Federal Communications Commission Chairman Ajit Pai wants to impose a budget cap on the Lifeline program that helps poor people buy broadband and phone service.

Under previous Chairman Tom Wheeler, the 32-year-old Lifeline program was expanded to let poor people use a $9.25 monthly household subsidy to buy Internet service. Previously, the subsidy could only be used for phone service.

But when Pai took over the chairmanship, he quickly got to work rolling back some of Wheeler's Lifeline changes. Pai, a Republican, ramped up his attempts to place limits on Lifeline last week with a proposal that will likely be approved by the commission at its meeting on November 16.

Pai's plan, titled "Bridging the Digital Divide for Low-Income Consumers," proposes a new "self-enforcing budget cap" that would limit Lifeline spending. Pai's proposal didn't include a specific amount for the cap; instead the commissioner wrote, "We intend for the program to automatically make adjustments in order to maintain the cap in the event the budget is exceeded."

If the cap is reached, Lifeline would not be able to provide subsidies to additional people even if they are poor enough to qualify for the program.

Imposing a cap will "ensure that Lifeline disbursements are kept at a responsible level and to prevent undue burdens on the ratepayers who contribute to the program," the proposal said. Pai has repeatedly criticized the Lifeline program for being ripe with "waste, fraud, and abuse," with subsidies going to ineligible subscribers and "phantom" subscribers who don't exist.

Pai's proposal is a Notice of Proposed Rulemaking (NPRM) that asks the public for feedback, so the FCC would need to take a second vote a few months later to implement the change. The NPRM also suggests eliminating a year-old nationwide approval process that makes it easier for telecoms to offer subsidized service and cutting off subsidies for telecoms that resell network access instead of operating their own networks. Together, these moves would lower the number of companies that can offer subsidized broadband to poor people, and they'd force telecoms to get separate approvals for each state in which they offer subsidized plans.

The FCC will also seek comment on how it can improve its verification process to prevent waste and fraud.

Budget cap controversy

Republicans and Democrats have previously fought over whether Lifeline should have a strict cap. Then-Chairman Tom Wheeler in 2016 instituted a budget of $2.25 billion, indexed to inflation, after rejecting a compromise that would have set a cap of $1.75 billion.

Lifeline is one of four Universal Service programs paid for by Americans through fees imposed on phone bills, and it's the only one of the four without a hard cap. Lifeline can exceed its current budget as long as FCC staff issues a report detailing reasons for the increased spending. Consumer advocacy groups say the program should have room to grow because only about one-third of eligible households is receiving the subsidies. The program had more than 12.5 million monthly average subscribers last year.

Democratic FCC Commissioner Mignon Clyburn has lobbied against imposing a cap, and she criticized Pai's new proposal.

"If the goal of the current FCC majority is to widen existing divides, and ensure that our nation's most vulnerable are less likely to be connected, this item sets us on that path," Clyburn said Friday. "It will harm those less fortunate, those who need to dial 911, stay in touch with their children's educators, keep a job, and stay healthy. The day we head down such a path, is a sad one indeed."

Americans with incomes at or near federal poverty guidelines are eligible for Lifeline. People in Tribal areas are given greater support, with an additional $25 monthly subsidy.

Fewer ISPs will be able to offer subsidized plans

Wheeler's Lifeline overhaul last year let the FCC approve new lifeline broadband providers nationwide so that ISPs would not have to seek approval from each state's government.

But after Pai took over the chairmanship, nine companies that were authorized to provide subsidized broadband had their Lifeline approvals revoked because Pai objected to the new federal application process. Twelve states had challenged the order in court, and Pai dropped the FCC's legal defense of the program changes, arguing that Congress gave state governments primary responsibility for approving such applications.

Last week's proposal seeks public comment on whether to end the nationwide approval process.

The proposal also seeks comment on discontinuing Lifeline support for resellers. Only "facilities-based providers," those that operate their own networks, would be eligible under this plan.

"We propose limiting Lifeline support to broadband service provided over facilities-based broadband networks that also support voice service," the FCC wrote.

Most of the Lifeline waste, fraud, and abuse uncovered by the commission was committed by resellers, not facilities-based providers, the FCC also said.

The FCC said that limiting funds to facilities-based providers will "improve the business case for deploying facilities to serve low-income households." The FCC rejected arguments from network resellers who said that their purchase of wholesale services from facilities-based carriers increases those carriers' incentives to deploy and maintain their networks. These resellers "offer little evidence beyond their own assertions," the FCC said.