Wednesday, February 11, 2009

When Is Lifeline Not Lifeline?

PULP recently learned from a New York City client that he lost his Lifeline low-income discount telephone service when he moved from one apartment to another even though his local phone company and telephone number did not change. This just didn't seem right.

Upon further discussion, we learned that his “Lifeline” service was provided by a competitive local telephone provider who had never been authorized by the New York Public Service Commission (PSC) to provide Lifeline assistance to its low-income New York customers. Rather, the company was giving the customer a $9 monthly discount off of its regular rates. While this may sound like a generous savings, low income customers of this provider actually end up paying far more than they should.

Lifeline discount telephone service has a specific definition both at the Federal Communications Commission (FCC) and the PSC and it involves much more than a perceived savings to low income customers. In order to offer Lifeline, a carrier must first receive what is known as “Eligible Telecommunications Carrier” status, which makes the company eligible to be compensated for a large portion of the Lifeline rate reduction out of the federal Universal Service Fund (USF) and the state’s Targeted Accessibility Fund (TAF). The federal USF is paid for by most telephone customers around the country who contribute to the fund through a surcharge on their monthly phone bill. The state TAF is a mandatory contribution made by certified local exchange carriers in the state and is based on a percentage of their intrastate revenues.

When a carrier seeks ETC status, it must certify to provide a whole host of services in exchange for being able to seek recompense from these funds. These services are:
a) Voice grade access to the public switched network;
b) Local usage;
c) Dual tone multi-frequency signaling or its functional equivalent;
d) Single party service or its functional equivalent;
e) Access to emergency services, including access to 911 or E911;
f) Access to operator services;
g) Access to inter-exchange service;
h) Access to directory assistance; and
i) Lifeline and Link-Up programs, including free toll limitation services for qualifying low-income customers.

The ETC designate must also advertise the availability of these services in media of general distribution.

Generally, the only items on this list that tend to be a challenge for some carriers are the requirements for offering access to operator services and to be able to provide toll blocking services to Lifeline customers who request it. To date, all 40 of the incumbent local telephone companies around the state have received ETC status as well as 11 competitive providers. Two wireless providers, Sprint PCS and TracFone, which wanted to offer Lifeline in New York were granted ETC status from the FCC, and they provide the federally supported Lifeline discount. Because the New York PSC has not exercised jurisdiction over terms and conditions of wireless service, wireless Lifeline carriers only receive the federal discount, and do not receive the state discount.

The carrier in question, we learned upon our inquiry, does not have ETC status.
The New York Commission was partially responsive to a complaint filed by our client to be reimbursed for overcharges (the differences between the carrier’s regular rate and the discounted rate he should have been charged under the carrier’s so-called “Lifeline” tariff), but did not resolve other, larger issues.

In addition to receiving lower rates for local service, true Lifeline customers pay a fraction of the normal installation charges (under the Link-Up program) and are exempt from all of the taxes and surcharges attached to the phone company’s charges (other than state sales tax). These taxes and surcharges, including the subscriber line charge, excise taxes, and gross receipts taxes, can add almost $15 to a typical phone bill. Accordingly, while the provider in question was giving a $9 discount (and presumably is not being reimbursed for the shortfall because it is not an ETC), customers lose out because they must still pay these taxes and surcharges. The customer was not notified about this.

PULP is all in favor of Lifeline service and the more companies that offer it, the better it is for the state’s low income customers and their ability to make choices of service from different providers and in different service packages. However, what this company was doing can be seen as deceptive and confusing to the public. We believe that this company should seek ETC status and offer a true Lifeline product or, alternatively, change the name of its offering to something other than Lifeline, such as “low income discount rate.” The Department of Public Service is currently looking into these concerns.

Lou Manuta

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