Majority Statement

• Chairman John Thune
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  Majority Statement

  Chairman John Thune

  Good morning.  Welcome to today’s hearing on the Federal Communications Commission’s Lifeline program.
  
  What began some 32 years ago as a program to help protect consumers from increases in telephone charges following the break-up of AT&T has morphed, as many government programs tend to do, into something much broader and more expensive—a one-and-a-half billion dollar a year program with no budget limit that provides, among other things, free phones and free service to millions. 
  
  Let me be clear:  the bipartisan principle of universal service have been the bedrock of our nation’s communications policies for more than 80 years, and programs that efficiently and prudently further the goal of universal service have contributed greatly to our nation’s economy, and to the safety and well-being of Americans.  As someone who represents a rural state, which also includes nine Indian reservations, I am especially committed to the notion that consumers in all parts of the country should have access to communications services that are comparable, in both service availability and price, to those services provided in urban areas.
  
  Even when services and rates are reasonably comparable, there is value in efforts to ensure access for low-income Americans.  Connectivity is necessary for health and welfare, and for full participation in the economy.  A carefully designed, properly administered program to help those Americans who, without a subsidy, would be unable to afford a reasonable level of connectivity is an important part of universal service.  Unfortunately, as has been demonstrated time and time again, the FCC’s Lifeline program has not lived up to this promise, especially to those that rely on these services.  The American people deserve better than a program so plagued by fraud, waste, and abuse.  This marks our second hearing in as many years on those problems in the Lifeline program. 
  
  Over the last seven years, the Government Accountability Office (GAO) has repeatedly documented the FCC’s failure to properly oversee the billions of dollars paid by American families to provide Lifeline support.  GAO has also highlighted the Commission’s failure to assess whether the Lifeline program is meeting its stated goals.  While much attention has rightly been focused on rampant fraud, duplicate payments, and unverified payments, an even more fundamental question has gone largely ignored:  Is the Lifeline program an effective means of increasing telephone subscribership among low-income consumers?  In 2010, GAO noted that the FCC has not prioritized the development of performance goals and measures for Lifeline, and as a result, the Commission has limited insight on what the program is actually accomplishing.  FCC action in this regard is long overdue, and I call upon the Commission to undertake this fundamental analysis of the program.
  
  There is substantial evidence to indicate that, even without the well-documented fraud, duplication, and unverified payments that have plagued the program, the Lifeline program could be an ineffective means of increasing telephone subscribership among low-income consumers.  As it is currently designed, for example, the Lifeline program appears to do a poor job of directing support to those who truly need it—namely, those who would not get service without a Lifeline subsidy.  One study estimated that, because most Lifeline subscribers would have purchased telecommunications services even without the subsidy, it costs the program $1100 annually for each truly new subscriber and over $2800 annually for each new prepaid wireless subscriber.  That would mean Lifeline is costing American consumers between eight and twenty times the benefit amount actually received by program participants for each new low-income subscriber.  The FCC’s long-standing failure to make performance goals a priority is a failure to meet its obligations to American consumers.
  
  Let me put it another way – I have no doubt that the Lifeline program provides a critical service for many low-income Americans, including my constituents, but I think we need an honest assessment of how best to deliver such services to those who need them the most.
  
  At the request of Senators Portman and McCaskill, the GAO completed a report earlier this year highlighting these and other issues in the administration of the Lifeline program.  The report does note some areas of improvement.  For example, under Chairman Pai, the FCC is finally taking the long-overdue step to move fees collected for the Universal Service Fund from a private bank account to the Federal Treasury, where they will benefit from the management practices and regulatory safeguards applied to other federal funds.  In addition, the number of duplicate subscribers—once a problem costing an estimated $160 million per year—appears to have been reduced significantly. 
  
  Separately, our colleagues Senators Fischer and Udall introduced legislation to overturn an Obama-era effort at the FCC to usurp State authority in designating eligibility for participation in the Lifeline program.  Chairman Pai has disavowed the Commission’s prior effort in favor of returning authority to the States.  The States have long played a key role in preventing waste, fraud, and abuse, and so this move is an important one – and why I’m especially pleased to have Commissioner Chris Nelson from the South Dakota Public Utilities Commission here as a witness today. 
  
  Finally, the FCC announced last week that, by the end of this year, it will begin rolling out to a few States a National Lifeline Eligibility Verifier.  We need to understand how this new tool will address the problems identified in the GAO report.
  
  Chairman Pai is making real progress toward improving oversight of the Lifeline program, but many serious issues remain.  I look forward to hearing from our diverse panel of experts as we explore ways to fulfill the promise of universal service for all Americans.

Testimony

• Mr. Seto Badoyan

  Director

  Forensic Audits & Investigative Service, Government Accountability Office
  Download Testimony (205.61 KB)

• Commissioner Chris Nelson

  Commissioner

  South Dakota Public Utilities Commission
  Download Testimony (187.81 KB)

• Ms. Deborah Collier

  Director of Technology and Telecommunications Policy

  Citizens Against Government Waste
  Download Testimony (413.42 KB)

• Dr. Jeffrey Eisenach

  Visiting Scholar

  American Enterprise Institute
  Download Testimony (117.89 KB)

• Ms. Jessica J. González

  Deputy Director & Senior Counsel

  Free Press
  Download Testimony (425.82 KB)