Reforming and Improving Lifeline and Link Up

Posted January 13th, 2011 by Sharon Gillett

 Last year was a busy one for Universal Service Fund (USF) reform at the FCC. We adopted a major order that modernized the E-rate program, which supports broadband for schools and libraries. We began the reform process for the High-Cost Fund, which supports phone service and broadband in rural and other high-cost areas, and the Rural Health Care program, which supports broadband for rural health facilities.

As part of our commitment to modernize all our USF programs and improve protections against waste, fraud, and abuse, we’ve also been working hard on improvements and reform proposals for Lifeline and Link Up, which provide telephone service discounts to low-income consumers. These discounts ensure that the financial hardships these customers face don’t disconnect them from the societal and economic benefits of having phone service. 

Here’s what’s been going on ...

• Last spring, in light of significant technological and marketplace changes since the current Lifeline and Link Up rules were adopted, we asked the Federal-State Joint Board on Universal Service to study and make recommendations to the Commission on our Lifeline and Link Up eligibility, verification, and outreach rules.  The Joint Board completed its work and sent us its recommendations late last year, and we’ll soon be addressing those recommendations in a Notice of Proposed Rulemaking (more on that below).

• Recently we have increased our supervision of the program, focusing on a number of different ways to eliminate potential waste, fraud and abuse, and to address the program’s growth.  Under our oversight, the program’s administrator, the Universal Service Administrative Company (known as USAC), will conduct nearly fifty compliance audits in the coming months addressing a range of program requirements and covering multiple states and providers.  These audits will test the compliance with our rules of carriers who serve low-income customers and provide us with the data we need to make necessary program reforms.  More importantly, these audits will assist us in discovering and exposing any misconduct in the program, leading to recovery of any improperly distributed program funds and creating incentives for companies to strengthen their internal controls to prevent future problems.

• We have also taken targeted actions that will continue to protect the program against waste, fraud, and abuse.  We denied Tracfone’s petition to eliminate our requirement that it contact all of its customers annually to ensure those customers are receiving only one Lifeline benefit per household.  This action comes on the heels of our ordering Virgin Mobile just a few weeks ago to adopt several measures designed to safeguard against abuse and growth in the fund, such as requiring the company to remove customers from the program if they don’t use their phones for 60 days, and taking other steps to prevent customers from receiving duplicate Lifeline-supported benefits.  The benefits of Lifeline and Link Up can only be assured if we carefully monitor the program to ensure that program funds go only to households eligible for them.

• As recommended by the National Broadband Plan, we’ve also been working on the development of pilot programs to determine if and how Lifeline and Link Up could be used to support broadband, including through discussions with outside stakeholders who are interested in launching such programs.  More than any other reason, consumers point to cost as the main reason for not adopting broadband, but we know that cost is rarely the only reason.  Pilot programs could help us understand these reasons and how best to use our limited resources to promote sustainable broadband adoption.  The goal of the pilot program would be to collect actionable information to ensure we develop effective strategies for helping low-income families connect to broadband.

• Finally, we are preparing a Notice of Proposed Rulemaking that will tee up a number of improvements to Lifeline and Link Up, including a set of recommendations made in November by the Joint Board, as well as proposals to control the size of the program.  The proposals will not only include improvements to the existing Lifeline program to reduce waste, fraud and abuse but also ways to modernize the program by evaluating whether it reflects the realities of current industry practices and communications technologies.

Houston, We Have A Solution: HP E-rate Fraud Case Settled

Posted November 12th, 2010 by Sharon Gillett

This week the FCC notched another win for America’s taxpayers, and especially for America’s students.  Working with the Department of Justice, and acting on tips from whistleblowers, the FCC investigated allegations that a group of companies that included Hewlett Packard Company (HP) lavished gifts on Houston and Dallas Independent School District personnel to lure contracts that included some $17 million in HP equipment. These improper actions constitute E-rate fraud, threatening the integrity of a crucial educational program, and have resulted in a settlement. Since 1996 the E-rate program has brought Internet connectivity to millions of students and virtually every classroom across the nation.

The charges are as eye-opening as they are disappointing. Yachting trips and pricey meals; tickets to see Tom Brady and the Patriots as Houston hosted the 2004 Super Bowl; and other varied and alluring entertainment packages. These contractors pulled out all the stops. All to sway officials to skirt a competitive bidding process that is vital to ensure that government funds provided to schools and libraries for our kids’ education stretch as far as possible.

In the settlement ironed out between the Department of Justice, FCC and HP, HP agreed to pay the government $16.25 million, most of which will be returned to the E-rate program. Further, the FCC will oversee a compliance agreement to prevent future foul play. HP will undergo audits of its E-rate business and has agreed to train its employees thoroughly on FCC gift and E-rate rules.

Collaborating with other agencies and alert citizens, we’re keeping our eyes open for instances of waste, fraud and abuse in the E-rate program. Just this September we took  more steps toward ensuring a fair and competitive bidding process. These steps include more specific E-Rate Program gift rules that send a clear message that conduct like that found in the Dallas and Houston cases will not be tolerated. We’ll do all we can to ensure that E-rate funds continue to increase educational opportunities and are not misused. As Chairman Genachowski noted in the press release issued earlier this week, E-rate resources should “work to benefit schools and libraries.” We’ll continue to hold the line.

Visit the Department of Justice to learn more about the settlement.