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For Immediate Release: April 25, 2013
Contact: Robert J. Thormeyer, 202-898-9382, rthormeyer@naruc.org

Proper Oversight, Safeguards Essential to Viability of Lifeline: NARUC President

WASHINGTON--Ensuring proper safeguards against waste, fraud, and abuse are essential as Congress and the Federal Communications Commission reform the vital Lifeline telephone assistance program, National Association of Regulatory Utility Commissioners President Philip Jones told Congress.

In testimony Thursday, April 24, President Jones said NARUC continues to support the federal Lifeline program, but opportunities for abuse ran rampant when the government expanded it several years ago to include wireless services. The FCC should be commended for the strong action it initiated to better control the program, President Jones said, but more can be done.

“We, as the State [commissions], stand ready and willing to work with the FCC, industry, the low-income community, and you in Congress to maintain this important program and combat waste, fraud, and abuse,” President Jones said.

President Jones delivered his remarks during the House Energy and Commerce Committee Subcommittee on Communications and Technology’s hearing on “The Lifeline Fund: Money Well Spent?”

The Lifeline program offers qualified consumers discounts on monthly telephone service, enabling them to stay in contact with friends, family, emergency services, and employers. The program is supported by the Universal Service Fund and funded mainly by consumers through surcharges on their telephone bills.

When first established in 1985, the program only applied to traditional landline service, and abuse was nearly non-existent. This is because the landline companies providing the service are certified and regulated by NARUC member State public utility commissions and the FCC. At the time, the program was manageable and well regulated.

But this all changed with the FCC in 2005 broadened the program to include wireless services. Not only did this change greatly expand Lifeline—and the USF as a result—it also created wide avenues for waste, fraud, and abuse, President Jones said.

NARUC expressed concern about the potential for abuse as far back as 2008, and in 2009 called for improvements in the verification practices. Because consumers typically only have access to one landline provider, any abuse such as duplicative subsidies was less common and easy to track. Moreover, no companies provided absolutely free service, and no companies were in a position to develop business plans based on making money from the Lifeline program.

Although some consumers benefited from this development— and the free cell-phone program has been popular, as evidenced by the program’s explosive growth in recent years—it “fundamentally changed the incentives for both customers and companies—opening up new avenues for waste, fraud, and abuse,” President Jones said.

Making matters worse, many States do not have authority over wireless or Internet-Protocol companies, removing one important regulatory layer of protection, President Jones said. This puts an even greater burden on the FCC. “The question remains, does the FCC have the ability and resources to properly oversee the program in such States? Does a different division of responsibilities make sense? These are appropriate and timely questions for Congress and this committee to answer,” President Jones said.

President Jones concluded by praising the FCC’s order in January 2012 that enhanced accountability and saved millions of dollars annually. The agency also reached out to State commissions through the Federal-State Joint Board on Universal Service by referring the Lifeline issues to it, and then publishing a proposed rule. “[T]his is exactly how the congressionally mandated Federal-State Joint Board process should be used,” President Jones said. “We hope the FCC will use this process more often for issues of shared responsibility.”

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NARUC is a non-profit organization founded in 1889 whose members include the governmental agencies that are engaged in the regulation of utilities and carriers in the fifty States, the District of Columbia, Puerto Rico and the Virgin Islands. NARUC's member agencies regulate telecommunications, energy, and water utilities. NARUC represents the interests of State public utility commissions before the three branches of the Federal government.

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