Lacking a Lifeline: How a federal effort to help low-income Americans pay their phone bills failed amid the pandemic

Winford, a psychologist, knew that some of her patients counted on the federal Lifeline program to obtain smartphones and cover the costs of their monthly bills. But Lifeline offered them limited aid, even during the pandemic, the doctor soon discovered. Service was spotty and talk times were restricted, even though most Americans nowadays can place as many calls as they want. The digital deficiencies threatened Winford’s ability to fully tend to her patients’ emotional and physical well-being, she said, creating additional headaches during a public-health crisis.

“I started learning patients’ minute-renewal schedules,” Winford said in an interview. She recalled one woman in particular who’d canceled her appointment last summer after exhausting her monthly allotment. The patient had used up all her time planning her brother’s funeral after he died of covid-19, the disease caused by the virus.

The coronavirus has reinforced the Internet as the fabric of modern American life, a luxury-turned-necessity for a generation now forced to work, learn and communicate primarily through the Web. But it also has laid bare the country’s inequalities — and the role Washington has played in exacerbating these long-known divides.

Nowhere is the gap more startling than with Lifeline, a roughly $2.4 billion digital safety net conceived nearly three decades ago to ensure that all Americans could access reliable communications. Families who rely on Lifeline say they have struggled to talk to their doctors, employers and loved ones throughout the pandemic, illustrating how significant technical shortcomings, and years of government neglect, have undermined a critical aid program at a time when it is needed most.

Many Lifeline subscribers are stuck with service so subpar that it would be unrecognizable to most app-loving, data-hungry smartphone users, according to interviews with more than two dozen participants and policy experts, including members of Congress, Biden administration officials, state regulators, telecom executives and public-interest advocates. The program’s inadequacies are so great that even those who are eligible for help often turn it down: More than 33 million households are eligible to receive Lifeline support, yet only 1 in 4 of these Americans actually takes advantage of it, according to U.S. government estimates prepared in October.

Yet attempts to update Lifeline and remedy its well-known shortcomings have stalled in Washington for years. The recently departed Trump administration even gutted plans to adapt the telecom benefit program so that it would have been more useful in helping people obtain broadband more easily at home, a change that might have been helpful now that state and federal health officials are pleading with people to stay indoors.

Low-income families still stand to gain a major reprieve once the U.S. government begins disbursing billions of dollars in new broadband rebates under a coronavirus stimulus program adopted by Congress in December. But the effort is expected to last only until the money runs out in a few months. Its looming expiration has touched off a fierce new lobbying battle in Washington — and threatens to subject millions of cash-strapped Americans to the same struggles they had faced before.

“People are ordering their groceries, they’re learning, they’re talking to the doctor, they’re scheduling vaccine appointments — everything is being done on the Internet,” said Rep. Mike Doyle (D-Pa.), who leads a key telecom-focused committee in the House. “To say that a certain percentage of our population is not able to do these things in this day and age is not morally right, it’s not fair, and it is has to be dealt with.”

“This program we have isn’t working,” he said.

The country’s digital divide — the gap between the haves and have-nots in accessing and affording the Internet — vexed policymakers long before the pandemic. At least 18 million Americans still lack speedy, reliable connectivity, the Federal Communications Commission found in a report released last June, though agency officials have cautioned that the actual number is probably much higher. The disconnect disproportionately affects low-income Americans and people of color, further depriving them of access to the tools they need to obtain financial help, find jobs and otherwise participate in digital life.

To help more Americans get connected, Congress, the FCC and other government agencies spend billions each year on programs that make broadband more available and affordable. The linchpin of that effort is Lifeline, part of the roughly $9 billion spent annually on initiatives that aim to boost rural broadband, fund classroom technology and aid low-income families. The Reagan-era Lifeline program imposes fees on telecom giants such as AT&T and Verizon, which pass them along to phone subscribers on their monthly bills. The money then funds a system that subsidizes low-income Americans’ landline or smartphone services, with the sums paid directly from the government to a Lifeline user’s telecom provider. Some Lifeline subscribers alternatively can use it to subsidize home Internet connections.

Typically, Lifeline subscribers receive free service, sparing those deep in poverty from having to take on steep costs just to access tools that are critical for their financial and physical well-being. But the program in practice has proved highly restrictive. The government often provides a monthly $9.25 credit to companies that offer both voice and data mobile service, an amount that hasn’t increased in almost 10 years. While most Americans over that period have seen faster speeds and fewer caps on their ability to talk and text — plus higher bills — Lifeline plans generally have stayed the same.

The limits of Lifeline mean that low-income Americans using the program often are capped at 1,000 minutes a month, receive about 4 gigabytes of data, and may contend with download speeds that can feel like the functional equivalent of 3G, more than a decade behind everyone else. Subscribers can pay more for additional service, but some cannot afford the extra costs of better connectivity and the benefits it provides, such as the ability to stream video conversations through Zoom and other tools.

The restrictions have been especially problematic during the pandemic, as Americans find themselves more dependent than ever on their mobile devices to stay connected. Many Lifeline subscribers say they have had to make unfair trade-offs — talking either to family or to doctors, for example, or participating in their communities or saving precious minutes for emergencies — that most Americans would find unfathomable.

Every Friday morning, Harold Valentine joins Club Memory, a D.C. hospital support group for people suffering from memory loss. But the 78-year-old stroke survivor has had a tough time participating since the virus forced the weekly gatherings online.

These days, Valentine said, he stays on the calls for just 30 minutes — and he only speaks by phone even when others are using Zoom video for the chat. The Lifeline program in some ways has been a “lifesaver” financially, Valentine emphasized, but he said it recently has come with unexpected costs of its own.

“It’s a handicap; the thousand minutes goes by fast,” said Valentine, adding that he keeps a reserve of time to talk with family in Denver. “I want to make sure the line is still open, five to 10 minutes [a month], just in case there’s an emergency.”

The government has seized on major events to rethink Lifeline and the service it covers. Hurricane Katrina in 2005 was devastating to communications in the Southeast, and it ultimately led the FCC under President George W. Bush to expand the program from home landline phones to newer mobile devices.

About a decade later, the telecom agency under Democrats tried to reorient the program. Tom Wheeler, an FCC chairman appointed by President Barack Obama, set about overhauling Lifeline in 2016, aiming to open the door for cable companies to more easily participate, perhaps allowing more Americans to put their federal subsidies toward more heavily discounted — or free — home broadband Internet service options.

“Imagine if the cable companies got engaged, and other companies got engaged,” said Gigi Sohn, who previously served as a top adviser to Wheeler. “You could drive the price of fixed broadband down to almost what the subsidy is. That was the dream.”

The FCC adopted Wheeler’s vision, but the overhaul never fully took effect: President Donald Trump appointed Ajit Pai, a Republican, to lead the FCC, and the new chairman began unwinding some of those changes and seeking dramatic new limitations on Lifeline. At one point, Pai had multiple proposals pending at the FCC that could have “eliminated” most of Lifeline’s biggest providers, restricted people from participating for more than a few years, and required low-income Americans to pay doctor-like “co-pays,” according to a report from the nonprofit Open Technology Institute.

“He was always hostile to this program,” said Joshua Stager, the institute’s senior policy counsel. “It’s been this death by a thousand cuts.”

Pai cited regulatory overreach and lingering concerns about waste, fraud and abuse as he sought to rethink Lifeline. He pointed to state and federal watchdog reports over the past decade that found millions of Americans had been enrolled improperly in Lifeline, putting hundreds of millions of dollars annually at risk of misuse. Pai ultimately would preside over the FCC as it issued multimillion-dollar fines in response, including a $200 million penalty that T-Mobile paid on behalf of Sprint after the two companies merged last year.

“The Lifeline program is an important tool in the commission’s efforts to bridge the digital divide for low-income consumers,” Pai said in 2019. “But there’s no dispute that it has been in trouble for the better part of a decade. Simply put, it’s been plagued by waste, fraud and abuse.”

Lifeline’s staunchest defenders acknowledge that the fraud concerns are serious, but they also faulted Pai for seeking to use them as cover. They said Republicans sought to dismantle a safety-net program they long had lambasted as offering “Obamaphones,” even though the former president didn’t create it.

“Despite the fact the program was started under Reagan, and expanded under George W. Bush, we’ve seen time and time again the welfare narrative used around this program,” said Brandon Forester, the national organizer for Internet Rights and Platform Accountability at MediaJustice.

Pai declined to comment for this report. Although he ultimately did not bring many of his most aggressive ideas up for a vote, critics say his actions at the FCC left Lifeline in an uncertain, unstable state entering the coronavirus pandemic.

Under Pai’s watch, for example, the U.S. government for years did not fully implement a national verification system — a state-of-the art digital tool designed to determine eligibility and crack down on the fraud Republicans sought to prevent. The myriad missteps are laid bare in a report released by the Government Accountability Office in late January, which found that by summer 2020, most states still had not implemented the technology. Those that did found it even harder for Lifeline applicants to get approved, creating undue delays even in cases in which low-income Americans should have qualified easily for the program.

“The FCC under Trump made it very difficult to access the program,” said Rep. Frank Pallone Jr. (D-N.J.), the chairman of the telecom-focused House Energy and Commerce Committee. He joined other lawmakers in requesting the GAO study, which he said proved that the verifier in particular had been “botched.”

The shortcomings were experienced firsthand by Etta Smith Wells, the service coordinator at the Franciscan Village Senior Apartments, a subsidized housing community for seniors in Cleveland. Wells, who assists about 176 residents, recalled an incident in September in which she tried to help someone in her care sign up for Lifeline. It ultimately took three weeks of haggling, hours of phone calls and a lot of “impatient” moments “for us to get things in place,” she said.

“It didn’t make sense why they were denying that person because they fit the criteria,” said Wells, citing the fact that Lifeline is for people well under the poverty line who receive other assistance such as food stamps.

Even Pai’s technical tweaks threatened to cast a pall over the program. In the waning hours of 2020, for example, the FCC raised the minimum amount of data that Lifeline providers must offer their mobile subscribers to 4 GB, a one-gigabyte bump that might have seemed beneficial to those who seek to use more apps and services on their phones. But Pai did not propose to couple the mandatory increase with an uptick in federal subsidies, essentially leaving some of Lifeline’s smaller carriers scrambling to figure out if they could continue offering the service essentially free — or if they had to increase prices, even though they knew their low-income subscribers could not afford to pay more.

TruConnect, the country’s fourth-largest Lifeline provider, in response started to slow its “efforts on the marketing side to enroll new members,” said Matthew Johnson, the company’s co-chief executive. Some states, such as California, offer sums on top of the federal Lifeline benefit, allowing TruConnect and its peers to provide more robust voice and Internet access there without additional charges. But most states do not augment the federal credit — so Johnson felt that Pai’s plan threatened to put his company, and many of his customers, in a financial bind.

Pai’s approach ultimately had a lingering, “toxic” effect, said Geoffrey Starks, a Democratic commissioner at the FCC, adding that the government needed to redouble its efforts in the future to fix the shortcomings and close the digital divide.

“We’ve been talking about the digital divide for more than two decades now,” he said. “It is past time to connect all Americans.”

With the pandemic worsening, U.S. lawmakers last year stepped in to offer fresh support. They tucked into the $900 billion stimulus adopted late in 2020 a program that will pay rebates to broadband customers facing serious economic hardship. The aid marks the first time the federal government has authorized such robust support to help Americans pay for Internet service and the devices needed to access it.

Distributing the aid swiftly represents a major, early test for Jessica Rosenworcel, tapped by President Biden as acting Democratic chair of the FCC last month. The agency has only weeks to start paying out benefits at a level and rate it has never been asked to do in its more than 90-year history. It could serve as a major referendum on the federal government itself, a chance for Washington to prove that it has learned the lessons of Lifeline — and can address shortcomings in helping Americans get online.

“We have an opportunity with the emergency broadband benefit to develop policies to get more households connected and then use what we learn from that process to inform what’s been our program in the past, and that’s Lifeline,” Rosenworcel said in an interview. “This program can help.”

The payments, which will be made directly to providers, could start by the end of this month. But the money is likely to last only a few months, and that has already touched off a lobbying blitz over what, if anything, should replace it.

On one side are AT&T, Verizon and other telecom giants, which say they support the push for universal service yet object to the way Lifeline is administered and funded. Many of these telecom giants argue through their primary lobbying arm, the trade group USTelecom, that Congress should finance phone and broadband benefits for low-income Americans on its own. That would allow these companies to strip the fees from customers’ bills that currently fund Lifeline — a move that would appear to lower subscribers’ monthly bills unless the telecom giants sought to raise prices later.

“The funding mechanism is really broken,” said Donna Epps, the senior vice president for public policy at Verizon. “We’re not suggesting eliminate it. We’re suggesting expanding and enhancing the resources the country provides to low-income people by adding a program that would provide greater subsidies and be federally funded.”

But the idea has drawn early opposition from those who advocate on behalf of Lifeline’s beneficiaries as well as Democratic policymakers, who say that a yearly fight over telecom aid would subject the much-needed money to the whims of Washington politics. Nor have they backed plans to impose new taxes or fees on other digital services, even if doing so might better fund the government’s attempts to boost broadband.

Olivia Wein, a staff attorney for the National Consumer Law Center, said she feared that Lifeline could face the same fights that plague the annual funding for home energy assistance and many other federal aid programs.

“States don’t know unless Congress passes appropriations in a timely fashion, which rarely ever happens, how much funding they’re going to have,” she said. “When [telecom] companies say appropriations, I don’t know if they’ve really thought that through.”

“I feel we need to have a real conversation about what the program covers,” Wein said, “so we don’t have a subpar service just because somebody does not have great wealth.”