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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 for 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 $.9 billion on the Lifeline Program in the fiscal year 2020 and is estimated to spend $1.0 billion in the fiscal year 2021 [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:

The graph above shows the number of individuals participating in the Lifeline Program since its inception [iii].  The Lifeline program had 7.4 million participants in 2020 which corresponds to 25.6 million adults in poverty (see Poverty Statistics Page).

The USAC is funded through assessments to telecommunication companies which then pass the costs on to consumers in the form of a tax on their phone bills.  The tax usually shows at the bottom of the phone bill denoted as a tax or sometimes as a USAC charge.  Overall the USAC taxes represent about 5.4% of total telecommunication company retail revenues [iv].  The Lifeline Program portion of the tax is about 10% of the total USAC tax [v].

Lifeline is one of thirteen welfare programs. See how it fits in the entire system on the Welfare Programs Page.

The Office of Management and Budget estimates a 13.8% Improper Payment rate for the Lifeline Program – see more information on the Welfare Fraud Page.  Compliance with qualification standards and the limitation of one subsidy per household has proved difficult for the FCC and telecommunications companies to police.

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.  For all of its complexity in qualification, taxes, compliance, and coordination with telecommunication companies, the Lifeline Program represents less than 1% of the solution to poverty for an individual and even less for a family.  From a benefit perspective participants would come out economically equivalent if the SNAP Program was increased by $9.25 per month per household.

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 of advanced telecommunication services for schools and health care 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.

The graph below shows Lifeline Program expenditures per year (federal government fiscal year), adjusted for the impacts of inflation (stated in 2020 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 April 7, 2022.   Available here.

[ii] FCC.  Universal Services Monitoring Report – 2021.  Table 2.2.  Available Here.

[iii] Ibid.  Table 2.1.

[iv] Ibid.  Table 1.2.  Total Universal Services surcharge of $8.059 billion divided by total telecom retail revenues of 150.447 billion.

[v] Ibid.  Table 1.10.   Data from 2020, total of low-income support divided by total USAC disbursements.

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