As the CRTC begins its “Review of basic telecommunications services“, FCC Commissioner Ajit Pai has a warning that should be considered. Writing in the National Review, he warns that a “fraud-friendly” Lifeline service has led to rising taxes and fees on consumer phone bills:
In 1993, humorist P. J. O’Rourke said, “If you think health care is expensive now, wait until you see what it costs when it’s free.” More than 20 years later, a similar thought comes to mind in looking at the Federal Communications Commission’s Lifeline program.
Commissioner Pai hails from my home town of Parsons, Kansas (a previously unrecognized spawning ground for telecom policy professionals) and he writes waste, fraud, and abuse that plague the current Lifeline program in the US, “known in some circles as ‘Obamaphone'”.
Commissioner Pai makes some recommendations for fixing Lifeline, which he says “must go hand in hand with any decision to begin providing broadband subsidies through Lifeline.”
Lifeline needs to be placed on a budget. It is now the only FCC program of its kind without a cap on spending. A Lifeline budget will increase incentives to eliminate fraud and prevent future out-of-control spending.
We should also prohibit carriers from giving away free phone service to Lifeline recipients. When the program was created 30 years ago, it offered low-income Americans discounted service, not free service. But recently, the program has lost its way. Requiring recipients to have some skin in the game will not only discourage waste, fraud, and abuse. It will also restore the program to its original purpose: providing a hand up, not a handout.
Commissioner Pai warns against expanding the current “broken program” to include broadband service, without first fixing the problems that burden consumers with wasteful costs.
As Canada prepares to consider expanding the definition of basic service to include broadband, any subsidy scheme should consider the experience in other jurisdictions. Start by reading the article, “What Those Rising Taxes on Your Phone Bill Pay For: A Fraud-Friendly ‘Obamaphone’ Program.”