Wealth Transfer on the March: 'Reforming' the Lifeline Program

Do you pay your phone bill? I do. Should you also pay for those who do not wish to? You already do. Does that give you a warm glow to know that you are helping spread the wealth, unasked? You see, phone service is so vital that everyone has a right to it, even as a drowning person has a right to a lifeline, and so the Federal Communications Commission (FCC) administers the Lifeline program. We're not talking about watered-down service that allows only 911 calls in an emergency but real, full-blown telephone service.

But, someone says, isn't that harsh to say that the poor choose not to pay for telephone service? What if they can't afford it?

In 2005, the average household defined as poor by the government lived in a house or apartment equipped with air conditioning and cable TV. The family had a car ... two color televisions, a DVD player, and a VCR ... a microwave, refrigerator, and an oven and stove ... a clothes washer, clothes dryer, ceiling fans, a cordless phone, and a coffee maker.

In short, the poor in America enjoy the most extravagant opulence compared to the vast majority of humans on this planet, and yet they should not have to pay their phone bill. Subsidies to rural households were created as part of FDR's New Deal in 1934: AT&T used the profits from overcharging for long-distance to subsidize basic service.

The Telecommunications Act of 1996, one of the signal "reforms" of the Clinton era, changed all that, creating the Universal Service Fund (USF), administered by the Universal Service Administrative Company, and you know the USAC is a Good Thing, because the USAC has a "diverse 19 member Board of Directors comprised of representatives of universal service stakeholders" (see Slide 3 of a train-the-trainer presentation). Among other things the USAC took over "Billing, Collection, Disbursement, and Accounting functions from IBM" (Slide 5), so that must have increased efficiency vastly.

The USF gets its money from telecom providers through what is known as the "contribution factor," adjusted every quarter. In 1999 it was a little under 4% (Slide 11), just one year ago it was 15.5%, and the FCC has just set the rate for first quarter 2012: 17.9%. The contribution factor is a politician's dream, a tax that is constantly adjusted upward without any messy wrangling in Congress, no debates, no votes, just the FCC toiling away to determine how large the increase should be. (I know, our government calls it a fee rather than a tax, and some insist that it's a cost recovery mechanism, but whatever it's called, the result is the same: money siphoned out of your account through the USAC and into the coffers of the telcos to provide service to someone else.)

One part of the Universal Service Fund is the Lifeline program, providing service to the poor. How important names are. Who could be so stony hearted as to oppose throwing a lifeline to a drowning person? Who would be so mean-spirited as to oppose the Lifeline program to bring telephone service to the poor?

So what's wrong with the Lifeline program, at least to a politician's mind? It doesn't do enough, it doesn't cover broadband Internet access, because that's now a right too. And here comes Julius Genachowski, Chairman of the FCC, with a draft proposal to "reform" the Lifeline program to include broadband at no extra cost to the taxpayer! Yay! More services, same cost. What's not to like?

While it is sometimes difficult to separate the sentiments of the chairman from those of the LA Times journalist who reported his proposal, the distinction is immaterial: Big Government and Big Media share the same worldview, work seamlessly together to the same ends. How long must we wait for an Eisenhower to warn us of the dangers of a government-media complex?

According to the article in the LA Times,

Chairman Genachowski ... would reform the commission's Lifeline program to include provisions to encourage broadband adoption. The program, currently aimed at providing affordable telephone service to low-income Americans, is supported by the Universal Service Fund.

Talk about opacity in reporting. These two sentences contain so much sleight of hand it's difficult to know where to begin. It were far too indelicate to write "Lifeline is a government-coerced wealth transfer from those who pay their phone bills to those who do not." No, no, nothing so plain and direct would ever do. Lifeline does not "provide" telephone service, it is "aimed at providing," and not simply "telephone service" but "affordable telephone service." Affordable is one of the politician's feel-good words: Who would be so churlish as to wish unaffordable service on anyone? This proposed "reform" would not "pay the bills" for broadband service. How crass: "pay" implies money changing hands, and readers might get riled up if money were mentioned any more than necessary. No, this reform would merely "encourage broadband adoption."

What are the problems that Lifeline is suffering from that cry out for "reform"? An FCC press release dated February 8, 2011, says that "USF has also become wasteful and inefficient in some situations, paying over $20,000 a year -- nearly $2,000 per month -- in support per line for some households." In his draft proposal, Chairman Genachowski omits the lurid detail of $2,000 per month for one subscriber's service:

Genachowski said the program has been successful, but has also been plagued with problems of accountability and efficiency. Multiple service providers are often supplying Lifeline subsidies to the same households, he said, because there is no centralized system.

"Accountability and efficiency": in other words, we have another government program plagued by fraud and abuse. But hey, it's still successful. The cure? A "centralized system." What a surprise! Problems in America always come down to too little command and control from Washington, because when it comes to administering Indian trust lands or delivering healthcare or the mail or anything else vital to modern life, huge bureaucracies in Washington always do a better job. That's an article faith among progressive politicians and their coadjutors in Big Media.

The draft proposal creates a national database ... "The order would make Lifeline reimbursement more transparent and streamlined," Genachowski said, calling the measure common sense. He said that FCC staff estimate the reforms will save the fund $2 billion over the next two years.

"National database" is thrown in to send a tingle up the legs of Genachowski's fellow bureaucrats, but "more transparent ... streamlined ... common sense" are for the hoi polloi. Such words are as emotionally loaded as reform and progressive, cudgels wrapped in velvet to bludgeon the opposition. Who among us is against common sense? Who dare oppose transparency and streamlining?

The "reforms" will save $2 billion over two years because FCC staff says they will, billions that the FCC can use to "work with existing broadband adoption programs to establish its own pilot program using savings from its budget reforms." There you have it: a federal bureaucracy "streamlines" the cumbersome operations it invented in the first instance and uses the resultant savings to expand its programs, all at no cost. Bureaucrats seem to always be inventing perpetual motion machines, schemes to pay for more and more goodies at no additional cost. And when the savings fail to materialize, they just ask for more money. In this case the FCC has it particularly easy: it simply adjusts the contribution factor up again -- and again, and again, every quarter, like clockwork.

Incidentally, using the FCC's webpage is anything but easy. Go here ("Announcing a new FCC.gov" blaring across the top of the page) and try clicking on the link for Universal Service Home Page (broken). Then do a search on "contribution factor." Zero hits. Only through Advanced Search can you find anything. Does the FCC have little interest in educating the public on the Universal Service Fund and the contribution factor?

A politician bandying about the word reform always puts me in mind of a speech I heard ex-President Gerald Ford give in the early 80s. The most memorable statement he made that evening was this: "Whenever I hear someone in Washington talk about reform, I get almost nauseous." Since then I have been acutely attuned to the word. Clothe the most vicious policy in the hallowed robes of reform and no one dare object. The word is as deceptive and debased as progressive. I would add a corollary to President Ford's observation: Whenever you hear a politician talk of reform, look to your wallet and your rights, for both will be assaulted.

A few months after I heard President Ford, ex-President Jimmy Carter came to town. What I remember of that speech was his assertion that there is a tradition of sitting presidents calling their predecessors for advice. "But do you know that President Reagan has not called me once. Not once." I was embarrassed for him, embarrassed that he was not embarrassed. The man was nearly 60 years old, yet he sounded like a second grader. You could almost hear the screen door slamming in Plains, Georgia, half a century before. "Mama!" little Jimmy shouts as he runs into the kitchen. "I was watchin' the fellahs play horse, and Ronnie didn't even ask me about the rules, and I know all the rules, don't I Mama! I know all the rules! He's no fair!" Too bad that the press, which has had far more exposure to the man than I, has chosen to mask his petty personality from the public. Beware the malign influence of the government-media complex.

Henry Percy is the nom de guerre for a technical writer living in Arizona. He may be reached at saler.50d[at]gmail.com.

Do you pay your phone bill? I do. Should you also pay for those who do not wish to? You already do. Does that give you a warm glow to know that you are helping spread the wealth, unasked? You see, phone service is so vital that everyone has a right to it, even as a drowning person has a right to a lifeline, and so the Federal Communications Commission (FCC) administers the Lifeline program. We're not talking about watered-down service that allows only 911 calls in an emergency but real, full-blown telephone service.

But, someone says, isn't that harsh to say that the poor choose not to pay for telephone service? What if they can't afford it?

In 2005, the average household defined as poor by the government lived in a house or apartment equipped with air conditioning and cable TV. The family had a car ... two color televisions, a DVD player, and a VCR ... a microwave, refrigerator, and an oven and stove ... a clothes washer, clothes dryer, ceiling fans, a cordless phone, and a coffee maker.

In short, the poor in America enjoy the most extravagant opulence compared to the vast majority of humans on this planet, and yet they should not have to pay their phone bill. Subsidies to rural households were created as part of FDR's New Deal in 1934: AT&T used the profits from overcharging for long-distance to subsidize basic service.

The Telecommunications Act of 1996, one of the signal "reforms" of the Clinton era, changed all that, creating the Universal Service Fund (USF), administered by the Universal Service Administrative Company, and you know the USAC is a Good Thing, because the USAC has a "diverse 19 member Board of Directors comprised of representatives of universal service stakeholders" (see Slide 3 of a train-the-trainer presentation). Among other things the USAC took over "Billing, Collection, Disbursement, and Accounting functions from IBM" (Slide 5), so that must have increased efficiency vastly.

The USF gets its money from telecom providers through what is known as the "contribution factor," adjusted every quarter. In 1999 it was a little under 4% (Slide 11), just one year ago it was 15.5%, and the FCC has just set the rate for first quarter 2012: 17.9%. The contribution factor is a politician's dream, a tax that is constantly adjusted upward without any messy wrangling in Congress, no debates, no votes, just the FCC toiling away to determine how large the increase should be. (I know, our government calls it a fee rather than a tax, and some insist that it's a cost recovery mechanism, but whatever it's called, the result is the same: money siphoned out of your account through the USAC and into the coffers of the telcos to provide service to someone else.)

One part of the Universal Service Fund is the Lifeline program, providing service to the poor. How important names are. Who could be so stony hearted as to oppose throwing a lifeline to a drowning person? Who would be so mean-spirited as to oppose the Lifeline program to bring telephone service to the poor?

So what's wrong with the Lifeline program, at least to a politician's mind? It doesn't do enough, it doesn't cover broadband Internet access, because that's now a right too. And here comes Julius Genachowski, Chairman of the FCC, with a draft proposal to "reform" the Lifeline program to include broadband at no extra cost to the taxpayer! Yay! More services, same cost. What's not to like?

While it is sometimes difficult to separate the sentiments of the chairman from those of the LA Times journalist who reported his proposal, the distinction is immaterial: Big Government and Big Media share the same worldview, work seamlessly together to the same ends. How long must we wait for an Eisenhower to warn us of the dangers of a government-media complex?

According to the article in the LA Times,

Chairman Genachowski ... would reform the commission's Lifeline program to include provisions to encourage broadband adoption. The program, currently aimed at providing affordable telephone service to low-income Americans, is supported by the Universal Service Fund.

Talk about opacity in reporting. These two sentences contain so much sleight of hand it's difficult to know where to begin. It were far too indelicate to write "Lifeline is a government-coerced wealth transfer from those who pay their phone bills to those who do not." No, no, nothing so plain and direct would ever do. Lifeline does not "provide" telephone service, it is "aimed at providing," and not simply "telephone service" but "affordable telephone service." Affordable is one of the politician's feel-good words: Who would be so churlish as to wish unaffordable service on anyone? This proposed "reform" would not "pay the bills" for broadband service. How crass: "pay" implies money changing hands, and readers might get riled up if money were mentioned any more than necessary. No, this reform would merely "encourage broadband adoption."

What are the problems that Lifeline is suffering from that cry out for "reform"? An FCC press release dated February 8, 2011, says that "USF has also become wasteful and inefficient in some situations, paying over $20,000 a year -- nearly $2,000 per month -- in support per line for some households." In his draft proposal, Chairman Genachowski omits the lurid detail of $2,000 per month for one subscriber's service:

Genachowski said the program has been successful, but has also been plagued with problems of accountability and efficiency. Multiple service providers are often supplying Lifeline subsidies to the same households, he said, because there is no centralized system.

"Accountability and efficiency": in other words, we have another government program plagued by fraud and abuse. But hey, it's still successful. The cure? A "centralized system." What a surprise! Problems in America always come down to too little command and control from Washington, because when it comes to administering Indian trust lands or delivering healthcare or the mail or anything else vital to modern life, huge bureaucracies in Washington always do a better job. That's an article faith among progressive politicians and their coadjutors in Big Media.

The draft proposal creates a national database ... "The order would make Lifeline reimbursement more transparent and streamlined," Genachowski said, calling the measure common sense. He said that FCC staff estimate the reforms will save the fund $2 billion over the next two years.

"National database" is thrown in to send a tingle up the legs of Genachowski's fellow bureaucrats, but "more transparent ... streamlined ... common sense" are for the hoi polloi. Such words are as emotionally loaded as reform and progressive, cudgels wrapped in velvet to bludgeon the opposition. Who among us is against common sense? Who dare oppose transparency and streamlining?

The "reforms" will save $2 billion over two years because FCC staff says they will, billions that the FCC can use to "work with existing broadband adoption programs to establish its own pilot program using savings from its budget reforms." There you have it: a federal bureaucracy "streamlines" the cumbersome operations it invented in the first instance and uses the resultant savings to expand its programs, all at no cost. Bureaucrats seem to always be inventing perpetual motion machines, schemes to pay for more and more goodies at no additional cost. And when the savings fail to materialize, they just ask for more money. In this case the FCC has it particularly easy: it simply adjusts the contribution factor up again -- and again, and again, every quarter, like clockwork.

Incidentally, using the FCC's webpage is anything but easy. Go here ("Announcing a new FCC.gov" blaring across the top of the page) and try clicking on the link for Universal Service Home Page (broken). Then do a search on "contribution factor." Zero hits. Only through Advanced Search can you find anything. Does the FCC have little interest in educating the public on the Universal Service Fund and the contribution factor?

A politician bandying about the word reform always puts me in mind of a speech I heard ex-President Gerald Ford give in the early 80s. The most memorable statement he made that evening was this: "Whenever I hear someone in Washington talk about reform, I get almost nauseous." Since then I have been acutely attuned to the word. Clothe the most vicious policy in the hallowed robes of reform and no one dare object. The word is as deceptive and debased as progressive. I would add a corollary to President Ford's observation: Whenever you hear a politician talk of reform, look to your wallet and your rights, for both will be assaulted.

A few months after I heard President Ford, ex-President Jimmy Carter came to town. What I remember of that speech was his assertion that there is a tradition of sitting presidents calling their predecessors for advice. "But do you know that President Reagan has not called me once. Not once." I was embarrassed for him, embarrassed that he was not embarrassed. The man was nearly 60 years old, yet he sounded like a second grader. You could almost hear the screen door slamming in Plains, Georgia, half a century before. "Mama!" little Jimmy shouts as he runs into the kitchen. "I was watchin' the fellahs play horse, and Ronnie didn't even ask me about the rules, and I know all the rules, don't I Mama! I know all the rules! He's no fair!" Too bad that the press, which has had far more exposure to the man than I, has chosen to mask his petty personality from the public. Beware the malign influence of the government-media complex.

Henry Percy is the nom de guerre for a technical writer living in Arizona. He may be reached at saler.50d[at]gmail.com.

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