Federal Communications Commission Chairman Ajit Pai today defended a new decision that prevents nine ISPs from using a federal program to sell subsidized broadband to poor people.

In a blog post titled "Setting the Record Straight on the Digital Divide," Pai said that Friday's decision regarding the Lifeline program doesn't mean he is abandoning his promise to close the gap between people who have access to "cutting-edge communications services and those who do not."

Journalists "sensationalized this story" and gave the impression that the FCC was ending Lifeline broadband subsidies entirely, Pai argued. "Our action only impacted 9 of the over 900 providers participating in the Lifeline program," Pai wrote. "In other words, 99 percent of the companies participating in the program are not affected at all."

That is true (and it's a detail that we reported last week), but it's not the only relevant detail. The 900 existing Lifeline providers gained their Lifeline approvals in order to offer subsidized telephone service. The FCC last year changed the Lifeline program so that providers can offer subsidized phone service or subsidized Internet service (or both in a bundle), allowing all 900 providers to start doing so. But those providers are not required to offer subsidized broadband; some or many could still be offering only phone service at the subsidized rate. (Lifeline-eligible subscribers get a $9.25 per month discount paid for by Americans through fees imposed on phone bills.)

The nine providers who had their Lifeline designations revoked were the first to receive a designation made possible by the Lifeline program's expansion into broadband. They were approved under a new process that lets the FCC "approve new Lifeline Broadband Providers nationwide, instead of following the state-by-state process as used to be the case," an FCC spokesperson told us.

One of the nine ISPs had already started providing the subsidized service and was ordered to notify its customers that they can no longer receive Lifeline discounts. The FCC's order acknowledged that these poor people will pay an extra $9.25 a month if they can't find an alternate provider. The American Library Association and other consumer advocacy groups said the move could prevent some poor people from getting Internet service.

Pai's blog post noted that "all but one of the newly designated providers covered by the order do not yet have any customers." The nine providers also still have their applications pending in front of the FCC. While their Lifeline approvals were revoked, the FCC did not throw out the applications entirely. "They simply remain pending at the commission," Pai wrote.

The FCC's previous leadership under Chairman Tom Wheeler "disregarded the well-established process for approving applications like these," Pai wrote. "As the National Tribal Telecommunications Association pointed out, several of the providers had never coordinated their applications with tribes, despite an FCC rule clearly requiring them to do so. These tribal representatives thus requested that the designations be reversed. Moreover, two of the designated providers were approved in the middle of the 30-day period for public comment — that is, before the public even had a chance to weigh in on the designation. Whatever one thinks of the merits of these applications, that was plainly improper."

The designations were approved in the final days of the Obama administration without support from a majority of commissioners, Pai wrote.

Questions about fraud and FCC’s legal authority

When announcing its decision last week, Pai's FCC said the commission wants to implement new measures to combat fraud and waste in the Lifeline program and that revoking the Lifeline designations will provide additional time to achieve that. None of the nine providers were accused of fraud, but Pai today expanded upon his reasoning.

"Every dollar that is spent on subsidizing somebody who doesn’t need the help by definition does not go to someone who does. That means that the commission needs to make sure that there are strong safeguards against waste, fraud, and abuse before expanding the program to new providers," Pai wrote.

Though the FCC is setting up a new National Verifier to make sure ISPs don't game the system by signing up ineligible subscribers, the database "does not currently exist and will not start operating until the end of 2017," Pai wrote. "Further, it is not scheduled to cover all states until 2019."

Pai said he investigated the Lifeline program last year and identified "serious weaknesses in federal safeguards, allowing providers to indiscriminately override checks that are supposed to prevent wasteful and fraudulent activities."

One of the commonly overridden checks involves "verifying the identity of would-be Lifeline recipients," Pai wrote. "From October 2014 until June 2016, wireless resellers had overridden such safeguards 4,291,647 times in total."

There are also loopholes, such as one that let a company claim subsidies for about 22,000 "phantom subscribers" a month, he wrote. An FCC spokesperson told Ars that the name of this company is under seal, and that there hasn't been a ruling in the case. The FCC does have authority to investigate and punish companies that violate program rules.

Lastly, Pai said that it isn't even clear "whether the FCC has the legal authority to designate Lifeline providers or whether such designations must be made by state governments, as has long been the norm." State regulatory agencies filed a legal challenge to the new process of the FCC designating Lifeline broadband providers, and the issue is before a court, Pai wrote.

"Putting the designations on hold gives the FCC the chance to make sure the process is legally defensible and to avoid potentially stranding customers if the courts ultimately deem the process unlawful," Pai wrote.

Evidence of broadband commitment

As evidence that Pai remains committed to expanding broadband access, he pointed to a decision that gave up to $170 million in broadband funding to New York to support a state program that will boost deployment in unserved rural areas. Pai also touted proposals to redirect billions of dollars from the existing Mobility Fund toward upgrading 4G LTE coverage in rural areas, and he noted further proposals to allocate nearly $2 billion from the existing Connect America Fund to support fixed broadband service in unserved rural areas.

Pai wrote that he has engaged with lawmakers about his proposal to create "gigabit opportunity zones" where companies in low-income areas would receive tax incentives and credits to build high-speed networks.

"My focus has been — and will continue to be so long as I have the privilege of serving as the Chairman of the FCC — doing everything within the FCC’s power to close the digital divide," Pai wrote today.