullest extent. We seek comment on this proposal and ask whether there is any other language that should be required on the form. 169. We propose that compliance with the one-per-residence rule shall be verified annually, using the same procedures and forms described above. Annual one-per-residence verification results should be reported along with the sampling data to USAC and the Commission, as discussed more fully below. Finally, any subscriber indicating they are receiving more than one subsidy per address shall be de-enrolled pursuant to the process for duplicates described above.303 Any non-responders shall also be de-enrolled pursuant to the termination process identified in our rules.304 We seek comment on these proposals. 170. Modifying certification procedures. We propose to amend section 54.409(d)(1) to eliminate the self-certification option and require all consumers in all states to present documents to establish eligibility for the program. We are concerned that the self-certification process does not provide adequate assurance that support is being provided only to qualifying customers. Self-certification offers minimal protection against those intentionally seeking to defraud the program and fails to exclude customers that are not eligible to participate but simply misunderstand the eligibility requirements. This proposal would reduce the number of ineligible consumers in the program and reduce opportunities for waste, fraud, and abuse. 171. We seek comment on this proposed rule change to eliminate self-certification for program eligibility. Will the rule change help identify and eliminate ineligible consumers from enrolling 300 2010 Recommended Decision, 25 FCC Rcd at 15607, 15608, paras. 26, 28. 301 See Appendix A, 47 C.F.R. § 54.410. 302 See Appendix A, 47 C.F.R. § 54.410; see also 2010 Recommended Decision, 25 FCC Rcd at 15610-11, para. 34. Note that pre-paid wireless ETCs, such as TracFone and Virgin Mobile, are already subject to such a requirement. TracFone ETC Designation Order, 23 FCC Rcd at 6214-15, para. 21; Virgin Mobile Forbearance Order, 24 FCC Rcd at 3392, para. 25; i-Wireless Forbearance Order, 25 FCC Rcd at 8790, para. 16; Global Forbearance Order, 25 FCC Rcd at 10517, para. 16 303 See Duplicate Claims discussion at supra section IV.A.2. 304 See 47 C.F.R. § 54.405(c), (d). Federal Communications Commission FCC 11-32 56 in the program? To the extent that any commenter opposes this proposed change, we encourage alternative suggestions that we could implement quickly to reduce opportunities for ineligible customers to participate in the program. We seek comment on whether this proposed change would present an undue burden on ETCs and/or consumers. 172. We also propose to amend section 54.409(d)(3) to require that a consumer notify the ETC within 30 days if the consumer has knowledge that he or she no longer qualifies for Lifeline program support.305 A consumer would be required to notify its carrier upon knowledge that they no longer meet the income criteria, no longer participate in a qualifying program, are receiving duplicate support, or otherwise no longer qualify for program support. We seek comment on this proposal. 173. Modifying annual verification procedures. We are concerned that although the current sampling methodology for federal default states may provide some insights into the percentage of ineligible subscribers for a given ETC, we are concerned that it may not adequately protect the program from waste, fraud, and abuse as it does not result in de-enrollment of all ineligible subscribers. 174. We propose changes to our annual verification procedures in three areas. First, consistent with the Joint Board’s recommendation, we propose to amend section 54.410 of the Commission’s rules to adopt a uniform federal rule to serve as a minimum threshold for verification sampling. Second, we propose to require ETCs to de-enroll from the program consumers who decline to respond to an ETC’s verification attempts. Third, consistent with the Joint Board recommendations, we propose uniform procedures for the collection and submission of verification data across all states. We seek comment on these proposals and ask whether there are other verification issues for which we should consider adopting a set of uniform procedures. We also seek comment how these proposals would impact existing ETC compliance plans for specific wireless providers. 175. We propose that these uniform minimum standards apply to all ETCs in all states regardless of any variances in state eligibility criteria. We recognize that individual states may have state- specific Lifeline programs, and therefore may have concerns that are not applicable to ETCs in all states. Therefore, we propose that states be allowed to implement additional verification procedures beyond the uniform minimum required procedures to accommodate those differences. We seek comment on this proposal. We also seek comment on whether there are any state verification processes that would be useful to adopt as a minimum uniform verification requirement to be applicable in all states. 176. The Joint Board also recommended that “states be allowed to utilize different and/or additional verification procedures so long as those procedures are at least as effective in detecting waste, fraud, and abuse as the uniform minimum required procedures.”306 We seek comment on this proposal. For commenters that support this option, how, if at all could the Commission monitor whether different state procedures are “at least as effective” as the federal standards? Would this proposal adequately address our concerns about the administrative burdens created by inconsistent standards among states? 177. Uniform sampling methodology. We propose to amend section 54.410 of the Commission’s rules to establish a uniform methodology for conducting verification sampling that would apply to all ETCs in all states and provide additional protections against waste, fraud and abuse. 307 178. As noted above, the Commission’s rules require ETCs in federal default states to implement procedures to verify annually the continued eligibility of a statistically valid random sample of 305 See Appendix A, 47 C.F.R. § 54.409(c)(3). 306 2010 Recommended Decision, 25 FCC Rcd at 15608, para. 28. 307 See Appendix A, 47 C.F.R. § 54.410. Federal Communications Commission FCC 11-32 57 Lifeline consumers and provide findings to USAC.308 The Commission has previously specified that the size of annual samples should be based on a number of factors, including the number of Lifeline subscribers served by the ETC and the previously estimated proportion of Lifeline subscribers served that are “inappropriately taking” Lifeline service.309 The Joint Board recommended that the Commission reconsider the equation used to calculate acceptable sample sizes, suggesting that current samples are not large enough to reveal the percentage of ineligible consumers receiving support.310 The Joint Board also stated that a uniform minimum standard for conducting the “statistically valid random sample” would help ensure accuracy, improve consistency among the sampling data, and assist in analyzing regional and national verification issues.311 179. There are several potential issues with our current sampling methodology. First, although our calculation method is designed so that poor results from prior years require an ETC to sample a larger number of customers in following years, the current methodology assumes that no more than six percent of customers would be found ineligible in any given year.312 As such, the tables that many ETCs use to determine the number of customers they must survey do not contemplate a situation in which more than six percent of customers are found ineligible.313 To illustrate the point, the minimum number of customers surveyed increases as the number found ineligible in the previous year increases from zero to fifty percent. However, because our instructions set a “cut off” of six percent ineligible, an ETC with 400,000 Lifeline subscribers (half of whom were estimated to be ineligible) would only need to survey 244 customers.314 As such, some ETCs may be sampling too few customers for their annual verification survey results to be statistically valid. 180. Second, our current methodology creates little incentive for the ETCs to obtain responses from all consumers in the sample; the only consequence for non-response is to de-enroll an admittedly small number of consumers in the sample population. The penalties for non-response largely fall on the subscriber (who may lose service despite eligibility), while there is little incentive for the ETC to educate customers about the importance of a prompt response. 181. Third, a statistically valid sample by definition provides only a basis for estimating the total number of ineligible consumers for a particular ETC; it does not result in de-enrollment of all (or even most) ineligible subscribers for that ETC. A hypothetical example illustrates the problem: if the annual verification survey estimates that half of a large ETC’s customers are ineligible in one year, the ETC need only survey 0.27% of its customers the following year.315 In other words, if an ETC has 308 See 47 C.F.R. § 54.410(c)(2). The recent GAO Report states that 17 states conduct verification through a statistically valid sample of Lifeline support recipients. See 2010 GAO REPORT at Table 6 (the report does not identify the methodology used by the states); see also 2010 Recommended Decision, 25 FCC Rcd at 15609, para. 31 n.72. 309 See Appendix B (Sample Size Table); see also 2004 Lifeline and Link Up Order, 19 FCC Rcd at 8365, Appendix J-1. 310 2010 Recommended Decision, 25 FCC Rcd at 15608-09, para. 30. 311 2010 Recommended Decision, 25 FCC Rcd at 15608-09, para. 30. 312 See Appendix B (“In all instances, the estimated proportion P should never be less than .01 or more than .06.”). 313 See Appendix B. 314 Id. 315 For illustrative purposes, we focus on ETCs with a large number of Lifeline subscribers (400,000 or more) in a state. For these ETCs, the minimum sample size is 2.706*P*(1-P)/.000625, where P is the percentage of customers found ineligible in the previous survey. Because that formula may overestimate the statistically necessary sample size for smaller ETCs, the Commission also has provided another formula for these ETCs that adjusts for size. (continued….) Federal Communications Commission FCC 11-32 58 400,000 Lifeline subscribers and half (or 200,000) were estimated to be ineligible, the ETC would only need to survey 1,082 Lifeline customers the following year for the sample to be statistically valid (and assuming the same ineligibility rate, would then de-enroll no more than half, or 541, of the sampled customers for ineligibility). In short, the current methodology fails to identify the ineligibles who are not part of the sample.316 182. Given these potential issues, we propose to amend section 54.410 of the Commission’s rules to establish a uniform methodology to be used by all states for determining minimum verification sample sizes to provide additional protections against waste, fraud and abuse.317 Specifically, we set forth two alternative proposals for determining how many Lifeline customers an ETC must survey each year. The first alternative is a sample-and-census proposal, which would allow an ETC to sample its customers so long as the rate of ineligibility among responders to the survey is below a fixed threshold. If that ineligibility rate exceeds the threshold, however, the ETC would be required to take a census of all customers. The second alternative is to modify the current formula used in the federal default states and apply it uniformly to all states. Both alternative proposals are intended to address the three issues with our current sampling methodology, but in distinct ways. We describe each alternative below and invite comment on the relative advantages and disadvantages of these two alternatives. 183. We describe the possible implementation of the sample-and-census approach by providing an example using 5 percent as the threshold for a full census: Each year, ETCs would sample enough customers so that at least 300 customers respond to the verification survey; if the lower bound of the confidence interval for the estimate of ineligible subscribers is at or above 5 percent of total respondents, then the ETC would be required to take a census of all Lifeline customers that year and verify that each and every customer is eligible to participate in the Lifeline program. We seek comment on each component of the sample-and-census approach: (1) the minimum number of customers that must respond to the survey for each ETC, (2) the threshold rate that would determine when the number of ineligible respondents is unacceptably high, and (3) the census requirement to remove ineligible customers from Lifeline’s rolls if that threshold is crossed. 184. First, we seek comment on the appropriate minimum number of respondents needed for an accurate sample. We note that under our current rules, an ETC with 400,000 Lifeline subscribers in a given state is required to sample no more than 244 customers, while an ETC with 10,000 subscribers is required to sample no more than 238 customers, and an ETC with 500 subscribers is required to sample no more than 164 customers. Our objective is to establish a minimum required number of respondents that would provide sufficient assurance that the results of the sample are indicative of the population at large, regardless of the expected margin of error. As set forth more fully in Appendix C, a sample size of 300 would have a margin of error no greater than 5.7 percent, regardless of the number of ineligibles ultimately identified. Thus, for instance, if there were 300 respondents, and the survey identified a 10 percent ineligibility rate, that would suggest the actual eligibility rate in the entire subscriber base is somewhere between 6.6 percent and 13.4 percent. Should we consider a larger or smaller sample size based on the number of Lifeline customers an ETC has in a state? Reducing the required number of respondents for smaller ETCs could result, for example, in sizably larger margins of error. On the other (Continued from previous page) Specifically, the minimum sample size for ETCs with fewer than 400,000 Lifeline customers per state is N/(1+{[N- 1]/(2.706*P*(1-P)/.000625)}), where P is the percentage of customers found ineligible in the previous survey and N is the number of Lifeline customers the ETC currently has. 2004 Lifeline and Link Up Order/FNPRM, 19 FCC Rcd at 8366, Appendix J-2 and J-3. 316 However, the Commission does have the means to identify ineligible subscribers that are not part of statistical survey, including but not limited to the use of audits. 317 See Appendix A, 47 C.F.R. § 54.410. Federal Communications Commission FCC 11-32 59 hand, a uniform number of respondents applicable to all ETCs could require smaller ETCs to survey all or most of their Lifeline customers each year, which could be burdensome. Such a requirement also could pose burdens to the extent that not all of the surveyed subscribers respond to the survey. Our goal is to establish a minimum number of respondents that is expansive enough to fully understand the scope of violations and de-enroll those who are ineligible, but that does not impose unnecessary costs on the program or on ETCs. We seek comment on how to appropriately balance the costs and benefits associated with implementing a standard minimum number of respondents, including the burdens that may be imposed on consumers as well as ETCs. 185. Next, we seek comment on the threshold rate that would be used to determine when the number of ineligible customers found in the survey warrants a full census. For these purposes, we distinguish between Lifeline subscribers that fail to respond to a verification attempt and those that are affirmatively are found to be ineligible.318 The example above set the threshold at 5% of respondents. Is this threshold appropriate? If not, what should be the triggering threshold? Should the threshold be higher in recognition of the fact that program rules allow a subscriber to remain in the program for a period of sixty days after becoming ineligible?319 Should it be lower, in order to further reduce waste, fraud, and abuse? 320 In the same vein, should we establish an analogous threshold for the percentage of customers who do not respond to the ETC’s verification survey? In other words, is there a level of non- responsiveness that should be deemed acceptable?321 If so, how could the Commission determine that threshold? If non-response rates exceed a specified threshold, should that level of non-response also trigger a full census, or are less burdensome measures to verify subscriber eligibility more appropriate. 186. Finally, we seek comment on the census component, i.e. on the requirement that an ETC must verify the eligibility of all Lifeline customers in a state if the ineligibility rate of survey respondents exceeds the threshold. Should an ETC be required to conduct the census immediately, i.e., within a specified number of months of completing the survey, or the following year (in place of the annual verification sample)? If the number of ineligible respondents found during the census exceeds the threshold rate, should the ETC be required to conduct another census the following year in lieu of a statistically valid sample? Should an ETC whose ineligibility rate exceeds the threshold be required to perform a census of all Lifeline customers each year until the ETC can establish that fewer than 5 percent of respondents are ineligible? 187. Should we establish another, higher threshold of ineligibility that would trigger a proceeding to determine whether that ETC’s ability to participate in the Lifeline program should be revoked? For example, if two censuses in a row show that more then 10% of a particular ETC’s Lifeline customers are ineligible, would that be evidence that the ETC has failed to implement adequate internal controls to assure compliance with Commission rules to such degree that it would be appropriate to 318 In addition to non-responders, should we exclude Lifeline customers who are no longer eligible for the program, have received a notice of termination, and are within the 60-day termination window? See 47 C.F.R. § 54.405(d). If so, how should we treat such customers and how would an ETC determine when a particular customer lost eligibility? 319 We note that a higher threshold may be appropriate in the context of the Lifeline program since Lifeline subscribers have 60 days to de-enroll if they lose eligibility (and the survey may occur during this 60-day window for some subscribers). See 47 C.F.R. § 54.405. 320 Under the Improper Payments Information Act of 2002, that if more than 2.5% of payments for a given federal program are erroneous, then a program is deemed “at risk,” and the federal government is required to take steps to reduce the level of improper payments. See Payment Accuracy, http://paymentaccuracy.gov (last visited Mar. 2, 2011). 321 2010 Recommended Decision, 25 FCC Rcd at 15609, para. 31. Federal Communications Commission FCC 11-32 60 revoke that ETC’s designation to receive federal Lifeline and Link Up support? If so, what would be the effect on subscribers receiving service from the offending ETC? For example, should subscribers be offered an automatic transfer to a different ETC or be required to re-enroll? 188. In the alternative, we seek comment on how to modify the current formula used in federal default states and applying that revised formula in all states. We propose to eliminate the current cap on the estimated ineligibility rate of 6 percent. Should we require a larger sample size that would gradually increase the number of customers that an ETC must survey each year when a specified level of ineligibility is found? We recognize that a statistically valid sample is likely sufficient when the percentage of customers found ineligible is very low and the sample size is sufficiently large.322 But if the number of ineligible subscribers (including those that do not respond to the verification survey) becomes significant, should ETCs be required to verify eligibility of a proportionately larger number of customers than necessary for a statistically valid sample, to provide increasing incentives for the ETC to root out any potential waste, fraud, and abuse? We seek comment on potential modifications to the existing formula to better comport with our goals for revising the annual verification sampling procedures of ETCs. 189. We seek comment on both alternative proposals. To what extent would each proposal address the potential issues with today’s methodology? Each proposal would eliminate the 6 percent “cut-off” that may distort the statistical reliability of today’s sampling methodology. Each could incentivize ETCs to educate their customers and increase the response rates of customers—the sample- and-census proposal would do so by putting the onus on ETCs to get a sufficient number of respondents, while a modified formula potentially could allow smaller verification surveys the following year if more customers respond to the verification survey. The first proposal includes a method for weeding out ineligible customers when one year’s survey suggests that the number of ineligible customers is unacceptably high. Under the second approach, it could take several years to more fully identify ineligible subscribers for a given ETC and in the meanwhile, ineligible consumers would continue to receive support in contravention of our rules. We also acknowledge while our current statistical sampling methodology may work well for ETCs with a large number of subscribers, there is a risk of highly uncertain results for ETCs with small Lifeline subscriber populations. 190. We seek comment on these two proposals. We also seek comment on alternative proposals. Are there other ways to modify the current federal methodology to improve it as we seek to make that the uniform minimum federal standard in all states? We also seek comment on methods used by non-federal default states to select a sample of subscribers that might provide a model for a uniform federal standard. What sample size and confidence intervals are used by the various states that require statistical sampling? 191. Procedures to be followed after sampling. When an ETC samples its customers, there are three possible outcomes: (1) some subscribers will not respond; (2) some respondents are eligible; and (3) other respondents are ineligible. 192. We propose to require ETCs to de-enroll from the program consumers who decline to respond to the ETC’s verification attempts. Our rules require ETCs in all states and territories to terminate Lifeline service if the carrier has a reasonable basis to believe that a subscriber no longer 322 See Appendix C (Verification Sample Size and Margin of Error). Under the Improper Payments Information Act of 2002, a program is “at risk” if the erroneous payment rate exceeds 2.5% and the total amount of erroneous payment is greater than $10 million. Improper Payments Information Act of 2002, Pub. L. No. 107-300, 116 Stat. 2350. Federal Communications Commission FCC 11-32 61 satisfies the qualifying criteria.323 Codifying the specific requirement that they be de-enrolled for non- response in our rules would further protect the program from waste, fraud, and abuse. ETCs conducting verification surveys typically receive responses from only some of the consumers surveyed. We note that ETCs already routinely de-enroll customers that do not respond to the ETC’s verification efforts, so this rule would not impose significant burdens on ETCs. We seek comment on this proposal. 193. Collection and submission of verification sampling data. Under current rules, the Commission has access to verification results only from ETCs in federal default states and in a handful of states that require ETCs to submit information annually to USAC.324 The Joint Board noted that gathering the same minimal data from all states would provide the Commission a more complete picture of how the Lifeline program is utilized, and would help identify regional and national verification issues.325 A more comprehensive data set would also allow the Commission to continue refining its rules and policies to reduce waste, fraud, and abuse in the program. We propose to require all states to submit verification sampling data to USAC. We seek comment on this proposal. 194. Consistent with the Joint Board’s recommendation, we seek comment on whether verification results submitted to USAC and the Commission should be shared with all states.326 The Joint Board also points out that making aggregate verification results available to the public could better inform interested parties about whether universal service funds are being used for their intended purposes.327 Accordingly, we seek comment on whether the Commission should periodically publish aggregated verification results. Finally, we seek comment on whether information relating to any other Lifeline or Link-Up eligibility criteria should be gathered by ETCs and submitted to USAC and the Commission during the certification and verification processes. 195. Certification and verification best practices. Consistent with the Joint Board’s recommendation, we seek comment on states’ certification and verification practices.328 The Joint Board noted that it received limited information regarding state certification and verification practices.329 More comprehensive data on states’ practices would assist the Commission with establishing appropriate uniform minimum standards. Therefore, we seek to build the record regarding best practices for certifying and verifying household eligibility. We encourage states, ETCs, Tribal governments, consumer groups, and others to provide us with their experiences with different certification and verification procedures, and to identify those that could be adopted as uniform minimum standards for all states. 196. In particular, we seek data on how program eligibility is verified in particular states, how frequently verification is required, by whom verification is conducted, and the scope of the verification process (e.g., the proportion of subscribers that are sampled). We also seek data on whether states impose different verification responsibilities on different types of carriers. For example, we understand that in 323 47 C.F.R. § 54.405(c),(d). This may also include non-responders. See Appendix B; Deadline for Annual Lifeline Verification Surveys and Certifications, WC Docket No. 03-109, Public Notice, 25 FCC Rcd 7272, 7277, para. 8 (Wireline Comp. Bur. 2010) (Verification Public Notice). 324 The following non-federal-default states require ETCs to submit their verification results to USAC: Alabama, Arkansas, Arizona, New York, North Carolina, Pennsylvania, and West Virginia. Given that there are 10 federal- default states, this means USAC currently receives verification results for a total of 17 states and territories. 325 2010 Recommended Decision, 25 FCC Rcd at 15607-08, para. 27. 326 2010 Recommended Decision, 25 FCC Rcd at 15608, para. 29. 327 2010 Recommended Decision, 25 FCC Rcd at 15607-08, para. 27. 328 2010 Recommended Decision, 25 FCC Rcd at 15608, para. 29. 329 2010 Recommended Decision, 25 FCC Rcd at 15610, para. 33. Federal Communications Commission FCC 11-32 62 some states Lifeline-only pre-paid wireless carriers may be subject to verification requirements different from other types of carriers.330 197. Certification and verification responsibilities and cost. Consistent with the Joint Board’s 2010 Recommended Decision, we seek to develop a fuller record on who should be certifying and verifying continued eligibility.331 In the federal default states ETCs perform these functions, while in other states, third-party administrators or social services agencies may perform them. Comprehensive data on certification and verification responsibilities and costs would assist the Commission in determining the most appropriate entity to certify and verify Lifeline consumers’ eligibility. Specifically, as suggested by the Joint Board, we seek comment on the costs of requiring ETCs, states, or third-parties to undertake certification and verification procedures.332 198. Requiring ETCs to verify eligibility by interacting with consumers may present challenges, including consumers’ hesitancy to provide personal information to ETCs.333 We also note that to the extent an ETC is seeking to build a Lifeline customer base, it may not have the same incentives to verify continued eligibility for benefits as would a neutral third party or government agency. Additionally, federal, state, or Tribal agencies administering qualifying programs may be able to provide more reliable and more accurate information than consumers for verifying program or income eligibility.334 Therefore, we seek comment on whether ETCs should continue to be responsible for conducting eligibility certification and verification directly with Lifeline consumers, and on how income- based eligibility can be verified if not directly through the consumer. Further, we seek comment on the relative merits of relying upon ETCs, state agencies, Tribal governments, or other third-party entities to conduct initial certification and subsequent verification of eligibility. We seek comparisons of state practices or procedures, including how various practices have impacted the number of ineligible subscribers and duplicates, and other forms of waste, fraud, and abuse. C. Coordinated Enrollment 1. Background 199. Coordinated enrollment is a mechanism that allows consumers to enroll in the Lifeline and Link Up programs at the same time they enroll in a qualifying public assistance program. The Commission has encouraged coordinated enrollment as a best practice since the 2004 Lifeline and Link Up Order. The National Broadband Plan recommended that the Commission encourage state agencies responsible for Lifeline and Link Up to streamline enrollment for benefits, and suggested the use of unified online applications for social services.335 In its 2010 Recommended Decision, the Joint Board affirmed that coordinated enrollment should be encouraged as a best practice.336 200. Several states use coordinated enrollment to allow ETCs to confirm in near real-time 330 See NASUCA Joint Board Reply Comments at 14 (identifying that FL requires verification every 60 days for some pre-paid wireless carriers); see also generally TracFone ETC Designation Order; TracFone Forbearance Order; Virgin Mobile Forbearance Order; i-Wireless Forbearance Order; Global Forbearance Order (identifying the federal requirements imposed on pre-paid wireless carriers). 331 2010 Recommended Decision, 25 FCC Rcd at 15609-10, para. 32. 332 Id. 333 Id. 334 See id. 335 NATIONAL BROADBAND PLAN at 175. 336 2010 Recommended Decision, 25 FCC Rcd at 15604, para. 18. Federal Communications Commission FCC 11-32 63 whether a potential customer is eligible for support.337 Coordinated enrollment is distinct from “automatic” or “automated” enrollment, in which a state automatically enrolls eligible consumers in the Lifeline program when such consumers subscribe to phone service.338 Unlike automatic or automated enrollment, coordinated enrollment requires eligible consumers to affirmatively choose to enroll in the Lifeline program. 2. Discussion 201. We agree with the Joint Board’s recommendation that coordinated enrollment should be encouraged as a best practice by the states.339 Coordinated enrollment can provide an important protection against fraud because eligibility is certified by the appropriate state or Tribal agency. We also agree with the Joint Board and many commenters that there are certain administrative, technological, and funding issues associated with coordinated enrollment. We seek comment on whether mandating coordinated enrollment would be appropriate, though we note that the record is not yet well developed on this issue. We seek further information about the costs and benefits of coordinated enrollment. We also seek to understand what if any steps the Commission might take to facilitate coordinated enrollment in all states.340 202. Administrative issues. We seek to build on the information we have collected from states and Tribal governments that are developing electronic interfaces to administer the Lifeline/Link Up program through coordinated enrollment. In the Joint Board proceeding, a few states provided detailed information regarding their coordinated enrollment best practices. For example, California explained that it moved from an automatic enrollment system to a system that pre-qualifies eligible consumers who must then affirmatively accept the service.341 Additionally, the GAO Report noted that states in its survey found that using various types of automatic enrollment procedures has a positive impact on reaching and enrolling eligible consumers.342 We seek comment on ways to ensure that coordinated enrollment provides fair and equivalent access to all providers of Lifeline service in a state,343 how to provide prompt and accurate notification of customer eligibility to carriers,344 and whether and how to ensure that a coordinated enrollment program would not prevent eligible consumers from qualifying under the income 337 See Federal-State Joint Board on Universal Service, CC Docket No. 96-45, Recommended Decision, 18 FCC Rcd 6589, 6608, para. 38 (Jt. Bd. 2003) (2003 Recommended Decision); see also LIFELINE ACROSS AMERICA WORKING GROUP, REPORT OF THE FCC/NARUC/NASUCA WORKING GROUP ON LIFELINE AND LINK-UP: “LIFELINE ACROSS AMERICA” 6 (2007), http://www.lifeline.gov/LLLUReport.pdf (WORKING GROUP REPORT). In its Report, the Working Group cited Iowa, New Mexico, New Jersey, New York, North Dakota, and Washington as states utilizing automatic enrollment in some fashion. WORKING GROUP REPORT at 6, 10; see also 2010 GAO REPORT at 19. 338 Nebraska PSC Joint Board Comments at 4-5. 339 Id. 340 CPUC Joint Board Comments at 13-14; PRWI Joint Board Comments at 11, PRWI Joint Board Reply Comments at 15; Smith Bagley Joint Board Comments at iii and at 9-10; Smith Bagley Joint Board Reply Comments at 14 (suggesting that current economic conditions and state budgetary problems appear to make an automatic enrollment mandate impractical unless sources of federal funding could be identified). 341 CPUC Joint Board Comments at 7. 342 2010 GAO REPORT at 19. 343 TracFone Joint Board Comments at 7. 344 Id. at 6. Federal Communications Commission FCC 11-32 64 criteria.345 We also seek comment on how many and which states and Native Nations would require changes in state or Tribal laws to effectuate coordinated enrollment. 203. Technological issues. Individual states or Tribal governments may face unique technological circumstances and burdens that make it impractical or unduly burdensome to implement coordinated enrollment. For example, the ability of a state or Tribal government to implement coordinated enrollment may depend upon the capabilities of existing data processing equipment, software, and data communication networks. We seek comment on these burdens and seek detailed information on the technological hurdles that states or Tribal governments would face, and how these challenges can be overcome. How many states and Tribal governments would need to upgrade or add data processing equipment, software, data networks, or other technology solutions in order to implement coordinated enrollment? 204. Funding issues. We are aware that there could be significant costs associated with coordinated enrollment, including the costs of safeguarding consumers’ privacy and security, administering the program, and developing and maintaining software and equipment.346 How have states that have implemented coordinated enrollment funded associated costs? If the Commission were to mandate coordinated enrollment, should states and Tribal governments be required to provide all of the necessary funding, or should the Universal Service Fund bear some of those costs, and if so, what portion? We ask states that have developed or are developing coordinated enrollment programs to provide data on the associated costs. We also seek comment on the overall cost savings, if any, associated with coordinated enrollment, and on any other benefits that arise from coordinated enrollment. For example, have coordinated enrollment procedures helped states or Tribal governments better target benefits to intended beneficiaries? We ask for comment on the extent to which coordinated enrollment might lead to increased participation in the low income program. We seek comment on whether coordinated enrollment would reduce fraud if participants were required to use a coordinated enrollment process in order to obtain benefits. We encourage commenters to quantify, to the extent possible, the magnitude of any administrative costs and potential savings of coordinated enrollment. D. Database 1. Background 205. The measures we propose above to reduce waste, fraud, and abuse could be implemented quickly to strengthen the program, but we are also interested in more comprehensive improvements. In particular, a national database or information management system could substantially reduce burdens on consumers, ETCs, states, and USAC; eliminate the need to certify eligibility on a state-by state basis; and help identify program violations. Some argue that a national database may be the only effective method for protecting the program against waste, fraud, and abuse.347 206. The National Broadband Plan recommended that the Commission explore the steps necessary to implement a centralized database for online certification and verification of low-income 345 Commenters to the Joint Board Referral Order expressed concern that coordinated enrollment would capture only those eligible consumers participating in federal assistance programs, but not low-income households that do not participate either by choice or due to other factors. See PRWI Joint Board Comments at 10; Smith Bagley Joint Board Reply Comments at 14. MoPSC points out the need to attempt to avoid reluctance on the part of federal agencies to allow any parties direct access to their data bases. MoPSC Joint Board Comments at 5. 346 Consumer Groups Joint Board Comments at 15; CPUC Joint Board Comments at 13-14; FL PSC Joint Board Comments at 4-5; PaPUC Joint Board Comments at 5; PaPUC Joint Board Reply Comments at 5-6. 347 Letter from Alan Buzacott, Executive Director, Federal Regulatory Affairs, Verizon, to Marlene H. Dortch, Secretary, Federal Communications Commission (dated Dec. 14, 2010) (Verizon Dec. 14, 2010 Ex Parte Letter). Federal Communications Commission FCC 11-32 65 households based on numerous proposals in the record.348 Similarly, the Joint Board encouraged the Commission to further explore the implications of creating or supporting some type of eligibility database.349 Many ETCs, state commissions, and consumer advocates also support the implementation of a database.350 207. We propose to create a national database to verify consumer eligibility, track verification and check for duplicates to ensure greater program accountability. We seek to develop a robust record on the development and implementation of a centralized database, including comments on who should administer the database; whether there should be one national database or multiple regional or state databases; what functions the database should include; the costs of constructing and maintaining a database and what funding sources should be used to defray those costs; and how data security and privacy issues should be addressed. 2. Discussion 208. Administration. We seek comment on who should administer the program database. Should USAC be the primary administrator of a centralized system, or should the Commission select another third-party to administer the database? Is a governmental agency in a better position to safeguard consumers’ highly sensitive information, such as household income, than a third-party?351 Several commenters note that state social service agencies interact most closely with the program’s target population, and may be most competent to deal with low-income households’ sensitive documents.352 What models or best practices are there in other contexts for social service programs? 209. Functionality. We have heard from several ETCs that a national database may be the 348 See NATIONAL BROADBAND PLAN at 173; see also Nebraska Public Service Commission Comments, GN Docket Nos. 09-47, 09-51, 09-137, at 9 (filed Dec. 7, 2009) (suggesting “the Commission should work with states to develop an accurate system that could be administered either at a central location or as a cooperative arrangement between states and the Universal Service Administrative Company for eligibility and verification of low-income participants”); NASUCA Comments, GN Docket Nos. 09-47, 09-51, 09-137, at 35 (filed Dec. 7, 2009) (suggesting that “a universal database could be created to trap ‘double-dippers’” who seek to obtain Lifeline-supported service from two different providers). 349 2010 Recommended Decision, 25 FCC Rcd at 15611-12, para. 36. 350 See, e.g., AT&T Joint Board Comments; CPUC Joint Board Comments; CTIA Joint Board Reply Comments; FPSC Joint Board Comments; MAG-Net Joint Board Comments; NASUCA Joint Board Comments; Nexus Joint Board Comments, NPSC Joint Board Comments; Ohio PUC Joint Board Comments; Qwest Joint Board Reply Comments; Smith Bagley Joint Board Comments; TracFone Joint Board Comments; US Telecom Joint Board Comments; Verizon Joint Board Comments; YourTel Joint Board Comments; see also Letter from Mitchell F. Brecher, Counsel, TracFone Wireless, to Marlene H. Dortch, Secretary, Federal Communications Commission, WC Docket No. 03-109 (filed Dec. 7, 2010) (TracFone Dec. 7, 2010 Ex Parte Letter); Verizon Dec. 14, 2010 Ex Parte Letter; Letter from Matt Connolly, Special Projects Manager, YourTel America, Inc., to Marlene H. Dortch, Secretary, Federal Communications Commission, WC Docket No. 03-109 (filed Dec. 10, 2010) (YourTel Dec. 10, 2010 Ex Parte Letter). 351 Verizon, for example, noted that California and Texas already have state-contracted Lifeline administrators. See Verizon Dec. 14, 2010 Ex Parte Letter. 352 Letter from Genevieve Morelli, Counsel, Emerios, to Marlene H. Dortch, Secretary, FCC, CC Docket No. 96-45, WC Docket No. 03-109, dated December 16, 2010 (Emerios Dec. 16, 2010 Ex Parte Letter); Letter from Genevieve Morelli, Counsel, Emerios, to Marlene H. Dortch, Secretary, FCC, CC Docket No. 96-45, WC Docket No. 03-109, dated December 16, 2010 (Emerios Jan. 4, 2011 Ex Parte Letter). Federal Communications Commission FCC 11-32 66 best means to protect against waste, fraud, and abuse.353 We seek comment on how we can create and implement a database that would enable efficient enrollment by households in the program, but also guard against waste, fraud and abuse. For example, AT&T proposes a national PIN database that would answer two questions: 1) has a consumer been deemed eligible by the state; and 2) is the consumer already receiving Lifeline discounts? Under AT&T’s proposal, states would assume responsibility for determining consumer eligibility and assigning a PIN that would be provided in blocks to various states by USAC. ETCs would access the database and be able to determine and change the status of a consumer. 354 210. We seek comment on what functions should be served by a centralized database and the priorities for implementation. We are interested in understanding whether there are databases or systems used to facilitate other government-supported programs that can serve as models. 211. First, we seek comment on the functionality that should be included in any information system that facilitates enrollment certification, and ongoing verification of eligibility. For example, how could a system simplify the certification process and provide real-time electronic verification of consumer eligibility?355 How can we ensure that the database provides ongoing verification of consumer eligibility?356 In addition, we seek comment on the type of information that the database would need to contain regarding a consumer’s current Lifeline enrollment status.357 How would ETCs access eligibility information? CGM notes that Wisconsin provides real-time certification of customer eligibility at the time of enrollment.358 Could Wisconsin’s system provide a model for a nationwide database? 212. In addition, we seek comment on whether a nationwide database could efficiently and effectively facilitate ongoing verification of customer eligibility. We seek comment on how a database would receive updates on changes in consumers’ eligibility from appropriate social service agencies so that eligibility for Lifeline could be monitored in a timely manner.359 For example, if a database is linked to a federal or state system that contains information regarding customer enrollment in a qualifying program and the subscriber becomes ineligible in that qualifying program sometime after enrolling in Lifeline, how would the system notify the ETC that the subscriber is no longer eligible for Lifeline? Would the system alert the ETCs on a periodic basis or every time a subscriber drops out of the qualifying program? We seek comment on the procedures ETCs would follow when a subscriber becomes 353 Letter from Mary L. Henze, Assistant Vice President, Federal Regulatory, AT&T Services, to Marlene H. Dortch, Secretary, Federal Communications Commission, WC Docket No. 03-109, at 4 (filed Sept. 24, 2010) (AT&T Sept. 24, 2010 Ex Parte Letter); TracFone Dec. 7, 2010 Ex Parte Letter; Verizon Dec. 14, 2010 Ex Parte Letter. 354 Letter from Mary L. Henze, AT&T, to Marlene H. Dortch, Secretary, FCC, CC Docket No. 96-45, WC Docket No. 03-109 (filed Feb. 18, 2011) (AT&T Feb. 18, 2011 Ex Parte Letter). 355 See supra Section VII.B (Certification and Verification of Consumer Eligibility for Lifeline). 356 See supra Section VII.A (Eligibility Criteria for Lifeline and Link Up). 357 PRWI Joint Board Comments at 10. 358 Letter from Steven A. Augustino, Counsel, CGM, LLC, to Marlene H. Dortch, Secretary, FCC, CC Docket No. 96-45, WC Docket No. 03-109, (filed Dec. 9, 2010) (CGM Dec. 9, 2010 Ex Parte Letter). CGM is a software development firm that designs, develops, and delivers software systems and outsourced solutions to service providers, including competitive and incumbent wireline providers and wireless providers. 359 Stakeholders have reported on their experience using different state systems and processes, such as Texas, California, and Florida, that utilize different methods for updating consumer eligibility information. See Letter from David J. Redl, CTIA, to Marlene H. Dortch, Secretary, Federal Communications Commission, CC Docket No. 96- 45 (filed Jan. 13, 2011) (CTIA Jan. 13, 2011 Ex Parte Letter); Verizon Dec. 14, 2010 Ex Parte Letter. Federal Communications Commission FCC 11-32 67 ineligible. For example, would the subscriber be given a grace period to secure alternative service once de-enrolled in Lifeline? How, if at all, could a database be updated to reflect changes in income eligibility?360 213. We also seek comment on whether a national database would resolve the issue of annual verification by providing an effective means of verifying customer eligibility monthly, quarterly, or annually? How could a nationwide database accommodate the differences in state Lifeline practices, which include varying Lifeline eligibility criteria and verification mechanisms?361 Additionally, we seek comment on the impact a national database would have on carriers’ administrative burden.362 214. Second, we seek comment on the functionality required to eliminate duplicate claims for support363 and generally guard against waste, fraud, and abuse.364 Stakeholders have stated that a national database could eliminate fraudulent and duplicate claims for Lifeline support by performing a pre- qualification address verification.365 Currently, only Texas has a database that can identify duplicate claims, but the database does not allow ETCs to determine immediately if a household is enrolled in another program.366 Rather, ETCs must wait to hear from the system administrator whether the potential household is being served by another ETC. Because the Texas database is not updated in real-time, stakeholders report that there is significant lag-time in signing up customers.367 Is it necessary or desirable to update the database on a real-time basis? 215. Third, we seek comment on how the database would be populated and by whom. Some commenters have pointed out that a national database populated by the states as well as ETCs could simplify the certification process by providing accurate and up-to-date information on eligibility.368 Other commenters explain that state social service agencies are best situated to provide these inputs.369 We seek comment on what authority the Commission has to require state social service agencies to provide inputs in the database. We seek comment on who should be charged with populating the database. 216. A national database would need to have the ability to normalize or standardize data into a common format in order to account for variations in consumer- or ETC-provided data fields, especially addresses. What entity or entities would be responsible for populating a national database with the necessary customer eligibility information? Would ETCs populate the database for all customer data, and if that is the responsibility of ETCs, should we impose different deadlines for completion depending on the number of Lifeline subscribers for each ETC. Would a phased implementation schedule be an appropriate way to populate such a national database? If we were to adopt such an approach, what 360 AT&T Joint Board Reply Comments at 3-4; Nebraska PSC Joint Board Comments at 6. 361 AT&T Joint Board Comments at 3. 362 CPUC Joint Board Comments at 17; Smith Bagley Joint Board Reply Comments at 10. 363 See supra Section IV.A (Duplicate Claims). 364 See supra Section IV (Immediate Measures to Eliminate Waste, Fraud, and Abuse). 365 See, e.g. AT&T Joint Board Comments at 14; FL PSC Joint Board Comments at 3; Leap Joint Board Comments at 6; Sprint Joint Board Reply Comments at 5; see also Emerios Dec. 16, 2010 Ex Parte Meeting. 366 TracFone Dec. 7, 2010 Ex Parte Letter. 367 Id. 368 CGM Dec. 9, 2010 Ex Parte Letter; Emerios Dec. 16, 2010 Ex Parte Letter; Emerios Jan. 4, 2011 Ex Parte Letter. 369 Emerios Dec. 16, 2010 Ex Parte Letter; Emerios Jan. 4, 2011 Ex Parte Letter. Federal Communications Commission FCC 11-32 68 threshold should we establish to determine when different providers are required to participate, and should that be based on the size of the ETC (total subscribers) or the number of low-income subscribers it has? 217. Fourth, we seek comment on the system requirements of a national database. For example, Emerios noted that a database must be flexible enough to allow for consumers to easily switch between providers,370 and CTIA points out that a database should include enough fields so that if the fund supports other services in the future that the database would remain relevant and useful.371 We seek comment on these issues as well as other matters implicated by a national database. 218. Costs and Funding. We seek comment on the best way to fund and maintain a national database. Should database administration be funded completely or partially from the Universal Service Fund?372 Alternatively, if fees are assessed on ETCs to fund a national database, should fees be assessed on a per Lifeline-applicant basis, per instance of accessing the database (per “dip” into the database), or both? Emerios estimates that a centralized database would cost approximately $1 per application to administer.373 CGM and YourTel suggest that ETCs pay $.05 - $.10 per dip.374 How many “dips” would be expected per year? Is there some other ETC assessment mechanism that would be more appropriate, such as a one-time flat fee? Verizon suggests that California’s model of funding a third-party administrator using a customer-billed surcharge is an effective strategy.375 Are there examples of funding for program participation databases in other contexts that could serve as a model?376 219. We seek comment on what costs the states might incur if a national database were established. For example, what costs would be associated with set-up, continuous operation, and updating of appropriate state databases that may be used for state low-income programs, as well as establishing appropriate telecommunications and information links and electronic data interfaces (EDIs) with a national database. Additionally, would existing state databases need to be modified in order to be compatible with a national database and at what cost? Could a national database have the inherent capability to perform seamless data protocol conversions while interacting with the state databases? The existing proposals have not addressed how the related non-recurring and recurring costs would be allocated among the individual states, the national/federal level, and ETCs.377 However, as Emerios points out, states could be incentivized to connect to an existing national database because of the reduced costs of interfacing with a single database rather than potentially interacting with numerous providers.378 Thus, even in the absence of a state mandate to interface with a national database, states may find moving towards automation to be fiscally sound. Alternatively, are there federal agencies with which we could partner to populate consumer eligibility data? 370 Emerios Dec. 16, 2010 Ex Parte Letter; Emerios Jan. 4, 2011 Ex Parte Letter. 371 CTIA Jan. 13, 2011 Ex Parte Letter. 372 AT&T Joint Board Comments at 9-10; AT&T Joint Board Reply Comments at 3-4. 373 See Emerios Jan. 4, 2011 Ex Parte Letter, at 4. 374 CGM Dec. 9, 2010 Ex Parte Letter. 375 Verizon Dec. 14, 2010 Ex Parte Letter. 376 For example, we note that Medicaid utilizes the Medicaid Management Information System (MMIS) which encompasses one criteria for eligibity for Lifeline and Link Up. See Medicaid Management Information Systems (MMIS) Overview, https://www.cms.gov/MMIS; see also 47 C.F.R. § 54.409(b). 377 PaPUC Joint Board Reply Comments at 6-7. 378 Emerios Dec. 16, 2010 Ex Parte Letter; Emerios Jan. 4, 2011 Ex Parte Letter. Federal Communications Commission FCC 11-32 69 220. Data Security and Privacy Issues. We note that the privacy-based limitations on the government’s access to customer information in Title II of Electronic Communications Privacy Act (ECPA), section 222 of the Communications Act, and our implementing rules and the privacy provisions of the Cable Act, may be implicated by collection of the data discussed here. 379 We seek comment on whether any of these pre-existing regulatory or statutory requirements would impose any restrictions on the storage by a database administrator of customer eligibility, certification, and verification data. We seek comment on how best to address these concerns. We ask commenters to suggest ways in which a database could comply with any such requirements, and how could it be set up both to get useful data and to minimize the burden on consumers and reporting entities? Are the concerns alleviated if consumers provide information directly to the Commission, or if the ETC obtains consumer consent through a waiver at the time of enrollment? If the latter, what steps could the Commission take to ensure that consumers have provided consent? How could the Commission address any other privacy issues, and any other legal impediments to the creation and maintenance of such a database? Are there other databases that have been constructed that could serve as a model for developing a database for Lifeline/Link Up? Specifically, we seek input from the states that have developed similar databases on how best to achieve our goal of allowing ETCs to access relevant data while protecting consumers’ privacy. 221. We note that different states have different laws governing privacy of consumer data. We seek comment to better understand the differences in state privacy and security laws concerning the program eligibility data. We also seek comment to explore how to construct an IT platform that could ensure data security while enabling convenient access for all Lifeline providers across the country. Emerios points out that having a single platform, populated by ETCs, which all states can access, decreases the risk of security breaches by reducing the number of portals for inputting sensitive information.380 Would a national database be a more effective way to ensure consumer privacy than requiring individual ETCs to gather documentation establishing household eligibility?381 222. State/Regional Database. We also seek comment regarding the feasibility and potential advantages and disadvantages of regional and state databases as opposed to, or in addition to, a national database. We seek comment on several key factors that parallel the critical issues outlined above for a national database, such as administration, cost and funding, privacy, and data security issues. We are interested in the advantages and disadvantages of these possible models.382 Consistent with the goal of preventing waste, fraud, and abuse, where a state has taken steps to automate the process to streamline or enhance eligibility and certification procedures and/or to prevent duplicate claims, we propose to require all ETCs operating in that state to utilize that state-managed process. We seek comment on this proposal. E. Electronic Signature. 223. Section 54.409(d) requires carriers to “obtain [a] consumer's signature on a document certifying under penalty of perjury” that the consumer meets certain Lifeline eligibility requirements.383 Section 54.410 requires carriers to verify continued eligibility by surveying consumers who must prove their continued eligibility and “self-certify under penalty of perjury” to certain requirements relevant to 379 See, e.g., 18 U.S.C. § 2510; Electronic Communications Act (ECPA), tit. II (Stored Communications Act (SCA)), 18 U.S.C. § 2701 et seq. (2006); Cable Communications Policy Act of 1984 (the Cable Act), 47 U.S.C. § 551 et seq. (2006); 47 U.S.C. § 222. 380 Emerios Dec. 16, 2010 Ex Parte Letter; Emerios Jan. 4, 2011 Ex Parte Letter. 381 See, e.g., AT&T Joint Board Reply Comments at 10-11; TracFone Joint Board Comments at 7. 382 See AT&T Joint Board Reply Comments at 10-11; TracFone Joint Board Comments at 7. 383 47 C.F.R. § 54.409(d). Federal Communications Commission FCC 11-32 70 continued eligibility.384 Virgin Mobile has requested to enroll Lifeline consumers online by allowing applicants to electronically sign the application and to enroll customers by telephone using an Interactive Voice Response (IVR) system, which records and saves by phone an applicant’s certification of eligibility.385 224. The Electronic Signatures in Global and National Commerce Act (E-Sign Act)386 and Government Paperwork Elimination Act387 make clear that electronic signatures have the same legal effect as written signatures. We propose to allow consumers to electronically sign the “penalty of perjury” requirements of sections 54.409(d) and 54.410 of the Commission’s rules. Because there is no general Commission rule on use of electronic signatures, we seek comment on the rules defining and guidelines for accepting electronic signatures for Lifeline enrollment, certification, and verification. For example, should sections 54.409(d) and 54.410 be amended to make clear that electronic signature is an acceptable “signature on a document” as required by the rules? We seek comment on how we can ensure that ETCs maintain copies of the household certifications in the event of duplicates or other questions concerning compliance with our rules. 225. We seek comment on whether an IVR telephone system is an acceptable method to verify a consumer’s signature under sections 54.409(d) and 54.410 of the Commission’s rules.388 Unlike section 54.410, section 54.409(d) specifically requires a signature by an eligible consumer, and we seek comment on whether an interactive voice response (IVR) telephone system satisfies the signature requirement of the rules. We note that the Commission has allowed the use of automated processes in other instances requiring verification by adopting rules specifically authorizing the use of such automated processes.389 How would ETCs satisfy the recordkeeping requirements of section 54.417 using an IVR telephone system?390 VIII. CONSUMER OUTREACH & MARKETING 226. Section 214(e)(1)(B) of the Act requires ETCs to advertise the availability of services supported by universal service funds “using media of general distribution.”391 Over the years, the Commission has highlighted the importance of outreach to low-income consumers,392 including by adopting outreach guidelines in its 2004 Lifeline and Link Up Order.393 384 47 C.F.R. § 54.510. 385 Letter from Peter Lurie, Virgin Mobile USA, L.P., to Sharon Gillett, Chief, Wireline Competition Bureau, Federal Communications Commission, WC Docket No. 09-197 (filed March 4, 2010). 386 15 U.S.C. §§ 7001-7004 (2006). 387 44 U.S.C. § 3501-20 (2006). 388 47 C.F.R. §§ 54.409(d), 54.410. 389 See, e.g., 47 C.F.R. § 64.1120 (allowing automated third party verification of a subscriber’s preferred carrier change). 390 47 C.F.R. § 54.417 (requiring ETCs to maintain the documentation required in §§ 54.409(d) and 54.410(b)(3) for as long as the consumer receives Lifeline service from that ETC.). 391 47 U.S.C. § 214(e)(1)(B). 392 Tribal Order, 15 FCC Rcd at 12250, para 78. 393 These outreach guidelines are: (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 (continued….) Federal Communications Commission FCC 11-32 71 227. Advertising the availability of discounted services available to low-income households falls into two related categories: outreach and marketing. Outreach entails increasing public awareness of the program, while marketing relates to how ETCs describe and sell their USF-supported products to consumers. The Commission wants to ensure that eligible consumers are made aware of the availability of Lifeline and Link Up and seeks comment below on effective outreach methods to low-income households. Moreover, as discussed below, some ETCs are energetically marketing Lifeline- and Link Up-supported products. We seek comment on whether we should impose marketing guidelines on ETCs to ensure that consumers fully understand the benefit being offered, which may help prevent the problem of duplicate support. 228. In its 2010 Recommended Decision, the Joint Board looked at both outreach and marketing and urged the Commission to adopt mandatory outreach requirements for all ETCs that receive low-income support from the Universal Service Fund.394 In support, the Joint Board cited USAC data showing that, in 2009, only 36 percent of eligible consumers participated in Lifeline.395 Based on this statistic, the Joint Board expressed concern that current outreach is ineffective or that some ETCs are neglecting low-income outreach altogether.396 The Joint Board also recommended that the Commission review carrier best practices on community-based outreach;397 clarify the role of the states in performing low-income outreach,398 including working with ETCs to formulate methods to reach households that do not currently have telephone and/or broadband service;399 and monitor ETCs’ outreach efforts.400 With respect to marketing, the Joint Board encouraged the Commission to provide ETCs with the flexibility to market their service offerings to eligible consumers in accordance with their respective business models, and recommended that the Commission seek comment on whether ETCs should be required to submit a marketing plan to the state or Commission describing outreach efforts.401 229. Outreach to Households Without Telephone Service. In 2004, the Commission adopted an outreach guideline recommended by the Joint Board that states and carriers utilize materials and methods designed to reach low-income households that do not currently have telephone service. In its 2010 Recommended Decision, the Joint Board recommended that states should assist ETCs in two primary ways in formulating methods to reach households that do not currently have telephone and/or broadband service.402 First, states can identify appropriate community institutions to participate in public- private partnerships.403 Second, states can assist ETC outreach efforts by identifying unserved and (Continued from previous page) administer any of the relevant government assistance programs. 2004 Lifeline and Link Up Order, 19 FCC Rcd. at 8326-28, paras. 45-48. 394 2010 Recommended Decision, 25 FCC Rcd at 15619, para. 60. 395 Id. at 15618-19, para. 59 n.152. 396 Id. at 15618-19, paras. 59-60. 397 Id. at 15621, para. 64. 398 Id. at 15622, para. 67. 399 Id. at 15622, para. 68. 400 2010 Recommended Decision, 25 FCC Rcd at 15623, para. 70. 401 Id. at 15620-21, paras. 62-63. 402 Id. at 15622, para. 68. 403 Id. Federal Communications Commission FCC 11-32 72 underserved populations for whom outreach would be beneficial.404 230. We seek comment on the efficacy of current efforts by states and ETCs to reach low- income consumers without phone service, and what more can be done to improve outreach, particularly in states where adoption of phone service is below the national average. We seek examples of public- private partnerships that have been effective in reaching low-income households without phone service. In addition, we would like to better understand how state social service agencies or public utility commissions identify unserved populations in their states, and whether and how they could share such information with ETCs operating within their states. We also seek comment on the role of Tribal governments and organizations in identifying and reaching out to members of their communities who lack telephone service and could benefit from Lifeline and Link Up. Moreover, we are interested in any data regarding whether outreach to low-income households results in increased telephone penetration rates. 231. Outreach to Non-English Speaking Populations. The Commission has encouraged states and carriers to use advertising that can be read or accessed by any sizable non-English speaking populations within the ETC’s service area.405 The Joint Board also emphasized the importance of outreach to non-English speaking communities in its 2010 Recommended Decision.406 We seek comment on whether current outreach efforts to non-English speaking communities by states and ETCs are effective, or whether more should be done in this area. As discussed in more detail below, we seek information on community-based partnerships or initiatives that have been effective in educating non- English speaking populations about the Lifeline/Link Up program. 232. Role of the States and Outreach with Government Assistance Programs. Since 2004, the Commission has urged states and carriers to coordinate their outreach efforts with governmental agencies that administer any of the relevant government assistance programs.407 The Commission’s 2004 outreach guidelines make clear that states play an important role in working with ETCs to advertise the availability of Lifeline supported services.408 Recently, the National Broadband Plan noted that requiring ETCs to conduct Lifeline outreach may not be the most effective way to reach underserved, low-income populations.409 Rather, the Broadband Plan suggested that state social service agencies should take a more active role in consumer outreach by making Lifeline and Link-Up applications routinely available when the agencies discuss other assistance programs with consumers.410 A few ETCs have pointed out that social service agencies are in a much better position than ETCs to approach potential consumers with information about Lifeline-assisted programs.411 233. We seek comment on what steps this Commission could take to encourage state and Tribal social service agencies to take a more active role in reaching potential Lifeline-eligible consumers going forward. For example, should we encourage the states to distribute to low income consumers comparative guides detailing the competitive Lifeline offerings available in their states?412 We seek 404 Id. 405 Id. at 15618, para 57. 406 2010 Recommended Decision, 25 FCC Rcd at 15620-21, para. 63. 407 2004 Lifeline and Link Up Order, 19 FCC Rcd. at 8328, para 48. 408 2004 Lifeline and Link Up Order, 19 FCC Rcd. at 8326-8327, para. 45-46. 409 NATIONAL BROADBAND PLAN at 172-173. 410 Id. 411 Qwest Dec. 16, 2010 Ex Parte Letter; Verizon Dec. 14, 2010 Ex Parte Letter. 412 2010 Recommended Decision, 25 FCC Rcd at 15631-32 (statement of Commissioner Clyburn). Federal Communications Commission FCC 11-32 73 comment on who should bear the cost associated with state outreach efforts, and whether outreach costs should come out of the Universal Service Fund. And we ask commenters to identify any best practices in the area of state outreach. We also inquire whether coordinating outreach with government assistance programs should be the preferred method of outreach, as opposed to imposing mandatory outreach requirements on ETCs. 234. Outreach by ETCs. As noted above, the Commission has not imposed mandatory outreach obligations on ETCs, but rather adopted outreach guidelines in 2004 designed to encourage states and carriers to work together to educate consumers about Lifeline-assisted programs.413 The Joint Board’s 2010 Recommended Decision recommended that the Commission adopt mandatory outreach requirements for all ETCs that receive low-income support from the Universal Service Fund.414 Looking at the current Lifeline participation rate, the Joint Board expressed concern that ETCs may not be doing enough to promote their Lifeline offerings to low-income households.415 The Joint Board also recommended that the Commission seek comment on whether ETCs should be required to submit a marketing plan to the state or Commission outlining their outreach efforts. 235. We seek comment on whether we should impose specific outreach requirements on ETCs, as recommended by the Joint Board. If the Commission were to adopt mandatory requirements, what should those requirements be? Would a uniform national rule be effective in achieving program goals, and what burdens would such a rule place on ETCs? In response to the Recommended Decision, Qwest argues that ETC advertisements do not necessarily result in more customers enrolling in the program, and that the better approach is for the state or social services agencies to promote the program.416 TracFone notes that it spent $41 million on advertising in 2010 to promote its Lifeline- supported SafeLink product, which included targeted marketing and advertisements in community newspapers.417 We seek to develop a fuller record on this issue, as suggested by the Joint Board. We are interested in understanding what are the most effective outreach methods to reach consumers, and how the Commission could evaluate the impact of outreach methods over time. 236. Community-Based Outreach. In its 2010 Recommended Decision, the Joint Board noted that community-based outreach may be an effective means to reach low-income households and encouraged the Commission to collect data on best practices in this area.418 We ask ETCs, community- based organizations, and other interested parties to highlight community-based outreach that has been successful in educating low-income households about the Lifeline program. For example, we seek comment on the role of Tribal governments and other Tribal organizations in reaching low-income households on Tribal lands. 237. Marketing and Uniform Language to Describe Lifeline. Some ETCs market their Lifeline-supported products under a trade name. For example, TracFone offers Lifeline-supported service under the name SAFELINK WIRELESS®, while Virgin Mobile’s competing offering is Assurance Wireless. Some eligible consumers may not understand that these products are Lifeline-supported offerings, and therefore may not realize they are violating our prohibition against having more than one Lifeline-supported service per household. To prevent consumer confusion and reduce the number of 413 2004 Lifeline and Link Up Order, 19 FCC Rcd. at 8326-8329, paras. 45-49. 414 2010 Recommended Decision at 15619, para. 60. 415 Id. at 15618-19, para. 59. 416 Qwest Dec. 16, 2010 Ex Parte Letter 417 TracFone Dec. 7, 2010 Ex Parte Letter, at 6. 418 2010 Recommended Decision, 25 FCC Rcd at 15621, para. 64. Federal Communications Commission FCC 11-32 74 consumers receiving duplicate support, we seek comment on whether we should require all ETCs to include language in the name of their service offering or in description of the service to make clear that the offering is supported by Lifeline. Should ETCs be required to expressly identify the service as a Lifeline-supported product in all advertising and outreach to consumers? Would it inhibit effective marketing by ETCs to require such language on the product name, potentially reducing competition for Lifeline-supported services? We seek comment on whether the other actions we propose in this Notice to eliminate waste, fraud, and abuse alleviate the need to set policies related to the marketing of Lifeline services to consumers. 238. We also seek comment on whether ETCs should be required to include in all marketing and advertising materials for Lifeline-supported offerings clear and prominent language explaining that consumers are entitled to only one Lifeline subsidy per household. Should the Commission develop model language that would be required for ETCs to use, or that would be a safe harbor for ETCs to use? If so, what should that language be? We request that ETCs provide us with the language they currently use to describe their Lifeline and Link Up service offerings. IX. MODERNIZING THE LOW INCOME PROGRAM TO ALIGN WITH CHANGES IN TECHNOLOGY AND MARKET DYNAMICS A. The Current Lifeline Program 1. Voice Services Eligible for Discounts 239. Background. The telecommunications marketplace has changed dramatically since the Commission created the current Lifeline program in 1997. In contrast to 1997, today incumbent telephone companies typically offer consumers packages that combine both local and long distance calling into a single plan. Some of these plans are structured so that a consumer pays a single rate regardless of whether their call is to a local or long distance number. Over the last decade, the wireless industry has migrated to packages that offer a bucket of minutes for a set price, with no distinction between local and long distance calling. Indeed, many wireless ETCs offer plans eligible for the Lifeline discount that also include nationwide calling.419 From the consumer’s perspective, distinctions between local and long distance calling are increasingly disappearing. 240. Currently, all ETCs must make available to qualifying low-income households certain enumerated services as part of their Lifeline service offerings, as defined by section 54.401.420 These Lifeline supported services consist of a “retail local service offering” with specific functionalities including, for example, access to public switched networks, emergency services, operator services, and directory assistance.421 Additionally, according to the definitions of “universal service” and “Lifeline” 419 See, e.g., Assurance Wireless, http://www.assurancewireless.com/Public/MorePrograms.aspx (stating that Assurance Wireless offers “[s]ervice within [a] nationwide coverage area reaching more than 275 million people”) (last visited Mar. 1, 2011); Cellular One, Lifeline and Link Up, http://www.cellonenation.com/lifeline.php (offering free in-state long distance for calls completed within the home calling area) (last visited Mar. 1, 2011); U.S. Cellular, Lifeline Plans, http://www.uscellular.com/plans/lifeline/index.html (offering free nationwide calling to subscribers purchasing the Lifeline Tribal lands/Oklahoma Calling Plan) (last visited Mar. 1, 2011). 420 47 C.F.R. § 54.405(a). 421 47 C.F.R. §§ 54.101, 54.401(a). Our rules require Lifeline-supported services to offer the following functionalities: (a) Voice grade access to the public switched network; (b) Local usage; (c) Dual tone multi-frequency signaling or its functional equivalent; (d) Single-party service or its functional equivalent; (continued….) Federal Communications Commission FCC 11-32 75 adopted in the 1997 Universal Service First Report and Order, an ETC providing program support to a customer is currently reimbursed only for discounts provided on the costs of monthly basic, local telephone service.422 241. On February 8, 2011, the Commission released the USF/ICC Transformation Notice, which, among other things, sought comment on modifying the definition of the supported services in section 54.101. 423 As the Notice explains, the Commission originally chose to define supported services in functional terms, rather than as tariffed services, in order to promote competitive neutrality and provide greater flexibility.424 However, due to marketplace changes, the USF/ICC Transformation Notice sought comment on simplifying how we describe the core functionalities and on defining them by a single term: “voice telephony service.”425 242. Discussion. In light of the marketplace changes noted above, it is also an appropriate time to evaluate the definition of “Lifeline” to ensure it is keeping pace with the basic connectivity needs of low-income consumers. We question whether Lifeline should continue to be defined as “basic local service.” As noted above, distinctions between local and long distance calling are becoming irrelevant in light of flat rate service offerings that do not distinguish between local and toll calls. Is the “local” qualifier outdated in light of marketplace changes? How should we define “basic” voice telephony for purposes of the Lifeline and Link Up programs? 243. We propose, consistent with the USF/ICC Transformation Notice, to amend the definition of “Lifeline” in section 54.401 to provide support for a set of defined functionalities known as “voice telephony service.”426 This amended definition may provide simplicity for ETCs who provide and advertise Lifeline services, and will ensure consistency across universal service support mechanisms. 244. We seek comment on this proposal. Should this definition of voice telephony service encompass the nine functionalities currently specified in section 54.401? Is there any reason to modify the functionalities to be provided to ensure quality service for low-income customers? As noted by the Commission in the USF/ICC Transformation Notice, with respect to the performance characteristics for voice telephony service, “voice grade access” to the public switched network is defined in section 54.101 of the Commission’s rules as “a functionality that enables a user of telecommunications services to (Continued from previous page) (e) Access to emergency services; (f) Access to operator services; (g) Access to interexchange service; (h) Access to directory assistance; and (i) Access to toll limitation. 422 See 47 C.F.R. § 54.401(a) (defining “Lifeline” as “a retail local offering” providing specified functionalities to eligible low-income consumers); see also Universal Service First Report and Order, 12 FCC Rcd at 8780, 8952, paras. 2, 328 (stating that, in implementing the universal service program, the Commission’s goals include a commitment to “maintain rates for basic residential service at affordable levels” and that “that Lifeline consumers should have the benefit of certain basic services and policies”). 423 See USF/ICC Transformation NPRM, FCC 11-13, at paras. 95-97 (citing 47 C.F.R. § 54.101(a)). 424 Id. at para. 95. 425 See id. at paras. 96-97. 426 See Appendix A, 47 C.F.R. § 54.401(a)(3). Because we are merely proposing to consolidate all currently supported services for the Lifeline program under one new term, “voice telephony service,” we need not consider whether these consolidated services should be part of the definition of supported services. 47 U.S.C. § 254(c)(1)(A)-(D). Federal Communications Commission FCC 11-32 76 transmit voice communications, including signaling the network that the caller wishes to place a call, and to receive voice communications, including receiving a signal indicating there is an incoming call. For the purposes of this part, bandwidth for voice grade access should be, at a minimum, 300 to 3,000 Hertz.”427 Is this definition appropriate for Lifeline households? How should we define services supported by Lifeline in a way that is technologically neutral and can evolve over time as technologies used to deliver voice service change in the years ahead? 2. Support Amounts for Voice Service a. Background 245. The benefit from the federal Lifeline program can vary by household depending on a number of factors. As noted above, the amount of federal Lifeline support that a household receives depends in part on the state and (if applicable) Tribal land in which the household is located. Moreover, the amount the household actually pays for phone service depends on the price charged by the carrier for offering the service and the type of service plan the carrier offers to which the discount is applied. The net result is that households end up paying significantly different amounts for their Lifeline-supported service depending on their chosen carrier and the state in which they reside, and in some cases do not pay for that service at all. 246. Under the current rules, there are four tiers of federal Lifeline support, each of which must be passed directly from the ETC to the qualifying low-income consumer in the form of discounts on the consumer’s monthly bill.428 All eligible subscribers receive Tier 1 support, which provides a monthly discount equal to the incumbent local exchange carrier’s Subscriber Line Charge, which today is capped at $6.50.429 Tier 2 support provides an additional $1.75 per month in federal support, available in all states.430 Tier 3 support provides one-half of the subscriber’s state Lifeline support amount, up to a maximum of $1.75 per month.431 Only subscribers residing in a state that has established its own Lifeline 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.432 Finally, Tier 4 support provides eligible subscribers living on Tribal lands up to an additional $25 per month towards reducing basic local service rates, but the rules specify that the discount cannot bring the subscriber’s rate for basic local service below $1.433 427 USF/ICC Transformation NPRM, FCC 11-13, at para. 86 (citing 47 C.F.R. § 54.101(a)(1)). 428 See 47 C.F.R. § 54.403; see also Universal Service First Report and Order, 12 FCC Rcd at 8971, para. 368. 429 See 47 C.F.R. § 54.403(a)(1). The SLC is a flat, monthly charge that incumbent local exchange carriers assess directly on end users of telecommunications service to recover a portion of their revenue assigned to the interstate jurisdiction. Federal-State Joint Board on Universal Service, CC Docket No. 96-45, Further Notice of Proposed Rulemaking and Report and Order, 17 FCC Rcd. 3752, 3767, para. 35 n. 81 (2002). USAC, Step 1: Lifeline Support, http://usac.org/li/telecom/step01/lifeline.aspx (last visited Mar. 1, 2011). 430 47 C.F.R. § 54.403(a)(2). When adopting Tier 2 support in 1997, the Commission sought to increase subscribership in those states that previously did not participate in the program. See Universal Service First Report and Order, 12 FCC Rcd at 8962-64, paras. 350-53. 431 47 C.F.R. § 54.403(a)(3). When adopting Tier 3 support in 1997, the Commission sought to increase subscribership and encourage states to provide matching discounts to eligible consumers. See Universal Service First Report and Order, 12 FCC Rcd at 8963-64, para. 353. We are aware that some states do not actually provide matching state discounts through explicit support, but rather mandate that the carrier reduce its rates by such amounts to qualify for Tier 3 support. 432 See 47 C.F.R. § 54.403(a)(3). 433 47 C.F.R. § 54.403(a)(4). Federal Communications Commission FCC 11-32 77 247. Significant marketplace changes have occurred since the Commission adopted the Lifeline support tiers. Notably, most non-ILEC ETCs do not assess SLCs on their subscribers, and their rates are not regulated by the Commission and/or the states.434 Therefore, it is unclear whether an ILEC’s SLC continues to be an appropriate metric for determining the amount of support that should be provided to a non-ILEC ETC that serves a low-income household. Moreover, to varying degrees, local rates for incumbent wireline telephony companies have been deregulated.435 Finally, the fact that numerous carriers are seeking designation as Lifeline-only ETCs, including prepaid wireless carriers and prepaid wireline carriers, suggests that the current structure of the program may present an attractive business opportunity for firms that employ different business models than traditional wireline carriers. As a result, it is unclear whether the aggregate amount of support or the tiered structure of support provided to an ETC for serving a low-income household and for the provision of Lifeline support should remain the same as they were in the past and whether they should remain the same for all types of carriers. Rather than just offsetting the rates paid by consumers, subsidies in an unregulated marketplace could reduce price competition and benefit providers more than consumers.436 Similarly, providing the same level of support for services offered over different technology platforms may result in over-subsidizing some technologies and under-subsidizing others. b. Discussion 248. We seek comment on whether there is a more appropriate reimbursement framework than the current four-tier system for determining federal support amounts for the program that will provide support for low-income households that is sufficient, but not excessive, consistent with section 254.437 Should the low-income tiers of support be modified in light of the marketplace changes that have occurred since the Universal Service First Report and Order? Such a change could be an important step toward reducing waste in the Lifeline program. How can the Commission ensure that low-income households can continue to benefit from the expanded array of service offerings, including pre-paid 434 See 47 C.F.R. §§ 69.104, 69.152(d)(1), 69.152(q). The Commission acknowledged this in the Universal Service First Report and Order, but ultimately opted to require that all ETCs pass Lifeline discounts in the amount of the SLC through to eligible consumers. See Universal Service First Report and Order, 12 FCC Rcd at 8970-71, paras. 366-67. The Commission “acknowledge[d] that the distribution of support to non-ILEC carriers cannot be achieved simply by waiving the SLC, as [c]arriers other than ILECs do not participate in the formal separations process that our rules mandate for ILECs and hence do not charge SLCs nor distinguish between the interstate and intrastate portion of their charges and costs.” Id. at 8970, para. 366. The Commission concluded, however, that “[t]he interstate portion of ILECs’ rates to recover loop costs is, almost without exception, greater than the amount of the SLC cap for residential subscribers; we are therefore confident that this amount is a reasonable proxy for the interstate portion of other eligible telecommunications carriers’ costs.” Id. at 8970-71, para. 367. 435 See, e.g., KAN. STAT. ANN. § 66-2005 (2009); Texas Util. Code Ann. § 52.201 (Vernon 2007); Ohio Substitute Senate Bill No. 162 (Sept. 2010), available at http://www.legislature.state.oh.us/bills.cfm?ID=128_SB_162; Press Release, Virginia State Corporation Commission, SCC Approves Partial Deregulation of Verizon Local Telephone Services (Dec. 14, 2007), http://www.scc.virginia.gov/puc/comp/v_exch/c_verdereg_07.aspx.; Phillip Rawls, Alabama Phone Deregulation Increases Jan. 1 as PSC Loses Control over 4 Companies, BIRMINGHAM NEWS, Dec. 31, 2010, http://blog.al.com/wire/2010/12/alabama_phone_deregulation_inc.html. 436 See, e.g., Scott Wallsten, Technology Policy Institute, The DTV Coupon Program: A Boon to Retailers, not Consumers, Sept. 15, 2008, http://www.techpolicyinstitute.org/files/the_dtv_coupon_program.pdf (DTV Coupon Program Paper) (“Because consumers pay $0 with the coupon for any box priced $40 or less, retailers have little incentive to reduce the price below $40. An analysis of converter box prices at retailers around the country suggests that the coupon program has increased the price of converter boxes by $21 - $34.”). 437 See 47 U.S.C. § 254(b)(5) (universal service support should be “sufficient” to preserve and advance universal service); see also Alenco Commc’ns., Inc. v. FCC, 201 F.3d 608, 620 (5th Cir. 2000) (“excessive funding may itself violate the sufficiency requirements of the Act.”). Federal Communications Commission FCC 11-32 78 wireless service, while ensuring that universal service funds are primarily benefiting consumers, rather than the carriers that serve those consumers? 249. Given the growth of the program in recent years, it is vital that the Commission ensure that funds are distributed in a targeted and meaningful way. In particular, we seek comment on whether it makes sense to continue to tie Lifeline support amounts to the federal subscriber line charge, which may not be the appropriate metric of whether service is affordable to a low-income household. Should we adopt a different framework for carriers that do not charge a subscriber line charge, or that do not allocate their costs between the intrastate and interstate jurisdictions?438 Is there an amount that would better ensure affordable service for eligible households? What might be the appropriate reimbursement structure be in the future, when voice service is provided as an application over broadband networks, potentially at no additional cost to the consumers? 250. We also seek comment on whether to maintain Tiers 2 and 3 of Lifeline support as currently set forth in the Commission’s rules. Should consumers be entitled to a higher or lower baseline federal support amount, justifying a change in the amount of available Tier 2 support? Similarly, should the Commission raise or lower the amount of federal matching support that is available under Tier 3? Finally, does $25 remain a reasonable additional reimbursement rate for consumers receiving enhanced Tribal support pursuant to Tier 4? Does providing such a flat amount effectively create a price floor for carriers serving Tribal lands, even though it may be possible in some instances to serve eligible households at a lower cost (i.e., for less than $25 per month)?439 We emphasize that in asking this question we are not seeking to limit benefits for low-income households, but rather looking at ways to restructure support levels to create incentives for carrier efficiency. 251. If the Commission were to create a new reimbursement structure for carriers providing Lifeline service to low-income households, should the reimbursement mechanism be different for wireless and wireline ETCs, based on their potentially divergent costs for providing service? Would there be any reason to adopt a different framework for pre-paid wireless providers as opposed to post-paid? Should the Commission maintain a tiered reimbursement structure? If so, what costs should be used as the basis for setting a support amount? Would adoption of a single, uniform flat discount amount without 438 We note that TracFone filed a petition for rulemaking and a waiver request in 2009 that raised some of these issues. In its petition for rulemaking, TracFone sought to amend the definition of Tier One Lifeline support as defined in section 54.403(a)(1). TracFone Wireless, Inc.’s Petition for Waiver of 47 C.F.R. § 54.403(a)(i), CC Docket No. 96-45, Petition (filed May 4, 2009) (TracFone Tier 1 Petition). On March 30, 2009, the Commission released a public notice seeking comment on TracFone’s petition for rulemaking. Public Notice, Report No. 2885, RM-11526 (rel. March 30, 2009), http://fjallfoss.fcc.gov/ecfs/document/view?id=6520204555. TracFone requested that the Commission detach Tier One support from the SLC in effect for the ILEC and allow all ETCs to receive the maximum available ($6.50 per household) in all service areas. TracFone Tier 1 Petition at 7-10. Additionally, TracFone requested that the Commission require ETCs claiming the maximum Tier One amount because of the rule amendment to provide an additional, unreimbursed $3.50 in Lifeline benefits per month. Id. Two parties commented on the proceeding. YourTel, a small carrier based in Missouri and a participant in the Lifeline program, concurredwith TracFone that Tier One support should be disconnected from the SLC. See YourTel TracFone Tier One Petition Comments at 1. YourTel contended that the current Tier One support system is “no longer valid in today’s wireline environment where niche carriers have higher costs.” Id. The Independent Telephone & Telecommunications Alliance (ITTA) disagreed, and stated that the Tier One support “is intended to be a proxy for interstate loop costs, and relies upon the determination that the SLC represents a fair approximation of that amount.” ITTA TracFone Tier One Petition Comments at 4. We hereby incorporate TracFone’s petition into our instant proceeding and seek further comment on these issues. 439 Cf. DTV Coupon Program Paper, at 1. Federal Communications Commission FCC 11-32 79 tiers be appropriate?440 Would a percentage discount rate, subject to an overall dollar cap, better assist low-income households in securing the best retail rates offered by their chosen ETC? In the alternative, should we establish national parameters of a basic Lifeline service, and require ETCs to specify the minimum price per household they would accept to provide such service? We seek comment on these alternatives. 3. Minimum Service Requirements for Voice Service 252. Background. As part of the ETC designation process, a carrier applying for designation must show that it offers local usage comparable to that offered by the incumbent LEC.441 In June 2010, the National Association of State Utility Consumer Advocates (NASUCA) adopted a resolution that raised concerns about “free” Lifeline calling plans offered by various wireless ETCs. In particular, NASUCA identified three areas of concern: First, that such plans have resulted in substantial growth of the Lifeline program, without a “necessary assurance of adequate value provided to the Lifeline customer,” or a demonstration that these plans make efficient use of Lifeline funds; second, that such plans include limited usage minutes and require subscribers needing additional minutes to purchase those minutes from the carrier; and third, that it is not evident whether such calling plans offer local usage comparable to available ILEC Lifeline calling plans.442 The NASUCA resolution recommended that the Commission consider establishing minimum standards of service for pre-paid wireless Lifeline service to ensure value for Lifeline consumers, as well as efficient use of universal service dollars.443 The Joint Board, in its 2010 Recommended Decision, urged the Commission to investigate the impact of designation of prepaid wireless providers on the program, noting that several commenters have suggested that minimum service requirements should be imposed upon prepaid wireless ETCs.444 253. Discussion. We seek comment on the advantages and disadvantages of adopting minimum standards for all ETCs offering Lifeline service. In the section above, we asked whether we should establish national parameters for a basic Lifeline service. Accordingly, if we were to adopt minimum service requirements for Lifeline-only ETCs, what should those requirements be? Should we establish a set minimum number of monthly minutes to be included in ETCs’ Lifeline service offerings, and if so, what would be an appropriate number of minutes?445 Should we establish a minimum number 440 See, e.g., Letter from Jamie M. Tan, Director, Federal Regulatory, AT&T Services, Inc., to Marlene H. Dortch, Secretary, Federal Communications Commission, WC Docket No. 03-109 (filed Dec. 9, 2010) (AT&T Dec. 9, 2010 Ex Parte Letter) (recommending that the Commission simplify the current rules for providing Lifeline support payments by providing a reimbursement mechanism that is not tied to ILECs’ SLC charges); AT&T’s ETC Proposal, infra note 533. 441 Federal-State Joint Board on Universal Service, CC Docket No. 96-45, Report and Order, 20 FCC Rcd 6371, 6380, para. 20 (2005) (ETC Designation Order). 442 National Association of State Utility Consumer Advocates, Resolution 2010-02, Calling for Reform of the Lifeline Program, Including Reform for Prepaid Wireless Lifeline Services, at 2-3 (June 15, 2010) (NASUCA Resolution). 443 NASUCA Resolution at 4. 444 2010 Recommended Decision, 25 FCC Rcd at 15627, para. 80 (citing Consumer Groups Joint Board Comments at 37). 445 We note that several pre-paid wireless, Lifeline-only ETCs, such as TracFone and Virgin Mobile, include several hundred minutes per month in their Lifeline service offerings. See SafeLink Wireless, http://www.safelinkwireless.com (last visited Mar. 2, 2011) (showing that TracFone, through its Lifeline service SafeLink Wireless, provides 68 minutes at a minimum, with options for 125 and 250 minutes); see also Assurance Wireless, http://www.assurancewireless.com (last visited Mar. 2, 2011) (showing that Virgin Mobile, through its (continued….) Federal Communications Commission FCC 11-32 80 of free long-distance calls? Is there a need for service quality standards when consumers often have the choice of several Lifeline providers? We seek comment on whether the Commission should impose minimum service requirements on all ETCs, as opposed to just wireless ETCs, and how we could impose standards that are technologically neutral. We note that wireless providers offer the benefits of mobility and often additional features and functionality, such as voicemail, caller ID, and call waiting, at no extra charge. Similarly, low-income households that select Lifeline offerings from wireless providers may have the ability to call distant family members and friends without incurring toll charges. Can uniform minimum standards be developed for all technologies, or is there a benefit to having standards tailored to different technologies? What are the relevant attributes or features that should be standardized across Lifeline offerings? 254. We also seek comment on the relevant costs and benefits associated with setting minimum standards of service. We note that minimum standards of service could increase the costs of Lifeline service to ETCs and could thus provide a disincentive for additional carriers to seek ETC status for the program. Would minimum standards deter companies from seeking ETC designation? Would high minimum standards make Lifeline offerings more attractive to low-income households, and thereby increase demand for the program? 4. Support for Bundled Services 255. Background. As noted above, our rules provide for Lifeline discounts on “basic, local service,” but do not address whether such discounts may be applied to bundled offerings that include basic local voice service. As noted above, section 54.401 of the Commission’s rules provides that Lifeline supported services consist of a “retail local service offering” with specified functionalities.446 It is not clear from the rule, however, whether the consumer may apply his or her Lifeline discount to reduce the cost of calling plans that include additional service components in addition to basic, local calling. Similarly, section 54.403(b) of the Commission’s rules sets out how Lifeline support discounts are passed through to consumers.447 Pursuant to that rule, ETCs that charge federal SLCs or equivalent federal charges apply Tier 1 federal Lifeline support to waive the federal SLC for Lifeline consumers.448 Any additional support received (i.e., from Tiers 2 through 4) is then applied to reduce the consumer’s intrastate rate.449 ETCs that do not charge federal SLCs or equivalent federal charges must “apply the Tier [1] federal Lifeline support amount, plus any additional support amount, to reduce their lowest tariffed (or otherwise generally available) residential rate” for the services they provide.450 Our rules, however, do not define the parameters of a lowest-cost plan or specify the types of service plans that are eligible for Lifeline support. 256. Some states have enacted policies to clarify whether Lifeline support may be used to reduce the cost of expanded service voice offerings that include optional features or bundled combinations of other services. Among these states, however, there is no uniform approach. 451 Several (Continued from previous page) Lifeline service Assurance Wireless, provides 250 minutes per month at a minimum, with options for 500 and 1000 minutes). 446 47 C.F.R. § 54.401(a). 447 See 47 C.F.R. § 54.403(b). 448 Id. 449 Id. 450 Id. 451 See NRRI STUDY at 49, Table 30. Federal Communications Commission FCC 11-32 81 states permit consumers to apply their monthly discounts to the basic voice plan of their choice, including enhanced service plans. Oregon and Texas, for example, have policies mandating that ETCs offer Lifeline discounts on all service plans that include a basic voice component.452 On the other hand, according to an October 2010 GAO report, ETCs in 14 states do not currently permit consumers to apply the Lifeline discount to a bundled service offering or package that includes telephone service. 453 257. The National Broadband Plan observed a wide variance in statewide Lifeline participation rates.454 Among other things, the Plan attributed the varied participation rates to differing “restrictions on consumers’ ability to apply the Lifeline discount to certain types of services.”455 The Plan recommended that the Commission and states should permit Lifeline customers to apply their Lifeline discounts on all calling plans with a local voice component, including bundled service packages.456 By so doing, the Plan stated, the Commission would make bundled offerings, including those that include broadband, more affordable for low-income households.457 258. Discussion. We seek comment on amending the Commission’s rules to adopt a uniform federal requirement that Lifeline and Link Up discounts may be used on any Lifeline calling plan offered by an ETC with a voice component, including bundled service packages combining voice and broadband, or packages containing optional calling features. We note that section 254(f) of the Act bars states from adopting regulations that are inconsistent with the rules established by the Commission to preserve and advance universal service458 259. In a number of states where ETCs are not precluded by state requirements from allowing consumers to apply their Lifeline discounts to the purchase of bundled packages or optional services, many carriers – including large carriers like Sprint Nextel, Verizon Wireless, and AT&T Mobility – limit Lifeline offerings to basic voice service.459 We seek comment on whether to adopt a national rule that would require all ETCs to offer Lifeline and Link Up discounts on all of their service plans with a voice component. Under such a rule, ETCs could be required to apply federal Lifeline support to reduce the cost of any calling plan or package selected by an eligible low-income household that allows local calling, rather than offering a discount only on the carrier’s lowest tariffed or otherwise generally available residential rate plan. However, each eligible household’s Lifeline discount would be capped at the 452 Or. Admin. R. 860-033-0010 (2009); Tex. Admin. Code tit. 16, § 26.412(e)(6)-(7); see also Petition of Sprint Spectrum L.P. for a Declaratory Ruling that the Kansas Corporation Commission’s October 2, 2006 Order in Docket 06-GIMT-446-GIT, Violates Federal Law, WC Docket Nos. 03-109 and 07-138 (filed June 8, 2007) (challenging an order of the Corporation Commission of the State of Kansas, which modified the state’s Lifeline rules to require that ETCs allow Lifeline customers to choose a calling plan and apply the Lifeline discount to the plan selected by the customer). 453 2010 GAO REPORT at 13. 454 See NBP at 172 (Recommendation 9.1) (noting that “some states have participation rates of more than 75% and others have rates less than 10%”). 455 Id. 456 Id. 457 Id. 458 See 47 U.S.C. § 254(f). States may, however, choose to supplement the federal Lifeline rules by establishing their own state low-income universal service programs and requirements that do not conflict with federal universal service regulations. Id. 459 See Lifelinesupport.org, www.lifelinesupport.org (last visited Mar. 2, 2011) (searchable database listing Lifeline and Link Up services available by each ETC in a state). Federal Communications Commission FCC 11-32 82 amount the subscriber would have received if it had selected a basic voice plan. Additionally, we seek comment on requiring all ETCs to permit eligible households to apply the Link Up discount amounts set forth in section 54.411(a) of the Commission’s rules to any service plan with a voice component. As with the Lifeline program, each eligible household’s Link Up discount could be capped at the amount the household would have received pursuant to the Commission’s rules if it had selected a basic voice plan. 260. We seek comment on whether amending our rules in this way would further the statutory principle that consumers have access to quality services at “just, reasonable, and affordable rates.”460 Restrictions on use of Lifeline discounts, whether imposed under state law or by an ETC, may preclude a significant number of eligible low-income households from the expanded service options available in the marketplace, such as packages that include broadband or data service. Further, as compared to carriers’ basic plans, bundled packages of services may offer better value for Lifeline and Link Up consumers.461 261. We seek to develop a fuller record on current ETC practices regarding the provision of Lifeline discounts on bundled offerings. To what extent do ETCs currently offer Lifeline and/or Link Up discounts on plans that include bundles of services or optional calling features? If so, what services are Lifeline and Link Up consumers permitted to purchase? We also seek comment on the extent to which specific states mandate that ETCs allow the application of Lifeline and/or Link Up discounts to expanded service plans. Is there any evidence that Lifeline and Link Up participation rates have been positively affected by policies requiring the extension of program discounts to the purchase of bundled packages and optional services? Where available, commenters are encouraged to submit supporting documentation of ETC or state practices along with any written submissions. 262. We seek comment on the potential administrative and practical consequences of amending our rules in this fashion. What changes to internal back office systems (e.g., for ordering service and billing) would be required to implement such a rule, and what costs would that impose on ETCs? How long would it take to implement such a change? If we were to adopt such a rule, should ETCs be obligated to offer a Lifeline discount on all of their service plans, including premium plans and packages? Conversely, are there certain service plans or packages that ETCs should not be required to make available to consumers seeking to apply Lifeline discounts? Should consumers be prohibited from applying a Lifeline discount to bundled offerings that contain a video component? 263. Would allowing consumers to choose from an array of expanded packages create a greater likelihood that Lifeline and Link Up consumers may be unable to pay for the remaining portion of their chosen calling plan and therefore risk termination of voice service? What are the options for reducing that risk? If we were to adopt such a rule, one option would be to require ETCs to offer methods of managing usage (whether minutes of use or data) that otherwise would yield higher monthly charges beyond the monthly fee. For instance, Lifeline consumers could elect to set maximum usage amounts for themselves that may not be exceeded per billing cycle. 462 We seek comment on the feasibility of this 460 47 U.S.C. § 254(b)(1). 461 For example, a recent Commission study found that consumers who receive broadband bundled with other services pay an average of $8.55 less per month than those customers who purchase stand-alone broadband service. See Broadband Adoption and Use in America at 15. 462 In October 2010, the Commission issued a Notice of Proposed Rulemaking proposing rules that would require mobile service providers to provide usage alerts and information to consumers in avoiding unexpected charges on their bills. See Empowering Consumers to Avoid Bill Shock, Consumer Information and Disclosure, CG Docket No. 10-207, CG Docket No. 09-158, Notice of Proposed Rulemaking, 25 FCC Rcd 14625 (2010) (Bill Shock Notice). The Commission noted that approximately 10% of all wireless billing rate complaints filed at the Commission relate to voice, text, or data overages, along with overages due to roaming. In addition, the U.S. Government Accountability Office (GAO) found that 34% of wireless subscribers had experienced unexpected charges on their wireless bills. Bill Shock Notice, 25 FCC Rcd at 14626, para. 2. Federal Communications Commission FCC 11-32 83 proposal. What capabilities exist today, or are anticipated in the near term, for carriers to assist Lifeline consumers in managing their service usage?463 What would be the administrative burdens and costs for a carrier if it were required to offer this to Lifeline subscribers?464 264. We seek comment on how we can identify and measure the potential benefits of this proposal. As residential broadband usage becomes more common, many companies have begun offering consumers the option to purchase broadband as part of a “bundled package” that provides a combination of voice, data, and video services to the customer, delivered over a shared infrastructure.465 As noted above, compared to carriers’ basic plans, bundled packages of services may offer better value for consumers.466 Would this proposal, if adopted, be likely to make broadband more affordable for low- income households and stimulate broadband adoption by low-income households? 265. We also seek comment on how we can identify and measure the potential costs of this proposal. For example, would this proposed rule change be likely to have an impact on the size of the universal service fund? What are the potential costs to carriers (e.g., administrative costs) in complying with the proposed rule? Finally, are there any potential costs to consumers associated with the proposed rule? To the extent that it is available, commenters are encouraged to submit supporting data along with any written submissions. B. The Transition to Broadband 1. Background 266. Over the last decade, the communications landscape has been transformed by the advent of broadband. Access to broadband is increasingly important for all Americans to actively participate in our economy and our society. Broadband can serve as a platform for educational, economic and social opportunities. It can also minimize socioeconomic disparities. However, despite the potential opportunities available through broadband, many low-income Americans simply cannot afford a home broadband connection. There is a broadband adoption gap in the United States, with low-income households among those being left behind.467 Our 2010 Broadband Consumer Survey found that 93 percent of households with incomes greater than $75,000 have broadband at home, only 40 percent of adults with household incomes less than $20,000 have broadband at home, and non-adopters cite cost as the primary obstacle to adoption.468 267. Research suggests that increasing broadband adoption could significantly increase national productivity and growth.469 Nearly 100 million Americans have not adopted broadband, and there is evidence that adoption is growing slowly.470 Cost appears to be the leading obstacle to low- 463 See Bill Shock Notice, 25 FCC Rcd at 14634-35, para. 20. 464 47 C.F.R. § 54.403(c). 465 See NATIONAL BROADBAND PLAN at 149. 466 See supra note 463 (citing Broadband Adoption and Use in America). 467 NATIONAL BROADBAND PLAN at 167. 468 NATIONAL BROADBAND PLAN at 172; Broadband Adoption and Use in America at 7; see supra para. 21, Chart 1 (detailing the household income levels, based on the Federal Poverty Guidelines, sufficient to establish eligibility for the Lifeline program); see also NTIA DIGITAL NATION at 5 (presenting a more up-to-date, but less detailed, analysis of the reasons that consumers have not adopted broadband at home and finding cost to be the most important factor as to why consumers do not have broadband at home). 469 NTIA DIGITAL NATION at 5. 470 The Pew Internet Home Broadband 2010 Report finds that the broadband adoption in the United States has (continued….) Federal Communications Commission FCC 11-32 84 income Americans adopting broadband;471 the lack of digital literacy is another major factor.472 Closing the adoption gap and accelerating broadband adoption, particularly among low-income Americans, will require significant effort, primarily by the private sector. But the Lifeline/Link Up program may be able to play an important if limited role in this effort, by enabling public-private partnerships to help tackle our national adoption challenge. Utilizing Lifeline/Link Up to reduce the cost of broadband for low-income Americans could help increase broadband adoption. 268. Closing the broadband adoption gap may be more difficult than closing the gap in telephone penetration because the barriers to broadband adoption are more complex. In addition to the cost of service and the cost of acquiring a computer or other Internet-access device, which some research suggests may be the leading barrier to adoption, the National Broadband Plan noted that almost two-thirds of non-adopters cite another reason, such as lack of digital skills, as the main reason for not adopting broadband at home.473 In contrast, consumers generally do not need any special skills to understand how to make a phone call; a telephone is often much less expensive than a computer, laptop, or other Internet access device; and monthly subscription fees for basic telephone service may be less than the fees for broadband. 269. The National Broadband Plan suggested that creating the conditions necessary to promote broadband adoption and increase utilization would require a range of activities conducted by a variety of stakeholders. Among other things, the Plan recognized the need to form partnerships across stakeholder groups to increase broadband adoption and utilization.474 270. There are some ongoing efforts to address the broadband adoption gap at the federal, state, and local level. 475 As part of the Broadband Technology Opportunities Program (BTOP), the National Telecommunications and Information Administration provided approximately $450 million in one-time grants to help develop sustainable broadband adoption initiatives and public computing centers across the country.476 Several private corporations and non-profits are also engaged in broadband adoption efforts, either on their own or in partnership with other stakeholders. For example, in 2001, Hewlett-Packard provided grant funding and other resources to the Southern California Tribal Chairman’s (Continued from previous page) slowed dramatically in the last year. See PEW RESEARCH CENTER, PEW INTERNET AND AMERICAN LIFE PROJECT, HOME BROADBAND 2010 REPORT 2 (2010) (HOME BROADBAND 2010 REPORT) available at http://www.pewinternet.org/Reports/2010/Home-Broadband-2010.aspx. 471 NATIONAL BROADBAND PLAN AT 168; see also HOME BROADBAND 2010 REPORT at 10 (noting that a fifth of non-adopters cite cost as a barrier). 472 NATIONAL BROADBAND PLAN at 168. 473 NATIONAL BROADBAND PLAN at 170; see also Broadband Adoption and Use in America at 5. 474 NATIONAL BROADBAND PLAN at 171. 475 See Roundtable Discussion to Explore Broadband Pilot Programs for Low-Income Consumers, Public Notice, WC Docket No. 03-109, 25 FCC Rcd 7305 (Wireline Comp. Bur. 2010) (announcing roundtable); see also Details for Low-Income Pilot Program Roundtable Discussion, Public Notice, WC Docket No. 03-109, 25 FCC Rcd 7947 (Wireline Comp. Bur. 2010) (providing agenda) (Roundtable Agenda Public Notice); Webcast of Wireline Competition Bureau, Low-Income Pilot Program Roundtable Discussion (Jun. 23, 2010), http://reboot.fcc.gov/video-archives (Roundtable Discussion) (identifying getconnectedtoday.com, the Cox Santa Barbara program, and initiatives by LEAP/Cricket, Charter, and others). 476 As of February 2011, NTIA had awarded approximately $200 million in one-time grants to support public computing centers, and $250 million to help develop sustainable broadband adoption initiatives. See Grants Awarded: Broadband USA – NTIA, http://www2.ntia.doc.gov/awards (last visited Mar. 2, 2011). Federal Communications Commission FCC 11-32 85 Association (SCTCA) to help launch the Tribal Digital Village (TDV). The Tribal Digital Village provides infrastructure as well as training and online content to 15 American Indian Reservations in San Diego and southern Riverside counties.477 A BTOP grant awarded to ZeroDivide in 2010 provided funding for additional equipment and support for community anchor institutions as well as computer skills and awareness training.478 We also note that, as a voluntary commitment in its recent transaction involving NBC Universal, Inc., Comcast Corporation agreed to make broadband available to low-income households for less than $10 per month, and making personal computers, netbooks, and other computer equipment available at a purchase price below $150.479 271. To help address the cost barrier faced by many low-income households unable to afford broadband, the National Broadband Plan recommended that Lifeline/Link Up be modernized to support broadband.480 The Joint Board also recognized the importance of broadband to low-income households in its 2010 Recommended Decision.481 The Joint Board proposed that the Commission adopt an additional universal service principle pursuant to its authority under section 254(b)(7) of the Act, that “universal service support should be directed where possible to networks that provide advanced services, as well as voice services.”482 In the USF/ICC Transformation Notice, the Commission proposed to adopt the Joint Board’s recommended principle and sought comment on whether to expand the definition of “universal service” to make broadband a supported service.483 272. The National Broadband Plan and the Joint Board also identified several practical issues that the Commission should consider when assessing whether and how to include broadband as a supported service under the program, including, among other things, how “broadband” should be defined and measured for universal service purposes, how best to ensure broadband availability in unserved and underserved areas, and how to structure a Lifeline discount for broadband services.484 The USF/ICC Transformation Connect America Fund Notice sought comment on how to define broadband for purposes of the high-cost program, but expressly reserved the right to adopt different performance requirements for Lifeline/Link Up. 273. Recognizing the complexities of modernizing the low-income support mechanisms for broadband while ensuring that universal service funds are used efficiently, the National Broadband Plan 477 Tribal Digital Village Broadband Adoption Program, Executive Summary, available at http://www.zerodivide.org/sites/default/files/5507_TDV.pdf (last visited Mar. 3, 2011); see also Tribal Digital Village, http://www.sctdv.net/ (last visited Mar. 2, 2011). 478 See BroadbandUSA, Connecting America’s Communities, ZeroDivide Fact Sheet, available at http://www2.ntia.doc.gov/files/grantees/fact_sheet_-_zerodivide_tribal.pdf (last visited Mar. 3, 2011); Press Release, ZeroDivide, ZeroDivide Receives Stimulus Funding to Increase Broadband in Native American Communities (Aug. 18, 2010), available at http://www.zerodivide.org/ntia/zerodivide_funding_native_american_tribal_communities (last visited Mar. 3, 2011). 479 See Applications of Comcast Corporation, General Electric Company and NBC Universal, Inc.; For Consent to Assign Licenses and Transfer Control of Licensees, MB Docket No. 10-56, Memorandum Opinion and Order, FCC 11-4, at para. 233 (rel. Jan. 18, 2011). 480 NATIONAL BROADBAND PLAN at 172. 481 See NATIONAL BROADBAND PLAN at 169, Box 9.1 (“Broadband Means Opportunity”); 2010 Recommended Decision at 15624-25, paras. 74-75. 482 See 2010 Recommended Decision at 15625, para. 75; see also 2007 Recommended Decision, 22 FCC Rcd at 20477 (discussing the redefinition of supported services to include broadband and mobility services). 483 See USF/ICC Transformation NPRM, FCC 11-13, at paras. 63, 65. 484 2010 Recommended Decision at 15625-26, para. 77. Federal Communications Commission FCC 11-32 86 recommended that the Commission begin transitioning Lifeline to support broadband by facilitating pilot programs to test different program design elements.485 More recently, in its review of the Lifeline and Link Up program, the GAO highlighted the importance of developing a needs assessment for the design of any new programs and to determine whether existing programs are meeting the needs of the targeted population.486 The GAO also noted that agencies should develop implementation and evaluation plans when conducting pilot programs to increase confidence in the results of such programs.487 274. The Commission hosted a roundtable discussion last summer to solicit input on pilot programs to integrate broadband as a supported service under the program.488 Participants discussed a number of critical issues, including goals for supporting broadband through the low-income program, the importance of addressing barriers in addition to the cost of service, what existing data and information is available on broadband service and adoption for low-income individuals, and pilot program mechanics and operation.489 Participants in the roundtable discussion and other stakeholders have suggested that they are exploring ways to conduct low-income broadband pilot projects.490 2. Support for Broadband 275. The Commission seeks comment on revising the definition of “Lifeline” to ensure it is keeping pace with the needs of low-income households, consistent with the statutory principle that “consumers in all regions of the country, including low-income consumers . . . should have access to telecommunications and information services.”491 Lifeline/Link Up does not currently support broadband. We seek comment on whether the Commission should amend the definition of Lifeline to explicitly allow support for broadband. 276. As noted above, the Commission has sought comment in the USF/ICC Transformation Notice on whether to make broadband a supported service and has sought comment on extending universal service support to broadband. If the Commission does not make broadband a supported service, what would be the legal basis for our authority to support broadband in the Lifeline and Link Up program? If the Commission makes broadband a supported service, what are the associated practical and operational challenges that we would need to address when expanding Lifeline support to broadband? For example, how should a broadband Lifeline service be defined and measured? Should Lifeline support be available on services that do not meet whatever speed threshold the Commission ultimately adopts for 485 NATIONAL BROADBAND PLAN at 173. 486 2010 GAO REPORT at 30. See Letter from Julius Genachowski, Chairman, Federal Communications Commission to the Honorable Joseph I. Lieberman, Chairman, Committee on Homeland Security and Governmental Affairs, United States Senate (Feb. 2, 2011) (agreeing with the GAO recommendation to conduct a needs assessment)(Commission Senate Letter). 487 2010 GAO REPORT at 30-31. 488 See Roundtable Discussion. 489 See Roundtable Agenda Public Notice; Roundtable Discussion. 490 See Letter from Jonathan Banks, Senior Vice President, Law and Policy, United States Telecom Association, to Marlene H. Dortch, Secretary, Federal Communications Commission, GN Docket Nos. 09-47, 09-51, 09-137 (filed Jan. 25, 2010) (USTA Jan. 25, 2010 Ex Parte Letter); Letter from Kelley Dunne, CEO, One Economy Corporation, and Ken Eisner, Managing Director, OE Ventures, to Hon. Julius Genachowski, Chairman, Federal Communications Commission, Docket No. 03-109 (filed Feb. 10, 2011) (One Economy Broadband Pilot Proposal); see also North Carolina Economic Development Center, E-NC Lite-Up Program, http://www.e-nc.org/public/nc_lite_up (last visited Mar. 2, 2011). 491 See 47 U.S.C. § 254(b)(1),(3); see also 47 U.S.C. § 151. Federal Communications Commission FCC 11-32 87 purposes of setting infrastructure deployment requirements under the Connect America Fund? For instance, some parties have suggested that for purposes of Lifeline, consumers should be free to choose to use discounts on services that provide 768 kbps or 1.5 Mbps downstream, rather than being forced to use the discount only on higher-speed offerings.492 Should there be any minimum performance requirements for Lifeline broadband offerings? 277. What would be the appropriate framework for determining support levels for broadband services, given that the price of the retail service is not regulated at either the federal or state level? We are mindful of the need to ensure that contributions to our universal service support mechanisms do not jeopardize our ability to promote quality services at affordable rates for all consumers. How should we balance these competing goals as we consider modernizing Lifeline and Linkup to support broadband? 278. If broadband is made a supported service, should we impose any terms and conditions on the Lifeline support that is available for broadband? For example, should there be any limitations on the types of services that are offered as part of a Lifeline plan? We sought comment above on whether low- income households should be able to use their Lifeline discounts on any plan with a voice component; should ETCs similarly be required to offer Lifeline discounts on all broadband plans, or just some? We note that several wireless ETCs currently offer text messaging services as part of their Lifeline calling plans.493 Should consumers be permitted to select “data only” Lifeline plans? Is there a risk that low- income households might incur excessive charges for data plans, absent some form of data or usage cap? We note that some Lifeline consumers already subscribe to broadband services.494 We ask that ETCs provide any data they may have regarding broadband subscribership among current Lifeline recipients. We also recognize that our analysis of these questions may depend, in part, on what we learn from the broadband pilots described below. 3. Broadband Pilot 279. We propose to set aside a discrete amount of universal service funds reclaimed from eliminating inefficiencies and/or waste, fraud, and abuse to create a pilot program to evaluate whether and how Lifeline/LinkUp can effectively support broadband adoption by low-income households. A broadband pilot program could help us gather comprehensive and statistically significant data about the effectiveness of different approaches in making broadband more affordable for low-income Americans and providing support that is sufficient but not excessive.495 This data could assist the Commission in considering the costs and benefits of various approaches prior to using Lifeline to support broadband on a permanent basis. We recognize that the ultimate success of using Lifeline funds to support broadband may hinge on the sufficiency and effectiveness of preliminary testing conducted through a pilot program. As identified by the GAO, the Commission has recognized the importance of developing an assessment 492 See, e.g., Cox Communications Comments, GN Docket Nos. 09-47, 09-51, 09-137, at 12 (filed Dec. 7, 2009); AT&T’s ETC proposal, infra note 533; Hughes Network Systems, LLC and WildBlue Communications, Inc., Joint Reply Comments, GN Docket No. 09-51, at 7 (filed July 21, 2009). 493 See, e.g., GCI, Lifeline Rural Wireless Service, http://wireless.gci.com/catalog/lifeline-rural-p-154.html (offers unlimited text messaging with all calling plans) (last visited Mar. 2, 2011); SafeLink Wireless Raises the Lifeline Offering: New York, http://www.cell-phone-plans.net/blog/cell-phones/safelink-wireless-raises-the-lifeline- offering-new-york/ (detailing TracFone’s new Lifeline plans that include one text message in exchange for one minute of provided voice service) (last visited Mar. 2, 2011). 494 Cf. Broadband Adoption and Use in America at 7 (stating that 40 percent of low-income Americans with annual household incomes at $20,000 or below have broadband). 495 See supra paras. 37-41 (proposing, as a performance goal, to ensure that Lifeline/Link Up provides support that is sufficient, but not excessive). Federal Communications Commission FCC 11-32 88 of the telecommunications needs of low-income households to inform the design and implementation of broadband pilot programs.496 280. Scope of the Pilot Program. We propose using the pilot program to fund a series of projects that would test different approaches to providing support for broadband to low-income consumers across different geographic areas. The projects could also try to take into account unique barriers faced by certain groups of low-income non-adopters such as Tribal communities or Americans for whom English may be a second language. While individual projects might involve only one type of provider or technology, the overall objective would be to design a pilot program that would be competitively and technologically neutral. 281. We propose structuring the pilot program as a joint effort among the Commission, one or more broadband providers, and/or one or more non-profit institutions or independent researchers with experience in program design and evaluation.497 The pilot also could include participation from other stakeholders such as private foundations; non-profits experienced in outreach and digital literacy training; desktop computer, laptop, or mobile device manufactures or retailers; and state social service or economic development agencies. We seek comment on these proposals to structure the pilot program as a joint effort among a variety of stakeholders focused on conducting a series of projects to test different approaches to providing support. We expect that the projects would test several variations on program design, including experimenting with different techniques to combine discounts on service and/or hardware with efforts to address other barriers to broadband adoption such as digital literacy. 282. Consistent with our historic role in providing support for services and not equipment,498 we seek comment on funding projects that would test variations in the monthly discount for broadband services, including variations on the discount amount, the duration of the discount (limited or unlimited, phased- down over time or constant), and the treatment of bundled services. We also propose to test variations in Linkup-like discounts to reduce or eliminate installation fees, activation fees, or similar upfront charges associated with the initiation of service. We seek comment on these proposals. 283. We propose to require at least some pilot participants to either offer hardware directly or partner with other entities to provide the necessary devices as a condition of participating in the pilot program. The cost of customer equipment necessary to access the Internet (including computers or other devices) has been shown to be a major barrier to adoption, particularly for low-income households.499 Some stakeholders have suggested that the cost of Internet-enabled devices poses a significant burden on an ETC’s ability to provide affordable broadband to low-income consumers.500 It would be valuable for pilot projects to test variations in discounts to reduce the cost of hardware, including discounts for air cards or modems. Because we intend to evaluate the impact of ETCs’ providing different types of discounts on hardware versus not providing any discount, some consumers would not be offered 496 Commission Senate Letter. 497 The National Broadband Plan highlighted the importance of forming partnerships across multiple stakeholder groups and simultaneously addressing multiple barriers to adoption which may include cost of service, cost of hardware, digital literacy and many others. NATIONAL BROADBAND PLAN at 170-71. 498 See 47 C.F.R. §§ 54.101(a), 54.401(a)(3). 499 See Robert D. Atkinson, The Information Technology and Innovation Foundation, Policies to Increase Broadband Adoption at Home (Nov. 2009), available at http://www.itif.org/files/2009-demand-side-policies.pdf (Broadband Adoption Report). 500 Letter from David Cohen, Vice President, Policy, US Telecom, to Marlene H. Dortch, Secretary, Federal Communications Commission, CC Docket No. 96-45, WC Docket No. 03-109, at 2 (February 23, 2011) (US Telecom Broadband Pilot Proposal). Federal Communications Commission FCC 11-32 89 discounted hardware. If we require some applicants for pilot program funding to offer discounted hardware, should all applicants be required to agree to do so even though we do not expect all consumers to receive discounts? We seek comment on these proposals. 284. We propose that applicants for pilot program funding should be prepared to experiment with different approaches to overcoming digital literacy barriers, other non-cost barriers to adoption, and variations in other program design elements that may help the Commission implement a permanent support mechanism. The National Broadband Plan and subsequent research identified the lack of digital literacy among low-income Americans as a major barrier to broadband adoption.501 Skills such as being able to use a computer or other Internet-enabled device to retrieve and interpret information or to communicate and collaborate with other users, and even such fundamental steps as navigating a website and creating a username and password, may pose significant difficulties for many consumers. Any program seeking to effectively increase adoption of broadband may need to address this barrier. We specifically seek comment on what subset of the following additional program design elements should be tested: · Training methods; · Outreach methods; · Contract terms; · Product offerings/service restrictions or requirements (such as establishing minimum or maximum speed offerings for consumers participating in the pilot); and/or · Administration/enrollment methods such as automated enrollment through low-income housing facilities or other social service entities. We also seek comment on how the Commission should take into account elements beyond its control, such as programs or services provided by the private sector, other governmental agencies, or non-profits in conjunction with support provided as part of a broadband Lifeline and Link Up program. 285. We intend for the pilot program as a whole to test the impact of these varying factors; we are not suggesting that each project funded through the pilot test every variable of interest to the Commission. We seek comment on this proposal. We also ask commenters to consider how many settings of key variables should be tested for each program design element (e.g. discount amount, duration of the discount). How many households should participate to test each element and variation in a way suitable for generalizing to a large scale program? Should all elements be tested simultaneously, or should they be sequenced in some manner? 286. We note that the goal of the pilot program is to conduct experiments to collect information that would help inform future policy decisions. The pilot is not intended to have an immediate impact on low-income consumers on a large-scale. Similarly, the structure and rules governing pilot projects may differ in important ways from rules that the Commission may ultimately adopt to expand Lifeline to support broadband. 287. Pilot Program Funding. We seek comment on how much money should be allocated to support discounts on broadband and administrative costs associated with the pilot projects. Because the goal of the pilot program is to conduct test projects that would produce meaningful data by experimenting with different program design elements, we believe that only a relatively small sample size is needed to 501 NATIONAL BROADBAND PLAN at 174; see NTIA DIGITAL NATION, at 9 (noting that level of education is a strong predictor of broadband use among adults). Federal Communications Commission FCC 11-32 90 develop statistically valid results.502 Depending on the parameters assessed by different pilot programs, the program may be able to gather statistically valid data from a smaller number of participating households. 288. Consistent with our over-arching objective of ensuring fiscal responsibility, we propose to fund the pilot projects by utilizing at least some of the savings from the proposal to eliminate reimbursement for Toll Limitation Services, as well as some of the savings realized by eliminating waste, fraud, and abuse from the program.503 USAC’s most recent projections forecast total annual 2011 TLS support of approximately $23 million.504 Are there other funding sources available that we should consider in implementing these pilot programs? Should we require entities applying for pilot program funding to contribute some sort of matching funds or in-kind contribution? 289. Duration of Pilot Program. Commenters have recommended pilot programs ranging from six months to multiple years.505 USTelecom suggested, for instance, that a period of 18 to 24 months would be needed to produce “meaningful data that would permit the Commission to thoughtfully design a permanent program.”506 We seek comment on the appropriate duration of a pilot program. Commenters who suggest schedules should explain the relative advantages and disadvantages of specific lengths of time.507 290. At the Commission’s broadband pilot roundtable, several parties suggested that it might be appropriate to provide subsidies only for a limited period of time to address the initial adoption hurdle of realizing the benefit of broadband.508 If some of the variables tested include variations on the length of time that a subsidy is available or a reduction in the amount of subsidy over time, for how long would researchers need to follow subscribers after the reduction to test whether adoption outcomes stay the same, or whether consumers drop service when the subsidy is eliminated or reduced? 291. Role of the States. We seek comment on the role that states should play in any pilot program integrating broadband service into the low-income program. For instance, could states assist in identifying target populations or assist in administration? Are there services or funding support that states are uniquely situated to provide in a broadband pilot program? How should low-income universal service support for broadband be integrated into other federal, state, regional, private, or non-profit programs that help address barriers to broadband adoption? 292. Consumer Eligibility To Participate in Pilot Projects. We propose using the Lifeline 502 See US Telecom Broadband Pilot Proposal at 3; see also e-NC Authority, http://www.e-nc.org/public/nc_lite_up (describing pilot program targeting only 270 households). 503 See supra Section IV (Immediate Reforms to Eliminate Waste, Fraud, and Abuse). 504 USAC 2Q 2011 FILING, at 17. 505 See, e.g., Letter from Christopher Savage, Counsel, Nexus Communications, to Marlene H. Dortch, Secretary, Federal Communications Commission, WC Docket 03-109; CC 96-45 at 2 (Nexus Communications Broadband Pilot Proposal) (proposing a 6 month pilot); Michigan Public Service Commission Comments, WC Docket No. 03- 109, at 5 (filed Nov. 26, 2008) (encouraging the Commission to extend by 2 years a pilot program originally proposed for 3 years if the pilot is successful). 506 USTelecom Broadband Pilot Proposal at 1. 507 Some stakeholders have expressed concern about delaying a wide-scale launch of a low-income support mechanism for broadband while the Commission conducts further analysis by facilitating pilot programs or through other means. At the same time, others have warned about the dangers of impatience and suggested that it would take at least two to three years to evaluate the results of a well-run pilot. See Roundtable Discussion. 508 See Roundtable Discussion. Federal Communications Commission FCC 11-32 91 eligibility rules currently in effect in federal default states as a uniform set of consumer eligibility requirements to be used in all pilot projects. We believe uniform eligibility rules will lower administrative costs associated with the pilots and help the Commission more easily compare results from different pilot projects. Is there any reason to allow some pilot projects to deviate from the federal default rules? For example, should the Commission consider funding a pilot project that tested the impact of more stringent or more lenient eligibility requirements to help assess the potential impact such requirements might have? Alternatively, are there reasons that the Commission should consider pilot projects that limit eligibility to a more narrowly defined group of households currently eligible under the federal default rules, such as households with children participating in the National School Lunch Program?509 293. Eligibility To Apply for Funding for Proposed Pilot Projects. We seek comment on whether funding for the pilot program should be limited to ETCs or whether non-ETCs could be eligible to receive funding during the pilot. Several commenters have suggested eligibility for funding for broadband pilots, or any broadband Lifeline support, should be independent from the traditional ETC requirements established under section 214 of the Act.510 Could we forbear from our current ETC requirements to allow non-ETCs (e.g, broadband providers who are not ETCs or non-providers) to participate in the pilot? Forbearance from our ETC requirements may encourage participation by a greater number of broadband providers. What are the advantages and disadvantages of having a larger number of providers seek funding for pilot projects? 294. We propose to allow non-ETCs (e.g., non-providers) to submit applications for pilot funding provided they have identified ETCs, which would receive the support disbursements, as partners. We believe allowing non-ETCs to apply for funding may increase participation by allowing ETCs to rely on other entities to help with pilot program administration. This approach may also encourage more multi-stakeholder partnerships designed to simultaneously address multiple barriers to adoption. We seek comment on this proposal. 295. We also seek comment on limiting program participation to ETCs that partner with entities approved by the NTIA’s State Broadband Data & Development (SBDD) Program. The SBDD program, led by state entities or non-profit organizations working at their direction, facilitates the integration of broadband and information technology into state and local economies.511 The program awarded a total of $293 million to 56 grantees or their designees and the grantees use this funding to support the use of broadband technology.512 Among other objectives, these state-created projects use the grants to research and investigate barriers to broadband adoption and created state and local task forces to expand broadband access and adoption. ETCs could work with the SBDD grantees and other stakeholders to develop pilot projects that integrate federal universal service support into a state’s existing or planned adoption efforts. The potential benefits of encouraging ETCs to partner with these SBDD grantees to participate in this pilot program are numerous: Each of the grantees was selected by a state 509 Letter from Steven F. Morris, National Cable & Telecommunications Association, GN Docket No. 09-51, WC Docket No. 05-337, CC Docket No. 96-45 (filed Dec. 4, 2009). 510 See, e.g., AT&T’s ETC Proposal, infra note 533; Supporting Broadband Access for Users of Video and IP-Based Communications who are Deaf, Hard of Hearing, Late-Deafened, or Deaf-Blind, or who have a Speech Disability, WC Docket No. 03-109, CC Docket No. 96-45, at 23 (filed Oct. 30, 2008); AT&T Comments, WC Docket No. 96- 45, WC Docket No. 03-109, at 53 (filed Nov. 26, 2008); Qwest Communications Comments, GN Docket Nos. 09- 47, 09-51, 09-137, at ii-iii (filed Dec. 7, 2009). 511 State Broadband Data & Development Program: BroadbandUSA – NTIA, http://www2.ntia.doc.gov/SBDD (last visited February 28, 2011). 512 Id. Federal Communications Commission FCC 11-32 92 government that may be well positioned to develop targeted, state-specific adoption approaches; many of the grantees have experience with training, outreach, and surmounting barriers to adoption; and such a pilot could leverage the work already conducted by NTIA, such as the due diligence it performed on the grantees and ongoing program oversight over those grantees. We seek comment on limiting eligibility in the pilot program only to ETCs that are partnering with SBDD grantees. Is there another group of federal or state program grantees that we should consider including in the pilot? 296. Proposals. We propose to require entities interested in applying for pilot program funding to submit specific information about the proposed project, such as applicant information, including any and all private or corporate partners or investors; a detailed description of the program, including length of operation; product offerings and service restrictions; discount or discounts provided, the duration of the discounts; treatment of bundled services; whether discounts would reduce or eliminate installation fees, activation fees, or other upfront costs; how to address (if at all) the cost of hardware, including aircards, modems, laptops, desktops, or other mobile devices;513 training and outreach; testing; identification of costs associated with implementing the program, including equipment and training costs; how the project complies with relevant program rules, adequately protects against waste, fraud, and abuse, and achieves the goals of the program discussed above. We also propose to require applicants to provide a brief description of how their program would help inform the Commission’s future decision- making related to providing low-income support to broadband on a nationwide basis. We seek comment on this process for submission of pilot proposals. 297. Pilot Evaluation. We seek comment on how to evaluate the results of pilot projects and what reporting requirements should be adopted for pilot participants. How could the Commission evaluate whether approaches tested during the pilot program further the proposed goal of providing affordable broadband service? Should one goal of the pilot be to test the impact of the project’s approach on increasing adoption? For instance, should we assess the total number of new adopters; new adopters as a percentage of eligible program participants; the number of program participants as a percentage of eligible participants; average percentage of participants’ discretionary income spent on discounted broadband service through the pilot relative to the national average percentage of household discretionary income spent on broadband? How could we evaluate the relative impact of the service discount compared to other potential factors that may be tested, such as the provision of training or equipment? We propose that the Commission also seek to develop information about the cost per participant and cost per new adopter through the pilot program. This information could assist the Commission in assessing the costs and benefits of particular approaches to whether broadband should be supported, and if so, how. We seek comment on this proposal and whether there are other types of data that the Commission should review to evaluate whether a given approach would provide support that is sufficient but not excessive. 298. We seek comment on other types of information the Commission should consider when assessing projects funded through the pilot program. For instance, how best can the Commission evaluate program administration costs and the feasibility of expanding any given test project to a national scale? 299. Delegation of Authority. We propose to delegate authority to the Wireline Competition Bureau to select pilot participants and take other necessary steps to implement the proposed program. We seek comment on this proposal. 300. Previously Submitted Proposals. A number of entities have developed and submitted ideas for different types of broadband low-income pilots.514 For instance, US Telecom explains that an efficient broadband pilot program design should include three components: research; program design and 513 See Roundtable Discussion. 514 US Telecom Broadband Pilot Proposal; Nexus Communications Broadband Pilot Proposal; One Economy Broadband Pilot Proposal. Federal Communications Commission FCC 11-32 93 implementation; and evaluation.515 Nexus Communications proposes that a broadband pilot be conducted in four different cities using “smart phones” that would enable the Commission to obtain real-word data with regard to community response to four different pricing and service arrangements.516 One Economy proposes two distinct pilot programs, one involving a 4G public private partnership and another one involving a reverse auction design.517 301. We seek comment on these proposals. We ask commenters to identify how these proposals could be improved or altered and to explain how any measures that they suggest are consistent with our proposed goals of ensuring just, reasonable, and affordable service and providing support that is sufficient but not excessive. 302. Finally, as discussed above, a number of other broadband adoption programs are currently underway, and other stakeholders have suggested that they may conduct their own projects on these issues. We are interested in learning more about the status of these projects and what data we can gather from those efforts. Is there information or data that the Commission is uniquely positioned to gather? What data can the Commission rely on outside sources to collect, and how could it design pilots to complement any private sector research efforts? Can the Commission gather sufficient information from existing adoption programs to inform its policies sufficiently to implement a long-term low-income support for broadband program without launching Lifeline and Link Up pilots? We welcome information from industry, academic institutions, governmental agencies, and other stakeholders that could assist in our evaluation of strategies to extend Lifeline to broadband. C. Eligible Telecommunications Carrier Requirements 303. Background. Section 254(e) of the Act limits universal service support, including Lifeline and Link Up support, to ETCs designated under section 214(e) of the Act.518 Section 214 of the Act, in turn, requires that ETCs use their own facilities, at least in part, to provide services supported by universal service and requires carriers to engage in a two-stage “redefinition” process before carriers may serve certain rural service areas.519 When Congress first adopted—and the Commission first interpreted—these requirements, the focus was on participation by ETCs in the Commission’s high-cost program and the need to encourage ETCs to invest in infrastructure to cover new areas and reduce the risk of cream skimming.520 In this section, we seek comment on whether those requirements remain necessary and in the public interest for participants in the Commission’s program. We also consider whether these requirements should be modified if we modernize the program to support broadband. 304. Since 2005, the Commission has granted forbearance eight times to carriers seeking to participate in the Lifeline program without using their own facilities to provide service.521 In each case, 515 US Telecom Broadband Pilot Proposal. 516 Nexus Communications Broadband Pilot Proposal. 517 One Economy Broadband Pilot Proposal. 518 47 U.S.C. § 254(e). 519 47 U.S.C. § 214(e)(1)(A) (requiring an ETC to “offer the services that are supported by Federal universal service support mechanisms . . . either using its own facilities or a combination of its own facilities and resale of another carrier’s services”), 214 (e)(5) (defining service areas for ETCs); 47 C.F.R. § 54.207 (establishing the process carriers must use to redefine a rural service area). 520 See, e.g., Universal Service First Report and Order, 12 FCC Rcd at 8861–76, 8880–83, paras. 150–80, 186–91. 521 See TracFone Forbearance Order; Virgin Mobile Forbearance Order; i-wireless Forbearance Order; Global Forbearance Order; Telecommunications Carriers Eligible for Universal Service Support; Federal-State Joint (continued….) Federal Communications Commission FCC 11-32 94 the Commission has concluded that the use of a carrier’s own facilities when participating in the Lifeline program is not necessary to ensure just and reasonable rates or to protect consumers and is in the public interest so long as the carrier granted forbearance fulfills certain conditions.522 And in each case, the reseller seeking to participate in the Commission’s Lifeline program has gone through the same process: filing a forbearance petition with the Commission and responding to comments and concerns about that petition; filing a compliance plan with the Wireline Competition Bureau and responding to comments and concerns about that plan; and filing ETC designation petitions with the Commission or the states and responding to another round of comments and concerns. This multi-stage process may take years to complete, costing companies time and money and placing a not insignificant burden on Commission resources. 305. The National Broadband Plan recommended that any broadband provider meeting criteria established by the Commission – whether wired or wireless, fixed or mobile, terrestrial or satellite – should be eligible to participate in Lifeline/Link Up.523 In the Connect America Fund Notice, we sought comment on whether the Commission should establish Lifeline-only ETCs, in the event it extends support to broadband. 306. Discussion. We seek comment on whether the Commission should forbear from applying the Act’s facilities requirement to all carriers that seek limited ETC designation to participate in the Lifeline program.524 Should every wireless reseller be eligible to become an ETC so long as it fulfills the conditions we have previously imposed as conditions of forbearance?525 If so, should the Commission adopt rules codifying the conditions rather than imposing them on a case-by-case basis? 307. Some of those conditions previously imposed on resellers may have some benefit even if applied to facilities-based carriers that participate in the Lifeline program, such as the condition that carriers directly deal with their customers (rather than use a third-party intermediary, like a retailer).526 Should the Commission adopt any of these conditions as rules that would apply to all ETCs that participate in the Lifeline program? Other conditions—such as the requirement to provide appropriate (Continued from previous page) Board on Universal Service; Conexions Petition for Forbearance, WC Docket No. 09-197, CC Docket No. 96-45, Order, 25 FCC Rcd 13866 (2010) (Conexions Forbearance Order). 522 See, e.g., Conexions Forbearance Order, 25 FCC Rcd at 13868–72, paras. 8-20. 523 NATIONAL BROADBAND PLAN at 173. 524 47 U.S.C. § 160(a) (“[T]he Commission shall forbear from applying any regulation or any provision of this Act to a telecommunications carrier . . . or class of telecommunications carriers” in certain circumstances.”). 525 See, e.g., i-wireless Forbearance Order, 25 FCC Rcd at 8788, 8790, paras. 11, 16 (conditioning forbearance on i- wireless (1) providing its Lifeline customers with 911 and enhanced 911 (E911) access regardless of activation status and availability of prepaid minutes; (2) providing its Lifeline customers with E911-compliant handsets and replacing, at no additional charge to the customer, noncompliant handsets of existing customers who obtain Lifeline- supported service; (3) complying with conditions (1) and (2) as of the date it provides Lifeline service; (4) obtaining a certification from each public safety answering point (PSAP) where the carrier seeks to provide Lifeline service confirming that the carrier provides its customers with 911 and E911 access or self-certifying that it does so if certain conditions are met; (5) requiring each customer to self-certify at time of service activation and annually thereafter that he or she is the head of household and receives Lifeline-supported service only from that carrier; (6) establishing safeguards to prevent its customers from receiving multiple Lifeline subsidies from that carrier at the same address; (7) dealing directly with the customer to certify and verify the customer’s Lifeline eligibility; and (8) submitting to the Wireline Competition Bureau a compliance plan outlining the measures the carrier will take to implement these conditions). 526 See, e.g., i-wireless Forbearance Order, 25 FCC Rcd at 8790, para. 16. Federal Communications Commission FCC 11-32 95 access to 911 and E911—may be applicable to facilities-based carriers that use their own facilities only in part.527 Should the Commission adopt such conditions as rules that would apply to ETCs that use other carriers’ facilities to offer access to emergency services? In short, what rules should the Commission adopt if it forbears from the facilities requirement for a class of carriers?528 308. More broadly, should the Commission consider issuing blanket forbearance for other purposes? For example, several carriers have requested forbearance from the facilities requirement for purposes of participating in the Commission’s Link Up program, but the Commission has thus far found that no carrier has shown that such forbearance would be in the public interest.529 Would blanket forbearance from the facilities requirement for this purpose, taking into account the differences between the Lifeline and Link Up programs, be in the public interest? What rules would be necessary to ensure that any such forbearance protects consumers, is in the public interest, and would not encourage waste, fraud, and abuse of universal service funds? 309. Other carriers have requested forbearance from the Act’s redefinition process as applied to low-income-only ETCs.530 Should the Commission consider forbearing from this process for a class of carriers, and if so, what rules and conditions would be necessary to protect the public interest? 310. AT&T has proposed that the Commission adopt an entirely new ETC regulatory framework. Specifically, AT&T argues that we should allow all providers of voice and broadband services to provide Lifeline discounts on a competitively neutral basis where they offer service.531 Under this proposal, we would establish a “Lifeline Provider” registration process whereby provider participation is not tied to the existing section 214 requirements or ETC designations, and not necessarily mandatory. Under this framework, each provider of eligible voice and broadband Internet access service, including resellers and wireless providers, would be eligible to provide Lifeline discounts to qualifying households in the areas where the provider offers the service.532 311. Consistent with this alternative approach, AT&T proposes that the Commission abolish the current Lifeline tier support structure set forth in section 54.403 of our rules and replace it with a flat, fixed-dollar discount amount that could be applied to the retail price of one eligible voice service and one eligible broadband service.533 Similarly, AT&T proposes a flat discount approach to Link-Up. AT&T’s ETC proposal also includes a recommendation that we automate program eligibility and verification processes and procedures, which is discussed in more detail above in the Database section of this Notice. 527 See, e.g., id. at 8788, para. 11. 528 For example, the Wireline Competition Bureau recently conditioned Virgin Mobile’s designation as a Lifeline- only ETC in certain states on voluntary commitments Virgin Mobile made to implement procedures to guard against waste, fraud, and abuse of its Lifeline service. See Virgin Mobile 2010 ETC Order, 25 FCC Rcd at 17805, para. 24. Should any of the conditions imposed in that order become rules for all carriers that receive forbearance? 529 See, e.g., i-wireless Forbearance Order, 25 FCC Rcd at 8791–92, para. 21. 530 See, e.g., NTCH, Inc. Petition for Forbearance from 47 U.S.C. § 214(e)(5) and 47 C.F.R. § 54.207(b), WC Docket No. 09-197 (filed Mar. 5, 2010); Cricket Communications, Inc. Petition for Forbearance, WC Docket No. 09-197 (filed Jun. 21, 2010). 531 Letter from Jamie M. Tan, AT&T, to Marlene Dortch, Secretary, FCC, WC Docket No. 03-109, GN Docket Nos. 09-51, 09-47, 09-137 (filed Dec. 22, 2009) (AT&T’s ETC Proposal). 532 Id. 533 Id. See supra paras. 245-47 for a discussion on lifeline support amounts and the current tiered Lifeline support structure. Federal Communications Commission FCC 11-32 96 312. We seek comment on AT&T’s proposal, which would enable all providers of voice and broadband services to offer Lifeline discounts to eligible low-income households. In particular, we ask commenters to address: (1) Whether the current ETC designation process should be revised for Lifeline providers and, if so, how; (2) whether current ETCs should be able to opt out of providing Lifeline services; (3) whether it should be mandatory or optional for ETCs to participate in the Lifeline program; (4) whether consumers should be entitled to a single discount off of a single service or whether consumers should be allowed to receive multiple Lifeline discounts on multiple services, (e.g. voice and broadband); (5) how this new regulatory framework would be administered; (6) what processes and procedures would be necessary to support this new framework; (7) what additional steps the Commission should take to guard against waste, fraud, and abuse in the program if additional providers offering multiple services were to participate in the program; (8) the legal basis for adopting such a proposal; (9) whether there are any issues we would need to account for in terms of transition to this type of model, such as service contracts; and (10) how this proposal would impact the states, including their current roles associated with granting ETCs authority to operate in their states and overseeing their performance. X. OTHER MATTERS 313. We propose to eliminate section 54.418 of our rules, which required ETCs to notify low- income consumers of the DTV transition. This rule is now obsolete given the completion of the DTV transition. We seek comment on this proposal. XI. PROCEDURAL MATTERS 314. The proposed rules are attached as Appendix A. In addition to the changes discussed above, the proposed rules include non-substantive changes to the rules applicable to the program. We seek comment on such changes. A. Paperwork Reduction Act Analysis 315. This document contains proposed new information collection requirements. The Commission, as part of its continuing effort to reduce paperwork burdens, invites the general public and the Office of Management and Budget (OMB) to comment on the information collection requirements contained in this document, as required by the Paperwork Reduction Act of 1995.534 In addition, pursuant to the Small Business Paperwork Relief Act of 2002,535 we seek specific comment on how we might “further reduce the information collection burden for small business concerns with fewer than 25 employees.”536 B. Initial Regulatory Flexibility Analysis 316. As required by the Regulatory Flexibility Act of 1980, the Commission has prepared an Initial Regulatory Flexibility Analysis (IRFA) of the possible significant economic impact on small entities of the policies and rules addressed in this document.537 The IRFA is set forth in Appendix E. 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 Notice provided on or before the dates indicated on the first page of this Notice. The Commission will send a copy of the Notice, including this IRFA, to the Chief Counsel for Advocacy of the Small Business Administration.538 In addition, the 534 Paperwork Reduction Act of 1995, Pub. L. No. 104-13, 109 Stat. 163 (1995). 535 Small Business Paperwork Relief Act of 2002, Pub. L. No. 107-198, 116 Stat. 729 (2002). 536 See 44 U.S.C. § 3506(c)(4). 537 See 5 U.S.C. § 603. 538 See 5 U.S.C. § 603(a). Federal Communications Commission FCC 11-32 97 Notice and IRFA (or summaries thereof) will be published in the Federal Register.539 C. Ex Parte Presentations 317. The rulemaking this Notice initiates shall be treated as a “permit-but-disclose” proceeding in accordance with the Commission’s ex parte rules.540 Persons making oral ex parte presentations are reminded that memoranda summarizing the presentations must contain summaries of the substance of the presentations and not merely a listing of the subjects discussed. More than a one- or two- sentence description of the views and arguments presented generally is required.541 Other requirements pertaining to oral and written presentations are set forth in section 1.1206(b) of the Commission’s rules.542 D. Comment Filing Procedures 318. Pursuant to sections 1.415 and 1.419 of the Commission’s rules, 47 CFR §§ 1.415, 1.419, interested parties may file comments and reply comments on or before the dates indicated on the first page of this document. Comments may be filed using: (1) the Commission’s Electronic Comment Filing System (ECFS), (2) the Federal Government’s eRulemaking Portal, or (3) by filing paper copies. See Electronic Filing of Documents in Rulemaking Proceedings, 63 FR 24121 (1998). § Electronic Filers: Comments may be filed electronically using the Internet by accessing the ECFS: http://fjallfoss.fcc.gov/ecfs2/ or the Federal eRulemaking Portal: http://www.regulations.gov. § Paper Filers: Parties who choose to file by paper must file an original and four copies of each filing. If more than one docket or rulemaking number appears in the caption of this proceeding, filers must submit two additional copies for each additional docket or rulemaking number. Filings can be sent by hand or messenger delivery, by commercial overnight courier, or by first- class or overnight U.S. Postal Service mail. All filings must be addressed to the Commission’s Secretary, Office of the Secretary, Federal Communications Commission. § All hand-delivered or messenger-delivered paper filings for the Commission’s Secretary must be delivered to FCC Headquarters at 445 12th St., SW, Room TW-A325, Washington, DC 20554. The filing hours are 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. § 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, Express, and Priority mail must be addressed to 445 12th Street, SW, Washington DC 20554. 319. In addition, one copy of each paper filing must be sent to each of the following: (i) The Commission’s duplicating contractor, Best Copy and Printing, Inc., 445 12th Street, SW., Room CY– 539 Id. 540 47 C.F.R. §§ 1.1200-1.1216. 541 47 C.F.R. § 1.1206(b)(2). 542 47 C.F.R. § 1.1206(b). Federal Communications Commission FCC 11-32 98 B402, Washington, DC 20554; Web site: www.bcpiweb.com; phone: 1–800–378–3160; (ii) Kimberly Scardino, Telecommunications Access Policy Division, Wireline Competition Bureau, 445 12th Street, SW., Room 5–B448, Washington, DC 20554; e-mail: Kimberly.Scardino@fcc.gov; and (iii) Charles Tyler, Telecommunications, Access Policy Division, Wireline Competition Bureau, 445 12th Street, SW., Room 5–A452, Washington, DC 20554, e-mail: Charles.Tyler@fcc.gov. 320. People with Disabilities: To request materials in accessible formats for people with disabilities (braille, large print, electronic files, audio format), send an e-mail to fcc504@fcc.gov or call the Consumer & Governmental Affairs Bureau at 202-418-0530 (voice), 202-418-0432 (tty). 321. Filings and comments are also available for public inspection and copying during regular business hours at the FCC Reference Information Center, Portals II, 445 12th Street, S.W., Room CY- A257, Washington, D.C., 20554. Copies may also be purchased from the Commission’s duplicating contractor, BCPI, 445 12th Street, S.W., Room CY-B402, Washington, D.C. 20554. Customers may contact BCPI through its website: www.bcpiweb.com, by e-mail at fcc@bcpiweb.com, by telephone at (202) 488-5300 or (800) 378-3160, or by facsimile at (202) 488-5563. 322. Comments and reply comments must include a short and concise summary of the substantive arguments raised in the pleading. Comments and reply comments must also comply with section 1.49 and all other applicable sections of the Commission’s rules.543 We direct all interested parties to include the name of the filing party and the date of the filing on each page of their comments and reply comments. All parties are encouraged to utilize a table of contents, regardless of the length of their submission. We also strongly encourage parties to track the organization set forth in the NPRM in order to facilitate our internal review process. 323. For further information, contact Kimberly Scardino at (202) 418-1442 in the Telecommunications Access Policy Division, Wireline Competition Bureau. XII. ORDERING CLAUSES 324. Accordingly, IT IS ORDERED that, pursuant to the authority contained in sections 1, 2, 4(i), 201-205, 214, 254, 403, and 410(c) of the Communications Act of 1934, as amended, 47 U.S.C. §§ 151, 152, 154(i), 201-205, 214, 254, 403, 410(c), this Notice of Proposed Rulemaking IS ADOPTED. 325. IT IS FURTHER ORDERED that the Commission’s Consumer and Governmental Affairs Bureau, Reference Information Center, SHALL SEND a copy of this Notice of Proposed Rulemaking, including the Initial Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of the Small Business Administration. FEDERAL COMMUNICATIONS COMMISSION Marlene H. Dortch Secretary 543 See 47 C.F.R. § 1.49. Federal Communications Commission FCC 11-32 APPENDIX A Proposed Rules For the reasons discussed in the preamble, the Federal Communications Commission proposes to amend 47 C.F.R. Part 54 as follows: PART 54 - UNIVERSAL SERVICE 1. 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. 2. Amend § 54.101 by removing subsection (a)(9), to read as follows: § 54.101 Supported services for rural, insular and high cost areas. (a) Services designated for support. The following services or functionalities shall be supported by federal universal support mechanisms: (1) ***** (2) ***** (3) ***** (4) ***** (5) ***** (6) ***** (7) ***** (8) ***** (9) [Reserved] 3. Amend § 54.400 by revising subsection (e), adding new subsections (b) and (e), eliminating subsections (b), (c), and (d), and re-designating (b), (c), (d), and (e), to read as follows: § 54.400 Terms and Definitions. (a) Qualifying low-income consumer. A “qualifying low-income consumer” is a consumer who meets the qualifications for Lifeline, as specified in § 54.409, and complies with the one-per-residence limitation, as specified in § 54.402. Federal Communications Commission FCC 11-32 100 (b) Duplicate support. Duplicate support exists when (1) two or more ETCs are receiving Lifeline or Link Up support for the same residential address at the same time; or (2) an ETC is receiving two or more Lifeline or Link Up support reimbursements for the same residence at the same time. (c) Eligible resident of Tribal lands. An “eligible resident of Tribal lands” is a “qualifying low-income consumer,” as defined in paragraph (a) of this section, living on a reservation or on Tribal lands designated as such by the Commission. A “reservation” is defined as any federally recognized Indian tribe’s reservation, pueblo, or colony, including former reservations in Oklahoma, Alaska Native regions established pursuant to the Alaska Native Claims Settlement Act (85 Stat. 688), and Indian allotments. “Tribal lands” also shall mean any land designated as Tribal lands by the Commission for purposes of this subpart pursuant to the designation process in §54.402. (d) Income. ***** (e) Customary charge for commencing telecommunications service. A “customary charge for commencing telecommunications service” is the ordinary charge an ETC routinely imposes on all customers within a state to initiate service. Such a charge is limited to an actual charge assessed on all customers to initiate service with that ETC. A charge imposed only on Lifeline and/or Link Up customers to initiate service is not a customary charge for commencing telecommunications service. Activation charges waived, reduced, or eliminated with the purchase of additional products, services, or minutes are not customary charges eligible for universal service support. 4. Amend § 54.401 by removing subsection (c), revising subsections (a)(3), to read as follows: § 54.401 Lifeline defined. (a) As used in this subpart, Lifeline means a retail local service offering: (1) ***** (2) ***** (3) That provides voice telephony service as specified in § 54.101(a); (b) [Reserved] (c) [Reserved] Federal Communications Commission FCC 11-32 101 (d) ***** (e) ***** 5. Add new § 54.402, to read as follows: § 54.402 Tribal lands designation process. The Commission may designate specific areas as Tribal lands for purposes of this subpart for areas or communities that fall outside the boundaries of a designated reservation, but which maintain the same characteristics as those defined. A request for designation must be formally requested by an official of a federally recognized Tribe who has proper jurisdiction and must be filed pursuant to the Commission’s rules. Good cause for the designation may be shown by: (1) providing evidence of a nexus between the area or community and the Tribe, such as identifying an area in which the federal government delivers services to Tribal citizens; (2) detailing how program support to the area would aid the Tribe in serving the needs and interests of its citizens in that community and further the Commission’s goals of providing Tribal support. The region or community areas associated with the Tribe, as outlined and described in a grant of designation request, shall be considered Tribal lands for the purposes of this Subpart. 6. Amend Section 54.403 by removing subsection (c), revising subsections (a) and (b), and adding a new subsection (c), to read as follows: § 54.403 Lifeline support amount. (a) The federal Lifeline support amount for all eligible telecommunications carriers shall equal: (1) ***** (2) ***** (3) ***** (4) Tier Four. Additional federal Lifeline support of up to $25 per month will be made available to an eligible telecommunications carrier providing Lifeline service to an eligible resident of Tribal lands, as defined in § 54.400(c), to the extent that the eligible telecommunications carrier certifies to the Administrator that it will pass through the full Tier-Four amount to qualifying eligible residents of Tribal lands and that it has received any non-federal regulatory approvals necessary to implement the required Federal Communications Commission FCC 11-32 102 rate reduction, to the extent that: ***** ***** (b) Maximum Lifeline Support Amount. (1) For a qualifying low-income consumer who is not an eligible resident of Tribal lands, as defined in §54.400(c), the federal Lifeline support amount shall not exceed $3.50 plus the tariffed rate in effect for the primary residential End User Common Line charge of the incumbent local exchange carrier serving the area in which the qualifying low-income consumer receives service, as determined in accordance with §69.104 or §69.152(d) and (q) of this chapter, whichever is applicable. (2) For an eligible resident of Tribal lands, the federal Lifeline support amount shall not exceed $28.50 plus that same End User Common Line charge. (3) For a qualifying low-income consumer who purchases a bundled service package or a service plan that includes optional calling features, the federal Lifeline support amount shall not exceed the maximum Lifeline support amount as determined in accordance with § 54.403(b)(1) or (b)(2) of this subpart, whichever is applicable. (c) Application of Discount Amount. Eligible telecommunications carriers that charge federal End User Common Line charges or equivalent federal charges shall apply Tier-One federal Lifeline support to waive the federal End-User Common Line charges for Lifeline consumers. Such carriers shall apply any additional federal support amount to a qualifying low-income consumer’s intrastate rate, if the carrier has received the non-federal regulatory approvals necessary to implement the required rate reduction. Other eligible telecommunications carriers shall apply the Tier-One federal Lifeline support amount, plus any additional support amount, to reduce the cost of any eligible residential Lifeline service plan or package selected by a qualified low-income consumer that provides voice telephony service with the performance characteristics listed in § 54.101(a), and charge Lifeline consumers the resulting amount. 7. Amend § 54.405 by adding subsections (e), and revising subsection (c), to read as follows: § 54.405 Carrier obligation to offer Lifeline. ***** Federal Communications Commission FCC 11-32 103 (c) Termination for Ineligibility. ***** ***** (e) De-enroll for disqualification. Notwithstanding § 54.405(c) of this section, notify Lifeline subscribers of impending termination of Lifeline service if the subscriber fails (1) to respond to notifications regarding duplicate support; (2) to respond to ETC verification attempts made pursuant to § 54.410(d) or (3) to use the supported service during a 60-day period. ETCs shall provide the subscriber 30 days following the date of the impending termination letter in which to demonstrate that Lifeline service shall not be terminated. ETCs shall terminate the Lifeline service if the subscriber fails to demonstrate that Lifeline service shall not be terminated. ETCs shall not seek Lifeline reimbursement for the subscriber during the 30-day period. 8. Amend § 54.407 by revising subsection (b) and (d), to read as follows: § 54.407 Reimbursement for offering Lifeline. (a) ***** (b) The eligible telecommunications carrier may receive universal service support reimbursement for each qualifying low-income consumer who has used the supported service to initiate or receive a voice call within the last 60 days. (c) ***** (d) The eligible telecommunications carrier seeking support must report partial or pro rata dollars when claiming reimbursement for discounted services to low-income consumers who receive service for less than a month. 9. Add new § 54.408, to read as follows: § 54.408 One-per-residence. (a) Lifeline and Link Up support is limited to one Lifeline discount and/or one Link Up discount per billing residential address. (1) Billing Residential address. For purposes of the Lifeline and Link Up programs, a “billing residential address” is a unique residential address recognized by the U.S. Postal Service address. Federal Communications Commission FCC 11-32 104 (2) Lifeline and Link Up support is available only to establish service at the qualifying low-income consumer’s primary residential address. The consumer must initially certify at enrollment that the consumer’s billing residential address of record is his or her primary residential address. (b) To be considered an eligible consumer for the purposes of Lifeline and Link Up support, a consumer must meet the criteria set forth in section §54.409 of the rules. 10. Amend § 54.409 by adding subsection (c)(3) and (d), revising subsections (a), (c) and (d), eliminating subsections (b) and (d), and re-designating subsections (b), (c), (c)(3) and (d), to read as follows: § 54.409 Consumer qualification for Lifeline. (a) To qualify to receive Lifeline service, a consumer’s household income, as defined in § 54.400(d), 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; Supplemental Nutrition Assistance Program; 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. (b) A consumer that is an eligible resident of Tribal lands, as defined by § 54.400(c) or § 54.402, shall be a “qualifying low-income consumer,” as defined by 54.400(a), and shall qualify to receive Tiers One, Two, and Four Lifeline support if the consumer’s residence: (1) has income that meets the threshold established in § 54.409(a) or participates in one of the federal assistance programs identified in § 54.409(a); or (2) participates in one of the following Tribal-specific federal assistance programs: Bureau of Indian Affairs general assistance, Tribally administered Temporary Assistance for Need Families (TANF); Head Start (but only those households meeting its income qualifying standard); or Food Distribution Program on Indian Reservations (FDPIR). 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 regulations of the state and provides carrier-matching funds, as described in § 54.403(a)(3). (c) Each eligible telecommunications carrier providing Lifeline service to a qualifying low-income Federal Communications Commission FCC 11-32 105 consumer pursuant to paragraphs (a) or (b) of this section must obtain that consumer’s signature on a document certifying under penalty of perjury that: (1) The consumer’s residence receives benefits from one of the programs listed in § 54.409 (a) or (b) of this section, and that the consumer presented documentation of program participation, as described in 54.410(b), which accurately represents the program participation of the consumer’s residence; or the consumer’s residence meets the income requirement of § 54.409 (a) of this section, and that the consumer presented documentation of income, as described in §§ 54.400(f), 54.410(a), which accurately represents the consumer’s income; and (2) If an eligible resident of Tribal lands, that the consumer lives on a reservation or Tribal lands, as defined in §54.400(c) and § 54.402; and (3) The consumer will notify the carrier within 30 days if that consumer ceases to participate in the program or programs, if the consumer’s income exceeds 135% of the Federal Poverty Guidelines, or if the consumer otherwise ceases to meet the criteria for receiving program support. 11. Amend § 54.410 by revising subsections (a) and (c), adding new subsections (b), (d), and (e), eliminating subsections (a)(1), (a)(2), (c)(1), and (c)(2), and re-designating subsections (b), (c), (c)(1) and (c)(2), to read as follows: § 54.410 Certification and Verification of Consumer Qualification for Lifeline. (a) Certification of income qualification. Prior to enrollment in Lifeline, consumers qualifying for Lifeline under an income-based criterion must present documentation of their income and certify that they will be receiving support for only one Lifeline discount per residence. By six months from the effective date of these rules, eligible telecommunications carriers in all states must implement certification procedures to document consumer-income-based eligibility for Lifeline prior to a consumer’s enrollment if the consumer is qualifying under the income-based criterion specified in §54.409(a). Acceptable documentation of income eligibility includes the prior year’s state or federal 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 Federal Communications Commission FCC 11-32 106 Unemployment/Workers’ Compensation statement of benefits, federal 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 the same type of documentation covering three consecutive months within that calendar year. States that mandate state Lifeline support may impose additional standards on eligible telecommunications carriers operating in their states to ensure compliance with the state Lifeline program. (b) Certification of program qualification. Consumers qualifying for Lifeline under a program-based criterion must present documentation of their household participation in a qualifying program and certify that they will be receiving support for only one Lifeline discount per residence prior to enrollment in Lifeline. By six months from the effective date of these rules, eligible telecommunications carriers in all states must implement certification procedures to document consumer-program-based eligibility for Lifeline prior to a consumer’s enrollment if the consumer is qualifying under the program-based criterion specified in §54.409(a) and (b). Acceptable documentation of program eligibility includes the prior year’s statement of benefits from the program, program participation documents, federal notice letter of participation in the program, or other official document. If the consumer presents documentation of program participation that does not cover a full year, such as current program benefits, the consumer must present the same type of documentation covering three consecutive months within that calendar year. States that mandate state Lifeline support may impose additional standards on eligible telecommunications carriers operating in their states to ensure compliance with the state Lifeline program. (c) Self-certifications. After income and program based certification procedures are implemented, eligible telecommunications carriers are required to make and obtain certain self-certifications, under penalty of perjury, related to the Lifeline program. Eligible telecommunications carriers must retain records of all self-certifications. (1) An officer of the eligible telecommunications carrier must certify that the eligible telecommunications carrier has procedures in place to review income and program documentation and that, to the best of his or her knowledge, the carrier was presented with documentation of the consumer’s income qualification Federal Communications Commission FCC 11-32 107 or program participation. (2) Lifeline and Link Up subscribers must initially certify at enrollment and during continued verification that they are receiving support for only one line per residence, consistent with the one-per-residence limitation as specified in § 54.408. (3) Consumers qualifying for Lifeline under an income-based criterion must certify the number of individuals in their residence on the document required in § 54.409(c). (d) Verification of Continued Eligibility. Consumers qualifying for Lifeline shall be required to verify continued eligibility on an annual basis. By six months from the effective date of these rules, eligible telecommunications carriers in all states shall implement procedures to verify annually the continued eligibility of a statistically valid sample [TBD] of their Lifeline subscribers for continued eligibility. (1) Eligible telecommunications carriers shall require each customer to certify that they are receiving support for only one line per residence. Eligible telecommunications carriers may verify directly with a state that particular customers continue to be eligible by virtue of participation in a qualifying program or income level. To the extent eligible telecommunications carriers cannot obtain the necessary information from the state, they may verify directly with the customers. (2) All eligible telecommunications carriers will be required to provide the results of their verification efforts to the Commission and the Administrator on the Annual Lifeline Certification and Verification Form (currently OMB 3060-0819) by August 31 each year. Eligible telecommunications carriers shall submit data to the Commission and Administrator regarding consumer qualifications for eligibility, including program-based and income-based eligibility, the number of customers that qualify based on income and program participation, the number of subscribers that qualify for each eligible program, the number of non-responders, and the number of customers de-enrolled and in the process of being terminated or de-enrolled. Eligible telecommunications carriers shall submit each customer name, address, and number of individuals in the customer’s residence for those customers qualifying based on income criterion. (e) Preventing and Resolving Duplicate Support. ETCs shall provide the Administrator with their Lifeline Federal Communications Commission FCC 11-32 108 and Link Up customer names, addresses, social security numbers, and/or other unique residence- identifying information as specified in the form and format requested on the Form 497 for the purpose of preventing and resolving situations involving duplicate support. 12. Amend Section 54.413 by revising subsection (b), to read as follows: § 54.413 Reimbursement for revenue forgone in offering a Link Up program. (a) ***** (b) In order to receive universal service support reimbursement for providing Link Up, eligible telecommunications carriers must keep accurate records of the revenues they forgo in reducing their customary charge for commencing telecommunications service, as defined in § 54.400(e), and for providing a deferred schedule for payment of the charges assessed for commencing service for which the consumer does not pay interest, in conformity with § 54.411. ***** 13. Amend Section 54.415 by revising subsections (a) and (c), eliminating subsection (b), and re- designating subsections (a) and (b), to read as follows: § 54.415 Consumer qualification for Link Up. (a) The consumer qualification criteria for Link Up shall be the criteria set forth in § 54.409(a). (b) Notwithstanding paragraph (a) of this section, the consumer qualification criteria for an eligible resident of Tribal lands, as defined in § 54.400(c) and § 54.402, shall qualify to receive Link Up support. 14. Amend Section 54.416 to read as follows: § 54.416 Certification of consumer qualification for Link Up. Consumers qualifying under income-based or program-based criteria must present documentation of their qualification prior to enrollment in Link Up consistent with the requirements set forth in §§ 54.410(a) and (b). 15. Amend Section 54.417 by revising subsections (a) and (b), to read as follows: § 54.417 Recordkeeping requirements. (a) ***** eligible telecommunications carriers must maintain the documentation required in §§ 54.409(c) and 54.410(c) for as long as the consumer receives Lifeline service ***** Federal Communications Commission FCC 11-32 109 (b) ***** To the extent such a reseller provides discounted services to low-income consumers, it is obligated to comply with the eligible telecommunications carrier requirements listed in this Subpart. 16. Amend Section 54.418 by eliminating this subsection as moot. § 54.418 [Reserved] Federal Communications Commission FCC 11-32 110 APPENDIX B Current Verification Methodology 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. Federal Communications Commission FCC 11-32 111 Sample Size Table Previously Estimated Proportion of Subscribers Inappropriately Taking Lifeline Service (P)3 3 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. 4 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. (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 85 106 126 146 166 186 206 225 244 100,0004 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 1,500 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 Federal Communications Commission FCC 11-32 112 (N) Number of Lifeline Subscribers (cont’d) 0.01 0.015 0.02 0.025 0.03 0.035 0.04 0.045 0.05 0.055 0.06 300 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 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 Federal Communications Commission FCC 11-32 113 APPENDIX C Proposed Verification Methodology The following charts identify the number of responders and margins of error based on an estimated ineligibility percentage (e.g. of the previous year). The charts have been calculated using a 95% confidence interval. The white portions of the table identify our proposed threshold rule and the shaded portions of the tables provide the information for alternative thresholds, on which we seek comment. SAMPLE SIZE1 Minimum Number of Responders for Verification Given the Margin of Error and Estimated Ineligibility Percentage2 Ineligibility Percentage 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 1% 1825 3458 4899 6147 7203 8068 8740 9220 9508 9604 2% 457 865 1225 1537 1801 2017 2185 2305 2377 2401 3% 203 385 545 683 801 897 972 1025 1057 1068 4% 115 217 307 385 451 505 547 577 595 601 Margin of Error 5% 73 139 196 246 289 323 350 369 381 385 MARGIN OF ERROR3 Margin of Error for Verification Given the Minimum Number of Responders and Estimated Ineligibility Percentage Ineligibility Percentage 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 100 4.3% 5.9% 7.0% 7.8% 8.5% 9.0% 9.3% 9.6% 9.8% 9.8% 200 3.0% 4.2% 4.9% 5.5% 6.0% 6.4% 6.6% 6.8% 6.9% 6.9% 300 2.5% 3.4% 4.0% 4.5% 4.9% 5.2% 5.4% 5.5% 5.6% 5.7% 400 2.1% 2.9% 3.5% 3.9% 4.2% 4.5% 4.7% 4.8% 4.9% 4.9% Minimum Number Of Responders 500 1.9% 2.6% 3.1% 3.5% 3.8% 4.0% 4.2% 4.3% 4.4% 4.4% 1 This chart provides the number of responders required based on a designated ineligibility percentage and margin of error. For example, if the Commission wanted to ensure that the ineligibility rate does not exceed 5%, with the margin of error no more than 1%, the ETC would need to obtain 1,825 eligible responders. 2 We note that these charts are based on the number of actual responders during verification and not the number surveyed. If the number surveyed does not result in the number of actual responders shown in the chart, more customers would need to be surveyed until the correct number of responders was reached. 3 This chart provides the margin of error that would exist based on a designated ineligibility percentage and the number of responders. For example, if an ETC had an estimated ineligibility percentage of 5%, and received 300 responders from a survey, this would represent a 2.5% margin of error in its verification survey. Federal Communications Commission FCC 11-32 APPENDIX D List of Commenters Comments and Reply Comments in Response to the TracFone Petition for Declaratory Ruling on Universal Service Issues WC Docket Nos. 09-197, 03-109 (TracFone Link Up Petition) Commenter Abbreviation AT&T, Inc. AT&T Budget Prepay, Inc. Budget PrePay and GreatCall, Inc. GreatCall Competitive Eligible Telecommunications Carriers CETCs Nexus Communications, Inc. Nexus Ohio Public Utilities Commission of Ohio Ohio Reply Commenter Abbreviation National Association of State Utility Consumer Advocates NASUCA Nexus Communications Inc. Nexus Communications TracFone Wireless, Inc. TracFone Comments and Reply Comments in Response to the Federal-State Joint Board on Universal Service, Lifeline and Link Up Referral Order CC Docket No. 96-45; WC Docket No. 03-109 (Joint Board) Commenter Abbreviation Advocates for Basic Legal Equality, Inc., Community Voice Mail National Crossroads Urban Center Disability Rights Advocates The Low Income Utility Advocacy Project Minnesota Legal Services Advocacy Project The National Consumer Law Center, On Behalf of Our Low-Income Clients New Jersey Shares Ohio Poverty Law Center Pro Seniors Salt Lake Community Action Program Texas Legal Services Center The Utility Reform Network Twin Cities Community Voicemail Consumer Groups AT&T Services, Inc. AT&T Benton Foundation, et al. Benton California Public Utilities Commission CPUC Community Voice Mail National Office CVMN Public Service Commission of the District of Columbia DCPSC Florida Public Service Commission FPSC Leap Wireless International, Inc. and Cricket Communications, Inc. Cricket Media Action Grassroots Network MAG-Net Missouri Public Service Commission MoPSC Federal Communications Commission FCC 11-32 115 National Association of State Utility Consumer Advocates NASUCA National Hispanic Media Coalition NHMC Nebraska Public Service Commission NPSC Nexus Communications, Inc. Nexus Public Utilities Commission of Ohio Ohio PUC PR Wireless, Inc. PR Wireless Smith Bagley, Inc. Smith Bagley TracFone Wireless, Inc. TracFone United States Telecom Association USTelecom Verizon and Verizon Wireless Verizon YourTel America, Inc. YourTel Reply Commenter Abbreviation Advocates for Basic Legal Equality, Inc., Community Voice Mail National Crossroads Urban Center Disability Rights Advocates The Low Income Utility Advocacy Project Minnesota Legal Services Advocacy Project The National Consumer Law Center, On Behalf of Our Low-Income Clients New Jersey Shares Ohio Poverty Law Center Pro Seniors Salt Lake Community Action Program Texas Legal Services Center The Utility Reform Network Twin Cities Community Voicemail Consumer Groups AT&T, Inc. AT&T CTIA–The Wireless Association CTIA Consumer Advisory Committee GCI Communication, Inc. GCI Leadership Conference on Civil and Human Rights Massachusetts Department of Telecommunications and Cable MDTC National Association of State Utility Consumer Advocates NASUCA National Hispanic Media Coalition Media Action Grassroots Network Office of Communication of the United Church of Christ, Inc., Benton Foundation, and Access Humboldt Public Interest Commenters Nexus Communications, Inc. Nexus Norma J. Torres Pennsylvania Public Utility Commission PaPUC PR Wireless, Inc. PR Wireless Qwest Communications International Inc. Qwest Smith Bagley, Inc. Smith Bagley Sprint Nextel Corporation Sprint TracFone Wireless, Inc. TracFone Verizon and Verizon Wireless Verizon Companies YourTel America, Inc. YourTel Federal Communications Commission FCC 11-32 116 Comments and Reply Comments in Response to the TracFone Wireless, Inc.’s Petition for Waiver of 47 C.F.R. § 54.403(a)(i) CC Docket No. 96-45 (TracFone Tier 1 Petition) Commenter Abbreviation Independent Telephone & Telecommunications Alliance ITTA National Assn. of State Utility Consumer Advocates NASUCA Oregon Public Utility Commission Oregon PUC Sprint Nextel Corporation Sprint YourTel America, Inc. Yourtel Reply Commenter Abbreviation National Association of State Utility Consumer Advocates NASUCA Pennsylvania Public Utility Commission PaPUC TracFone Wireless, Inc. TracFone Comments and Reply Comments in Response to the TracFone Request for Clarification of Universal Service Lifeline Program “One-Per-Household” Rule as Applied to Group Living Facilities WC Docket No. 03-109 (TracFone One-Per-Household Clarification) Commenter Abbreviation American Public Communications Council APCC AT&T Inc. AT&T City of Cambridge, MA & Cambridge Continuum of Care City of Cambridge - CoC East Side SRO Legal Services Project Florida Public Service Commission and Florida Office of Public Counsel Florida PSC & OPC General Communication, Inc. GCI Homeless Advocacy Project HAP Manhattan Legal Services NYC Miriam’s Kitchen MFY Legal Services National Assn. of State Utility consumer Advocates NASUCA National Consumer Law Center NCLC Part of the Solution, Inc. POTS Public Utilities Commission of Ohio Ohio Commission Smith Bagley, Inc. SBI Washington Legal Clinic for the Homeless, Inc. Reply Commenter Abbreviation GCI Communication, Inc. d/b/a GCI Communication Corp and GCI GCI Massachusetts Department of Telecommunications and Cable MDTC National Consumer Law Center and Greater Boston Legal Services NCLC/GBLS National Network to End Domestic Violence NNEDV Federal Communications Commission FCC 11-32 117 Public Utility Commission of Oregon OPUC TracFone Wireless, Inc. TracFone Federal Communications Commission FCC 11-32 118 APPENDIX E Initial Regulatory Flexibility Analysis 1. Pursuant to the Regulatory Flexibility Act (RFA), the Commission has prepared this Initial Regulatory Flexibility Analysis (IRFA) of the possible significant economic impact on small entities by the policies and rules proposed in this Notice of Proposed Rulemaking.1 Written public comments are requested on this IRFA. Comments must be identified as responses to the IRFA and must be filed on or before the dates indicated on the first page of this NPRM. The Commission will send a copy of the NPRM, including the IRFA, to the Chief Counsel for Advocacy of the Small Business Administration.2 In addition, the NPRM and IRFA (or summaries thereof) will be published in the Federal Register.3 A. Need for, and Objectives of, the Notice of Proposed Rulemaking: 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 programs, the Commission adopted a program to provide discounts that make basic, local telephone service affordable for low-income consumers.6 3. This Notice of Proposed Rulemaking (NPRM) is one in a series of rulemaking proceedings designed to implement the National Broadband Plan’s (NBP) vision of improving and modernizing the universal service programs.7 In this NPRM, we propose and seek comment on comprehensive reforms to the universal service low-income support mechanism. We propose and seek comment on a package of reforms that address each of the major recommendations by the Universal Service Joint Board regarding the low-income program.8 We also propose a series of recommendations in accordance with a report on the program by the Government Accountability Office (GAO).9 4. Specifically, we propose and seek comment on the following reforms and modernizations that may be implemented in funding year 2011 (January 1, 2011 to December 31, 2011): (1) strengthening the Commission’s rules to ensure that the low-income program subsidizes no more than one service per eligible residential address; (2) reducing waste, fraud, and abuse by addressing duplicate claims, subscriber reporting, and de-enrollment procedures; (3) streamlining and improving program 1 5 U.S.C. § 603. The RFA, 5 U.S.C. §§ 601-612 has been amended by the Contract With America Advancement Act of 1996, Public Law No. 104-121, 110 Stat. 847 (1996) (“CWAAA”). Title II of the CWAAA is the Small Business Regulatory Enforcement Fairness Act of 1996 (“SBREFA”). 2 5 U.S.C. § 603(a). 3 Id. 4 47 U.S.C. § 254. 5 Federal-State Joint Board on Universal Service, CC Docket No. 96-45, Report and Order, 12 FCC Rcd 8776, paras. 326-328 (1997). 6 See id. 7 See NATIONAL BROADBAND PLAN. 8 2010 Recommended Decision. 9 See U.S. GOVERNMENT ACCOUNTABILITY OFFICE, REPORT TO CONGRESSIONAL REQUESTERS, GAO 11-11, TELECOMMUNICATIONS: IMPROVED MANAGEMENT CAN ENHANCE FCC DECISION MAKING FOR THE UNIVERSAL SERVICE FUND LOW-INCOME PROGRAM (2010). Federal Communications Commission FCC 11-32 119 administration through the establishment of uniform eligibility, verification, and certification requirements; and (4) establishing a centralized database for reporting. B. Legal Basis: 5. This Notice of Proposed Rulemaking, including publication of proposed rules, is authorized under sections 1, 2, 4(i)–(j), 201(b), 254, 257, 303(r), and 503 of the Communications Act of 1934, as amended, and section 706 of the Telecommunications Act of 1996, as amended, 47 U.S.C. §§ 151, 152, 154(i)–(j), 201(b), 254, 257, 303(r), 503, 1302.10 C. Description and Estimate of the Number of Small Entities to which the Proposed Rules Will Apply: 6. 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.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.13 A small business concern is one that: (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).14 Nationwide, there are a total of approximately 29.6 million small businesses, according to the SBA.15 A “small organization” is generally “any not-for-profit enterprise which is independently owned and operated and is not dominant in its field.”16 Nationwide, as of 2002, there were approximately 1.6 million small organizations.17 The term “small governmental jurisdiction” is defined generally as “governments of cities, towns, townships, villages, school districts, or special districts, with a population of less than fifty thousand.”18 Census Bureau data for 2002 indicate that there were 87,525 local governmental jurisdictions in the United States.19 We estimate that, of this total, 84,377 entities were “small governmental jurisdictions.”20 Thus, we estimate that most governmental jurisdictions are small. 10 47 U.S.C. §§ 151, 152, 154(i)–(j), 201(b), 254, 257, 303(r), 503, 1302. 11 5 U.S.C. § 603(b)(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 15 U.S.C. § 632). Pursuant to the RFA, 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). 14 Small Business Act, 15 U.S.C. § 632. 15 See Small Business Administration, Office of Advocacy, Frequently Asked Questions, http://www.sba.gov/advocacy/7495 (last visited March 2, 2011). 16 5 U.S.C. § 601(4). 17 Independent Sector, The New Nonprofit Almanac & Desk Reference (2002). 18 5 U.S.C. § 601(5). 19 U.S. Census Bureau, Statistical Abstract of the United States: 2006, Section 8, page 272, Table 415. 20 We assume that the villages, school districts, and special districts are small, and total 48,558. See U.S. Census Bureau, Statistical Abstract of the United States: 2006, section 8, page 273, Table 417. For 2002, Census Bureau (continued….) Federal Communications Commission FCC 11-32 120 1. Wireline Providers 7. Incumbent Local Exchange Carriers (Incumbent LECs). Neither the Commission nor the SBA has developed a small business size standard specifically for incumbent local exchange services. The appropriate size standard under SBA rules is for the category Wired Telecommunications Carriers. Under that size standard, such a business is small if it has 1,500 or fewer employees.21 Census Bureau data for 2007, which now supersede data from the 2002 Census, show that there were 3,188 firms in this category that operated for the entire year. Of this total, 3,144 had employment of 999 or fewer and 44 firms had had employment of 1000 or more. According to Commission data, 1,307 carriers reported that they were incumbent local exchange service providers.22 Of these 1,307 carriers, an estimated 1,006 have 1,500 or fewer employees and 301 have more than 1,500 employees.23 Consequently, the Commission estimates that most providers of local exchange service are small entities that may be affected by the rules and policies proposed in the Notice. Thus under this category and the associated small business size standard, the majority of these incumbent local exchange service providers can be considered small providers.24 8. Competitive Local Exchange Carriers (Competitive LECs), Competitive Access Providers (CAPs), Shared-Tenant Service Providers, and Other Local Service Providers. Neither the Commission nor the SBA has developed a small business size standard specifically for these service providers. The appropriate size standard under SBA rules is for the category Wired Telecommunications Carriers. Under that size standard, such a business is small if it has 1,500 or fewer employees.25 Census Bureau data for 2007, which now supersede data from the 2002 Census, show that there were 3,188 firms in this category that operated for the entire year. Of this total, 3,144 had employment of 999 or fewer and 44 firms had had employment of 1,000 employees or more. Thus under this category and the associated small business size standard, the majority of these Competitive LECs, CAPs, Shared-Tenant Service Providers, and Other Local Service Providers can be considered small entities.26 According to Commission data, 1,442 carriers reported that they were engaged in the provision of either competitive local exchange services or competitive access provider services.27 Of these 1,442 carriers, an estimated 1,256 have 1,500 or fewer (Continued from previous page) data indicate that the total number of county, municipal, and township governments nationwide was 38,967, of which 35,819 were small. Id. 21 13 C.F.R. § 121.201, NAICS code 517110. 22 See Trends in Telephone Service, Federal Communications Commission, Wireline Competition Bureau, Industry Analysis and Technology Division at Table 5.3 (Sept. 2010) (Trends in Telephone Service). 23 See id. 24 U.S. CENSUS BUREAU, AMERICAN FACTFINDER, 2007 ECONOMIC CENSUS, http://factfinder.census.gov, (find “Economic Census” and choose “get data.” Then, under “Economic Census data sets by sector…,” choose “Information.” Under “Subject Series,” choose “EC0751SSSZ5: Employment Size of Firms for the US: 2007.” Click “Next” and find data related to NAICS code 517110 in the left column for “Wired telecommunications carriers”) (last visited March 2, 2011). 25 13 C.F.R. § 121.201, NAICS code 517110. 26 U.S. CENSUS BUREAU, AMERICAN FACTFINDER, 2007 ECONOMIC CENSUS, http://factfinder.census.gov, (find “Economic Census” and choose “get data.” Then, under “Economic Census data sets by sector…,” choose “Information.” Under “Subject Series,” choose “EC0751SSSZ5: Employment Size of Firms for the US: 2007.” Click “Next” and find data related to NAICS code 517110 in the left column for “Wired telecommunications carriers”) (last visited March 2, 2011). 27 See Trends in Telephone Service at Table 5.3. Federal Communications Commission FCC 11-32 121 employees and 186 have more than 1,500 employees.28 In addition, 17 carriers have reported that they are Shared-Tenant Service Providers, and all 17 are estimated to have 1,500 or fewer employees.29 In addition, 72 carriers have reported that they are Other Local Service Providers.30 Seventy of which have 1,500 or fewer employees and two have more than 1,500 employees.31 Consequently, the Commission estimates that most providers of competitive local exchange service, competitive access providers, Shared-Tenant Service Providers, and Other Local Service Providers are small entities that may be affected by rules adopted pursuant to the Notice. 9. Interexchange Carriers. Neither the Commission nor the SBA has developed a small business size standard specifically for providers of interexchange services. The appropriate size standard under SBA rules is for the category Wired Telecommunications Carriers. Under that size standard, such a business is small if it has 1,500 or fewer employees.32 Census Bureau data for 2007, which now supersede data from the 2002 Census, show that there were 3,188 firms in this category that operated for the entire year. Of this total, 3,144 had employment of 999 or fewer, and 44 firms had had employment of 1,000 employees or more. Thus under this category and the associated small business size standard, the majority of these Interexchange carriers can be considered small entities.33 According to Commission data, 359 companies reported that their primary telecommunications service activity was the provision of interexchange services.34 Of these 359 companies, an estimated 317 have 1,500 or fewer employees and 42 have more than 1,500 employees.35 Consequently, the Commission estimates that the majority of interexchange service providers are small entities that may be affected by rules adopted pursuant to the Notice. 10. Operator Service Providers (OSPs). Neither the Commission nor the SBA has developed a small business size standard specifically for operator service providers. The appropriate size standard under SBA rules is the category Wired Telecommunications Carriers. Under that size standard, such a business is small if it has 1,500 or fewer employees.36 Under that size standard, such a business is small if it has 1,500 or fewer employees.37 Census Bureau data for 2007, which now supersede 2002 Census data, show that there were 3,188 firms in this category that operated for the entire year. Of the total, 3,144 had employment of 999 or fewer, and 44 firms had had employment of 1,000 employees or more.38 Thus 28 See id. 29 Id. 30 See id. 31 See id. 32 13 C.F.R. § 121.201, NAICS code 517110. 33 U.S. CENSUS BUREAU, AMERICAN FACTFINDER, 2007 ECONOMIC CENSUS, http://factfinder.census.gov, (find “Economic Census” and choose “get data.” Then, under “Economic Census data sets by sector…,” choose “Information.” Under “Subject Series,” choose “EC0751SSSZ5: Employment Size of Firms for the US: 2007.” Click “Next” and find data related to NAICS code 517110 in the left column for “Wired telecommunications carriers”) (last visited March 2, 2011). 34 See Trends in Telephone Service at Table 5.3. 35 See id. 36 13 C.F.R. § 121.201, NAICS code 517110. 37 Id. 38 U.S. CENSUS BUREAU, AMERICAN FACTFINDER, 2007 ECONOMIC CENSUS, http://factfinder.census.gov, (find “Economic Census” and choose “get data.” Then, under “Economic Census data sets by sector…,” choose “Information.” Under “Subject Series,” choose “EC0751SSSZ5: Employment Size of Firms for the US: 2007.” (continued….) Federal Communications Commission FCC 11-32 122 under this category and the associated small business size standard, the majority of these interexchange carriers can be considered small entities.39 According to Commission data, 33 carriers have reported that they are engaged in the provision of operator services. Of these, an estimated 31 have 1,500 or fewer employees and 2 have more than 1,500 employees.40 Consequently, the Commission estimates that the majority of OSPs are small entities that may be affected by our proposed action. 11. Local Resellers. The SBA has developed a small business size standard for the category of Telecommunications Resellers. Under that size standard, such a business is small if it has 1,500 or fewer employees.41 Census data for 2007 show that 1,523 firms provided resale services during that year. Of that number, 1,522 operated with fewer than 1000 employees and one operated with more than 1,000.42 Thus under this category and the associated small business size standard, the majority of these local resellers can be considered small entities. According to Commission data, 213 carriers have reported that they are engaged in the provision of local resale services.43 Of these, an estimated 211 have 1,500 or fewer employees and two have more than 1,500 employees.44 Consequently, the Commission estimates that the majority of local resellers are small entities that may be affected by rules adopted pursuant to the Notice. 12. Toll Resellers. The SBA has developed a small business size standard for the category of Telecommunications Resellers. Under that size standard, such a business is small if it has 1,500 or fewer employees.45 Census data for 2007 show that 1,523 firms provided resale services during that year. Of that number, 1,522 operated with fewer than 1000 employees and one operated with more than 1,000.46 Thus under this category and the associated small business size standard, the majority of these resellers can be considered small entities. According to Commission data,47 881 carriers have reported that they are engaged in the provision of toll resale services. Of these, an estimated 857 have 1,500 or fewer employees and 24 have more than 1,500 employees. Consequently, the Commission estimates that the majority of toll resellers are small entities that may be affected by our action. (Continued from previous page) Click “Next” and find data related to NAICS code 517110 in the left column for “Wired telecommunications carriers”) (last visited March 2, 2011). 39 Id. 40 Trends in Telephone Service at Table 5.3. 41 13 C.F.R. § 121.201, NAICS code 517911. 42 U.S. CENSUS BUREAU, AMERICAN FACTFINDER, 2007 ECONOMIC CENSUS, http://factfinder.census.gov, (find “Economic Census” and choose “get data.” Then, under “Economic Census data sets by sector…,” choose “Information.” Under “Subject Series,” choose “EC0751SSSZ5: Employment Size of Firms for the US: 2007.” Click “Next” and find data related to NAICS code 517911 in the left column for “Telecommunications Resellers”) (last visited March 2, 2011). 43 See Trends in Telephone Service at Table 5.3. 44 Id. 45 13 C.F.R. § 121.201, NAICS code 517911. 46 U.S. CENSUS BUREAU, AMERICAN FACTFINDER, 2007 ECONOMIC CENSUS, http://factfinder.census.gov, (find “Economic Census” and choose “get data.” Then, under “Economic Census data sets by sector…,” choose “Information.” Under “Subject Series,” choose “EC0751SSSZ5: Employment Size of Firms for the US: 2007.” Click “Next” and find data related to NAICS code 517911 in the left column for “Telecommunications Resellers”) (last visited March 2, 2011). 47 See Trends in Telephone Service at Table 5.3. Federal Communications Commission FCC 11-32 123 13. Pre-paid Calling Card Providers. Neither the Commission nor the SBA has developed a small business size standard specifically for pre-paid calling card providers. The appropriate size standard under SBA rules is for the category Telecommunications Resellers. Under that size standard, such a business is small if it has 1,500 or fewer employees.48 Census data for 2007 show that 1,523 firms provided resale services during that year. Of that number, 1,522 operated with fewer than 1000 employees and one operated with more than 1,000.49 Thus under this category and the associated small business size standard, the majority of these pre-paid calling card providers can be considered small entities. According to Commission data, 193 carriers have reported that they are engaged in the provision of pre-paid calling cards.50 Of these, an estimated all 193 have 1,500 or fewer employees and none have more than 1,500 employees.51 Consequently, the Commission estimates that the majority of pre-paid calling card providers are small entities that may be affected by rules adopted pursuant to the Notice. 14. 800 and 800-Like Service Subscribers.52 Neither the Commission nor the SBA has developed a small business size standard specifically for 800 and 800-like service (“toll free”) subscribers. The appropriate size standard under SBA rules is for the category Telecommunications Resellers. Under that size standard, such a business is small if it has 1,500 or fewer employees.53 Census data for 2007 show that 1,523 firms provided resale services during that year. Of that number, 1,522 operated with fewer than 1000 employees and one operated with more than 1,000.54 Thus under this category and the associated small business size standard, the majority of resellers in this classification can be considered small entities. To focus specifically on the number of subscribers than on those firms which make subscription service available, the most reliable source of information regarding the number of these service subscribers appears to be data the Commission collects on the 800, 888, 877, and 866 numbers in use.55 According to our data, at of September 2009, the number of 800 numbers assigned was 7,860,000; the number of 888 numbers assigned was 5,888,687; the number of 877 numbers assigned was 4,721,866; and the number of 866 numbers assigned was 7,867,736. The Commission does not have data specifying the number of these subscribers that are not independently owned and operated or have more than 1,500 employees, and thus are unable at this time to estimate with greater precision the number of toll free subscribers that would qualify as small businesses under the SBA size standard. Consequently, the Commission estimates that there are 7,860,000 or fewer small entity 800 subscribers; 5,888,687 or fewer small entity 888 subscribers; 4,721,866 or fewer small entity 877 subscribers; and 7,867,736 or 48 13 C.F.R. § 121.201, NAICS code 517911. 49 U.S. CENSUS BUREAU, AMERICAN FACTFINDER, 2007 ECONOMIC CENSUS, http://factfinder.census.gov, (find “Economic Census” and choose “get data.” Then, under “Economic Census data sets by sector…,” choose “Information.” Under “Subject Series,” choose “EC0751SSSZ5: Employment Size of Firms for the US: 2007.” Click “Next” and find data related to NAICS code 517911 in the left column for “Telecommunications Resellers”) (last visited March 2, 2011). 50 See Trends in Telephone Service at Table 5.3. 51 See id. 52 We include all toll-free number subscribers in this category, including those for 888 numbers. 53 13 C.F.R. § 121.201, NAICS code 517911. 54 U.S. CENSUS BUREAU, AMERICAN FACTFINDER, 2007 ECONOMIC CENSUS, http://factfinder.census.gov, (find “Economic Census” and choose “get data.” Then, under “Economic Census data sets by sector…,” choose “Information.” Under “Subject Series,” choose “EC0751SSSZ5: Employment Size of Firms for the US: 2007.” Click “Next” and find data related to NAICS code 517911 in the left column for “Telecommunications Resellers”) (last visited March 2, 2011). 55 Trends in Telephone Service at Tables 18.4, 18.5, 18.6, 18.7. Federal Communications Commission FCC 11-32 124 fewer small entity 866 subscribers. We do not believe 800 and 800-Like Service Subscribers will be effected by our proposed rules, however we choose to include this category and seek comment on whether there will be an effect on small entities within this category. 2. Wireless Carriers and Service Providers 15. Below, for those services subject to auctions, the Commission notes that, as a general matter, the number of winning bidders that qualify as small businesses at the close of an auction does not necessarily represent the number of small businesses currently in service. Also, the Commission does not generally track subsequent business size unless, in the context of assignments or transfers, unjust enrichment issues are implicated. 16. Wireless Telecommunications Carriers (except Satellite). Since 2007, the Census Bureau has placed wireless firms within this new, broad, economic census category.56 Prior to that time, such firms were within the now-superseded categories of Paging and Cellular and Other Wireless Telecommunications.57 Under the present and prior categories, the SBA has deemed a wireless business to be small if it has 1,500 or fewer employees.58 For the category of Wireless Telecommunications Carriers (except Satellite), Census data for 2007, which supersede data contained in the 2002 Census, show that there were 1,383 firms that operated that year.59 Of those 1,383, 1,368 had fewer than 100 employees, and 15 firms had more than 100 employees. Thus under this category and the associated small business size standard, the majority of firms can be considered small. Similarly, according to Commission data, 413 carriers reported that they were engaged in the provision of wireless telephony, including cellular service, Personal Communications Service, and Specialized Mobile Radio Telephony services.60 Of these, an estimated 261 have 1,500 or fewer employees and 152 have more than 1,500 employees.61 Consequently, the Commission estimates that approximately half or more of these firms can be considered small. Thus, using available data, we estimate that the majority of wireless firms can be considered small. 17. Wireless Communications Services. This service can be used for fixed, mobile, radiolocation, and digital audio broadcasting satellite uses. The Commission defined “small business” for the wireless communications services (WCS) auction as an entity with average gross revenues of $40 million for each of the three preceding years, and a “very small business” as an entity with average gross revenues of $15 million for each of the three preceding years.62 The SBA has approved these 56 U.S. Census Bureau, 2007 NAICS Definitions: Wireless Telecommunications Categories (except Satellite), http://www.census.gov/naics/2007/def/ND517210.HTM (last visited March 2, 2011). 57 U.S. Census Bureau, 2002 NAICS Definitions: Paging, http://www.census.gov/epcd/naics02/def/NDEF517.HTM (last visited March 2, 2011); U.S. Census Bureau, 2002 NAICS Definitions: Other Wireless Telecommunications, http://www.census.gov/epcd/naics02/def/NDEF517.HTM (last visited March 2, 2011). 58 13 C.F.R. § 121.201, NAICS code 517210 (2007 NAICS). The now-superseded, pre-2007 C.F.R. citations were 13 C.F.R. § 121.201, NAICS codes 517211 and 517212 (referring to the 2002 NAICS). 59 U.S. CENSUS BUREAU, AMERICAN FACTFINDER, 2007 ECONOMIC CENSUS, http://factfinder.census.gov, (find “Economic Census” and choose “get data.” Then, under “Economic Census data sets by sector…,” choose “Information.” Under “Subject Series,” choose “EC0751SSSZ5: Employment Size of Firms for the US: 2007.” Click “Next” and find data related to NAICS code 517210 in the left column for “Wireless Telecommunications Carriers (except Satellite)”) (last visited March 2, 2011). 60 See Trends in Telephone Service at Table 5.3. 61 See id. 62 Amendment of the Commission’s Rules to Establish Part 27, the Wireless Communications Service, GN Docket No. 96-228, Report and Order, 12 FCC Rcd 10785, 10879, para. 194 (1997). Federal Communications Commission FCC 11-32 125 definitions.63 The Commission auctioned geographic area licenses in the WCS service. In the auction, which commenced on April 15, 1997 and closed on April 25, 1997, seven bidders won 31 licenses that qualified as very small business entities, and one bidder won one license that qualified as a small business entity. 18. Satellite Telecommunications Providers. Two economic census categories address the satellite industry. The first category has a small business size standard of $15 million or less in average annual receipts, under SBA rules.64 The second has a size standard of $25 million or less in annual receipts.65 19. The category of Satellite Telecommunications “comprises establishments primarily engaged in providing telecommunications services to other establishments in the telecommunications and broadcasting industries by forwarding and receiving communications signals via a system of satellites or reselling satellite telecommunications.”66 Census Bureau data for 2007 show that 512 Satellite Telecommunications firms that operated for that entire year.67 Of this total, 464 firms had annual receipts of under $10 million, and 18 firms had receipts of $10 million to $24,999,999.68 Consequently, the Commission estimates that the majority of Satellite Telecommunications firms are small entities that might be affected by our action. 20. The second category, i.e., All Other Telecommunications, comprises “establishments primarily engaged in providing specialized telecommunications services, such as satellite tracking, communications telemetry, and radar station operation. This industry also includes establishments primarily engaged in providing satellite terminal stations and associated facilities connected with one or more terrestrial systems and capable of transmitting telecommunications to, and receiving telecommunications from, satellite systems. Establishments providing Internet services or voice over Internet protocol (VoIP) services via client-supplied telecommunications connections are also included in this industry.”69 For this category, Census Bureau data for 2007 show that there were a total of 2,383 firms that operated for the entire year.70 Of this total, 2,347 firms had annual receipts of under $25 63 See Letter from Aida Alvarez, Administrator, SBA, to Amy Zoslov, Chief, Auctions and Industry Analysis Division, Wireless Telecommunications Bureau, FCC (filed Dec. 2, 1998) (Alvarez Letter 1998). 64 13 C.F.R. § 121.201, NAICS code 517410. 65 13 C.F.R. § 121.201, NAICS code 517919. 66 U.S. Census Bureau, 2007 NAICS Definitions, Satellite Telecommunications, http://www.census.gov/naics/2007/def/ND517410.HTM (last visited March 2, 2011). 67 U.S. CENSUS BUREAU, AMERICAN FACTFINDER, 2007 ECONOMIC CENSUS, http://factfinder.census.gov, (find “Economic Census” and choose “get data.” Then, under “Economic Census data sets by sector…,” choose “Information.” Under “Subject Series,” choose “EC0751SSSZ4: Receipts Size of Firms for the US: 2007.” Click “Next” and find data related to NAICS code 517210 in the left column for “Satellite Telecommunications”) (last visited March 2, 2011). 68 Id. 69 U.S. Census Bureau, 2007 NAICS Definitions, All Other Telecommunications, http://www.census.gov/naics/2007/def/ND517919.HTM (last visited March 2, 2011). 70 U.S. CENSUS BUREAU, AMERICAN FACTFINDER, 2007 ECONOMIC CENSUS, http://factfinder.census.gov, (find “Economic Census” and choose “get data.” Then, under “Economic Census data sets by sector…,” choose “Information.” Under “Subject Series,” choose “EC0751SSSZ4: Receipts Size of Firms for the US: 2007.” Click “Next” and find data related to NAICS code 517919 in the left column for “All Other Telecommunications”) (last visited March 2, 2011). Federal Communications Commission FCC 11-32 126 million and 12 firms had annual receipts of $25 million to $49, 999,999.71 Consequently, the Commission estimates that the majority of All Other Telecommunications firms are small entities that might be affected by our action. 21. Common Carrier Paging. The SBA considers paging to be a wireless telecommunications service and classifies it under the industry classification Wireless Telecommunications Carriers (except satellite). Under that classification, the applicable size standard is that a business is small if it has 1,500 or fewer employees. For the general category of Wireless Telecommunications Carriers (except Satellite), Census data for 2007, which supersede data contained in the 2002 Census, show that there were 1,383 firms that operated that year.72 Of those 1,383, 1,368 had fewer than 100 employees, and 15 firms had more than 100 employees. Thus under this category and the associated small business size standard, the majority of firms can be considered small.73 The 2007 census also contains data for the specific category of Paging “that is classified under the seven-number North American Industry Classification System (NAICS) code 5172101.74 According to Commission data, 291 carriers have reported that they are engaged in paging or messaging service. Of these, an estimated 289 have 1,500 or fewer employees, and 2 have more than 1,500 employees.75 Consequently, the Commission estimates that the majority of paging providers are small entities that may be affected by our action. In addition, in the Paging Third Report and Order, the Commission developed a small business size standard for “small businesses” and “very small businesses” for purposes of determining their eligibility for special provisions such as bidding credits and installment payments.76 A “small business” is an entity that, together with its affiliates and controlling principals, has average gross revenues not exceeding $15 million for the preceding three years. Additionally, a “very small business” is an entity that, together with its affiliates and controlling principals, has average gross revenues that are not more than $3 million for the preceding three years.77 The SBA has approved these small business size 71 Id. 72 U.S. CENSUS BUREAU, AMERICAN FACTFINDER, 2007 ECONOMIC CENSUS, http://factfinder.census.gov, (find “Economic Census” and choose “get data.” Then, under “Economic Census data sets by sector…,” choose “Information.” Under “Subject Series,” choose “EC0751SSSZ5: Employment Size of Firms for the US: 2007.” Click “Next” and find data related to NAICS code 517210 in the left column for “Wireless Telecommunications Carriers (except Satellite)”) (last visited March 2, 2011). 73 13 C.F.R. § 121.201, NAICS code 517210. 74 U.S. CENSUS BUREAU, AMERICAN FACTFINDER, 2007 ECONOMIC CENSUS, http://factfinder.census.gov, (find “Economic Census” and choose “get data.” Then, under “Economic Census data sets by sector…,” choose “Information.” Under “Subject Series,” choose “EC0751SSSZ5: Employment Size of Firms for the US: 2007.” Click “Next” and find data related to NAICS code 5172101 in the left column for “Paging”) (last visited March 2, 2011). In this specific category, there were 248 firms that operated for the entire year in 2007. Of that number 247 operated with fewer than 100 employees and one operated with more than 1000 employees. Based on this classification and the associated size standard, the majority of paging firms must be considered small. 75 See Trends in Telephone Service at Table 5.3. 76 Amendment of Part 90 of the Commission’s Rules to Provide for the Use of the 220-222 MHz Band by the Private Land Mobile Radio Service, PR Docket No. 89-552, GN Docket No. 93-252, PP Docket No. 93-253, Third Report and Order and Fifth Notice of Proposed Rulemaking, 12 FCC Rcd 10943, 11068-70, paras. 291-295 (1997). 77 See Letter to Amy Zoslov, Chief, Auctions and Industry Analysis Division, Wireless Telecommunications Bureau, FCC, from A. Alvarez, Administrator, Small Business Administration (Dec. 2, 1998). Federal Communications Commission FCC 11-32 127 standards.78 An auction of Metropolitan Economic Area licenses commenced on February 24, 2000, and closed on March 2, 2000.79 Of the 985 licenses auctioned, 440 were sold. Fifty-seven companies claiming small business status won. 22. Wireless Telephony. Wireless telephony includes cellular, personal communications services, and specialized mobile radio telephony carriers. As noted, the SBA has developed a small business size standard for Wireless Telecommunications Carriers (except Satellite).80 Under the SBA small business size standard, a business is small if it has 1,500 or fewer employees.81 According to the 2008 Trends Report, 434 carriers reported that they were engaged in wireless telephony.82 Of these, an estimated 222 have 1,500 or fewer employees and 212 have more than 1,500 employees.83 We have estimated that 222 of these are small under the SBA small business size standard. 3. Internet Service Providers 23. The 2007 Economic Census places these firms, whose services might include voice over Internet protocol (VoIP), in either of two categories, depending on whether the service is provided over the provider’s own telecommunications facilities (e.g., cable and DSL ISPs), or over client-supplied telecommunications connections (e.g., dial-up ISPs). The former are within the category of Wired Telecommunications Carriers,84 which has an SBA small business size standard of 1,500 or fewer employees.85 The latter are within the category of All Other Telecommunications,86 which has a size standard of annual receipts of $25 million or less.87 The most current Census Bureau data for all such firms, however, are the 2002 data for the previous census category called Internet Service Providers.88 That category had a small business size standard of $21 million or less in annual receipts, which was revised in late 2005 to $23 million. The 2002 data show that there were 2,529 such firms that operated for the entire year.89 Of those, 2,437 firms had annual receipts of under $10 million, and an additional 47 firms had receipts of between $10 million and $24,999,999.90 Consequently, we estimate that the 78 Revision of Part 22 and Part 90 of the Commission’s Rules to Facilitate Future Development of Paging Systems, WT Docket No. 96-18, PR Docket No. 93-253, Memorandum Opinion and Order on Reconsideration and Third Report and Order, 14 FCC Rcd 10030, paras. 98-107 (1999). 79 Id. at 10085, para. 98. 80 13 C.F.R. § 121.201, NAICS code 517210. 81 Id. 82 See Trends in Telephone Service at Table 5.3. 83 Id. 84 U.S. Census Bureau, 2007 NAICS Definitions: Wired Telecommunications Carriers, http://www.census.gov/naics/2007/def/ND517110.HTM (last visited March 2, 2011). 85 13 C.F.R. § 121.201, NAICS code 517110 (updated for inflation in 2008). 86 U.S. Census Bureau, 2007 NAICS Definitions: All Other Telecommunications, http://www.census.gov/naics/2007/def/ND517919.HTM (last visited March 2, 2011). 87 13 C.F.R. § 121.201, NAICS code 517919 (updated for inflation in 2008). 88 U.S. Census Bureau, 2002 NAICS Definitions: Internet Service Providers, Web Search Portals, and Data Processing Services, http://www.census.gov/epcd/naics02/def/NDEF518.HTM (last visited March 2, 2011). 89 U.S. Census Bureau, 2002 Economic Census, Subject Series: Information, “Establishment and Firm Size (Including Legal Form of Organization),” at Table 4, NAICS code 518111 (issued Nov. 2005). 90 An additional 45 firms had receipts of $25 million or more. Federal Communications Commission FCC 11-32 128 majority of ISP firms are small entities. D. Description of Projected Reporting, Recordkeeping, and Other Compliance Requirements 24. The reporting and recordkeeping requirements in this NPRM could have an impact on both small and large entities. Though the impact may be more financially burdensome for smaller entities, we believe the impact of such requirements is outweighed by their corresponding benefits to entities and consumers. Further, these requirements are necessary to ensure that the statutory goals of section 254 of the Telecommunications Act of 1996 are met without waste, fraud, or abuse. 25. The Commission proposes several reporting, recordkeeping, and compliance requirements for the low-income program. We propose that Eligible Telecommunications Carriers (ETCs) seeking support would extend their reporting to the Universal Service Administrative Company (USAC) to include reporting of subscribers’ partial participation. Further, we propose de-enrollment procedures to reduce waste in the program. We also propose to retain the existing verification requirements for federal default states and extend these requirements to the remainder of states. 26. Duplicate Claims and One-Per-Residential Address. The Commission proposes several reporting and recordkeeping requirements to reduce the likelihood that a residential address will receive more than one subsidized service through the low-income program. Specifically, we propose an information solicitation and submission process to enable USAC to identify duplicate claims of support and violations of the proposed rules, which, if adopted, will help USAC determine whether two or more ETCs are providing Lifeline-supported service to the same residential address.91 ETCs would be required to solicit identifying residential address information and certification from Lifeline subscribers. ETCs would then submit this data to USAC. Under the proposal, USAC would then notify ETCs of any duplicate claims of support. ETCs would also be required to notify customers with duplicate Lifeline service by phone and in writing when possible that the subscriber must select one Lifeline provider or face termination from the program. The selected ETC would then notify USAC as well as any other ETC providing Lifeline service to the customer. 27. Line 9 Reporting. To help ensure that ETCs seek reimbursement only for active Lifeline subscribers, the Commission proposes to require ETCs to report partial or pro rata dollars when claiming reimbursement on Form 497. Compliance with the proposed rule would require ETCs to report the number of subscribers beginning or terminating Lifeline service mid-month as well as the length of service provided during that month to each partial-month subscriber, which is similar to ETCs’ billing of partial-month service to non-Lifeline consumers. 28. De-Enrollment Procedures and Customer Usage Requirements. As part of the effort to reduce waste in the program, and in accordance with the proposed one-per-residential address codification, the Commission proposes to require ETCs to de-enroll their Lifeline subscribers who: (1) select another ETC after being notified of a duplicate claim; and (2) subscribers who do not use their phone for 60 days. Compliance with the proposed de-enrollment procedures would require ETCs to monitor whether a Lifeline phone was used during any 60-day period. After de-enrollment, the ETC would need to notify USAC of the de-enrollment. USAC could then pursue recovery actions against the ETC for past inappropriate support. 29. Verification. The Commission’s rules currently require ETCs in federal default states to implement procedures to verify annually the continued eligibility of a statistically-valid random sample of Lifeline subscribers and to provide the results to USAC. We propose to extend these standards to all 91 See Appendix A for Proposed Rules. Federal Communications Commission FCC 11-32 129 states. Furthermore, in accordance with the proposed one-per-residential address requirement, we propose to require ETCs to verify consumer certifications upon enrollment and annually thereafter. 30. Service Deposit or Minimum Service Fee. Though we do not propose any rules on a service deposit for commencing Lifeline service or a minimum service fee for maintaining service, we seek comment on whether such rules would balance the competing needs of program efficacy with program efficiency. Specifically, we seek comment as to whether requiring ETCs to bill consumers would pose a disproportionate burden upon small entities, especially those, like pre-paid wireless resellers, that do not currently bill their consumers on a monthly basis. 31. Database. We propose a comprehensive reform to the low-income program: we recommend the creation of a centralized database for online certification and verification of low-income subscribers. In the NPRM, we seek comment on which entity or entities would be best suited to create and maintain such a database. Compliance with requirements associated with a centralized database would include reporting of information solicited from Lifeline subscribers for the purposes of certifying and verifying their eligibility. E. Steps Taken to Minimize Significant Economic Impact on Small Entities, and Significant Alternatives Considered 32. The RFA requires an agency to describe any significant alternatives that it has considered in reaching its approach, which may include the following four alternatives, among others: (1) the establishment of differing compliance or 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 any part thereof, for small entities.92 33. In this NPRM, we make a number of proposals that may have an economic impact on small entities that participate in the universal service low-income support mechanism. Specifically, as addressed above, we seek comment on: (1) mitigating duplicate claims of service through increased reporting to USAC, in accordance with the proposed one-per-residential address rule; (2) requiring the reporting of consumers’ partial-month Lifeline participation; (3) establishing clear de-enrollment procedures; and (4) establishing a uniform verification regime. If adopted, these proposals will help USAC and ETCs reduce waste, fraud, and abuse in the low-income support mechanism. 34. In seeking to minimize the burdens imposed on small entities where doing so does not compromise the goals of the universal service mechanism, we have invited comment on how these proposals might be made less burdensome for small entities.93 We again invite commenters to discuss the benefits of such changes on small entities and whether these benefits are outweighed by resulting costs to ETCs that might also be small entities. We anticipate that the record will reflect whether the overall benefits of such programmatic changes would outweigh the burdens on small entities, and if so, commenters will suggest alternative ways in which the Commission could lessen the overall burdens on small entities. We encourage small entities to comment. 35. We have taken the following steps to minimize the impact on small entities. First, to ease the administrative burden on applicants, we propose an approach that minimizes reporting requirements by appropriating Form 497 for further information collection rather than creating an additional form. In accordance with the E-Sign Act,94 we propose to allow consumers to sign their certifications 92 5 U.S.C. § 603. 93 See supra para. 315. 94 15 U.S.C. §§ 7001-7004 (2006). Federal Communications Commission FCC 11-32 130 electronically, eliminating significant reporting and mailing burdens currently placed on all entities. In order to minimize the impact on ETCs, including small entities, we have placed the burden of checking addresses for duplicate claims upon USAC, rather than ETCs. Furthermore, in an effort to make verification simpler for all ETCs, we have proposed uniform rules of eligibility and verification. Most significantly, however, we contemplate a phased structure for reporting to a centralized database: large entities would begin populating the proposed database initially, with small entities following suit after a period of time during which the process will be made less burdensome when possible. F. Federal Rules that May Duplicate, or Conflict with Proposed Rules: 36. None. Federal Communications Commission FCC 11-32 131 STATEMENT OF CHAIRMAN JULIUS GENACHOWSKI Re: Federal-State Joint Board on Universal Service, CC Docket No. 96-45, Lifeline and Link-Up, WC Docket No. 03-109, Lifeline and Link-Up Reform and Modernization, WC Docket No. 11-18 Today we propose to reform and modernize the Lifeline/Link-Up program – to make it more efficient and effective, and to determine how best to meet our national goal of broadband adoption by all Americans. Since Lifeline was created in 1985 and Congress codified it in the Telecommunications Act of 1996, the program has drawn broad bipartisan support and helped millions of low-income households afford phone service. But the world has changed considerably since then, and the Lifeline/Link-Up program has not kept pace. Major technological, market, and regulatory changes – including the Commission’s decision in 2005 to allow prepaid wireless resellers to offer Lifeline service – have created new challenges and pressures on the program, as well as new opportunities for consumers. Yet the Commission has not comprehensively reexamined the program, or implemented clear performance goals or sufficiently robust protections against waste, fraud, and abuse. Every Lifeline/Link- Up dollar that today gets spent on duplicate service, ineligible participants, or other waste or inefficiencies is a dollar that could go to helping more low-income Americans connect. And Lifeline/Link-Up has grown more rapidly over the past few years, increasing the contribution burden on consumers and businesses throughout the country, which can undermine our universal service goals. Increases in the contribution burden are particularly concerning for the tens of millions of Americans at or near the poverty line who pay for phone service but don’t participate in Lifeline. That’s why we asked the Federal-State Joint Board on Universal Service to examine the Lifeline/Link-Up program and evaluate a host of issues related to the program’s performance and administration. Late last year, the Joint Board reported back with a series of important and thoughtful recommendations for reform and modernization. The NPRM we adopt today puts forward these recommendations, as well as proposals from the Government Accountability Office, from the National Broadband Plan, and from a number of private- sector stakeholders. The NPRM proposes three main types of reforms: First, we propose immediate reforms to eliminate waste, fraud, abuse, and other misspending in the program – including proposals to eliminate duplicate support to a single household and preventing carriers from obtaining support for consumers that haven’t used their service in months. We also propose to establish a National Accountability Database, administered by an independent third party, to ensure that multiple carriers are not getting Lifeline/Link-Up support to serve the same household, and that only eligible households are participating in the program. Second, we propose to make the program more accountable – that means accountability for consumers who benefit from the program, carriers that receive support, and government. To do this, we propose reforms like establishing concrete performance goals for the program, and stepping up oversight. Federal Communications Commission FCC 11-32 132 Third, we seek comment on measures – including capping the size of the program – to prevent over-burdening the consumers and businesses that contribute to the Universal Service Fund. These reforms will provide Lifeline/Link-Up clear goals and robust safeguards, and put the program on a sound footing. And in the interim, while we’re seeking comment on these reforms, we will work to ensure that consumers are not misusing the program and that the companies that receive Lifeline/Link-Up support are living up to their responsibilities to combat waste, fraud, and abuse, including taking adequate precautions to prevent duplicate support. As we reform Lifeline/Link-Up to be a leaner, more efficient, and more effective program, we’re also making sure the program meets consumer needs in the broadband age. Broadband is at least as crucial to full participation in our economy and society in the 21st century as telephone service was in the 20th. We know that increasing broadband adoption is essential for generating economic growth and improving our global competitiveness; a 2009 McKinsey study suggests that a 10% increase in broadband penetration could increase annual GDP by more than $200 billion in a country with an economy the size of ours in the United States. Broadband is also crucial for advancing national priorities like education – think of online courses and digital textbooks, and health care – think of two-way video consultations with medical specialists. It’s crucial for finding a job, as job postings have moved online, and for landing a job, as companies increasingly require basic digital skills. Despite the importance of broadband for everyone, more than half of low-income Americans – about 60% – don’t have broadband in their homes. Fewer than half of African Americans, Latinos, and Americans without a high school diploma have broadband. And as we heard this morning, fewer than 10% of Native Americans households are online. Especially at a time when countries like South Korea boast broadband adoption rates higher than 90 percent, that’s simply not good enough. Accelerating broadband adoption is one of our great national challenges. But it’s not an easy problem to solve. The National Broadband Plan identified a number of major barriers. Many non- adopters lack the digital literacy needed to adopt and use broadband – they don’t know how to use a computer or how to navigate a webpage. Many non-adopters don’t think broadband is relevant to them or can improve their lives. And affordability is a core obstacle, particularly for low-income Americans. The FCC has been working on a number of initiatives to overcome these barriers and increase broadband adoption and use. Today, we propose an important step toward this goal: Pilot programs, funded with savings from reforms, to determine how Lifeline/Link-Up can best be used to increase broadband adoption and use among low-income consumers. We’ll be looking broadly for the best ideas for accountable, efficient, metrics-based initiatives that will move the needle on broadband adoption. As we move forward, we should be realistic. Lifeline/Link-Up won’t solve the adoption challenge by itself. We need to harness e-government, and think creatively about how different parts of the public sector – federal, state, and local – can be part of the solution. Government cannot, and should not, meet this challenge alone. Success is going to require sustained attention and effort from broadband providers, technology companies, nonprofit groups, educators, and parents, as well as policymakers. Federal Communications Commission FCC 11-32 133 I’d like to acknowledge and praise existing private efforts and challenge companies to do more in this area. This is as much a win-win as anything I’ve seen. Every new broadband subscriber helps that subscriber, the company offering service, and our economy and global competitiveness. I look forward to working with a broad range of stakeholders to meet our broadband adoption challenge. I’d like to thank my fellow Commissioners, who worked together to improve and shape the Notice. I also want to thank the staff, particularly the staff of the Wireline Competition Bureau, for their outstanding work preparing this item. Federal Communications Commission FCC 11-32 134 STATEMENT OF COMMISSIONER MICHAEL J. COPPS Re: Federal-State Joint Board on Universal Service, CC Docket No. 96-45, Lifeline and Link-Up, WC Docket No. 03-109, Lifeline and Link-Up Reform and Modernization, WC Docket No. 11-18 Connecting low income consumers is a central pillar of this Commission’s Universal Service mission. All our people need access to the wonders of communications—and I always underline that word “all.” We can no longer afford to have digital divides between the haves and have-nots. Until each and every citizen of this great country is connected—urban or rural, living on tribal lands or in distressed inner cities, whether they are rich or poor, whether or not they are members of our disabilities communities—our work remains unfinished. Our Lifeline and Linkup programs help ensure that Americans who need it most have affordable access to the nation’s communications networks. Today, that has to mean support for affordable broadband access. The Commission has rightly begun to transition our Universal Service focus across all our programs to the advanced communications services that the digital age requires. Whether it’s applying for a job or accessing a public assistance program, doing homework or caring for our health, broadband becomes with each passing day more essential—a basic prerequisite for participation in the social and economic life our nation. Low-income consumers simply cannot afford to wait for the benefits of broadband. As this item points out, only 40% of households earning less than $20,000 a year have broadband – compared to a 93% adoption rate for households making more than $75,000 annually. And we know that cost is a primary barrier to broadband adoption. Disparities that dramatic cry out for immediate action. At the same time, we must acknowledge that there is still work to be done to ensure that all Americans have access to basic voice service. Almost 10% of low-income households nationally lack telephone service. And I would hazard that many of our distinguished guests from Indian country today could tell us first-hand how much remains to be done on this score. The low-income programs have been historically underutilized and although there has been recent growth in the program, in 2009 only 36% of eligible consumers participated in Lifeline. So I’m pleased that this item builds on the recommendations of the Federal-State Joint Board on Universal Service with regard to outreach and coordinated enrollment when consumers are signing up for other assistance programs. These proposals can potentially expand the reach of the low-income support programs, which is critical as long as telephone penetration rates for low-income households consistently lag behind the rest of the nation. I certainly support looking for program savings and action to ensure that carriers that are receiving support are doing so in compliance with our rules to prevent waste, fraud and abuse. This item also identifies areas where the program needs to be modernized, such as by updating the rules on toll limitation services reimbursement. I appreciate that as we ask how to enforce the one-per-household rule designed to prevent duplicative support, we acknowledge that some low-income consumers have living situations where a residential address is not a good proxy for a household. I hope any duplicative support or outdated support we do recover is used to expand the benefits of advanced communications to low- income consumers. These savings should be used to provide funding for the proposed broadband pilot programs, which can be an important first step on what I hope is an accelerated transition to a low-income program that helps all Americans reach our national broadband goals. Our challenge is to close the stubborn and persistent gap of low-income Americans who remain without even basic voice service while transforming the program to provide support for the advanced telecommunications services that all Americans need in order to compete in the 21st century economy. That’s a tall order—and that is why I am concerned that this item contemplates capping low-income Federal Communications Commission FCC 11-32 135 support. As we tee up proposals about how to provide support for broadband, capping today’s program would be at best imprecise. How can we intelligently cap a program when we don’t know how much meeting the challenge is going to cost? At worst, we risk compromising the future of low-income Americans who may never be connected without Lifeline. My thanks to all the staff in the Bureau whose efforts went into today’s item. I also want to acknowledge the Federal-State Joint Board members and staff whose work informed this NPRM. I look forward to working with all these good folks, with my colleagues here, and with all stakeholders in the months ahead. Federal Communications Commission FCC 11-32 136 STATEMENT OF COMMISSIONER ROBERT M. McDOWELL RE: Federal-State Joint Board on Universal Service, CC Docket No. 96-45, Lifeline and Link-Up, WC Docket No. 03-109, Lifeline and Link-Up Reform and Modernization, WC Docket No. 11-18 If I’ve learned one thing in my nearly five years on the Commission, it is that our work on universal service reform is a bit like painting the Golden Gate Bridge: a project that is always underway and never seems to end. During my time here, I have advocated for a comprehensive review of all of the programs with a primary goal being curbing the growth of expenditures. As such, today’s initiation to revamp the Lifeline/Linkup program is a critical part of our overall reform efforts, and I commend the Chairman for launching this Notice of Proposed Rulemaking. The original goal of the Lifeline/Linkup program was a noble one: to provide an opportunity for Americans with limited means to stay connected to the rest of the world through basic phone service. This program has improved many lives by not only allowing for everyday communications, but it has also helped save lives by allowing consumers to place emergency calls. Nonetheless, we cannot ignore the fact that the size of the Lifeline/Linkup program has steadily and dramatically increased. In 1997, the total support for the program was $162 million, and in 2010 it had risen to $1.3 billion. This trend is unsustainable. It is encouraging to see that this proceeding attempts to examine and address waste, fraud and abuse within this program. It seems that policymakers often speak of “waste, fraud and abuse” when attempting to create efficiencies in government programs to the point where that term has become hackneyed and virtually meaningless. Today, however, the FCC is actually doing something specific to reverse some troubling trends. For instance, the Notice: seeks comment on ways to ensure duplicate support is not provided; explores ways to prevent companies from receiving funds for inactive customers; and asks for the public’s advice on possibly imposing a uniform federal standard as a minimum threshold for verifying continued eligibility. Also, regarding duplicate claims, I am supportive of efforts the Chairman may have to find ways to curb excess and inappropriate spending. I thank the hard-working staff in the Wireline Competition Bureau for their dedication to this Notice, and I look forward to discussing these issues with all of my colleagues and the various stakeholders. It is my hope that we can move forward in a fiscally prudent and thoughtful way. Federal Communications Commission FCC 11-32 137 STATEMENT OF COMMISSIONER MIGNON L. CLYBURN RE: Federal-State Joint Board on Universal Service, CC Docket No. 96-45, Lifeline and Link-Up, WC Docket No. 03-109, Lifeline and Link-Up Reform and Modernization, WC Docket No. 11-18 For many years, fulfilling the basic communications needs of low-income consumers has been a priority for our nation. Since 1985, the Lifeline and Link Up programs have ensured millions of low- income Americans access to affordable telephone service. This not only permits these consumers the means to stay connected to friends and family, it also offers them the ability to make doctor’s appointments, and call 911 in an emergency. By ensuring that low-income consumers have access to a phone in their homes, our nation has provided every American—no matter their financial circumstance— the lifeline they need to communicate with the rest of the world. For those consumers who are struggling to meet basic needs, such as food and shelter, these programs truly are making a difference. Many would go without phone service, but for these programs. And given the economic downturn over the last several years, it is not surprising that the fund has grown. We have seen numerous changes in the marketplace since the implementation of the Lifeline and Link Up programs. Notably, mobile wireless service has grown significantly, and competitive Lifeline products are now available, allowing low-income consumers the ability to choose from various phone options. Today, access to high-speed Internet service has become essential for Americans to communicate with one another. As a result, it is appropriate for the Commission to revisit the current structure of the Lifeline and Link Up programs. We must ensure that they are efficient, effective, and address the modern communications needs of our nation’s low-income citizens. While these programs have helped many consumers afford telephone service, not all needs have been addressed. As my friends from the Tribal Nations are fully aware, basic phone service still lags significantly on Tribal Lands as compared to the rest of the country. Today’s NPRM builds upon the recommendations made by the Federal-State Joint Board on Universal Service last November, as well as the National Broadband Plan last March. The Commission’s consideration of these recommendations is essential for modernizing and improving the programs. By ensuring that only eligible consumers participate in the programs, that the annual verification requirements are effective, and that we minimize duplicative services to households, we likely can extract some efficiencies in the programs that could be used to further address the voice and broadband needs of low-income consumers. I am encouraged by our full exploration in this Notice of the use of an electronic database that would permit real-time checks on consumer eligibility and participation in the Lifeline and Link Up programs. Such a database has the potential to offer us savings in the long run—savings that could be used to further address the needs of low-income consumers. It is very appropriate that this Commission work towards a broadband-based solution that all Lifeline and Link Up providers could rely upon to make these programs more efficient and effective. I am also pleased that we are asking some very basic questions in this Notice, such as how much support truly is required for both the initiation of voice service through Link Up, and the monthly benefit that Lifeline provides. Where we can identify savings, those funds could be used to begin addressing and supporting the broadband needs of low-income consumers which we know are significant. Less than half of low-income Americans have subscribed to broadband, and one-third of Americans who have not purchased broadband, say they have not done so due to the expense of obtaining such service. We also know that for those consumers who are struggling to pay for their basic needs, there is very little discretionary income left to afford broadband service. One analyst recently noted that 40% of Federal Communications Commission FCC 11-32 138 U.S. households have just $100 of disposable income, after paying for their food, shelter, and transportation. Yet broadband service is just as much a necessity today, as phone service was when the Commission established the Lifeline and Link Up programs 26 years ago. Without broadband at home, it is more difficult for citizens to look for a new job and interact with government services. Indeed, some government agencies only offer their services to consumers via the Internet. For these reasons, over the last year, I have repeatedly stated that we must fully focus on our nation’s broadband adoption gap. I believe that we will not successfully bridge this gap for low-income consumers if we don’t address the affordability issue. Given the expansive modern communications needs of low-income Americans, we would be on a fool’s errand if we think that we can address both voice and broadband requirements, while simultaneously capping the fund. To be clear, I don’t subscribe to the belief that the Fund will meet all of these needs, even if it is not capped. I believe it will take both the public and private sectors to address these issues. I am hopeful that with the discounts providers already offer to low-income consumers, along with the broadband pilot projects proposed herein, and with the flexibility of consumers to use their Lifeline discount for bundled voice and broadband services, we can find effective solutions to bridge the digital divide for most low-income Americans. This is not an easy task, but I challenge every Lifeline and Link Up provider, every broadband provider, and all other interested stakeholders, including Congress, the states, consumer advocates, and public interest groups, to help us find the most effective solutions for improving the current Lifeline and Link Up programs for voice service, and to stretch the programs’ dollars even further, so that we can cover broadband services. I also wish to praise those broadband providers that have recognized the significant need of low-income consumers and have started their own adoption programs, and I hope that they continue to share their work with us. By learning what has and has not been successful, we can better address the modern communications needs of all Americans. Federal Communications Commission FCC 11-32 139 STATEMENT OF COMMISSIONER MEREDITH ATTWELL BAKER RE: Federal-State Joint Board on Universal Service, CC Docket No. 96-45, Lifeline and Link-Up, WC Docket No. 03-109, Lifeline and Link-Up Reform and Modernization, WC Docket No. 11-18 The Commission’s low-income programs provide the means for 8.6 million Americans to afford basic telephone service, and the ability to reach public safety, schools, and employers. I support our effort to reform these important programs to ensure their long-term sustainability. This item is an appropriate and timely follow-up to last month’s review of our high-cost programs, and an important step forward in implementing the Joint Board’s November Recommended Decision. The themes here mirror closely the challenges and opportunities we face with the high-cost fund. To put these programs on a stronger foundation both operationally and financially, we need to take a comprehensive look at these programs to evaluate whether they are effective, fiscally responsible, as well as whether they properly reflect today’s consumer demands and market realities. Operationally, I believe the Commission has let critical questions about program eligibility linger too long, and I am happy to see us take affirmative steps to update these programs and curb waste, fraud, and abuse. As we work together collectively on reform, we need carriers receiving low-income support today to act as responsible partners in the interim minimizing any wasteful or duplicative expenditures. Our reforms must also reflect the need for greater fiscal discipline in accomplishing our mission. Much like the high-cost fund, the low-income programs have grown significantly. In the past ten years, these programs have more than doubled from $577 million to over $1.3 billion today. I support our efforts to address the need for real cost containment, and to recognize that—in difficult economic times—escalating contribution burdens on consumers can create their own affordability challenges undermining our efforts. We are also beginning our dialogue on how to update these programs to support broadband. I appreciate that we are looking before leaping on broadband funding. By all metrics, adoption of broadband for low- income Americans lies well below the national average, and this poses an important challenge for all of us. The promising news is that the gap is beginning to shrink. Broadband adoption for those making between $15,000 and $25,000 a year has jumped from 24 percent in October 2007 to over 42 percent last year. There is obviously still much to do, and our low-income programs are a potentially untapped resource to help. Moving forward with broadband pilot programs appears to be the right next step. Adoption is not a one-size-fits-all challenge and affordability is but one of the core challenges we must face. Indeed, those making between $15,000 and $25,000 a year identify relevance as the primary impediment to adoption (44.3 percent), affordability is a distant second (27 percent). More money alone will not solve this problem.