FCC Dials Up ‘Obamaphone’ Program Expansion to Pay for Internet Access

Published May 20, 2016

The nation’s top telecommunications regulatory agency voted in March to approve expanding an existing entitlement program to provide subsidies to lower-income people purchasing high-speed internet service.

The program is funded by the Universal Service Fund fee, which is collected from taxpayers’ telephone bills.

The entitlement expansion moves the Federal Communication Commission’s (FCC) Lifeline telephone program beyond its original goal of providing taxpayer-funded mobile phones to participants in other entitlement programs, such as Medicaid, the Supplemental Nutrition Assistance Program, Head Start, and the Bureau of Indian Affairs General Assistance program.

‘Enhanced Subsidy’

FCC Commissioner Ajit Pai says the program’s vague language allows fraud and waste to continue without adequate oversight.

“A problem with the program is what is called the ‘enhanced subsidy,'” Pai told Budget & Tax News. “Right now, the Lifeline program will provide a $9.25 [per month] subsidy. The FCC has adopted an enhanced subsidy of $25 on top of that, so it’s $34.25, total. The theory was that this was one way to ensure that people who live in really remote areas where there is no telecom service—places like tribal reservations—will receive that enhanced subsidy.

“The problem I’ve found is the FCC treats certain areas like tribal land even if they are not actually tribal lands,” Pai said. “For example, the entire State of Oklahoma is pretty much considered tribal land. As a result, anyone who lives the State of Oklahoma is [eligible] for this enhanced subsidy.”

Misdirected Funds

Pai says the entitlement program doesn’t actually benefit people who need assistance.

“The programs are not directed at the people who actually need help,” Pai said. “Under the current program, for example, the median income of a Lifeline household is $38,000. Studies from the nonpartisan Government Accountability Office have suggested that people who are getting Lifeline subsidies would subscribe to broadband anyway, regardless of the subsidy. Therefore, we’re essentially pouring money into the pockets of people who do not actually need the help.”

‘General Lack of Accountability’

James Gattuso, a senior research fellow at The Heritage Foundation, says unelected federal bureaucrats are imposing taxes on the public.

“I think the general lack of accountability in the program is another issue,” Gattuso said. “Congress has the power to tax and the power to spend for a reason … because the people who are authorizing the spending are accountable to the voters. The FCC, however, cuts that tie between the voter and the bills being imposed on them.”

FCC Bypassing Congress

Gattuso says FCC should be held accountable for its tax hikes and spending sprees.

“Even if you think there is a need for this sort of thing, why not send it through Congress?” Gattuso said. “If you think there is a pressing need to subsidize internet service, then go to Congress, and if it is such a good idea, Congress will vote for it.

“In terms of the FCC, you’re more or less admitting that it doesn’t have enough support nationally to be approved by the people who should be approving this,” Gattuso said.


Luke Karnick ([email protected]) writes from Indianapolis, Indiana.