The Lifeline Program’s Afterlife Problem
Asubsidy program can survive many things. Paying benefits to the dead should not be one of them.
That is the problem now facing the Federal Communications Commission’s (FCC) Lifeline program, which was designed to ensure that low-income Americans can connect to the communications networks modern life depends on. As the program has expanded to cover new services, the Universal Service Fund (USF) contribution factor—essentially a tax on consumer phone bills—has climbed to 37%. That makes every dollar lost to fraud more than an accounting error. It is a charge passed on to the consumers funding the system.
Reasonable people can debate the merits of the existing USF structure, and of broadband-subsidy programs more generally. But if regulators want to continue supporting broadband deployment and adoption, those programs should maximize benefits while minimizing costs.
USF costs have risen largely because support has expanded to broadband. But waste, fraud, and abuse still drive costs higher without producing any offsetting public benefit. Most notably, the FCC Office of Inspector General (OIG) found that providers in states that opted out of federal verification systems collected nearly $5 million in reimbursements tied to more than 116,000 deceased individuals over just five years. Roughly 40% of those payments went to individuals who may have died before they ever enrolled.
Eliminating waste, fraud, and abuse matters. But doing so also carries costs. Compliance burdens that are too heavy, eligibility rules that are too blunt, or verification requirements that are too cumbersome can prompt eligible households to abandon enrollment. They can also push providers out of thin-margin markets rather than absorb mounting administrative overhead.
Fortunately, the FCC could take two immediate steps to address this specific fraud with minimal burden on consumers.
First, the FCC should require all states to use federal verification systems, ensuring that up-to-date mortality information is used to verify claims. Second, it should require a secondary consent mechanism to confirm that the individual subscribed to a Lifeline-supported service is actually eligible and receiving that service.
Taken together, these reforms would directly target one of the Lifeline program’s most significant fraud vectors without undermining participation in the program.