How to Expand Access to Wireless and Broadband

Though there are leadership changes pending at the Federal Communications Commission, the agency will no doubt continue to focus on providing better telecommunications access to underserved communities -- especially in regard to wireless phones and broadband Internet.

The best way to accomplish these goals, of course, is through vibrant free markets that encourage innovation and competition and increase affordability. Lawmakers have often preferred different principles, opting for government programs that start with the best of intentions but all too often fall short of the mark.

In the world of wireless phones, there has recently been some attention paid to the federal Lifeline program. Lifeline is aimed at giving taxpayer-subsidized discounts to consumers who live at or below 135 percent of the federal poverty level or are eligible for various other federal poverty programs.

Some on the left have lauded the Lifeline program as “money well spent,” while others have attacked some of the wireless service providers that participate in the program, especially TracFone, the fifth largest wireless provider. TracFone’s target market is lower-income consumers, including many veterans, elderly, and minorities, and it received about 28 percent of the funds in the Lifeline program in 2011, the last year for which data is available.

When one digs into the objections to TracFone, it becomes clear that the segment of the Left attacking the company is doing so for reasons that have nothing to do with the Lifeline program itself, or even anything affecting U.S. consumers, but rather with concerns over the pricing and other business practices of its owner's other companies in Mexico. Critics on the left have not targeted any of the other large telecommunication companies that participate in the Lifeline program.

While pricing in the Mexican wireless market is an issue for another day, the attacks unintentionally illuminate a basic problem of programs like Lifeline: Too often, it is big-government policies -- not free market dynamics -- that pave a road for big business interests, with both taxpayers and consumers on the sideline.

In 2012, the FCC spent $2.2 billion in taxpayer money on the Lifeline program. Prices for mobile-phone service have steadily declined in recent years, while costs for the Lifeline program have increased 266 percent since 2008 and grown almost six-fold since 1998. Reports of waste and fraud in the program have also increased -- with the highlight being the minor "Obamaphone" political storm that developed during last fall's presidential campaign, when a video clip of a woman in Ohio excitedly giving the president credit for buying her a phone went viral.
 
To its credit, the FCC has imposed independent-audit requirements on carriers receiving more than $5 million a year in Lifeline funding -- a policy actually modeled after TracFone's own internal audit controls. The FCC says its efforts will save $2 billion over the next three years.
 
In terms of reforming the current system and using the free market to expand telecommunications access for the poor, cutting waste is a start. Targeting the vast amount of regulatory red tape would also be beneficial. Think of what consumers in the wireless market paid ten or 20 years ago, when, in addition to relying on more primitive technology, the telecommunications industry suffered from much higher regulatory costs. In fact, the mere existence of programs like Lifeline depends on products that evolved in a freer and more vibrant market.

Until policymakers allow market forces to fill more fully the role of providing connectivity for all consumers, including those in lower-income communities, an outdated reliance on bureaucracy will continue to guarantee that costs, waste, and inefficiency will negatively affect all American taxpayers and consumers.

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