All NY Phone Customers Lose Big $$ Due to PSC Lifeline Policies

You’ve seen the numbers: Lifeline discount telephone service subscribership in New York State has plummeted from a peak of over 756,000 in 1996 to about 300,000 today. Meanwhile the number of households receiving Supplemental Nutrition Assistance Program benefits (Food Stamps) across the state – one of several categorical eligibility qualifications for Lifeline – now exceeds 1.1 million

Why are these two statistics charting in opposite directions? What is the impact on New Yorkers?

Background
Lifeline is intended to promote the universal service goal of a phone in every home at a cost that does not create hardship. It can be a lifesaver for needy families. Every household which either participates in or is eligible for any of numerous need-based assistance programs is automatically qualified for Lifeline. In New York, these programs include:

  • Supplemental Nutrition Assistance Program (“SNAP”) Benefits (formerly Food Stamps)
  • Low Income Home Energy Assistance Program (“LIHEAP”)
  • Medicaid
  • Safety Net Assistance
  • Supplemental Security Income (“SSI”)
  • Temporary Assistance for Needy Families (“TANF”)
  • Veterans Disability Pension
  • Veterans Surviving Spouse Pension

In addition, customers are eligible for Lifeline in New York if they earn up to 135 percent of the Federal Poverty Guidelines.

Verizon offers two flavors of Lifeline. Basic Lifeline costs $1 a month (plus sales taxes) and every local call costs about 10 cents. Flat Rate Lifeline costs between $12 and $14 a month (plus sales taxes) and includes unlimited local calls. The savings can be significant over non-Lifeline rates, especially considering most taxes and surcharges do not apply to Lifeline service, including the $6.50 Subscriber Line Charge. As a result, Lifeline customers can save as much as $20 a month with Lifeline.

Between federal and state matching programs, Lifeline providers are reimbursed for virtually the entire difference between what a Lifeline customer pays and the regular tariffed costs of service. With the significant benefits for Lifeline customers – combined with the telephone companies being made whole – Lifeline looks like (and should be) a win-win situation.

So, why are the numbers down? What is really being lost when so many eligible customers are not receiving Lifeline benefits?

It appears that the primary culprit is the New York State Public Service Commission (“PSC”).

Over the years the PSC has passed up many opportunities to expand Lifeline eligibility criteria, advocate for increased participation to keep federal universal service dollars from leaving New York for other states, and to work with the providers and the Office of Temporary and Disability Assistance to make automatic enrollment work better, but has chosen to sit on the sidelines. As a result, everyone loses.

The Impact on All New Yorkers
Lifeline is supported in two ways: All telephone customers pay a federal Universal Service Fund (“USF”) charge on their long distance service and this money is pooled together to support a variety of universal service issues, including Lifeline. The federally collected funds are managed by the Universal Service Administrative Company, under direction of the FCC. New York has its own state fund, known as the Targeted Accessibility Fund, which is paid for by the telephone companies out of their intrastate revenues, under direction of the PSC. According to the FCC’s most recent Universal Service Monitoring Report (with 2007 data), New Yorkers contributed $445,600,000 into the federal USF in 2007, but New York telephone companies only received $248,838,000 in return ($36 million for Lifeline). The difference – nearly half of what is contributed – goes off to help fund programs in other states, most notably Alaska, Kansas, Louisiana, Mississippi, and Oklahoma. With an increase in the number of Lifeline customers in New York, more of this money would stay in New York, with little (if any) impact on the contribution level.

The Impact on Low Income Families
A savings of $15 to $20 a month for a low income family is a significant amount. This can help pay other utility bills, medical expenses, and even the rent. The policies of the PSC which have let the number of Lifeline customers drop are unnecessarily costing low income families an additional $180 to $240 each year for their phone service.

Eligibility Criteria
The limits on Lifeline eligibility have been a concern for PULP since at least as far back as 2002. That year, in the PSC Order establishing Verizon’s incentive plan, the Commission succinctly summarized PULP’s concerns about Lifeline eligibility and the need for its expansion

PULP expresses concern about the Joint Proposal’s failure to address difficulties now being experienced in the telephone Lifeline program. PULP explains that although the New York telephone Lifeline program is “robust” in comparison to those in other states, enrollment has declined precipitously over the last five years. PULP attributes the decline to the fact that Lifeline enrollment is tied to eligibility for other low-income assistance programs and that as eligibility for those programs declines, so does access to Lifeline. To respond to the problem, PULP proposes that three programs be added to the list of those creating telephone Lifeline eligibility: The National Free/Reduced School Lunch Program, The State Earned Income Tax Credit Program, and the Child Health Plus Program.

PULP suggests that each of these programs encompasses the same income levels as the existing programs and that they are unlikely to see significant shifts in enrollment resulting from welfare reform. PULP asserts as well that if these additional customers were able to access the telephone Lifeline program, virtually all of the increased cost would be paid by the federal government through the Federal Universal Service Fund and the State Targeted Assistance Fund. As a result of those arrangements, any revenue gain to Verizon associated with the customer moving from Lifeline to non-Lifeline basic service would be offset by revenue losses resulting from reduced federal or state support money.

In its Order, the PSC opted to do nothing:

The Federal-State Joint Board on Universal Service is currently conducting a proceeding to determine what, if any, changes should be made in the federal low-income program eligibility. We will await the outcome of that review before addressing whether additional changes to the New York State program are advisable.

Now, seven years later, even though the National School Lunch Program’s Free Lunch Program has been added to the FCC’s program eligibility list (which applies to states which have not chosen to set their own criteria), the PSC has refused to act. Not surprisingly, subscribership in New York continues to plummet.

PULP brought up the need to boost Lifeline enrollment again in 2005 during the PSC’s “Comp III” proceeding which looked at streamlining regulatory requirements for telephone companies in light of increasing competition for new providers, such as wireless and Voice over Internet Protocol. Once again, PULP proposed expansion of the eligibility criteria – especially in light of welfare reform which removed thousands of names from the TANF rolls — but the PSC was unmoved again. The Commission wrote in its 2006 Comp III Policy Statement that:

While we would certainly share PULP’s concern if the magnitude of such a decline could be confirmed and its cause identified, we question whether the decline cited actually reflects a change in New Yorkers’ access to telephone services, a change in the method by which the data were collected, or some other data anomaly.

The inability of the PSC to add to the eligibility criteria has brought the Legislature to act. A bill, A4967, is currently pending and would do what the PSC could have done all along – codify the eligibility criteria noted above and add the National School Lunch Program, the State Earned Income Tax Credit, and Child Health Plus. The bill passed the Assembly on May 6th and is awaiting action in the state Senate.

Action in Other States
Interestingly enough, the same year that the PSC decided to wait on expanding Lifeline eligibility, 2002, California’s Commission made it a goal to place 100 percent of eligible Lifeline customers on the service. So, now, while New York’s numbers continue to decline, California has 2.7 million Lifeline customers (this, despite the fact that California has slightly fewer SNAP households than New York and includes the National School Lunch Program and Public Housing Assistance as eligible programs. Coincidence?

We could look for details on Lifeline and LinkUp assistance at the New York PSC’s Lifeline webpage — but there isn’t one.

In fact, about all the consumer information you’ll find by searching the NY PSC website is an “Options for Telephone Consumers” page, which offers a one sentence description of Lifeline.

Meanwhile, California not only has detailed information about its Lifeline program on its website it has a “Lifeline Administrator” on staff dedicated to providing Lifeline assistance to all who qualify.

It is a fair comparison to look at New York and California’s records on Lifeline enrollment, even though California has a much larger population base. First of all, the percentage of population at 135 percent of the federal poverty level (one of the criteria for Lifeline enrollment) is virtually identical between the states. As mentioned, the number of households on Food Stamps is similar as well. Why, then, according to the FCC’s annual Universal Service Monitoring Report (Table 1.12) did New York Lifeline service providers receive just over $36 million in 2007 from the federal USF while California providers received over $272 million? New York did receive over $54 million in 2003, but this number has dropped every year since then along with the number of Lifeline subscribers.

Meanwhile, Texas, which has a similar population to New York and also a similar poverty level , has seen its Lifeline subscribership steadily grow during the same time period (from 193,444 in 1997 to 777,059 in 2007). In addition, the amount of money going to its Lifeline providers has jumped from $45.6 million in 2002 to $89.4 million in 2007. Also, the differential between what Texas pays out to its Lifeline providers and what it receives from subscribers in the state is actually positive – more money (about $35 million) flowed into the state in 2007, the same year New York saw nearly $197 million of universal service charges flow out. The Texas Public Utilities Commission web site also includes much more detailed information on Lifeline than New York . In addition, Texas has expanded its eligibility criteria to include Child Health Plus and Public Housing assistance. Yet another coincidence.?

Automatic Enrollment
There is an automatic Lifeline enrollment process in place for customers in Verizon’s service territory, which is a confidential computerized matching program to enroll and verify eligibility of households . However, hundreds of thousands of eligible households have still fallen through the cracks and are not on Lifeline. There are several reasons why someone on Food Stamps, for example, would not be enrolled in Lifeline: There may be bugs in the computer system which does the matching and the Food Stamp recipient may not know about Lifeline. The customer may want to subscribe to a service (including toll calls and voice mail, caller ID, etc.), but Verizon does not permit Lifeline customers to subscribe to service packages. They may already subscribe to cable TV and find the bundled savings with voice service to be sufficient when compared to the non-discounted Verizon service. Keep in mind that cable television companies do not offer Lifeline and, at the moment, do not contribute to TAF. The PSC has an obligation to work with telephone companies and other agencies to ensure the automatic enrollment process – a program that it endorses – works properly and efficiently to enroll eligible customers in the Lifeline assistance programs.

No matter how you look at it, all New Yorkers are spending money unnecessarily to support universal service in other states even as fewer New Yorkers receive this important benefit. This costs low income households money that they don’t have or that they need to spend on other essentials. Why is this happening? Because the PSC is letting it happen and has been for many years.

Lou Manuta

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