NOTICES

Lifeline and Link-Up Programs; Doc. No. M-00051871

[35 Pa.B. 3377]

Public Meeting held
May 19, 2005

Commissioners Present: Wendell F. Holland, Chairperson; Robert K. Bloom, Vice Chairperson; Kim Pizzingrilli

Final Order

By the Commission:

   By this Final Order, we adopt participation in the National School Free Lunch Program and income-based criterion at or below 135% of the Federal Poverty Guidelines as additional eligibility criteria for Pennsylvania's Lifeline 150 and Link-Up programs in order to make our programs consistent with the Federal Communication Commission's (FCC) default Lifeline/Link-Up programs, as announced on April 29, 2004, Report and Order and Further Notice of Proposed Rulemaking In the Matter of Lifeline and Link-Up, at CC Docket No. 04-87, WC Docket No. 03-109. We also modify the Lifeline 150 program and rename it Lifeline 135, since the income eligibility level has changed.

Procedural History

   In 1984, the FCC established a Lifeline program to promote universal telephone service by providing low-income consumers with discounts on the monthly cost of dial tone service. By 1987, the FCC implemented Link-Up America (Link-Up) to help low-income households pay phone connection charges. With the passage of the Telecommunications Act of 1996 (TA-96), the FCC expanded its rules¹ so that Federal Lifeline service could be provided to low-income consumers in every state regardless of whether a state provided related support; under the amended rules, telephone companies designated as eligible telecommunications carriers (ETCs) must provide Lifeline service to eligible consumers and receive federal universal service funding support for doing so.

   Until November 30, 2004, the effective date of Act 183,² all local exchange carriers (LECs) operating in the Commonwealth were required to provide Lifeline service and to have a Lifeline plan and rates filed in their tariff. On June 28, 1994, the Commission first ordered Bell Atlantic--Pennsylvania, Inc. (BA-PA) (now Verizon PA), to submit for approval a revenue-neutral Lifeline program and a Universal Telephone Assistance Program (UTAP). On August 3, 1995, the Commission granted BA-PA's petition and ratified a Lifeline Settlement Agreement.³ BA-PA's Lifeline program was implemented in 1996 and was the first such program in the Commonwealth. In 1997, BA-PA revised its Lifeline program in Docket No. R-00974153, Order entered November 21, 1997, so Lifeline customers had a choice in local service options. The order also increased the customer discount. Additionally, BA-PA requested that the Commission designate BA-PA as an ETC so that it could receive federal Universal Service Fund (USF) support. Given the federal initiative, the Commission subsequently, at I-00940035, on July 31, 1997, directed each LEC to file a Lifeline plan to become effective January 1, 1998. On September 30, 1997 the Pennsylvania Telephone Association (PTA) filed a petition for the Approval of Lifeline Service Plan on behalf of its member companies. The PTA companies' Lifeline eligibility requirements mirrored the BA-PA plan except that the BA-PA Lifeline program provided Lifeline customers with a larger credit for monthly service. By Order entered November 21, 1997⁴ the Commission approved the PTA plans which led to the implementation of the statewide Lifeline program.

   Lifeline programs were addressed in the Global Order.⁵ Three orders approving the later-filed Lifeline/Link-Up tariffs of BA-PA, GTE North, and the PTA, respectively, were addressed at the Global Order dockets and were entered August 17, 2000.⁶ These orders approved the tariff filings and defined the program eligibility requirements further by adding the State Blind Pension program and the Temporary Assistance for Needy Families Program (TANF) to the list of eligible social assistance programs.

   Pennsylvania's telephone current Universal Service Programs are as follows:

   Lifeline--Verizon PA⁷ and Verizon North are the only companies offering this. It provides qualified customers with a credit (currently between $11.55 and $12.00)⁸ towards their basic monthly phone charges with the option of choosing either the local area standard usage service or the local area unlimited usage service. Eligible customers may qualify if they have incomes at or below 100% Federal Poverty Income Level Guidelines (FPG) or receive General Assistance (GA), Supplemental Security Income (SSI), or Temporary Assistance for Needy Families (TANF). This program did not permit customers to subscribe to Call Waiting or other optional services. However, customers were permitted to subscribe to Call Trace Service at regular cost under special circumstances.

   Lifeline 150--All LECs operating in Pennsylvania carry Lifeline 150 in their tariffs. It provides qualified customers with a credit (currently between $7.80 and 8.25)⁹ towards their basic monthly phone charges with the option of choosing either the local area standard usage service or the local area unlimited usage service. Eligible customers may qualify if they have incomes at or below 150% of the FPG and participate in certain assistance programs.¹⁰ Further, a customer was restricted to one line with either local area standard usage package or local area unlimited usage package, and one optional service such as Call Waiting, Caller ID, home voice mail, etc., at regular charges.

   On April 29, 2004, the FCC released a Report and Order and Further Notice of Proposed Rulemaking In the Matter of Lifeline and Link-Up, at CC Docket No. 04-87, WC Docket No. 03-109. The FCC modified its rules (most of which became effective July 22, 2004), so as to increase the national telephone penetration rate above the current level of 94.7% and make phone service affordable to more low-income households. The order expanded the federal default eligibility criteria so as to include an income-based criterion of 135% of the Federal Poverty Guidelines (FPG)¹¹ and added the National School Lunch Program's free lunch program (NSL)¹² as a qualifying social assistance program. In prior years, consumers whose state followed the federal program had to participate in one of the qualifying programs to qualify for Lifeline. Now low-income consumers can qualify based on household income alone. Thus, more households nationwide arguably could qualify for the federal default program.

   In order to combat fraud, the FCC added a proof of eligibility provision that places an additional administrative requirement on the LECs to get their customers to certify in writing, under oath, that they meet the eligibility requirements for household income or participation in qualifying social assistance programs.

   On September 3, 2004, this Commission entered a Tentative Opinion and Order at Docket No. P-00951005¹³ that addressed the Settlement Agreement and Further Settlement Agreement regarding the Petition of the Frontier Companies for approval under Chapter 30 of the Public Utility Code for Approval of an Alternative Regulation and Network Modernization Plan (September 3, 2004 Order). The September 3, 2004 Order modified one aspect of the Further Settlement Agreement by rejecting the provision allowing customers who receive the Lifeline discount to purchase up to two vertical services on the basis that it was inconsistent with the Commission's conclusion in the Global Order on this issue. Ordering Paragraph No. 8 of the September 3, 2004 Order also directed Commission staff to submit a recommendation to the Commission within 60 days of the entry date of that Order regarding how the Pennsylvania Lifeline program should be structured as a result of the recent FCC Lifeline Order.

   On November 19, 2004, Pennsylvania's legislature passed House Bill 30--an amended version of the original Chapter 30 provisions concerning alternative rate regulation for the telecommunications industry and network modernization plans. The Governor signed House Bill 30 into law as Act 183, with an effective date of December 1, 2004. Among other things, Act 183 expressly mandates significant changes to Pennsylvania's universal service programs. Specifically, the provisions outlined in Section 3019(f) state the following:

§ 3019(f) Lifeline Service.--

(1)  All eligible telecommunications carriers certificated to provide local exchange telecommunications service shall provide lifeline service to all eligible telecommunications customers who subscribe to such service.

(2)  All eligible telecommunications customers who subscribe to lifeline service shall be permitted to subscribe to any number of other eligible telecommunications carrier telecommunications services at the tariffed rates for such services.

(3)  Whenever a prospective customer seeks to subscribe to local exchange telecommunications service from an eligible telecommunications carrier, the carrier shall explicitly advise the customer of the availability of lifeline service and shall make reasonable efforts where appropriate to determine whether the customer qualifies for such service and, if so, whether the customer wishes to subscribe to the service.

(4)  Eligible telecommunications carriers shall inform existing customers of the availability of lifeline service twice annually by bill insert or message. The notice shall be conspicuous and shall provide appropriate eligibility, benefits and contact information for customers who wish to learn of the lifeline service subscription requirements.

(5)  When a person enrolls in a low-income program administered by the department of public welfare that qualifies the person for lifeline service, the department of public welfare shall automatically notify that person at the time of enrollment of his or her eligibility for lifeline service. This notification also shall provide information about lifeline service including a telephone number of and lifeline subscription form for the person's current eligible telecommunications carrier or, if the person does not have telephone service, telephone numbers of eligible telecommunications carriers serving the person's area, which the person can call to obtain lifeline service. Eligible telecommunications carriers shall provide the department of public welfare with lifeline service descriptions and subscription forms, contact telephone numbers, and a listing of the geographic area or areas they serve, for use by the department of public welfare in providing the notifications required by this paragraph.

(6)  No eligible telecommunications carrier shall be required to provide after the effective date of this section any new lifeline service discount that is not fully subsidized by the federal universal service fund.

   On March 8, 2005, the Commission entered a Tentative Order proposing to expand Lifeline 150 and Link-Up program eligibility requirements consistent with the provisions of Act 183. Comments from the Pennsylvania Telephone Association (PTA),¹⁴ the Office of Consumer Advocate (OCA) and Verizon were filed with the Commission.

Discussion

PTA's Comments

   The PTA comments that the Commission should delay implementation of the 135% income eligibility standard. PTA claims that the FCC reduced its standard from 150% to 135%. Thus, the PTA proposes maintaining the 150% income standard in light of the FCC's statement that it will explore further whether to adopt a 150% income standard. Requiring ETCs to adopt the more restrictive 135% standard now while the possibility remains that those companies will be required to return to the 150% standard in the near future will create an unnecessary administrative burden. Further, PTA argues that consumers will benefit as the current standard is less restrictive.

   We disagree with PTA regarding this issue. The current standard of 150% Federal Poverty Guidelines and participation in one of a list of approved social assistance programs is more restrictive than just meeting a 135% of Federal Poverty Guidelines household income standard. Not all consumers with household incomes of 150% FPG or less are also enrolled in a social assistance program. Whereas, by changing the two-prong test to a single prong test, the consumer need only meet either the income standard or the participation in a social assistance program standard, and not both. To date, there has been no final decision from the FCC regarding expanding its default Lifeline/Link-Up program income qualifying criteria from 135% to 150%. In fact, this Commission does not believe PTA's statement that the FCC reduced its income qualifying criteria from 150% to 135% is inaccurate. There was previously no federal income requirement--only a requirement for participation in social assistance programs. Should the FCC decide in the future to expand the qualification from 135% to 150%, this Commission will reevaluate its own Lifeline/Link-Up programs.

   PTA also comments that it does not oppose including the National School Lunch Program's free school lunch program as a qualifying program for Lifeline eligibility so long as the customer is responsible for providing the ETC with verification of enrollment as this program is not overseen by the Department of Public Welfare. The PTA believes the companies should be permitted to recover the additional costs incurred in implementing this addition. PTA asserts such recovery could be through the exogenous event factor recognized in the companies' price cap formula.

   Although there are approximately 500,000 students in Pennsylvania who currently qualify for free school lunches, this Commission does not know exactly how that translates into number of households in Pennsylvania that qualify. Further, it is likely that if one or more children in a household are receiving their school lunches at no cost, that household's income is below 135% FPG and that household receives social assistance in the form of food stamps, LIHEAP, Medicaid, TANF, SSI, or some other approved program.¹⁵ Therefore, since there is likely an overlap of program participation, the administrative costs incurred by the companies as a result of the addition of NSL do not seem on the surface to be that overly burdensome as many households can already qualify with the DPW database check.

   Any ILEC can of course petition for recovery through price stability mechanisms or a rate increase, but would have to be able to demonstrate how this additional cost qualifies as an exogenous event within the meaning of its Chapter 30 plan. Further, we recognize there is as of yet no national database with household information regarding the children qualifying and participating in the National School Lunch free lunch program. Thus, we are willing to accept as sufficient evidence of participation in the program, a copy of the letter from the program administrator to the household identifying the child's name and address and the year for which the child qualifies. The address would have to match the address of the household requesting the Lifeline/Link-Up credit. There need not be separate verification through the Pennsylvania Department of Education or a national database at this time.

   Finally, PTA comments that it does not oppose changing the language of the Global Order from ''and'' to ''or'' provided that those customers applying for Lifeline service pursuant to the income criteria bear responsibility for documentation of their income. PTA claims that income-based eligibility cannot be verified through any state-maintained database. The applicants' eligibility, therefore, must be confirmed by the customers themselves through verified forms detailing their income. According to the PTA, ETCs do not have the resources or inclination to continuously follow-up with customers enrolled in Lifeline, and requiring ETCs to do so would cause unreasonable administrative burden. PTA avers that any obligation for providing or updating the relevant information in a timely manner should be borne by the customers themselves. In order to deter fraud, PTA argues that customers seeking to enroll on the basis of income alone should be required to submit their income information using an independently verified format, such as a state or federal income tax return.

   Currently, Verizon uses the Pennsylvania Department of Revenue (DOR) to separately check if the customer's income meets the 150% FPG standard if the customer first is not found to be on one of the qualifying social assistance programs according to the Department of Public Welfare's (DPW) database. The DOR charges $5.00 per inquiry as it is a manual task and is not automated. DOR reports that in 2003 there were approximately 2900 inquiries, dropping to roughly 2000 in 2004, and in 2005, so far there have been 260 inquiries. Of these statistics, more than half of the inquiries are from Verizon. So, the expense may likely be no more than $10,000--$15,000 per year for Verizon, and for the other ETCs, probably substantially less. This Commission finds that the companies ought to use the DPW's database first to establish if there is acceptable social assistance program participation. If the household qualifies, then no further investigation or verification need be done. The household qualifies based on program participation or income verification. If the household does not appear to be enrolled in one of the approved social assistance programs, then 135% FPG income or less may be verified through either copies of written state or federal income tax returns for the prior year, or the carrier may contact DOR and pay the nominal fee to have the customer's household's income verified. We agree with PTA that self-certification without some form of reasonable independent verification is suspect for fraudulent abuse and will not be acceptable in Pennsylvania as a means for qualifying for our Lifeline/Link-Up programs.

   Finally, PTA asserts that it does not oppose the Commission's proposed annual recertification requirement as long as no additional recertification obligations exceed those put in place by the FCC. We agree with the PTA regarding this issue, and are satisfied that the statistically valid sampling method imposed by the FCC is sufficient and will be adopted here in Pennsylvania, with the exception that the FCC has a deadline of June 22, 2005 for the sampling to be complete, and we will offer jurisdictional LECs an additional six months until December 31, 2005 to submit their samples to the Universal Service Administration Company (USAC). The sample may be verified through DPW, DOR or LIHEAP's separate program.

Verizon's Comments

   Verizon Pennsylvania Inc. and Verizon North Inc. (collectively ''Verizon'') commented first that the Commission should permit at least the incremental costs of administering the expanded Lifeline 135 program to be recovered by Verizon and other ETCs. Verizon predicts that the proposed changes in the Tentative Order will likely result in tens of thousands of Verizon customers in the 135% and under group applying for Lifeline service, which will likely exponentially increase Verizon's costs for the Department of Revenue's certification of applicants' income eligibility based on tax returns as well as Verizon's internal administrative costs for the manual handling of applications. Accordingly, Verizon requests we allow Verizon and other ETCs to track and recover at least the additional administrative costs incurred in connection with the Lifeline programs. Verizon requests that monies set aside for Lifeline purposes from the 2004/2005 Price Change Opportunity should be available to offset the addition administrative costs.

   It is premature to estimate how much more administrative costs Verizon and the other ETCs will incur as a result of the impact of Act 183, which eliminated the restriction on vertical services from the prior Lifeline 150 program, and other proposed changes outlined in our Tentative Order. Currently, Verizon does not do a cross-check on income even though the current Global Order says ''150% FPG income and participation in an approved social assistance program.'' Verizon infers that the customers' income must be at or less than 150% FPG for him or her to be receiving such social assistance. This is logical and it saves Verizon the unnecessary cost of a separate $5 fee per inquiry from DOR. If the customer is listed as an approved social assistance program participant, the customer is accepted into the Lifeline/Link-Up programs. If the customer is not listed as a social assistance program participant, Verizon searches for LIHEAP qualification, and if that doesn't confirm eligibility, Verizon inquires at the DPW. The DPW inquiry does not cost Verizon anything, and DPW has automated its database. The search is quick, efficient and not costly. DOR costs $5 per inquiry because it involves a manual search on the part of DOR employees and DOR has no plans to automate its system especially since the number of inquiries has been decreasing over the years. The ETCs are permitted to track costs associated with administering the Lifeline programs, but we are not prepared at this point to allocate any 2004/2005 PCO monies towards covering any additional administrative costs for Verizon. Verizon may make this type of request in a future PCO filing if it has evidence of substantial additional administrative costs in implementing the new program.

   Second, Verizon argues that Lifeline eligibility should not be expanded to include the National School Lunch Program as a criterion until compliance with the criterion is verifiable. We will work with the Pennsylvania Department of Education to determine if a state-wide data base can be made available to the phone carriers for independent verification. However, we are satisfied that at this time, a written document showing the name of the child, his or her address, and the year for which he/she qualifies for free school lunches is sufficient to qualify for the Lifeline/Link Up credit as long as the address matches the household address of the customer seeking the credit.

   Finally, Verizon argues that the implementation period for the Lifeline 135 eligibility changes should be longer than 30 days. Verizon argues the FCC provided default states a full year after the date its Lifeline Order was published in the Federal Register to implement the same eligibility changes as the Commission proposes to make final here. Verizon requests a 6-month delay to allow Verizon and other ETCs needed time to gear up to handle the expected heavy volume of additional Lifeline applicants and time to get a separate National School Free Lunch program verification system set up. Six months delay in implementation is a little long given that LECs have been on notice of possible changes since the FCC entered its April 29, 2004 Lifeline Order, and the Commission subsequently entered its Tentative Order in March, 2005, adopting the federal default program requirements. We will grant the ETCs four months from the date of entry of this Order to begin implementation of the new eligibility standards for Lifeline/Link-Up programs in Pennsylvania. Four months is sufficient to draft tariff supplements, form applications for the Lifeline/Link-Up programs, and brochures. Further, the LECs have until December 31, 2005, to do the verification of existing customers through sampling. We will not delay implementation pending the establishment of an independent National School Lunch free lunch program verification system since we do not know definitely when that will occur, and are not immediately requiring independent verification of customer documentation of participation in the National School Lunch free lunch program.

OCA's Comments

   OCA filed comments in support of the Tentative Order. OCA supports adding the National School Lunch free lunch program for the same reasons as the FCC gave in its Lifeline Order.

The Impact of Act 183

   Section 3019(f)(1) requires all ETCs¹⁶ to provide Lifeline service to all eligible customers. The Commission's Global Order required all LECs (including non-ETCs) to file Lifeline tariffs and provide this service to eligible customers. The current pool of ETCs consists of all 37 ILECs and three CLECs (MCI Metro Access Transmission Services, Service Electric Telephone, Inc., and RCN Telecom Services of Pa., Inc.) and two wireless companies (Nextel Partners, Inc. and Sprint PCS). In accordance with Section 3019(f)(1), CLECs that are not ETCs are no longer required to provide Lifeline service. The FCC does not permit pure CLEC resellers to seek ETC status. However, these companies are permitted to offer Lifeline by purchasing a discounted Lifeline service from an ILEC such as Verizon. CLECs that are facilities-based may seek ETC status from this Commission. Non-ETC CLECs¹⁷ reported that 587 of their customers received Lifeline 150 service in 2003. As of December 31, 2003 the non-ETC CLECs had 489 Lifeline customers still enrolled in the Lifeline 150 program. The majority of these Lifeline customers were divided between two large CLECs, Comcast (329) and CTSI (140). The remaining 20 Lifeline customers were split among four smaller CLECs

   The Commission encourages all CLECs to continue offering Lifeline and Link-Up services and to revise their Lifeline offering to comply with the expanded program set forth in this Order. As per the Global Order, Verizon will continue to provide CLEC resellers discounted rates for Lifeline services. This means that CLEC resellers may continue to provide Lifeline and Link-Up services. The Commission also encourages facilities-based CLECs to seek ETC status so they may provide Lifeline and Link-Up services and be reimbursed from the federal universal service fund. CLECs that choose to remove Lifeline and/or Link-Up provisions from their tariffs must provide their customers with notice. This notice will advise customers that the CLEC will no longer offer Lifeline or Link-Up service. In addition, the notice must provide customers with details on how to migrate their local service to an ETC LEC operating in the same area.

   Companies' outreach efforts have generally been limited to sending out an annual bill insert, providing information in their directories, and in some cases, developing their own Lifeline brochures. Generally, Act 183 directs ETCs to expand their outreach efforts. Section 3019(f)(4) states that ETCs shall inform existing customers of the availability of Lifeline service twice annually by bill insert or message. Under Section 3019(f)(3) whenever a prospective customer seeks to subscribe to local exchange telecommunications service from an ETC, the carrier shall explicitly advise the customer of the availability of Lifeline service and shall make reasonable efforts where appropriate to determine whether the customer qualifies for such service and, if so, whether the customer wishes to subscribe to the service. Automatic notification is also discussed in Act 183. Section 3019(f)(5), states that the DPW shall automatically notify people about Lifeline service when they enroll for qualifying low-income programs administered by DPW.

   Pennsylvania's current Lifeline 150 program restricts the purchase of vertical services to one service. Under Section 3019(f)(2) of Act 183, ''[a]ll eligible telecommunications customers who subscribe to Lifeline service shall be permitted to subscribe to any number of other eligible telecommunications carrier telecommunications services at the tariffed rates for such services.'' Therefore, the prior restriction to one vertical service is now lifted, and there are no restrictions on the number of vertical services a Lifeline customer can choose.

Default vs. Non-Default State

   At the time the Global Order was entered in September 1999, the Commission determined Pennsylvania was a ''default'' state based on the language then present in 47 CFR § 54.409 of the FCC's regulations. A non-default State mandates its own Lifeline/Link-Up programs and there are contributions other than federal universal service fund contributions being made toward the Lifeline/Link-Up credit. The significance of being a non-default state is that the Commission or the state legislature can establish rules specific to Pennsylvania to address any issues that may be unique to the Commonwealth. Whereas, a default state does not mandate Lifeline/Link-Up programs; thus, carriers operating in default states are required to follow the FCC's regulations and the Lifeline/ Link-Up eligibility requirements are directed by the FCC. In 1999, Section 54.409(b) stated:

To qualify to receive Lifeline in states that do not provide state Lifeline support, a consumer must participate in one of the following programs: Medicaid; food stamps; Supplemental Security Income; federal public housing assistance; or Low-Income Home Energy Assistance Program.

Now, the same Section 54.409(b) states:

To qualify to receive Lifeline service in a state that does not mandate state Lifeline support, a consumer must participate in one of the following federal assistance programs: Medicaid; food stamps; Supplemental Security Income; federal public housing assistance; and Low-Income Home Energy Assistance program.

In 1999, we viewed our state as a default state for the Lifeline 150 program because Pennsylvania did not provide any funding for the program and we did not require LECs to provide additional support for this program. The Commission viewed the Lifeline 150 as a separate program that would be totally funded by federal support. At that time, we did not believe that contributions from BA-PA for its Lifeline 100 program would be viewed by the FCC as state contribution for the Lifeline 150 program. Therefore, Lifeline 150 customers could not qualify based on income alone and would have to participate in qualifying assistance programs.

   The companies also viewed Pennsylvania as a default state in 1999 as evidenced in the Replies of PTA, BA-PA, and GTE North (now known as Verizon North) to the exceptions of OCA regarding these three Lifeline Compliance Tariffs filed on or about November 30, 1999. At that time BA-PA stated,

The Commission's requirement that Lifeline recipients participate in one of the enumerated programs is completely consistent with the FCC's requirements for receiving federal universal service support for eligible Lifeline customers . . . . The OCA's interpre- tation--that Lifeline eligibility can be met through income alone--is flatly inconsistent with the FCC's regulations, and could jeopardize BA-PA's ability to obtain federal universal service fund reimbursement for the Lifeline 150 program.¹⁸

   Further evidence that BA-PA once viewed Pennsylvania as a default state was their petition to the FCC for a waiver of one of FCC's rule Section 54.409(b) to permit BA-PA to use Pennsylvania Department of Public Welfare (DPW) database to verify the eligibility of Lifeline subscribers.¹⁹ This petition was granted by the FCC on December 27, 2000. In its order approving the petition, the FCC stated:

Option 2 [Lifeline 150] expands eligibility for support to all subscribers with incomes at or below 150% of the federal poverty level and permits those customers to add vertical services. Because the program is funded entirely from federal support, Commission rules require Bell Atlantic to obtain written certifications of eligibility from subscribers to Lifeline Option 2.

Bell Atlantic seeks a waiver of the written certification requirement for subscribers of the Lifeline Option 2 who are listed in the Pennsylvania DPW database. It asks that, given its four years of successful experience with the DPW database, it be allowed to continue to rely on that database when the database indicates that a customer is eligible for Lifeline Option 2 [Lifeline 150]. Bell Atlantic agrees that if its waiver request is granted, it will continue to require the written certification specified in Section 54.409(b) of the rules where consumers qualify for the program based on their enrollment in the federal public housing assistance or Low-Income Home Energy Assistance programs, because data about participation in those programs is not contained in the DPW database.

We find that Bell Atlantic has demonstrated that good cause exists to waive section 54.409(b) of the Commission's rules.²⁰

   However, despite the prior FCC order, Pennsylvania was not listed as a default state in the FCC's Appendix G of the FCC Lifeline Order. Appendix G listed 16 states that are considered to be default states because these states did not mandate their own Lifeline/Link-Up programs. Arguably then, we are a non-default state. Commission staff was told by the FCC that Appendix G is not necessarily up to date or accurate, but at the same time, there was no dollar contribution amount threshold requirement before a state could be classified as non-default. In Pennsylvania, only Verizon North and Verizon PA are required to provide support to the Lifeline program (Lifeline 100 only). Because Verizon is mandated to contribute to its Lifeline programs Pennsylvania qualifies as a ''non-default'' state according to the FCC rules. None of the other LECs who offer Lifeline are required to provide support for this program. Still, this seems to be enough to now satisfy the FCC's definition of a non-default state. Pennsylvania mandates support for a Lifeline program and contributions other than Federal monies are being made. Further, a representative from the Universal Service Administration Company (USAC) represented that we were a non-default state and OCA as well as the LECs participating in staff's Lifeline survey all agreed that Pennsylvania is a non-default state.

   Pennsylvania is a ''state that mandates state Lifeline support'' based on the support provided by BA-PA for the Verizon Lifeline 100 program. Universal service goals are furthered even though the state Lifeline support does not apply to all Pennsylvania Lifeline programs. Thus, the Commission has some flexibility pursuant to Section 54.409(a) of the FCC's Lifeline regulations to establish eligibility criteria so long as they are ''narrowly targeted qualification criteria that are based solely on income or factors directly related to income.'' 47 CFR § 54.409(a). As the FCC explained, this flexibility allows states such as Pennsylvania ''to consider federal and state-specific public assistance programs with high rates of participation among low-income consumers in the state.'' FCC Lifeline Order par. 5.

Lifeline Program Take Rates

   Consumer advocates, staff, and members of the General Assembly²¹ have all expressed concern about the low levels of participation in Pennsylvania's Lifeline programs. As shown on the following chart, Pennsylvania's customer participation has grown since 2000. Even so, the penetration rates for these programs have been disappointing given the number of eligible consumers and the amount of money Pennsylvania ratepayers²² contribute to the federal USF. According to the Office of Consumer Advocate and the DPW, there are over a million people who participate in Medicaid living in Pennsylvania. For August 2004, the DPW reports the unduplicated number of persons eligible for Medical Assistance totaled 1,713,023. Medical Assistance Eligibility Statistics, August 2004.²³

End-of-Year Lifeline Enrollment 2000-2003
Major Telephone Companies²⁴

Company	2000	2001	2002	2003
ALLTEL	1,356	3,388	3,902	4,106
Comcast	NA	NA	NA	329
Commonwealth	694	997	1,195	1,485
MCI Local	45	163	434	555
United	1,083	1,334	1,563	1,913
Verizon North*	3,070	3,794	6,890	6,763
Verizon PA*	46,459	68,630	95,969	118,987
Total*	52,707	78,306	109,953	134,138

*Includes Lifeline and Lifeline 150
N/A not available
 
Adding the non-major LECs' end-of-year enrollment figures to the major LECs' subtotal of 134,138 yields a total Lifeline enrollment total of about 137,000. Assuming a maximum of 1.7 million households eligible, this calculates the take rate to be possibly as low as 8%.

   According to the FCC, Pennsylvania's take rate is 16.2% compared to the nationwide take rate of 33.7%.^{24 25} We have seen an enrollment increase since the Global Order from approximately 35,000 Lifeline customers in September 1999 to 137,000 as of December 31, 2003, but we are still very short of enrolling all consumers who could benefit from the Lifeline credit. If other states act to add the new income-based eligibility criteria of 135% of FPG, to remain unchanged in our policy may result in Pennsylvania incurring increased federal USF responsibility (as the size of the Fund increases) with no improvement in the percentage returned to the Commonwealth in terms of federal USF low-income support.

Pennsylvania is a Net-Contributor to the Universal Service Fund

   We are concerned that in 2003, Pennsylvania received $13.6 million in low-income support yet our ratepayers contributed over $126.4 million to all four federal USF programs²⁶ of which approximately $24 million went towards the low-income federal USF.²⁷ Thus, Pennsylvania is a net-contributor regarding the low-income portion of the federal USF. Last year approximately $10 million dollars collected here through federal USF charges were not used by our Lifeline customers, but rather were used by other states' low-income programs. This disparity will only widen as a result of the recent FCC rules changes unless the Commission follows the FCC's lead and broadens its Lifeline 150 eligibility criteria in addition to removing the vertical services restriction barrier to enrollment. The Commission recognizes that in a pooled fund, such as the federal USF, not all states can be net recipients. However, increasing Pennsylvania's participation levels will allow more dollars to remain within the state.

Examination of Other States

   An examination of other states similar to Pennsylvania shows that Florida's Public Service Commission recently recognized that even though it is not a default state, ''it is in Florida's best interest to also adopt this criterion.'' In re: Adoption of the National School Lunch Program and an income-based criterion at or below 135% of the Federal Poverty Guidelines as eligibility criteria for the Lifeline and Link-Up programs, Notice of Proposed Agency Action Order Expanding Lifeline Eligibility at 4, Docket No. 040604-TL (Fl.PSC Aug. 10, 2004) (Florida PSC Order). As the Florida PSC stated, ''[w]e are concerned that if we do not adopt the 135% criterion for all ETCs, it could result in compounding Florida's status as a net contributor into the USF Low Income Support Mechanism and keep some consumers that would otherwise be eligible out of the program.'' Florida PSC Order at 4-5. Like Pennsylvania, Florida's LECs already used TANF as an eligibility criterion. Florida PAA Order at 1.

   In 2003, Kansas (another non-default state) decided to enroll low-income consumers with incomes at or below 150% of FPG. Kansas also enrolls consumers in Lifeline based on eligibility for the Free School Lunch Program. See In Re: Investigation into the Lifeline Service Program and Methods to Ensure Awareness of the Program, Docket No. 00-GIMT-910-GIT, Order (KS, SCC, Jan. 21, 2003).

   As stated previously, we are still a long way from enrolling all consumers who could benefit from the Lifeline credit, and failing to modify our policy may result in Pennsylvania incurring more of the federal USF funding liability as other states act to add the new income-based eligibility criteria of 135% of FPG. The FCC has already stated that it has weighed the impact on the federal USF if all states added the new income-based eligibility criteria of 135% of FPG and found that the benefits of ''adding new low-income subscribers and retaining existing subscribers outweigh the potential increased costs.'' FCC Lifeline Order, par. 12.

   Even though many LECs said that they were unclear whether enrollment in Lifeline service would increase should Pennsylvania make these changes to its Lifeline program, we may logically deduce from the factual information that is currently available to the Commission that the proposed changes would not result in lowered enrollment, and could, in fact, result in significant increases in enrollment.

   Many consumers in Pennsylvania could be benefiting from the Lifeline/Link-Up credit but are not because they do not qualify under the current 2-prong test, or possibly because of lack of awareness of the availability of the program. The Commission believes it is likely that the addition of household participation in NSL as a Lifeline eligibility criterion may increase Lifeline enrollment in Pennsylvania even though the FCC noted that statistics are not available that translate into the number of NSL recipients into a household count. Therefore, the Commission believes it should expand the Lifeline 150 program to include NSL and change the 150% ''and'' requirement to 135% ''or.'' We would lose no current enrolled customers and this change could boost enrollment figures. Moreover, we would be on more even footing with other states and imposing standards consistent with those in the federal regime. While some additional administrative costs may be incurred by LECs in order to implement revisions allowing NSL and income as eligibility factors, the benefits to Pennsylvanians outweigh this burden.

Increasing Subscriber Line Charges

   The federal USF low-income program is designed to help low-income consumers' bills remain affordable as the FCC continues to raise the subscriber line charge (SLC), which currently is capped at $6.50 per line on all monthly phone bills. If our program eligibility is more restrictive than the federal rules, and the SLC continues to increase, we may be doing a disservice to Pennsylvanian low-income ratepayers.

Notification Requirements

   Section 3019(f)(4) requires ETCs to inform existing customers of the availability of Lifeline service twice annually by bill insert or message. The notice must be conspicuous and must provide appropriate eligibility, benefits and contact information for customers who wish to learn of the Lifeline service subscription requirements. 66 Pa.C.S. § 3019(f)(4). In keeping with tradition, we will direct our Bureau of Consumer Services to work with the Pennsylvania Telephone Association to develop biannual Lifeline bill inserts or bill messages that are written consistent with the Commission's plain language policy guidelines at 52 Pa. Code § 69.251.

Conclusion

   In the Global Order, the Commission recognized that eligibility criteria identified by the FCC in 47 CFR Section 54.409(b) established, prima facie, income-based eligibility. Thus, in the Global Order and subsequent orders approving compliance filings, the Commission did not limit eligibility criteria strictly to those set forth in Section 54.409(b) of the FCC's Lifeline regulations. Instead, the Commission required LECs ''to broaden eligibility requirements'' by adding Temporary Assistance for Needy Families (TANF), General Assistance (GA), and State Blind Pension (Verizon only) to the FCC's list of eligible social assistance programs. In re Nextlink, Inc., 93 Pa. P.U.C. 172, 244 (Sept. 30, 1999). See also, Pa. PUC v. Pa. Telephone Ass'n, Docket No. P-00991648, P-00991649, Order at 2, 5 (Aug. 17, 2000) (PTA Lifeline Order). Pa. P.U.C v. Bell Atlantic-Pennsylvania, Inc. Docket No. P-00991648, P-00991649) (BA-PA Lifeline Order).

   The Commission shall again broaden, on a prospective basis, the Lifeline eligibility criteria to benefit low-income Pennsylvania telephone consumers. As the FCC stated in its April 2004 Order, ''we believe there is more we can do to make telephone service affordable for more low-income households.'' FCC Lifeline Order. In Pennsylvania 1,842,724 children were enrolled in the National School Lunch Program as of October, 2004. Of that number, 498,604 were eligible to participate in the NSL free lunch program.²⁸ Upon adoption of the NSL program, we will coordinate with the Pennsylvania Department of Education, and Department of Public Welfare, and other organizations to incorporate the program into Pennsylvania's current Lifeline and Link-Up outreach initiatives. Adding the NSL program will benefit Pennsylvania by increasing the number of eligible consumers for the Lifeline and Link-Up programs. We hereby adopt the NSL program for purposes of determining eligibility in the Lifeline and Link-Up programs in Pennsylvania.

   For ease in comparison, the following is a table comparison between the old and new FCC Lifeline eligible requirements, and the Commission's current Lifeline 150 program requirements and the new eligibility requirements established under this Final Order.

Telephone Universal Service Program Eligibility Requirements
Old FCC Lifeline Program	PA PUC Lifeline 150 Program	New FCC	New PaPUC Order and Act 183
Medicaid	Medicaid	Medicaid	Medicaid
Federal Public Housing Assistance (Section 8)	Federal Public Housing Assistance (Section 8)	Federal Public Housing Assistance (Section 8)	Federal Public Housing Assistance (Section 8)
Low-Income Home Energy Assistance Program (LIHEAP)	Low-Income Home Energy Assistance Program (LIHEAP)	Low-Income Home Energy Assistance Program (LIHEAP)	Low-Income Home Energy Assistance Program (LIHEAP)
Supplemental Security Income (SSI)	Supplemental Security Income (SSI)	Supplemental Security Income (SSI)	Supplemental Security Income (SSI)
Food Stamps	Food Stamps	Food Stamps	Food Stamps
	Temporary Assistance to Needy Families (TANF)	Temporary Assistance to Needy Families (TANF)	Temporary Assistance to Needy Families (TANF)
	State Blind Pension*		State Blind Pension*
	General Assistance		General Assistance
		National School Lunch Program	National School Lunch Program
No separate income requirement	AND Income at or below 150% of the Federal Poverty Guidelines	OR income at or below 135% of the Federal Poverty Guidelines	OR income at or below 135% of the Federal Poverty Guidelines
No restriction on vertical services	Only allowed one vertical service	No restriction on vertical services	No restriction on vertical services

   * Only Verizon North and Verizon PA.

   Lifeline enrollment in Pennsylvania will tend to increase if the Commission requires all Pennsylvania LECs to modify their existing Lifeline 150 programs in two ways:

   (1)  Change the current eligibility limitation from the conjunctive ''and income at or below 150% of FPG'' to a new disjunctive eligibility criterion so Lifeline eligibility may be determined based on participation in a public benefit program ''or income at or below 135% FPG.''

   (2)  Add participation in the National School Lunch free lunch program (NSL) as an additional program-based eligibility criterion.

   While these changes may increase administrative costs to the ETCs administering the programs, any such increase is outweighed by the potential benefits in terms of increased enrollment and in securing a greater portion of the federal USF benefits that Pennsylvania consumers are already paying for. Moreover, the proposal is consistent with FCC standards. Accordingly, the Commission will expand the eligibility criteria to include the National School Lunch Free Lunch program (NSL), and a separate income-based eligibility criterion of 135% of FPG.

Therefore,

It Is Ordered That:

   1.  The current income limitation in the Lifeline 150 programs of ''and income at or below 150% of Federal Poverty Guidelines'' is hereby amended to a new separate eligibility criterion so Lifeline eligibility may be determined based on participation in a public benefit program ''or income at or below 135% of Federal Poverty Guidelines.''

   2.  We hereby add the National School Lunch free lunch program (NSL) to the list of qualifying social assistance programs for purposes of determining eligibility in the Lifeline and Link-Up programs in Pennsylvania.

   3.  Commission Staff continue to explore a means of independent state or federal verification of household participation in the National School Lunch free lunch program.

   4.  ETCs accept written documentation of eligibility and participation in the National School Lunch free lunch program in Pennsylvania for the current year within which the customer is applying for the Lifeline/Link-Up program.

   5.  In accordance with 66 Pa.C.S. § 3019(f)(1), ETCs are directed to file tariff revisions on or before four months from the date of entry of this order to: (1) change the current income limitation in the Lifeline 150 programs of ''and income at or below 150% of Federal Poverty Guidelines'' to a new separate eligibility criterion so Lifeline eligibility may be determined based on participation in a public benefit program ''or income at or below 135% of Federal Poverty Guidelines''; and (2) add the National School Lunch free lunch program (NSL) for purposes of determining eligibility in the Lifeline and Link-Up programs in Pennsylvania.

   6.  In accordance with 66 Pa.C.S. § 3019(f)(2), all ETCs shall permit customers who subscribe to Lifeline service to subscribe to any number of other telecommunications services including vertical services at the tariffed rates for such services.

   7.  In accordance with 66 Pa.C.S. § 3019(f)(3), each ETC in the Commonwealth shall explicitly advise new service applicants of the availability of Lifeline service and shall make reasonable efforts where appropriate to determine whether the applicant qualifies for such service and, if so, whether the applicant wishes to subscribe to the service.

   8.  The Bureau of Consumer Services work with the Pennsylvania Telephone Association to develop biannual Lifeline bill inserts or bill messages that are written consistent with the Commission's plain language policy guidelines at 52 Pa. Code § 69.251.

   9.  LECs offering Lifeline and Link Up services are directed to recertify their Lifeline and Link-Up customers at least annually in accordance with FCC procedures established at 47 CFR § 54.410 (relating to certification and verification of consumer qualifications for Lifeline) and § 54.416 (relating to verification of qualifications for Link-Up).

   10.  We hereby adopt the statistically valid random sampling method established by the Federal Communications Commission at 47 CFR § 54.410(c)(ii) as a proper means of continued verification of eligibility for Lifeline and Link-Up and that LECs have until December 31, 2005, to submit the results of their samples to the Universal Service Administration Company, and this verification shall occur annually by December 31 of each year going forward.

   11.  Any non-ETC CLECs that choose to remove Lifeline and/or Link-Up provisions from their tariffs shall be required to provide their customers with 60 days notice of the type described herein, which has been reviewed and pre-approved by the Commission's Bureau of Consumer Services.

   12.  All LECs operating in Pennsylvania, the Pennsylvania Telephone Association, Nextel Partners, Inc., Sprint PCS, Office of Consumer Advocate, Department of Public Welfare, Pennsylvania Utility Law Project, Department of Revenue, Department of Education and AARP shall be served with a copy of this Final Order.

   13.  A copy of this Final Order shall be published in the Pennsylvania Bulletin.

   14.  The deadline for implementation of the new eligibility standards is 120 days from the date of entry of this Final Order.

JAMES J. MCNULTY,   
Secretary

[Pa.B. Doc. No. 05-1158. Filed for public inspection June 10, 2005, 9:00 a.m.]

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¹  Federal-State Board on Universal Service, (FCC May 8, 1997) CC Docket No. 96-45, FCC 97-157.

²  Act 183 of 2004 is the new Chapter 30 to Title 66 of Pennsylvania Consolidated Statutes. House Bill 30 (P. N. 4778) was signed into law by the Governor on November 30, 2004, and became effective immediately.

³  Pennsylvania Public Utility Commission v. Bell Atlantic--Pennsylvania, Inc., P-00930715, P-00950958, entered August 4, 1995.

⁴  Petition of the Pennsylvania Telephone Association Lifeline Service Plan at Docket Nos. I-00940035, P-00971274, Order entered November 21, 1997.

⁵  Joint Petition of Nextlink Pennsylvania, Inc., et al. and Joint Petition of Bell Atlantic Pennsylvania, Inc., et al., P-00991648 and P-00991649, September 30, 1999 (Global Order).

⁶  Pennsylvania PUC v. Bell Atlantic--Pennsylvania, Inc., Pennsylvania PUC v. Pennsylvania Telephone Association, Pennsylvania PUC v. GTE North Incorporated, P-00991648, P-00991649, August 17, 2000.

⁷  Verizon PA also offers eligible Lifeline customers and qualified Lifeline applicants (with a pre-existing basic service arrearage) financial assistance to restore their basic telephone service through its Universal Telephone Assistance Program (UTAP). The Salvation Army manages UTAP and distributes funds to qualified customers and Lifeline applicants.

⁸  Verizon PA and Verizon North Lifeline credit is a monthly amount equal to their federal subscriber line charge of $6.05 for Verizon PA and $6.50 for Verizon North plus a $2.50 contribution from Verizon and $3.00 from the Federal USF.

⁹  Verizon PA and Verizon North Lifeline 150 credit is a monthly amount equal to their federal subscriber line charge of $6.05 and $6.50 respectively plus $1.75 from the Federal USF. Lifeline 150 for all other ILECs is each company's federal subscriber line charge, currently capped at $6.50 plus $1.75. CLECs provide similar Lifeline credit amounts, regardless of whether or not they designate a federal subscriber line charge on customer bills.

¹⁰  These social assistance programs include: General Assistance (GA), Supplemental Security Income (SSI), and Temporary Assistance for Needy Families (TANF), Food Stamps, Low Income Home Energy Assistance Program (LIHEAP), Medicaid, and Federal Public Housing Assistance. Verizon also includes State Blind Pension as an eligible program.

¹¹  At or below 135436000f the FPG is $24,840 for a family of four.

¹²  To be eligible for the NSL free lunch program, a consumer's household income must be at or below 1300f the FPG, which is currently $23,920 for a family of four. 2003 FPG, 68 Fed. Reg. at 6456-58. In addition, children are automatically eligible to participate in the NSL free lunch program if their household receives Food Stamps, benefits under the Food Distribution Program on Indian Reservations or, in most cases, benefits under the TANF program. http://www.fns.usda.gov/cnd/About/faqs.htm.

¹³  The Tentative Opinion and Order became final in accordance with Ordering Paragraph No. 6 that stated: ''That if none of the Parties object to the modifications to the Settlement Agreement and Further Settlement Agreement, within the time specified in Ordering Paragraph No. 3 of this Tentative Order, then it is further ordered that this Tentative Opinion and Order shall become final, and a Secretarial Letter shall be issued to that effect, without further action by the Commission.'' All of the Parties subsequently notified the Commission that they do not object to Settlement and Further Settlement Agreement as modified by the Tentative Opinion and Order.

¹⁴  The Pennsylvania Telephone Association represents more than 30 incumbent local exchange carriers operating in Pennsylvania.

¹⁵  In order to qualify for participation in the National School Lunch Program's free lunch program, a household's income cannot exceed 130multiplied by the Federal Income Poverty Guidelines for the year 2005. United States Department of Agriculture's Notice of Child Nutrition Programs--Income Guidelines, 70 Fed. Reg. 52, p. 13161, March 18, 2005.

¹⁶  Act 183 appears to apply only to ETCs. We interpret Chapter 30, specifically Section 3019 to preclude the Commission from continuing to require non-ETC LECs to provide Lifeline/Link-Up programs because the legislature used the specific term, ''ETCs'' instead of ''LECs.'' Therefore, the Commission may reasonably infer using statutory interpretation principles that the use of this explicit term means to the exclusion of all non-ETC LECs.

¹⁷  These numbers are based on the 2003 Annual Lifeline Tracking Reports submitted by the following companies: Comcast Phone of Pennsylvania, LLC, CEI Networks, CTSI LLC, IDT Corporation, Penn Telecom, VartecTelecom, Inc., and Z-Tel Communications Inc.

¹⁸  Reply of Bell Atlantic-Pennsylvania To Exceptions of the Office of Consumer Advocate to Lifeline Compliance Tariff, June 12, 2000, pp. 3-4.

¹⁹  See Bell Atlantic-Pennsylvania, Inc., Petition for Waiver of Section 54.409(b) of the Commission's Rules and Regulations, filed December 22, 1999.

²⁰  In the Matter of Federal-State Joint Board On Universal Service, Bell Atlantic Pennsylvania, Inc., Petition for Waiver of Section 54.409(b) of the Commission's Rules and Regulations, CC Docket No. 96-45, December 27, 2000, pp. 2-3.

²¹  House Bill 2571, Introduced by State Representative Veon.

²²  Some LECs and IXCs collect federal universal service funding as a line item on their monthly bills.

²³  While the Commission is not completely certain how 1.7 million Medicaid participants translates into number of households which participate in Medicaid, we believe it it likely there are significantly more than 137,000 households that would be considered Medicaid-participating households.

²⁴  These are LECs with 50,000 or more residential customers. Comcast does not have ETC status.

²⁵  FCC Report, April 29, 2004, FCC 04-87, Table 1.A, Baseline Lifeline Subscription Information (Year 2002).

²⁶  The four federal USF programs include: (1) low-income; (2) schools and libraries; (3) rural health care; and (4) high-cost support.

²⁷  FCC Federal-State Joint Board Universal Service Monitoring Report, CC Docket No. 98-202, Table No. 2.4 (rel. Oct. 2004). This table states Pennsylvania received $13.6 million in low income support. The Commission estimates Pennsylvania ratepayers contributed $24 million based on the most recent data staff could obtain, from the Universal Service Administrative Company Annual Report of 2002 based upon 2001 data. The Commission also notes that Pennsylvania received a total of $126,408,000 from the USF in 2001 for the four programs including: 1) low-income, 2) high cost support; 3) Schools and libraries; and 4) rural health care. However, our ratepayers consistently year after year contribute more than what is returned through the USF.

²⁸  National School Lunch Program Approved Free and Reduced Applications, Building Data Report for October 2004 Children Eligible, October, 2004, Sandy Souder, Administrator, National School Lunch Program.

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