Telecommunications: FCC Should Evaluate the Efficiency and Effectiveness of the Lifeline Program

What GAO Found

The Federal Communications Commission (FCC) has made progress implementing reforms to the Lifeline Program (Lifeline), which reduces the cost of telephone service for eligible low-income households. In 2012, FCC adopted a Reform Order with 11 key reforms that aimed to increase accountability and strengthen internal controls, among other things. FCC has made progress implementing eight of the reforms, including the National Lifeline Accountability Database, which provides a mechanism to verify an applicant’s identify and whether the applicant already receives Lifeline service. FCC has partially implemented three of the reforms. For example, FCC established performance goals for the program, but it has not fully defined performance measures.

FCC has not evaluated the extent to which Lifeline is efficiently and effectively reaching its performance goals—to ensure the availability of voice service for low-income Americans and minimize the burden on consumers and businesses that fund the program. FCC attributes improvements in the level of low-income households' subscribing to telephone service over the past 30 years to Lifeline, but other factors, such as lower prices, may play a role. FCC officials stated that Lifeline's structure makes evaluation difficult, but referred GAO to two academic studies that have evaluated the program. These studies suggest that household demand for telephone service—even among low-income households—is relatively insensitive to changes in the price of service and household income; therefore, several households may receive the Lifeline subsidy for every additional household that subscribes to telephone service due to the subsidy. GAO has found that program evaluation can help agencies understand whether a program is addressing an intended problem. Without a program evaluation, FCC does not know whether Lifeline is effectively ensuring the availability of telephone service for low-income households while minimizing program costs.

The usefulness of the broadband pilot program may be limited by FCC’s lack of an evaluation plan and other challenges. The pilot program included 14 projects to test an array of options and provide data on how Lifeline could be structured to promote broadband. Although GAO recommended in 2010 that FCC develop a needs assessment and implementation and evaluation plans for the pilot, FCC did not do so. A needs assessment, for example, could provide information on the telecommunications needs of low-income households and the most cost-effective means to meet those needs. In addition, the 14 projects enrolled about 12 percent of the 74,000 customers anticipated. FCC officials said they do not view the pilot’s low enrollment as a problem, as the program sought variation. FCC officials noted that the pilot program is one of many factors it will consider when deciding whether and how to incorporate broadband into Lifeline, and to the extent the pilot program had flaws, those flaws will be taken into consideration. In May 2015, FCC released a report which discusses data collected from the pilots.

Why GAO Did This Study

Through FCC's Lifeline program, companies provide discounts to eligible low-income households for telephone service. Lifeline supports these companies through the Universal Service Fund (USF); in 2014, Lifeline’s disbursements totaled approximately $1.7 billion. Companies generally pass their USF contribution obligation on to their customers, typically in the form of a line item on their telephone bills. In 2012, FCC adopted reforms to improve the program’s internal controls and to explore adding broadband through a pilot program.  This testimony summarizes the findings from GAO’s March 2015 report (GAO-15-335) and provides information on (1) the status of Lifeline reform efforts, (2) the extent to which FCC has evaluated the effectiveness of the program, and (3) how FCC plans to evaluate the broadband pilot program. GAO reviewed FCC orders and other relevant documentation; analyzed 2008-2012 Census Bureau data; and interviewed FCC officials, officials at four pilot projects selected based on features such as technology, and officials from 12 Lifeline providers and four states selected based on factors such as disbursements and participation.