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State may permanently shrink internet and cell phone discounts for low-income Californians


Companies and consumers aren’t happy, but consumer advocates say the proposed rule could be a more efficient use of the public’s money.

During the pandemic, California took major steps to boost cell phone and internet access to vulnerable communities throughout the state, especially to low-income households.

In July 2021, Gov. Gavin Newsom signed into law a $6 billion statewide plan to expand high-speed internet infrastructure in rural and other under-resourced regions.

And from May 2021 until March of this year, the state allowed low-income families to leverage up to $75 a month in discounts from state and federal subsidy programs, to buy internet and cell phone services. Qualifying households could “stack” the subsidies from three programs, two federal and one state, to reap those savings.

This month state regulators are considering curtailing some of their savings.

The California Public Utilities Commission is expected to vote on a new rule that would limit how much communication companies could make from the state’s Lifeline program, which provides discounts to low-income households for home phone and cell phone services.

Under the new rule, low-income California households who qualify for federal help to pay for phone service and internet access would lose some or all of their California Lifeline monthly discounts. The result: Instead of being able to stack three discounts, most California Lifeline users would be limited to two, for a total of up to $39.25 in discounts a month.

The companies that serve Lifeline customers, and some of their clients, are contesting the change, contending that it would cost low-income consumers money and limit what cell and internet services they can buy.

The outcome of the proposal “is perverse, elitist, discriminatory and profoundly harmful to California’s low-income consumers,” six California Lifeline providers and the National Lifeline Association recently wrote to the commission.

‘A windfall to wireless’

Some 1.7 million California residents are enrolled in the state’s Lifeline program, which is an offshoot of the federal Lifeline program. Commission staff predicted the proposed change could result in more money being available to spread services to more low-income residents.

State officials also argued that the two federal discounts are enough to satisfy most consumer needs and in many cases are paying for excess, unused data capacity. Stacking three subsidies, the commission’s staff wrote, “would result in a windfall to wireless providers and constitute waste, fraud, and abuse.”

Most Californians who own a phone pay for these subsidies via a 4.75% charge on their monthly bill.

Nationwide phone surcharges fund emergency services such as 911 and what is called the Universal Service Fund, which keeps the federal Lifeline program afloat. The federal government set up its Lifeline subsidy in 1984 to extend phone service to the poorest Americans. Now it pays provider companies $9.25 a month to help fund phone and cell services for households with incomes below 135% of the federal poverty line — or less than $37,463 for a family of four — and for people who receive public assistance.

During the pandemic, in May 2021, the federal government also created a $50-a-month Emergency Broadband Benefit to help keep families connected to the internet as schools closed, people worked from home and many others lost jobs. In late 2021 Congress’ Infrastructure and Jobs Act swapped that emergency benefit for what is now called the Affordable Connectivity Plan, which provides a $30-a-month discount instead of $50.

Meanwhile California continued its own Lifeline program — one of three states to do so — with a $16.23-a-month discount for low-income households or those receiving public assistance. A family of four making $40,600 or less qualifies, for instance.

‘One more expense’

At the height of the pandemic, Californians could stack the three discounts to purchase service from Lifeline providers, but that ended in March.

Now, at best, consumers can apply one Lifeline plan and one Affordable Connectivity Plan discount per household. The commission is considering making that limit permanent.

Commissioner Genevieve Shiroma argued that bundling all three programs provided people with more data than the minimum required by law.

“California Lifeline subsidies should be designed to ensure that ratepayer funds are used prudently and in a fiscally sound manner,” the proposal states. Shiroma’s staff said she was not available to answer questions about the proposal.

At least 30 members of the public wrote to the commission opposing changes to the discounts and defending their use of data.

“California Lifeline subsidies should be designed to ensure that ratepayer funds are used prudently and in a fiscally sound manner.”

Christina Moore, a Lifeline user in Los Angeles, pleaded with the commission.

“I use my phone for job hunting … I use it to talk to my doctor for my condition…This phone has been a blessing from the good Lord for me particularly in the pandemic,” she wrote. “Please do not cut our benefits and please let us use the maximum minutes and benefits from all levels of government!”

Kristin Morris, from Mission Viejo, worried about losing options for her family.

“How is it that the CA is finding new ways to make it more difficult for consumers to stay connected,” she wrote. “My kids need phones and tablets to keep up in school and complete their homework. By limiting the service plans available to low-income folks — you are making the problem worse for us, not better. This has been so important for my family —- please find a way to give us more and better service not less! With all the rising costs this is just one more expense we can’t afford.”

‘Failure to provide’

Todd Snyder from San Francisco said that restricting internet options for low-income Californians would be unfair.

“This proposed decision would exacerbate inequality and expand the digital divide for low-income Californians struggling to compete in today’s rapidly changing digital economy,” he wrote.

A few consumer advocacy groups took the opposite position, supporting the commission’s plan. They said some California Lifeline providers were charging high monthly fees for data plans that varied drastically in quality and services, and consumers weren’t always getting what they paid for.

“This proposed decision would exacerbate inequality and expand the digital divide for low-income Californians.”

“Some providers’ failure to provide … Lifeline service of good value to customers is part of the reason why the commission is considering not allowing providers to stack California Lifeline subsidies with (Affordable Connectivity Plan) subsidies,” said Ashley Salas, an attorney for the consumer advocacy group The Utility Reform Network, based in San Francisco.

The Federal Communications Commission and the California Public Utilities Commission have set minimum service standards for Lifeline plans. Currently they call for unlimited voice and text and 6 gigabytes of data per month.

A 6GB plan allows you to browse the internet for three days, stream 1,200 songs, or watch 12 hours of standard videos, according to Reviews, a Paris-based product review website. The average American smartphone user consumed 11GB or more of data a month in 2020, but that’s expected to rise with the spread of 5G, according to Ericcson, a Swedish telecommunications giant.

Some objectors to the commission’s plan said today’s Zoom meetings, online courses and telemedicine sessions already require more than 6GB a month.

State officials countered that most Lifeline users don’t use all their data and the industry has failed to prove otherwise.

Nuanced views

Nathan Johnson, CEO of TruConnect, a Los Angeles-based wireless company that offers Lifeline, said many low-income people do need more data and for that reason many do not even enroll in Lifeline.

A 2019 report by the Legislative Analyst’s Office said only 40% of eligible California families enroll in Lifeline. The report posited several reasons: Families may not know about the program, they may prefer non-Lifeline plans or carriers, or they have difficulty with the program.

Johnson said TruConnect’s low-income customers often use more than 6GB a month when they are offered higher data plans, adding that the utilities commission should be more flexible.

“Why should Californians get less when they deserve more?” he asked.

Other consumer groups don’t necessarily agree. Vinhcent Le, a lawyer at the Oakland-based Greenlining Institute, said advocates’ views are more nuanced. They’re considering not just consumers of Lifeline services, but other consumers who are paying the surcharges.

“It wasn’t an easy decision to support” the commission, he said. “It always looks bad when you can’t apply more subsidies … But I think what the CPUC is trying to do here — and why we supported it — is to create a pathway where you can use your discounts more effectively and make sure there’s funding so we don’t have to increase surcharges on California consumers.”

And if Lifeline funds are used more efficiently, he said, perhaps California could lower its surcharge on its other consumers.

The commission is set to vote on the issue September 15.

CalMatters is a nonprofit, nonpartisan media venture explaining California policies and politics.