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FCC Seeks to Expand 'Obamaphone' Boondoggle to the Internet

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Access to reliable, high-speed Internet is almost a given in today’s America.  But should it be subsidized?  The Federal Communications Commission thinks it should.  On May 28, FCC Chairman Tom Wheeler announced a proposal to expand the agency’s 30-year-old “Lifeline” program to include broadband Internet.  Now costing about $2 billion a year, Lifeline defrays the cost of monthly landline or mobile phone service for low-income subscribers.  Phone companies and consumers each bear part of the cost.  The proposal may force Internet Service Providers to contribute.  Funding for Lifeline in recent years has been high enough to warrant the moniker of ‘Obamaphone.’  Yet given rampant fraud in the program, the main issue would seem less its funding level than its very existence.

Federal aid for residential phone service was around long before Barack Obama took office as president.  Congress created Lifeline in 1985 as a way of enabling telecom companies to offer monthly service discounts to low-income households.  A participating firm reduces customer bills, and the government in turn reimburses the firm.  Eligible households must have incomes no higher than 135 percent of the poverty line and/or receive benefits from one or more means-tested anti-poverty programs, including Medicaid, food stamps and Section 8 rental housing vouchers.  The per-household subsidy can be as high as (and usually is) $9.25 per month; extra aid is available for residents of Native American and Alaska Native tribal communities.    Only one person per household may participate, and that person must choose between a landline and a cell phone subsidy.  And residential phone subscribers as well as service providers contribute to the subsidy pool; resident customers see a surcharge on their monthly phone bill that averages about $2.50.  About 2,000 telecom companies are certified providers.  The money has added up.  In fiscal year 2013, the federal government spent $1.8 billion on Lifeline aid for roughly 17 million households.  The telecom provider, not the government, determines a beneficiary’s eligibility – a major problem, as we shall see later.

Initially, the program covered only landline service.  But in 2005, the Bush-era Federal Communications Commission expanded it to include prepaid wireless phone plans.  Congress, as part of the Telecommunications Act of 1996, already had placed the Low-Income Program (of which Lifeline by far is the largest) and three other programs – the Connect America Fund, Rural Health Care, and the Schools & Libraries Program (E-Rate) – under a new subsidy mechanism known as the Universal Service Fund (USF).  That law also chartered a new entity, Universal Service Administrative Company (USAC), to run all programs, which in fiscal year 2013 cost a combined more than $8.3 billion. 

The FCC thinks that as far as Lifeline is concerned, there is plenty of room for expansion.  On Thursday, May 28, Commission Chairman Tom Wheeler unveiled the rudiments of a plan that would make high-speed broadband Internet service eligible for Lifeline aid.  “A world of broadband ‘haves’ and ‘have-nots’ is a world where none of us will have the opportunity to enjoy the full fruits of what broadband has to offer,” Wheeler noted in a blog post.  “As communications technologies and markets evolve, the Lifeline program also has to evolve to remain solvent.”  The proposal would apply to the purchase of stand-alone Internet access for laptops, home computers and cell phones.  The FCC proposal thus far has avoided the sticky issue of whether Internet Service Providers (ISPs) would have to contribute funds and in what proportion.   

The proposal to expand Lifeline into cyberspace rests on the highly questionable premise that our nation suffers from a gaping “digital divide.”  Wheeler and other program enthusiasts frequently cite data purporting to show that Internet service is largely a privilege for the well-off.  Pew Research Center survey data released in November 2010 concluded that 95 percent of U.S. households with an annual income of at least $75,000 owned a cell phone, as opposed to 75 percent of households with an income of less than $30,000.  The Pew report also found that 87 percent of $75,000-and-over households had broadband home Internet service, a figure that was only 40 percent for households making less than $30,000.  Because blacks and Hispanics are overrepresented in lower income brackets, they tend to have less service.  In May 2013, the U.S. Census Bureau released a report, “Computer and Internet Use in the United States.”  Based on data collected in a July 2011 supplement to the Current Population Survey, the study concluded that 75.6 percent of all U.S. households had a computer at home, up from 8.2 percent in 1984 and 61.8 percent in 2003.  Internet access was 71.7 percent in 2011, up from 18.0 percent in 1997 and 54.7 percent in 2003.  Whereas 76.2 percent of non-Hispanic whites and 82.7 percent of Asians in 2011 had Internet service at home, blacks and Hispanics registered figures of 56.9 percent and 58.3 percent, respectively.  The figures for all groups were well higher than in 2000.     

“Civil rights” activists see lower rates for blacks and Hispanics as clear evidence of racial discrimination.  Malkia Cyril, executive director of the Oakland, Calif.-based Center for Media Justice, put it this way in 2011 in an article for The Huffington Post:  “We know that digital inclusion and closing the digital divide is only possible with affordable, accessible, and open high-speed networks.  True representation of people of color and the poor demands that the civil rights community fight for this as vigorously as we fight for equal access in our schools, services, and in the broader society.”  More recently, this past Wednesday, June 10, Wade Henderson, president of the Washington, D.C.-based Leadership Conference on Civil and Human Rights, in a letter to Chairman Wheeler urged immediate expansion of Lifeline to include Internet service.  He cited, with great alarm, Pew and other data showing that while 92 percent of households with incomes in the $100,000-to-$150,000 range have broadband service, these figures were:  47 percent for households with incomes below $25,000; 64 percent for African-Americans; 53 percent for Hispanics; 63 percent for people with disabilities; 51 percent for people with limited English proficiency; and 38 percent for households who prefer to communicate in Spanish.  Such disparities, he insisted, deprived “historically disadvantaged communities of the very opportunities they need to participate fully in America’s success.”  This view, all too often pitched in this sort of moralizing tone, is highly misleading for at least two reasons.   

First, computer prices have dropped dramatically over the years, even as the speed and range of features of computers generally have expanded dramatically.  During the early and mid-Nineties, a microcomputer running at 5 Mhz typically cost around $3,000.  Today a microcomputer running at 2 Ghz (400 times as fast) routinely can be had for $1,000 or less.  Name-brand laptops powered by Windows 8 now cost as little as $250 and even less during a Black Friday or year-end holiday sale.  And for all intents and purposes, every computer sold today is equipped with Internet access, with a Web browser and search engine.  Computer service is an investment affordable to the overwhelming majority of Americans willing to invest in their own future.  The idea that large swaths of the American public systematically been “excluded” from computer access is ridiculous.     

Second, the notion that one’s inability to afford a good or service is the inevitable result of a denial of moral justice is out of whack with reality.  Rational persons, regardless of race or income, adhere to something resembling a budget – i.e., spending limits – on which to base future consumption decisions.  Such people are aware of constraints, adapt to them for the time being, and try to improve their economic situation.  One no more has a “right” to a high-speed computer than a “right” to a flat-panel TV, a new car or an Ivy League education.  In his classic 1995 book, “The Vision of the Anointed,” economist and Hoover Institution Senior Fellow Thomas Sowell rebutted the deception inherent in treating lack of affordability as an injustice: 

People are often said to lack “access” to various jobs, educational institutions, or credit, when in fact they may not have behaved or performed in a way that would enable them to meet the same standards that others meet.  “Access” is just one of a number of ex ante expressions – “opportunity,” “bias,” and “glass ceiling,” for example – used to describe ex post results in such a way as to preempt the whole question as to why those results turned out the way they did…

People who do not choose to spend their money on health insurance, but on other things, are denied “access” to health care by “society.”  On the contrary, they are often given medical treatment at other people’s expense, whether under specific social programs or in various other ways, such as using hospital emergency rooms for things that are not emergencies at all, or which have become emergencies only because nothing was done until a medical problem grew too large to ignore.

Yes, many people do not have a computer with Internet access. 

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