KY Groups Oppose FCC Lifeline

Published May 4, 2012

The Federal Communications Commission’s shift from subsidizing the cost of telephone service to greater focus on broadband for low-income consumers is drawing fire from several anti-tax groups in Kentucky, who are annoyed the new plan will continue to pay for outdated landline connections in the Bluegrass State.

The FCC Link-Up program, which provided subsidies nationwide for the initial cost of telephone service, ended in early April and was replaced by the agency’s new Lifeline program. Lifeline will continue to assist with the cost of monthly phone bills for eligible consumers.

More than 250,000 Kentucky households participate in the Lifeline program which contributes up to $12.75 per month for eligible Kentucky households to maintain a single telephone line, either landline or wireless. Eligibility is determined by enrollment in one of several other assistance programs such as Medicaid or the Low-Income Home Energy Assistance Program, and for households with an income at or below 135 percent of the federal poverty level.

Jim Waters, president of the Bluegrass Institute for Public Policy Solutions, says Lifeline is “a vivid example of politicians’ mindset of thinking backward and looking forward to staying that way.”

‘These Onerous Regulations’
The end of the Link-Up program is part of an FCC effort to overhaul low-income assistance programs as the commission shifts its focus away from voice telephone service and toward Internet service. Lifeline, like Link-Up before it, is funded by surcharges on all telephone bills.

Waters says many eligible households don’t participate in either program, indicating to him how impractical it is for those who pay their own phone bill—with the myriad fees and charges—to fund landlines for others in the wireless age. Currently, the national average of phone taxes accounts for more than 16 percent of a customer’s total bill, including the Universal Service Fund collected nationally by the FCC.

“Such government mandates and subsidies need to go the way of rotary phones and record players,” Waters says. “These onerous regulations prevent additional, meaningful investment in the commonwealth.”

USF Efficiency Questioned
Andy Hightower, executive director for the Kentucky Club for Growth, notes Kentucky has 20 basic local exchanges in its telephone system, with the most rural exchanges dominated by cooperatives and local utilities services. These rural exchanges often rely on USF revenues as a part of their overall capital budget, regardless of whether the monies are applied directly to new landlines.

“The USF subsidy has allowed [exchange] rates to remain relatively steady over decades, while rates for major carriers have risen,” he says.

“The question is whether a public policy priority exists to keep some sort of rural connection, landline, broadband, or otherwise, and if the USF is an efficient way to accomplish it,” said Hightower.

Kenneth Artz ([email protected]) writes from Dallas, Texas.