Lifeline Program—Provides support to telecommunications carriers  that in turn offer discounts on telecommunications services to eligible  low-income households. Carriers generally pass their USF  contribution obligation on to their customers, typically in the form of a line  item on their monthly telephone bill. In particular, FCC adopted the Lifeline Reform Order (the Order) in 2012  to strengthen internal controls, improve accountability, and explore the  inclusion of broadband in the program through a pilot program. FCC Has Made Progress Implementing Lifeline Reforms, but It Has Not Evaluated the Program’s Effectiveness FCC Has Made Progress Implementing Lifeline Reforms, but Some Reform Efforts Remain Incomplete

Although FCC has made progress implementing the reforms contained in  the Order, four actions remain incomplete. In some cases, FCC needs to  make a decision, such as determining the permanent rate for Lifeline  reimbursement claims. In other cases, FCC needs additional time to fully  implement the reform, such as defining performance measures. These goals were: (1) to ensure the  availability of voice service for low-income Americans, (2) to ensure  the availability of broadband for low-income Americans, and (3) to  minimize the Universal Service Fund contribution burden on  consumers and businesses. However, FCC officials noted that two academic studies have  assessed the program, including the impact of the Lifeline program on  household decisions to subscribe to telephone service. In 2014, Over 12 Million Households Participated in Lifeline, and Some Households Faced Challenges in Accessing and Retaining Benefits

		Lifeline Participation Was 18.1 Million Households in 2012 and Declined to 12.4 Million by 2014

Lifeline participation and disbursements increased rapidly from 2008  through mid-2012 and declined after FCC’s reform Order in 2012 (see fig. 2). In 2010, we found that growth in  the program was primarily due to the introduction of prepaid wireless  as an eligible service. Usefulness of Broadband Pilot Program May Be Limited by FCC’s Lack of Evaluation Plan and Other Challenges

		FCC Designed the Broadband Pilot Program to Test a Variety of Factors, but Did Not Conduct a Needs Assessment or Develop an Evaluation Plan

FCC’s broadband pilot program includes 14 pilot projects that test an  array of options and will generate information that FCC intends to use to  decide whether and how to incorporate broadband into Lifeline. According  to FCC, the projects are expected to provide high-quality data on how the  Lifeline program could be structured to promote broadband adoption by  low-income households. In particular, according to FCC officials, the pilot projects  completed offering subsidized service in October 2014, but FCC has not  announced when or how it would share the results of the projects. FCC officials  said that the 74,000 consumers noted in the December 2012 order  adopting the pilot program was an estimate of consumers who could be  served through the program given the available funding and was not a  reliable number and should not be interpreted as a goal for the program. FCC officials believe  information on the number of consumers offered service can provide  relevant information regarding the subsidy’s effect on broadband  adoption. Without such planning, FCC now faces difficulties in evaluating the  program without established benchmarks for success. Further, FCC does  not know why large numbers of eligible households did not enroll in the  pilot projects. FCC attributes the narrowing of the gap between low- income and higher-income households’ telephone penetration rates over  the past 30 years to the Lifeline program. However, several factors could  play a role in this change, such as a reduction in the price of service over  time. Program evaluation is a critical strategy that can allow agencies to  assess the value or effectiveness of a program, among other things. Recommendation for Executive Action

We recommend that FCC conduct a program evaluation to determine the  extent to which the Lifeline program is efficiently and effectively reaching  its performance goals of ensuring the availability of voice service for low- income Americans while minimizing the contribution burden on  consumers and businesses. In written comments, reproduced in appendix II, FCC agreed  that it should evaluate the extent to which the program is efficiently and  effectively reaching its performance goals, and said that FCC staff will  address our recommendation. Appendix I: Objectives, Scope, and Methodology

The objectives of this report were to examine (1) the status of Lifeline  reform efforts and the extent to which the Federal Communications  Commission (FCC) has evaluated the effectiveness of the program; (2)  how the Lifeline program verifies household eligibility and addresses  associated privacy and data security; (3) the extent to which households  participate in Lifeline and the challenges, if any, they face in accessing  and retaining program benefits; and (4) how FCC plans to evaluate the  broadband pilot program and the extent to which the pilot program will  enable FCC to decide whether and how to include broadband in the  Lifeline program.
Why GAO Did This Study

Through FCC's Lifeline program, companies provide discounts to eligible low-income households for telephone service. Lifeline supports these companies through the Universal Service Fund (USF). Companies generally pass their USF contribution obligation on to their customers, typically in the form of a line item on their telephone bills. In 2012, FCC adopted reforms to address problems with duplicate and ineligible participants and to explore adding broadband through a pilot program.
GAO was asked to review FCC's reforms. This report examines (1) the status of reform efforts and the extent to which FCC has evaluated program effectiveness, (2) the extent to which households participate and challenges they face in accessing and retaining benefits, and (3) FCC's plans to evaluate the broadband pilot program.
GAO reviewed FCC orders and other relevant documentation; analyzed 2008–2012 Census Bureau data; and interviewed FCC officials, officials at four pilot projects selected based on features such as technology, and officials from 12 Lifeline providers and four states selected based on factors such as disbursements and participation.

What GAO Found

The Federal Communications Commission (FCC) has made progress implementing reforms to the Lifeline Program (Lifeline), which reduces the cost of telephone service for eligible low-income households. In 2012, FCC adopted a Reform Order with 11 key reforms that aimed to increase accountability and strengthen internal controls, among other things. FCC has implemented seven of the reforms and partially implemented four. In some cases, FCC needs to make a decision, and in other cases, additional time is needed to fully implement the reform. However, FCC has not evaluated Lifeline's effectiveness in achieving its goals—to ensure the availability of voice service for low-income Americans and minimize the burden on consumers and businesses that fund the program. FCC attributes improvements in the level of low-income households' subscribing to telephone service over the past 30 years to Lifeline, but other factors, such as lower prices, may play a role. FCC officials stated that Lifeline's structure makes evaluation difficult, but referred GAO to academic studies that suggest that many low-income households would subscribe to telephone service without Lifeline. GAO has found that program evaluation can help agencies understand whether a program is addressing an intended problem. Without a program evaluation, FCC does not know whether Lifeline is effectively ensuring the availability of telephone service for low-income households while minimizing program costs.
In 2014, over 12 million households participated in Lifeline, up from about 7 million in 2008. At its peak enrollment in 2012, Lifeline served about 18 million households. The introduction of prepaid wireless service contributed to this growth. After the Reform Order, program disbursements declined from $2.2 billion in 2012 to $1.7 billion in 2014, due in part to a reduction in the number of ineligible households receiving benefits. Based on interviews with stakeholders and providers, GAO identified challenges households may face in accessing and retaining benefits, including lack of awareness of the program and difficulty complying with new requirements, such as providing documentation of eligibility. Companies providing Lifeline service have taken steps, such as greater outreach and in-person enrollment, to mitigate these challenges.
The usefulness of information FCC gathered through its broadband pilot program may be limited due to the lack of an evaluation plan and other challenges. The pilot program included 14 projects to test an array of options and provide data on how Lifeline could be structured to promote broadband. According to FCC officials, the 14 projects enrolled about one-tenth of the 74,000 customers anticipated before ending subsidized service in October 2014. Although GAO previously recommended in 2010 that FCC develop a needs assessment and implementation and evaluation plans for the pilot, FCC did not do so and now faces difficulties in evaluating the program without established benchmarks. Although enrollment was lower than anticipated, FCC officials believe information on the number of eligible consumers offered service can provide relevant information regarding the options' effects on broadband adoption. However, FCC did not survey these consumers and does not know why eligible households did not enroll. The pilot projects are substantially complete, and FCC officials noted that the pilot program is one of many factors FCC will consider when deciding whether and how to incorporate broadband into Lifeline.

What GAO Recommends

FCC should conduct a program evaluation to determine the extent to which the Lifeline program is efficiently and effectively reaching its performance goals. FCC agreed that it should evaluate the extent to which the program is efficiently and effectively reaching its performance goals and said that FCC staff will address GAO's recommendation.