Conference Agenda

The Federal Communications Commission (FCC) has proposed reforms that would substantially tighten eligibility requirements under the Universal Service Fund (USF) Lifeline program. The FCC proposes treating Lifeline as a federal public benefit limited to U.S. citizens and qualified aliens, with enhanced verification requirements (e.g., full Social Security number collection and use of federal verification systems).[1] The FCC is also proposing codifying requirements that providers must verify a household doesn’t already receive Lifeline support before enrolling them, and also seeking comment on mechanisms to remove support for subscribers not actively using service. The NPRM is motivated in part by concerns about waste, fraud, and abuse in Lifeline administration, and aims to balance protecting benefits for eligible consumers with strengthening program accountability.

While efforts to reduce waste, fraud, and abuse in the Lifeline program are both appropriate and necessary to preserve public trust and fiscal discipline, there is a risk that overly stringent eligibility, verification, or usage requirements could unintentionally suppress broadband adoption among the most vulnerable households. The FCC contends that these changes are intended to eliminate financial waste in the Lifeline program. In a recent news release, the agency referenced a January internal investigation finding that approximately $10.5 million was improperly disbursed between 2020 and 2025, including funds credited to deceased individuals or issued in duplicate. Even so, that amount represents less than 1% of Lifeline’s annual budget, which was set at $2.9 billion for 2026 alone.[2]

Voice and broadband availability is a prerequisite to closing the digital divide, but once available adoption remains the final hurdle. Lifeline has historically provided targeted subsidies to low-income households to support broadband and voice service adoption. Changes to the complexity of enrolling in the program will affect household adoption decisions and ultimately the digital divide. Current data shows that in 2023, only about 21% of eligible households were enrolled in Lifeline (e.g., ~8.1 million enrolled out of ~38.6 million eligible).[3]

Low-income consumers tend to be highly price sensitive and face greater administrative burdens; even modest increases in compliance costs or uncertainty can reduce participation. From prior work and available evidence, we know that the complexity of the verification process poses a significant barrier to enrolling in low-income internet subsidy programs. If the FCC reforms increase this complexity, there can be significant decreases in enrolment leading to widening the digital divide. In an economy rapidly integrating AI tools and digital platforms, reduced connectivity among disadvantaged populations risks exacerbating inequality, slowing human capital development, and ultimately weakening U.S. competitiveness.

Traditional analyses of Lifeline reforms often rely on static participation counts or budgetary savings calculations. However, increased cost of compliance and administrative uncertainty may generate broader equilibrium effects through reduced consumer and provider participation in low-income markets. In this paper, we will evaluate the full economic impact of the FCC’s proposed reforms using BEYOND, Brattle’s structural general equilibrium model.

The proposed FCC reforms will be introduced into BEYOND as (1) tightening of compliance thresholds that increases the cost of participation in the Lifeline program, (2) reduction in ‘genuine’ enrolment due to the one subscription per address rule (as there may be multiple low-income families in the sane address), and (3) reduction in enrolment due to the citizenship rule. The model will simulate new equilibrium outcomes relative to a baseline calibrated to current market conditions.

Our model will quantify both the static and dynamic effects of higher enrollment complexity and usage constraints. On the static margin, higher per-household compliance costs act like a tax on program participation and discourage take-up. On the dynamic margin, lower broadband access reduces returns to education and labor-market productivity by constraining access to online coursework, job applications, and remote work. Aggregating these effects in general equilibrium allows us to capture secondary feedbacks — for example, reduced labor supply and earnings lower demand for goods and services, which reduces employment and tax revenue, further amplifying welfare losses in low-income communities. We expect to show that the social and private losses from reduced broadband adoption — lower expected lifetime earnings, reductions in educational attainment, increased search frictions in the labor market, and lost tax revenue — substantially exceed the program savings from eliminating inefficiencies such as duplicate enrollments or payments to deceased individuals. In short, the modest fiscal savings the FCC attributes to improved enforcement are dwarfed by the broader, long-run economic costs that result from lower Lifeline participation and constrained broadband access among the poorest households.

[1] https://docs.fcc.gov/public/attachments/DOC-418282A1.pdf

[2] https://www.cabletv.com/news/fcc-lifeline-changes-low-income-internet

[3] https://www.usac.org/lifeline/resources/program-data/?utm_source=chatgpt.com#Participation