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The Looming Lifeline Internet Subsidy Crisis

How FCC Internet speed requirements—designed to prevent Internet Service Providers from providing slow Internet—will make large numbers of low-income households ineligible for upcoming discounts.

By Rick Paulas


(Photo: transkamp/Flickr)

When the Federal Communications Commission allowed the merger between AT&T and DirectTV to occur last year — creating the largest pay-television provider in the country — one of the stipulations of the deal to counter any monopolistic worries from the new mega-conglomerate was that it had to provide discount broadband service for low-income residents. The resulting program, dubbed Access from AT&T, works like so: If one person in a household participates in the SNAP food stamp program, and that household is also free and clear of outstanding debts to AT&T, the home is entitled to a discount to be used for home Internet service.

The discount is tiered. In places where AT&T offers download speeds of 5 Mbps or 10 Mbps, the savings is $10 per month, while in areas where they offer 3 Mbps, the discount is cut to $5 per month (the difference due to the company’s price for the service). But nestled at the end of the explanation is this clause in small print: “If none of the above speeds are technically available at your address, unfortunately you won’t be able to participate in the Access program from AT&T at this time.” Perhaps you can spot the problem.

In fact, the NDIA found that 21 percent of Census blocks in Cleveland and Detroit — mostly, low-income areas of inner-city neighborhoods — had slower than 3 Mbps service.

“We assumed AT&T had at least 3 megs [of service coming into homes],” says Angela Siefer, director of the National Digital Inclusion Alliance, a non-profit focused on delivering affordable broadband. After a few months of NDIA workers coming back to the office with tales of low-income households having trouble getting the service, the loophole presented itself. “We had all these houses that were only getting 1.5 meg coming in.” And thus, ineligible.

These homes weren’t in scattered rural communities where poor infrastructure can be blamed, but nestled in the hearts of cities, in many cases next to or near neighbors who have access to faster service. In fact, the NDIA found that 21 percent of Census blocks in Cleveland and Detroit — mostly low-income areas of inner-city neighborhoods — had slower than 3 Mbps service. So, they approached AT&T about closing this loophole.

“We were like, how about you give those folks the Access program for $5 a month too?” Siefer says.

Of course, seeing as the FCC agreement didn’t account for this, there was nothing in the law forcing the company’s hand in making the change. AT&T, a corporation focused more on providing a profit for its shareholders than providing a service to the community, politely declined the request.

Siefer pestered the company for a few months before deciding that the best choice was to get the word out herself. On September 5th, the NDIA published a report about this loophole, soon picked up by Ars Technica and other news sites. In this case, the public-shaming tactic worked. Four days after Siefer’s report, an AT&T representative told CNN that they’re “working to expand the eligibility process of Access from AT&T to [those] unable to receive internet speed tiers of 3 Mbps and above.” No word yet on exactly what all that means, but it was a point for the little guy.

The kerfuffle, however, shined light on a bigger problem looming on the horizon.

It might seem strange that the FCC placed a minimum threshold on Internet speeds when writing programs for discounted services. Wouldn’t it make more sense for the FCC to simply not have a minimum threshold? But the reasons for it become a little more understandable when you consider the goal of a private Internet Service Provider.

“ISPs want the highest profit margin they can get,” Siefer says. “If there are not minimum standards, the broadband offered could end up so low as to be unusable for modern digital needs.”

“What will happen is that an eligible person will assume they can get Lifeline broadband, and then find they cannot get the subsidized service because AT&T does not offer 10 megs of service at their address.”

It’s a kind of damned-if-you-do, damned-if-you-don’t scenario. If the FCC didn’t write the minimum requirements, ISPs could provide the slowest and worst possible service to the discount-eligible users because they’re not making money off it anyway. But because the FCC does write the requirements, ISPs may sneak through the rule’s loophole, deliberately or not, by providing poor neighborhoods Internet slow enough not to activate the discount. This conundrum is where the time bomb lies.

When the FCC announced a tweak to the country’s $9.25 a month Lifeline subsidy to allow it to be used for home Internet service as well as telephone service, they wrote in the same sort of minimum requirements for download speeds. But this time, the minimum speed is 10 Mbps.

“What will happen is that an eligible person will assume they can get Lifeline broadband, and then find they cannot get the subsidized service because AT&T does not offer 10 megs of service at their address,” Siefer says. “Many low-income areas don’t get 10 megs.”

It’s a problem that could reach beyond AT&T, one of many ISPs expected to participate in the Lifeline program. Comcast, CenturyLink, Time Warner, Cox, and every other ISP will be needed to help accomplish the program’s goal of bringing affordable Internet to low-income residents. But the presumed exploitation of this loophole on a national scale may make the entire subsidy essentially meaningless.

“None of the providers have told us what their Lifeline offerings are going to be,” Siefer says. “But it won’t be as useful as we thought it was, because they have such slow speeds in poor neighborhoods.”

The question now is: Will this loophole be closed before the subsidy rolls out in December?