Conservatives have reserved their worst epithet for the Lifeline program, which provides discounted phone service to low-income families: “Obamaphone.”

Liberals call it a vital source of empowerment for the poor.


Now the Federal Communications Commission is readying a proposal to extend the subsidies to the Internet, setting up a new battle with Republicans who already want to shut down the effort.

Lifeline currently pays carriers to reduce the cost of phone service by $9.25 a month for low-income households. Funded by a universal service fee on consumer phone bills, it’s drawn criticism over cases of fraud and misuse — with conservatives dubbing it Obamaphone even though the program dates back to the Reagan administration.

But the agency’s Democratic majority wants to broaden the program to pay for Internet service to give more people access to broadband and close the nation’s “digital divide.” Chairman Tom Wheeler circulated his proposal to the other commissioners on Thursday so they can vote on it at the agency’s June 18 meeting.

Wheeler said he wants to “‘reboot’ Lifeline for the Internet age.”

“[A]s communications technologies and markets evolve, the Lifeline program also has to evolve to remain relevant,” he wrote in a blog post. “Americans need broadband to keep a job, as companies increasing require basic digital literacy skills. We rely on broadband to manage and receive healthcare, and to help our children do their homework.”

The expansion plan is not sitting well with some GOP opponents of Lifeline who want to kill the program entirely.

“Even after a GAO report questioned the effectiveness of Lifeline and the FCC’s promises of ‘sweeping reforms,’ we continue to have regular reports of fraud and abuse,” said Sen. David Vitter (R-La.). “The free government cell phone program is beyond reform and should be ended.”

FCC action on Lifeline would mark the agency’s latest effort to shape the future of broadband. The commission’s Democratic majority in February approved new net-neutrality rules that treat broadband like a utility, a move that enraged Republicans and telecom giants who warn of overregulation. And the FCC raised doubts about Comcast’s acquisition of Time Warner Cable over concerns it would concentrate too much of the nation’s broadband service in one company’s hands. Comcast ended up dropping the deal last month.

Democratic FCC Commissioner Mignon Clyburn, a strong advocate of expanding Lifeline subsidies to Internet service, said it simply recognizes the reality of how people communicate today, with text messages replacing telephone calls and important business like applying for a job being conducted entirely online.

“It’s important for us to look at this program and really synch it up to what we know are critical needs in this country,” she said in an interview.

In a nod to criticism of the program’s history of abuses, Wheeler wants to make some changes. Phone providers have long had the role of determining who qualifies for the subsidies — an arrangement that’s been at the root of many of the problems. The chairman is proposing a new system, like putting a neutral third party in charge. Clyburn, for her part, suggests that a person eligible for food stamps or free school lunches should automatically qualify for Lifeline.

The full text of Wheeler’s proposal won’t be available until commissioners vote on it next month, but even then, there may be a number of unknowns. Senior FCC officials said Thursday they are looking for input from industry and the public about what speed of Internet service would qualify for the program, whether the Lifeline budget should be capped, and whether Americans would have to pay more on their phone bills to fund it. Low-income consumers would only be eligible for a phone or Internet subsidy, but not both, the officials said.

Lifeline began almost three decades ago and was initially aimed at helping low-income people pay for higher phone bills following the breakup of the mammoth Bell System, known as Ma Bell. The program became part of the FCC-administered Universal Service Fund in 1996.

During President George W. Bush’s administration, the FCC began allowing subsidies for cellphone in addition to traditional landline service, and let prepaid wireless providers participate in the program. The shift sparked tremendous growth in Lifeline and made it a magnet for misuse. The number of households taking part swelled from 7 million in 2008 to 17 million in 2012, before dropping to 12 million last year after the FCC instituted some reforms to tighten eligibility and avoid duplication, according to the agency.

The FCC has taken a number of actions to combat misuse of the Lifeline program. In the latest example, it reached a nearly $11 million settlement last month with AT&T and Southern New England Telephone for overbilling the program. The Justice Department has also targeted cases of alleged Lifeline fraud.

Despite these efforts, the program has struggled to shed its reputation for misuse and its misleading Obamaphone moniker, which emerged several years ago amid false rumors the administration was handing out free cellphones.

President Barack Obama recently complained about the talk of Obamaphone, which he called part of a broader campaign by outlets like Fox News to portray the poor in a bad light.

“I think that the effort to suggest that the poor are sponges, leeches, don’t want to work, are undeserving, got traction. And look, it’s still being propagated,” Obama said. “And I have to say, if you watch Fox News on a regular basis, they will find folks who make me mad. I don’t know where they find them! They’ll find folks who say, ‘I don’t want to work, I just want a free Obamaphone!’”

Still, any FCC effort to extend the subsidy program to broadband is likely get a frosty reception on Capitol Hill.

“Lifeline obviously is kind of a controversial program and one that doesn’t enjoy a lot of support up here, at least from Republicans,” said Senate Commerce Committee Chairman John Thune (R-S.D.). “An expansion of the program is probably not something there’s going to be a lot of support for.”

The program also has its critics in the House.

“Depending upon how they do it, how much they’re looking at spending, you can’t have a blank check, and that’s something we’ve got to keep an eye on,” said Rep. Greg Walden (R-Ore.), chairman of the House Energy & Commerce telecom subcommittee. “This is still taxpayer, ratepayer money, and I think it’s important for us to do some oversight in that area, to look at how it’s being spent, who’s getting it, what are the controls.”

Walden praised the FCC for reining in some abuses but asked: “Have they gone far enough? I don’t know, that’s what we’ve got to look at.”

At the FCC itself, GOP Commissioner Michael O’Rielly contends the agency needs to do more to get the program’s house in order.

“The Commission is still grappling with the consequences of its previous expansion, so we need to be very cautious about further changes,” O’Rielly wrote in a blog post in February. “Moreover, there is a legitimate debate whether the Lifeline program should be abolished or significantly scaled back rather than expanding its mission.”

He floated the idea of a cap on Lifeline, which made $1.66 billion in disbursements in 2014, down from $2.18 billion in 2012.

But Clyburn argues that to cap the program would go against the universal service doctrine at the core of the 1934 Communications Act.

“I don’t see anything in the Communications Act that says all these benefits should accrue to everyone but poor people,” she said. “It’s needs-based. If there’s no demand, there’s no expenditure. If the budget goes up, then that’s a canary in a coal mine for the economy.”

Kate Tummarello and Alex Byers contributed to this report.