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

Sunday, September 11, 2022 | Sacramento, CA
AP Photo/File

In this Sept. 16, 2017, file photo, a person uses a smart phone in Chicago.

AP Photo/File

By Lil Kalish, CalMatters

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. 

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