Archive for March, 2016

AM Revitalization Springs Forward

Wednesday, March 30th, 2016

Last October, the Commission took the first steps in over a quarter-century to revitalize the AM broadcast service.  AM radio has traditionally been the backbone of the broadcast service, and has time and again kept the public entertained and informed, as well as serving a vital role in times of emergency, disaster and severe weather.  The Commission’s goal is to assist AM broadcasters in the face of increasing technical challenges to their service, such as interference from electronic devices.

I am happy to report that those efforts have borne fruit, and that AM broadcasters are reaping the benefits of the Commission’s actions in the AM Revitalization proceeding.  One of the cornerstones of the Order was the opening of an exclusive window for the lowest-powered and most vulnerable AM stations, to relocate FM translator stations in order to re-broadcast their AM signals.  This gives the stations the ability to expand their service by broadcasting at night when their AM signals may be significantly reduced.  Hundreds of AM broadcasters have taken advantage of this opportunity.  To date, over 600 applications to relocate FM translators for AM rebroadcast use have been filed since the window opened on January 29, 2016.  Audio Division staff have already granted 80 percent of those applications, and will continue to process these quickly to provide relief to the AM broadcaster applicants.  This will continue through the end of this window in July, as well as the three-month window to follow, which will be open to all AM broadcasters.

Other aspects of the AM Revitalization Order have likewise proved successful.  For example, the Commission streamlined the procedures for AM stations to employ new energy-saving MDCL technologies, eliminating the requirement that they seek permission to do so, now requiring only that they notify us by form.  Since this new procedure became effective in March, we have seen a 25 percent increase in the number of AM broadcasters employing these new technologies.  This is just one example of the ways in which we at the Commission hope to reduce the burdens on AM broadcasters that want to move their service into the 21st Century, and to remain a vibrant and essential part of America’s communication infrastructure.

Empowering Small Businesses to Innovate in Today’s Digital Economy

Friday, March 25th, 2016

March twenty five, 2016 – 1: 00 pm

Tom Wheeler | FCC Chief

Today, I possess circulated to my fellow Commissioners the draft of the Commission’s latest report to…

Lifeline: Striking the Right Balance

Monday, March 21st, 2016

From the outset of the Commission’s Lifeline modernization proceeding, one of the primary challenges has been striking the right balance between the Commission’s dual mandates of affordability and access to “advanced communications technologies.” In other words, how can we guarantee that low-income Americans can take advantage of all the opportunities that real broadband Internet access enables – from jobs to education to healthcare – while also ensuring that this access remains within reach financially?

So, it’s not surprising that since Chairman Wheeler and Commissioner Clyburn announced their proposal for including broadband in the Lifeline program, we’ve heard some questions about what the proposed rules – and, in particular the concept of phased in “minimum service standards” – would mean for the affordability of Lifeline-supported services.  Understandably, we have also heard concerns about what the proposal means for future availability of mobile voice service in the Lifeline program.

In her visionary AEI speech on Lifeline, Commissioner Clyburn said, “the FCC should establish minimum service standards … The reality is that for years, the program has not resulted in providers offering much better or diverse services while all of the other consumers appear to have a healthy set of options…This level of stagnation must be addressed and modified.”  The Communications Act also makes clear that Universal Service offerings should look a lot like what most Americans are getting. The minimum service standards outlined in the proposal are aimed at ensuring Lifeline begins to deliver real, meaningful service.

At the same time, the law also tells us that service must be affordable for low-income consumers.  There’s a tension.  And, as we think about setting minimum service standards, we must also keep an eye on this affordability mandate.

The proposed rules, scheduled for a Commission vote on March 31, provide for a phase-in of mobile broadband minimum service standards so that Lifeline providers can have plenty of time to adjust their business models.  Each year, starting in December 2016, the phase-in increases the amount of 3G data beginning with 500 MB and then increasing to 1 GB and beyond.  We believe this “glide path” would offer a meaningful broadband experience to low-income households at a highly affordable level. 

Consider a few facts:

  • Today mobile prepaid providers are retailing 3G data at around 1.5 cents per MB, according to table V.C.1 on page 66 of the FCC’s 18th Mobile Competition Report, which shows per-MB prices of 1 cent to 2 cents, and page 1 of a March 2 filing by Tracfone, showing a top-up price of $10 per Gigibit, or 1 cent per MB.   So as of today – March 2016 – the 500 MB minimum standard for data would be consistent with a retail price point of $7.50 per month, well within the current $9.25 Lifeline discount.  Add in a few dollars per month for a device, and other standard business expenses, and that would be a very affordable mobile data choice for a Lifeline consumer.
  • Data costs have been falling at a healthy clip of around 20 percent per year, according to an April 15, 2015 research note by Philip Cusick for J.P. Morgan North American Equity Research.

To ensure that Lifeline is continuing to meet subscribers’ needs and that our reforms are accomplishing their intended modernization goals, the proposal also specifically requires a mid-2019 program review and report by the FCC’s Wireline Competition Bureau.

There’s another an important proposed change to the Lifeline program that would help considerably with the affordability mandate: shifting all eligibility reviews to the National Verifier and thereby decreasing administrative burdens on providers.  By helping Lifeline providers realize significant cost savings in their administrative overhead, the National Verifier would also help promote affordable offers that meet the minimum standards.

Finally, modern mobile networks continue to see technological advances that allow services such as voice to be delivered more and more efficiently.  For Lifeline, an important trend in the years ahead will be the growing use of so-called Voice-over-LTE capabilities by US wireless providers.  On a VoLTE-enabled service, a single megabyte of data – or 1/1000 of a 1 GB plan – could be used to support about 3 minutes of voice.  In other words, a 2 GB data plan – such as proposed for the Lifeline minimum standard that would apply three years from now – could support roughly 6,000 minutes of voice.  More likely, the customer for a 2 GB plan could use about 1.7 GB for accessing data services and the remaining 300 MB for the equivalent of 900 minutes of voice.

Taking these market trends and reform impacts together – and of course factoring in device costs and companies’ overhead and profit – we are confident that the Lifeline provider market under the proposed reforms would be able to meet the minimum standards with very affordable offers. 

Choice is just as important for low-income consumers as it is for other Americans. Some subscribers will want standalone broadband, others will want voice packages of either higher or lower numbers of minutes too.  Just as in the broader consumer market, these choices will come with different price tags.  Those who want more will pay a little more, and we expect providers will gladly meet consumers’ demands for different choices.

Lifeline has always been an affordability program, but it hasn’t always provided robust levels of service.  The proposal’s phase-in of minimum standards would allow ample time for customers and providers to transition from yesterday’s model, and it would help to balance affordability and meaningful service in the new, better Lifeline program.

Broadband: A Lifeline for the 21st Century

Tuesday, March 8th, 2016

If you’re reading this blog, youve probably come to take Internet access for granted. Without even thinking about it, millions of us go online multiple times daily, to check e-mail, catch up on the news, or shop or stream our favorite shows while the kids research their homework assignments on the Web. Now imagine if that Internet connection were severed. Almost every aspect of your life would be disrupted: how you keep in touch with friends and family; how you do your job; how you get news and entertainment; how you make informed financial decisions. More than sixty-four million Americans, however, don’t have to imagine life without an Internet connection; they live on the wrong side of the digital divide.

The biggest reason these Americans don’t sign up for broadband is cost. Only half of the nation’s households in the lowest income tier subscribe to broadband. And 43 percent of all people who don’t subscribe to broadband at home say that affordability is the reason. Of the low income consumers who have subscribed to mobile broadband, 44% have to had cancel or suspend their service due to financial constraints and for those whose only access to the Internet is their smart phone, 48% have had to cancel or shut off service for a period of time due to financial hardship.

We can recite statistics all we want, but we must never lose sight of the fact that what we’re really talking about is people – unemployed workers who miss out on jobs that are only listed online, students who go to fast-food restaurants to use the Wi-Fi hotspots to do homework, veterans who are unable to apply for their hard-earned benefits, seniors who can’t look up health information when they get sick.

Internet access has become a pre-requisite for full participation in our economy and our society, but nearly one in five Americans is still not benefitting from the opportunities made possible by the most powerful and pervasive platform in history.

We can do better. We must do better. Indeed, Congress told us to do better.  By modernizing the FCC’s Lifeline program, we will do better.

Lifeline was established in 1985 to help low-income Americans afford access to vital communications, and the program has allowed tens of millions of Americans to afford basic phone service. But at a time when our economy and lives are increasingly moving online and millions of Americans remain offline, it doesn’t make sense for Lifeline to remain focused only on 20th century voice service.

Today, we are putting forward a proposal to help close the broadband affordability gap by modernizing the FCC’s Lifeline program. There are three central facets of this reform plan.

First, it re-orients Lifeline for the broadband era and sets minimum service standards for voice and broadband. That way Lifeline subscribers will be able to take full advantage of the many benefits reliable Internet access can bring – from jobs to education to healthcare, and the hard-working Americans who support the program won’t be paying for second-rate service.

Second, it improves Lifeline’s management and design. We streamline program rules and eliminate outdated or unnecessary regulations to reduce administrative burdens and make it easier for broadband providers to participate. This provides them with a good business case for participation – and provides Lifeline consumers with more competitive options. By increasing competition and bringing market forces to bear on the program, we get at the heart of the historic issues that have undermined the program’s efficiency. In short, we get more bang for our Lifeline buck and ensure low income consumers have access to services comparable to what the rest of us are fortunate to enjoy

Third, it shuts the door on the program’s final remaining vulnerability. We establish a National Eligibility Verifier as a powerful check against waste, fraud, and abuse. The program we inherited allowed Lifeline providers to verify the eligibility of their subscribers. This is both an administrative burden for providers, and an opportunity for unscrupulous marketers to admit ineligible consumers. The National Eligibility Verifier solves this problem by creating an independent third party to establish an efficient system of eligibility verification, lifting burden and foreclosing fraud. This verifier will use existing trusted programs such as Medicaid and the Supplemental Nutrition Assistance Program (SNAP) to determine eligibility. The independent Verifier has the added benefits of increased subscriber portability, which means more consumer choice.  The result is a more dignified process for enrollment that better protects consumer privacy and security.

Finally, a few points on how we got here.

Throughout this process, some have told us to wait, pointing to waste, fraud, and abuse that resulted when, during the Bush Administration, Lifeline was opened for wireless service. They are ignoring the fact that the FCC’s 2012 reforms, in particular the National Lifeline Accountability Database (NLAD), are already working to eliminate the waste previous program designs permitted. Indeed, annual Lifeline payouts have decreased by over 30 percent since 2012, due largely to these reforms. But, more importantly, these voices are ignoring the fact that low-income households are falling a little further behind every day without the access to jobs, educational opportunities, services and more that broadband provides. To wait is to push these Americans further down the ladder of opportunity.

This idea that we have to pick between adopting measures that help low-income Americans or cracking down on waste is a false choice. Today’s plan does both.

This is good-government reform that puts consumers and ratepayers first by creating a market-based climate for competition, with the controls needed to guard against market abuse. We’re pleased to offer this plan to provide a pathway out poverty for low-income consumers by modernizing Lifeline for the 21st Century.

Informing and Engaging Consumers- National Consumer Protection Week: March 6-12, 2016

Monday, March 7th, 2016

As Acting Chief of the FCC’s Consumer and Governmental Affairs Bureau, I am excited about the opportunity to join with federal, state and local agencies in celebrating National Consumer Protection Week — a coordinated effort to encourage consumers to take full advantage of their rights and make better-informed decisions.  Indeed, this is our bureau’s daily mission on behalf of the Commission.

In this spirit, I wanted to highlight how the FCC strives to inform and empower consumers in the communications marketplace.  A few examples:

  • At FCC.gov/consumers, you can browse our library of more than 160 consumer guides on topics that range from tips on pocketbook issues, such as how to detect unauthorized charges on your phone bill, to mobile device theft protection or stopping unwanted robocalls and texts, to name just a few.
  • Through our Consumer Help Center, you can file a complaint with the FCC.  The collective data we receive – with more than 380,000 individual complaints logged since the Consumer Help Center launched in January 2015 – helps us keep a pulse on what consumers are experiencing.
  • By signing up for our AccessInfo email list, you can keep up with our latest efforts to promote innovation, competition and access to new technology for consumers with disabilities. 
  • Thanks to accessible technology advances, consumers who are deaf or hard of hearing can communicate with us directly through our American Sign Language Consumer Support Line – available using videophone at 844-432-2275 – as part of our continuing push to expand the availability of Direct Video Communications in government agencies and businesses.

Looking ahead, we know that the changes resulting from technology innovation occur rapidly in the marketplace, presenting new opportunities, but also new challenges for consumers.  As FCC Chairman Wheeler often says, “With continuing advances in technology, I believe that if we can imagine it, we can do it.”

At the FCC, our goal is to keep pace and empower you, the consumer, ensuring that you are informed to take advantage of the rules that protect your rights, and – when needed – to seek our help in navigating solutions in today’s communications marketplace.

Lifeline Reform: Add a Hard Budget

Thursday, March 3rd, 2016

Why is it so easy for some people in Washington, DC to spend other people’s money?  It is one thing to be careless with your own finances, but it is another for stewards of Americans’ tax dollars or other monies to seem oblivious to the impact of their actions on hard working consumers.  The desire to spend seems to exceed any interest in doing so in a rational and responsible way.  This is exactly the situation facing the Commission’s reform effort for the universal service fund (USF) Lifeline Program. 

Failing a major change in direction, the FCC is preparing to massively expand the size and scope of the Lifeline Program without the necessary inclusion of a hard budget or financial constraints.  Such irresponsible action will balloon a program plagued by waste, fraud, and abuse and result in higher phone bills for every American – including those already struggling in the current economy.  In sum, it’s a recipe for disaster, and I can’t and won’t be part of it.

By the Numbers

Let’s put what the FCC is considering into perspective.  The argument has been made that, as it currently stands, only 40 percent of eligible Lifeline recipients take advantage of the program.  Accepting this as true for argument’s sake, the $1.630 billion spent on the program in 2014[1] would need to increase by 150 percent, or $2.445 billion, for a total of $4.075 billion or more per year in order to reach all those currently thought to be eligible.  That would increase total USF spending to $12.745 billion a year,[2] an increase of $5.275 billion, or 70.6 percent, since 2009, during the current Administration under Chairmen Genachowski and Wheeler.[3]  

Using the FCC’s own data on Lifeline would lead to an even bigger price tag.  In 2014, there were 13.45 million claims[4] out of the 42 million households[5] that were eligible for the program, which is only 32 percent.[6]  Sizing the program to reach the remaining 68 percent would cost an additional $3.464 billion, for a total of $5.094 billion per year.  That would make the Lifeline program the most expensive universal service program – more costly even than the high-cost program, which helps fund the deployment of actual network infrastructure in rural parts of the country.  And all of this assumes that the FCC does not expand eligibility even further in the next item, which is unlikely.

Using this level of spending ($3.464 billion more per year) would have a dramatic effect on calculating the “contribution” factor, which translates into the fees Americans pay on a portion of each month’s phone bill.  If you plugged this additional Lifeline spending into the 2016 first quarter formula, the percentage of Americans’ phone bills that goes toward the FCC’s USF spending (as opposed to service-related purposes or state and local taxes) would increase from 18.2 percent to 26.7 percent,[7] based on the FCC data.  But this underestimates the actual effect since telecommunications revenues continue to shrink yearly. 

Additionally, expanding the spending to everyone currently eligible would increase the number of households receiving subsidized Lifeline service to more than 36 percent of the 116 million American households.[8]  Since Lifeline subscribers are exempt from USF fees, this means that fewer people will be available to cover the expense, so their share of the total bill will increase.  Therefore, this figure would likely rise much higher.    

False Arguments against a Hard Budget

The benefits of a firm budget are undeniable.  Setting a top line figure allows proper balancing of Lifeline with other USF programs, and limits the overall cost to consumers.  It is also the first line of defense against a rapid increase in the program’s size.  Moreover, it acts as a deterrent to providers and recipients to prevent oversubscription or abuse – it’s the difference between handing out candy at Halloween and leaving a candy dish at the door.   

Those who oppose a cap or budget on the Lifeline program seem to congregate around three arguments, which are easily refuted.

  1. The Next Administration Can Worry About Right-Sizing the Program

Certain advocates for expanding the Lifeline Program suggest that now is not the time to determine a budget.  Instead, they argue that everything should be done to ensure that spending covers both voice and broadband, while the next Administration should decide on how best to “right-size” the program in 2017.  Under this line of thinking, the next president would decide the size of the budget, implying a Republican would trim costs or eliminate the program all together and a Democrat would demand even more funds, notwithstanding the fact that the Commission is supposed to be an independent agency that’s not beholden to any Administration.  

This approach is fraught with problems and is intellectually bankrupt.  First, Lifeline shouldn’t be treated as a political football.  The entirety of the merits and problems of any program should be considered regardless of current politics.  It is far too presumptuous to assume what the next president might or might not expect from the next Chairman.  It also ignores the fact that the next Administration will have a host of international and homeland security issues to address, so a Lifeline budget may not be at the top of its agenda.  Second, right-sizing spending later means that services initiated could be curtailed causing unnecessary disruption for consumers.  But perhaps that’s the goal: get people addicted to free broadband now and dare someone to try to take it away later.  Third, this harms service providers who will make investment, spending and resource decisions based on expected demand.  Possible right-sizing later will result in uncertainty and wasted equipment, and will undermine provider efficiencies.  Lastly, this whole line of thinking assumes that establishing a budget can be effectively separated out from the rest of the decisions, as if it is not a key component to decision making.

  1. We Can’t Determine the Right Number

No budget is ever perfect.  Naturally, adjustments will be necessary at some point in the future based on experience and changing circumstances.  To not enact one using this line of thought, simply ignores the fact that the Commission has budgets for each of the other three USF programs.  If budgets are so hard to adopt, how did this very Commission just set a new one for the Schools and Libraries Program, better known as E-rate, eleven months ago?  Moreover, other assistance programs have budgets but are still able to balance demand and outlays so that consumers are not suddenly displaced. 

To initiate discussion, I have suggested, as a starting point, using the 2014 Lifeline spending level, or $1.63 billion, for a period of five years.  At that time, the next Commission can continue at or reset the amount, as necessary.  To reject even a discussion now of an appropriate budget helps confirm my worst fears: proponents plan to spend through the roof and don’t want any accountability.

  1. People Have a Right to Lifeline Funding

At no time in the history of the Lifeline Program, or any USF program, has it ever met the prerequisites to be classified as an “entitlement,” as with Medicaid or Medicare.  No potential recipient can claim that they are entitled to receive Lifeline benefits.  That means that the Commission retains the complete right to determine and limit eligibility, especially to meet budgetary concerns.  As such, the argument that enacting a budget would constrain recipients and thus violate current law is invalid.

USF Contribution Reform is Not the Answer

While I agree that the Commission should move contribution reform, it is disingenuous to treat it as a solution to unrestrained Lifeline spending.  By incorporating new payers (people, devices or services) into the system, it merely masks the true increase in spending.  In other words, expanding the denominator to impose fees on more services, like Internet access, just dilutes the current contribution factor but it does nothing to address the growing numerator (i.e., overall spending).  And, it means that instead of one fee on voice services, as in today’s collection process, there would be smaller fees on multiple services that collectively will total more than consumers are currently paying.  That’s the hidden agenda.  Under this construct, families will pay more, possibly unknowingly, to the Federal government when all of the new services are subjected to the Commission’s fee mandates.

*             *             *

In the end, shouldn’t we expect more from the Commission than runaway Lifeline spending?  Rejecting the enactment of a budget based on erroneous and misleading arguments would continue the FCC’s recent reckless practices that seek to take more money and freedom from Americans.                                                                                                                                             

 

[2] I arrive at this figure by adding the $4.5 billion for high cost, $3.9 billion for schools and libraries, $4.075 billion for lifeline, and $270 million for rural healthcare.  Moreover, this figure is conservative because the Commission had to “find” $1.5 billion extra to fully fund inside wireless connections in schools and libraries,  With program demand at the cap and any future savings tenuous at best, the Commission would need to come up with additional funding going forward or cut back on the Wi-Fi component, an unlikely outcome.

[4] 2015 Universal Service Monitoring Report, Table 2.2.  Under FCC rules, claims are limited to one per household.

[5] Lifeline and Link Up Reform and Modernization, WC Docket No. 11-42, Telecommunications Carriers Eligible for Universal Service Support, WC Docket No. 09-197, Connect America Fund, WC Docket No. 10-90, Second Further Notice of Proposed Rulemaking, Order on Reconsideration, Second Report and Order, And Memorandum Opinion and Order, 30 FCC Rcd 7818, para. 111 (2015), https://apps.fcc.gov/edocs_public/attachmatch/FCC-15-71A1.pdf. 

[6] Other data just recently filed by USAC shows 12,493,961 NLAD subscribers out of 38,861,000 households.  That also yields a 32 percent participation rate.  Letter from Michelle Garber, USAC to Ryan Palmer, FCC, WC Docket No. 11-42 (filed Feb. 24, 2016).

[7] Using the FCC’s Office of Managing Director Public Notice from December 2015, which announced the First Quarter contribution factor, an additional $866 million per quarter was added to the calculation for “Projected Revenue Requirement.”