The Lifeline Program is administered by the Federal Communications Commission (FCC) to provide a monthly phone or broadband internet subsidy to low-income individuals or families [i]. The subsidy is limited to $9.25 per household per month. If used for phone service, the subsidy can apply to either fixed line or cell phone service. Many states supplement the federal program to provide increased benefits to participants. The program started in 1985 but experienced dramatic expansion to more users under the Obama Administration (see graph to the left) and is therefore sometimes referred to as the Obama Phone. The program is one of four programs administered within the FCC by the Universal Service Administrative Company (USAC), which also subsidizes phone service in high-cost areas, rural areas, schools, and libraries. Overall the federal government spent $.7 billion on the Lifeline Program in the fiscal year 2021 and is estimated to spend $.7 billion in the fiscal year 2022 and 2023 [ii].
To participate in the program, individuals must either have income that is at or below 135% of the federal poverty threshold or participate in one of the following assistance programs:
- Supplemental Nutrition Assistance Program (SNAP)
- Supplemental Security Income (SSI)
- Medicaid
- Federal Public Housing Assistance
- Certain tribal programs
- Veterans Pension and Survivors Benefit Programs
Lifeline Participation Over the Years
The graph above shows the number of individuals participating in the Lifeline Program since its inception [iii]. The Lifeline program had 6.5 million participants in 2021, which corresponds to 7.4 million families in poverty and 12.5 million single households in poverty (see Poverty Statistics Page).
Program Summary and Qualification
The USAC is funded through assessments to telecommunication companies, which then pass the costs on to consumers as a tax on their phone bills. The tax is usually shown at the bottom of the phone bill, denoted as a tax or sometimes as a USAC charge. Overall, the USAC taxes represent about 7.4% of the total retail revenues of telecommunication companies [iv]. The Lifeline Program portion of the tax is about 8.5% of the total USAC tax [v].
Entire Welfare System
Lifeline is one of thirteen welfare programs. See how it fits in the entire system on the Welfare Programs Page.
Waste, fraud, and abuse
The Office of Management and Budget estimates a 6.1% Improper Payment rate for the Lifeline Program – see more information on the Welfare Fraud Page.
Lifeline Equals Less than 1% of the Poverty Solution
The maximum support to an individual from Lifeline totals about $111 per year ($9.25 per month). This compares with a poverty threshold of over $13,000 for an individual in poverty. The Lifeline Program represents less than 1% of the solution to poverty for an individual and even less for a family. From a benefits perspective, participants would be economically equivalent if the SNAP Program was increased by $9.25 per month per household.
History of the Lifeline Program
The following history of the Lifeline Program was adapted from Wikipedia, Universal Service Fund [vi].
The Lifeline Program was started in 1985 but took its present form in 1997 under the Telecommunications Act of 1996. The act addressed new challenges and opportunities of the digital information age, with the goal of promoting universal service. The act set out some immediate priorities of universal service. These included quality and reasonably priced services, access to advanced telecommunication services, access for rural, low-income, and high-cost regions, equitable and nondiscriminatory service, specific and predictable price structure, and access to advanced telecommunication services for schools and libraries. The act created the Universal Service Fund.
The 1996 Act stated that all providers of telecommunications services should contribute to federal universal service in some equitable and nondiscriminatory manner; there should be specific, predictable, and sufficient Federal and State mechanisms to preserve and advance universal service; all schools, classrooms, health care providers, and libraries should, generally, have access to advanced telecommunications services; and finally, that the Federal-State Joint Board and the FCC should determine those other principles that, consistent with the 1996 Act, are necessary to protect the public interest.
In January 2012, the FCC adopted a Lifeline Reform Order to implement new policies and procedures to cut down on fraud and abuse of the program. Steps included the creation of a national database of users, verification that users were enrolled in qualifying benefit programs, and periodic audits of users. In 2016 The FCC reported that as a result of the reforms, 2.5 million duplicate subscribers were eliminated, resulting in decreased Lifeline disbursements from approximately $2.2 billion in 2012 to $1.5 billion in 2015 [vii].
On March 31, 2016, the FCC expanded the Lifeline Program to include broadband internet service [viii]. The vote by Commissioners was 3-2, along party lines, in a highly contentious ruling. The three commissioners assenting to the expansion believed the mandate for the FCC allows for broad services to low-income Americans and that those services should be expanded to include broadband in today’s internet world and not be limited to just voice (phone). The two dissenting commissioners did not believe the action was lawful, that it would lead to fraud and abuse, and that a cap on expenditures should be implemented to control future costs.
Lifeline Expenditures Over the Years
The graph below shows Lifeline Program expenditures per year (federal government fiscal year), adjusted for the impacts of inflation (stated in 2022 dollars) [ix]. The lifeline costs have dropped in recent years due to the drop in households using the program, due in part to the 2012 Reform Order as described above.
[i] See FCC. Lifeline Support for Affordable Communications. [Internet] Retrieved July 1, 2023. Available here.
[ii] FCC. Universal Services Monitoring Report – 2022. Table 2.2. Available Here.
[iii] Ibid. Table 2.1.
[iv] Ibid. Table 1.2. Total Universal Services surcharge of $9.126 billion divided by total telecom retail revenues of 122,812 billion.
[v] Ibid. Table 1.10. Data from 2021, total of low-income support divided by total USAC disbursements.
[vi] Wikipedia, Universal Services Fund. Retrieved July 3, 2023. Available here.
[vii] Hearing before the Committee on Homeland Security and Governmental Affairs United States Senate One hundred fifteenth Congress. First Session September 14, 2017. Page 9. Available here.
[viii] FCC. Ruling 16-38. Third Report and Order, Further Report and Order, and Order on Reconsideration. Adopted March 21, 2016, Released April 27, 2016. Available here.
[ix] FCC. Universal Services Monitoring Report – 2022. Table 2.2. Available Here. See methodology of inflation adjustment on the web page, Poverty and Spending Over the Years.