FCC votes to make low-income Americans eligible for subsidy for high-speed Internet service

Low-income Americans will be eligible for a monthly subsidy of $9.25 to receive high-speed Internet service in an effort approved by federal regulators on Thursday to close the so-called digital divide and expand access to broadband.

The Federal Communications Commission voted 3-2 along party lines to expand a 3-decade-old program that subsidizes phone service for people who cannot afford it.

Now consumers will be able to apply the monthly Lifeline subsidy to broadband service or a bundled voice-and-data package from an Internet service provider. The Internet service could be wired or wireless and the FCC anticipates the new option will be available Dec. 1.

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"There remains a digital divide that keeps a significant number of Americans from participating" in the many benefits of the Internet, said FCC Chairman Tom Wheeler, a Democrat who proposed the new regulations.

In another broadband-related action, the FCC voted along party lines to start a formal rule-making process for new restrictions on how Internet service providers could use the personal information of their customers.

High-speed Internet is available in 95% of households with annual incomes of more than $150,000, the FCC said. But nearly half of households with incomes of less than $25,000 a year do not have a high-speed connection.

Lifeline is a program that has been "stuck in an analog time warp" and needed to be modernized for the needs of low-income Americans who need access to high-speed Internet to compete in the 21st century economy, said FCC Commissioner Mignon Clyburn, a Democrat and supporter of the overhaul.

The lack of broadband is a particularly problem for students who usually need Internet access to do homework, said FCC Commissioner Jessica Rosenworcel, another member of the Democratic majority.

She cited a Pew Research Center study that found 5 million households out of the 29 million with school-aged children lack high-speed Internet access. 

"There was a time when broadband access was a luxury.  No more," she said. "And nothing demonstrates this as clearly as with education."

The program is funded by a small monthly fee on consumers' phone bills, and spent about $1.5 billion last year to provide services to 13 million Americans. Recipients get the monthly subsidy, which is paid to their telecom provider, and can use it to offset the cost of one land-line or wireless phone line.

Households would be limited to one subsidy.

Lifeline has been the subject of controversy as it has grown dramatically in recent years.

The program's spending ballooned from $809 million in 2005 to a peak of $2.2 billion in 2012, causing Republican critics to criticize it as "Obamaphone" because much of the growth occurred during President Obama's administration.

They have pushed for a limit on Lifeline spending each year. The FCC on Thursday set a $2.25-billion annual budget, indexed to inflation.

Republican Commissioners Ajit Pai and Mike O'Rielly, who voted against the proposal, said the budget is not a hard cap that limits spending. Wheeler admitted that it was possible for the FCC to approve spending above the budget level.

The FCC also took steps to eliminate waste, fraud and abuse of the program, including taking eligibility determinations away from the companies and giving it to an independent third-party administrator.

The changes build on reforms enacted by the FCC in 2012, such as creating a database to prevent multiple phone companies from receiving subsidies for the same subscriber.

Lifeline spending has decreased the last few years, and public interest and civil rights groups have pushed for Lifeline subsides to be used for broadband service.

More than 15,000 people signed a petition organized by Demand Progress to expand Lifeline "to help narrow the digital divide."

On Thursday, Democratic presidential candidate Sen. Bernie Sanders (I-Vt.) tweeted, "Broadband access is a necessity, not a luxury. I urge the FCC to expand Lifeline and help millions of working families get online."

The vote came after Wheeler blocked a bipartisan compromise reached by Pai, O'Rielly and Clyburn that would have capped the program's spending at $2 billion a year, among other changes, Pai said.

The meeting's start was delayed as Wheeler worked to undermine the deal, Pai said.

"This agency in this proceeding represented the worst of government," he said

Wheeler said the delay was because "the deliberative process was in full swing."

After the meeting, Clyburn said she was not pressured by Wheeler to back out of the deal. And Wheeler said suggestions that he pressured her were "balderdash."

Clyburn said she opposes a cap on the program's spending but "negotiated in good faith to have a budget mechanism in place that ensures millions of new households will have the opportunity to afford advanced telecommunications services."

But she said that "upon further deliberation, I concluded that such a mechanism could not fully achieve my vision of a 21st century Lifeline program."

Under the rules proposed by Wheeler to restrict use of personal information, cable and wireless companies that offer broadband service would in most cases need permission from customers to use or share the data collected about them as they access the Internet.

The new regulations would apply only to broadband providers and not to individual websites or social networks. For that reason, Internet service providers oppose the proposed rules.

"Our digital footprints are hardly in sand; they are effectively in wet cement," Rosenworcel said.

"The market incentives to keep our data and slice and dice it to inform economic activity are enormous," she said. "They are only going to grow."

Pai and O'Rielly voted against launching the rule-making process, saying broadband providers should not be regulated more strictly than search engines and other companies that collect consumer data on the Internet.

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For the record

2:44 p.m.: In a previous version of this article, Pai and O'Rielly were reported to have said that broadband providers should be regulated more strictly than search engines and other companies that collect consumer data on the Internet. They said that broadband providers should not be regulated more strictly.

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"When it comes to privacy, the principle of parity makes sense," Pai said. "There is no good reason to single out ISPs -- new entrants in the online advertising space -- for disparate
treatment."

Follow @JimPuzzanghera on Twitter.

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Update

2:01 p.m.: The story has been updated with additional detail.

1:35 p.m.: This story was updated with additional detail and comment.

This story originally was published at 1:10 p.m.

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