[Federal Register Volume 69, Number 119 (Tuesday, June 22, 2004)]
[Rules and Regulations]
[Pages 34590-34601]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-13996]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 36 and 54

[WC Docket No. 03-109; FCC 04-87]


Lifeline and Link-Up

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, the Commission modifies its rules to improve 
the effectiveness of the low-income support mechanism, which ensures 
that quality telecommunications services are available to low-income 
consumers at just, reasonable, and affordable rates. The Commission 
expands the federal default eligibility criteria to include an income-
based criterion and additional means-tested programs. The Commission 
adopts federal certification and verification procedures, and requires 
states, under certain circumstances, to establish certification and 
verification procedures to minimize potential abuse of these programs. 
To target low-income consumers more effectively, the Commission adopts 
outreach guidelines for the Lifeline/Link-Up program. The Commission 
issues a voluntary survey to gather data and information from states 
regarding the administration of Lifeline/Link-Up programs. The actions 
the Commission takes will result in a more inclusive and robust 
Lifeline/Link-Up program, consistent with the statutory goals of 
maintaining affordability and access of low-income consumers to 
supported services, while ensuring that support is used for its 
intended purpose.

DATES: Effective July 22, 2004 except for Sec. Sec.  54.405(c), 
54.405(d), 54.409(d), 54.409(d)(3), 54.410, 54.416, 54.417 which 
contain information collection requirements that have not been approved 
by the Office of Management Budget (OMB). The Commission will publish a 
document in the Federal Register announcing the effective date of those 
sections.

FOR FURTHER INFORMATION CONTACT: Shannon Lipp, Attorney, and Karen 
Franklin, Attorney, Wireline Competition Bureau, Telecommunications 
Access Policy Division, (202) 418-7400.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report 
and Order in WC Docket No. 03-109 released on April 29, 2004. A 
Companion Further Notice of Proposed Rulemaking was also released in WC 
Docket No. 03-109 released April 29,

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2004. The full text of this document is available for public inspection 
during regular business hours in the FCC Reference Center, Room CY-
A257, 445 Twelfth Street, SW., Washington, DC, 20554.

I. Introduction

    1. In this Report and Order, we modify our rules to improve the 
effectiveness of the low-income support mechanism, which ensures that 
quality telecommunications services are available to low-income 
consumers at just, reasonable, and affordable rates. Since its 
inception, Lifeline/Link-Up has provided support for telephone service 
to millions of low-income consumers. Nationally, the telephone 
penetration rate is 94.7%, in large part due to the success of the 
Lifeline/Link-Up program and our other universal service programs. 
Nevertheless, we believe there is more that we can do to make telephone 
service affordable for more low-income households. Only one-third of 
households currently eligible for Lifeline/Link-Up assistance actually 
subscribe to this program. We agree with the Federal-State Joint Board 
on Universal Service (Joint Board) that the current Lifeline/Link-Up 
program could be modified to serve the goals of universal service 
better.
    2. Consistent with the Joint Board's recommendation, we expand the 
federal default eligibility criteria to include an income-based 
criterion and additional means-tested programs. We adopt federal 
certification and verification procedures, and require states, under 
certain circumstances, to establish certification and verification 
procedures to minimize potential abuse of these programs. To target 
low-income consumers more effectively, we adopt outreach guidelines for 
the Lifeline/Link-Up program. We issue a voluntary survey to gather 
data and information from states regarding the administration of 
Lifeline/Link-Up programs. The actions we take will result in a more 
inclusive and robust Lifeline/Link-Up program, consistent with the 
statutory goals of maintaining affordability and access of low-income 
consumers to supported services, while ensuring that support is used 
for its intended purpose.

II. Report and Order

A. Eligibility

a. Income-Based Criteria
    3. We adopt the Joint Board's recommendation that a consumer be 
eligible to participate in Lifeline/Link-Up if the consumer's income is 
at or below 135% of the Federal Poverty Guidelines (FPG). We agree with 
the Joint Board that adding an income-based criterion to the federal 
default eligibility criteria may increase participation in the 
Lifeline/Link-Up program. This will enable, for example, a family of 
four whose annual income is at or below $24,840 to qualify for 
Lifeline/Link-Up support even if they do not participate in one of the 
current qualifying assistance programs. We have included estimated 
income requirements for various sizes of households at or below 135% of 
the FPG. Our staff analysis estimates that adding an income-based 
criterion of 135% of the FPG could result in approximately 1.17 million 
to 1.29 million new Lifeline/Link-Up subscribers. Of these new 
Lifeline/Link-Up subscribers, the analysis projects that approximately 
one in five likely would be new subscribers to telephone service. 
Therefore, in addition to ensuring that many low-income subscribers may 
be better able to afford to maintain their existing service; this 
criterion will enable many low-income subscribers to have service for 
the first time. Adding an income-based standard should thereby promote 
universal service by increasing subscribership and making rates more 
affordable for existing low-income subscribers.
    4. We agree with the majority of commenters that support adding an 
income-based standard to the current program-based criteria. We also 
agree with the Joint Board and several commenters that adding an 
income-based standard likely will capture some low-income consumers who 
are not eligible for Lifeline/Link-Up because they no longer 
participate in the qualifying assistance programs. In 1996, Congress 
passed ``The Personal Responsibility and Work Opportunity 
Reconciliation Act,'' also known by the acronym ``PRWORA.'' PRWORA 
instituted sweeping changes to several federal public assistance 
programs, including time limits and work requirements backed by 
sanctions. In the 1997 Universal Service Order, 62 FR 32862, June 17, 
1997, the Commission indicated it would monitor the impact of PRWORA on 
participation in Lifeline/Link-Up qualifying programs and revise 
eligibility criteria if the program-based criteria model ``becomes an 
unworkable standard.'' In the Twelfth Report and Order, 65 FR 47941, 
August 4, 2000, the Commission also noted it would consider adding an 
income-based criterion in the future because it might ``reach more low-
income consumers, including low-income tribal members, than the current 
method of conditioning eligibility on participation in particular low-
income assistance programs.'' We understand that participation is 
decreasing in many public assistance programs, including at least one 
program used to determine eligibility for Lifeline/Link-Up. At the same 
time, poverty rates in the U.S. are increasing by the traditional 
measure. In 2002, 12.1% or 34.6 million people fell below the poverty 
threshold, compared to 11.3% or 31.1 million people in 2000. At the 
same time, however, the Census Bureau has published six alternative 
measures of poverty, none of which appear to show a statistically 
significant increase in poverty rates between 2001 and 2002. Regardless 
of factual differences in the data, broadening eligibility criteria to 
include an income-based standard at this time should ensure continued 
participation in Lifeline/Link-Up among low-income households, which, 
in turn, should increase subscribership to the network. Several 
commenters also state that individuals who are no longer eligible to 
receive welfare or benefits under federal assistance programs may still 
be too poor to afford the cost of local telephone service. Adding an 
income-based standard could increase subscribership among low-income 
individuals affected by PRWORA. Thus, this action will further the 
goals of section 254.
    5. Consistent with the Joint Board recommendation, we initially set 
the income-based standard at 135% of the FPG, while we further develop 
the record on the costs and benefits of adopting a 150% FPG standard. 
The Joint Board concluded that an income-based standard at 135% of the 
FPG struck an appropriate balance between increasing subscribership 
without significantly overburdening the universal service fund. It 
noted that most commenters supported adoption of an income-based 
standard ranging from 125% to 150% of the FPG, and that many other 
federal welfare programs, and state Lifeline programs, base eligibility 
on a standard within that range. We note that our staff analysis 
projects that if all states were to adopt an income-based standard at 
or below 135% of the FPG, federal Lifeline expenditures could increase 
by $127 to $140 million over current levels; in contrast, if we were to 
adopt an income-based standard at or below 150% of the FPG, federal 
Lifeline expenditures could increase by $316 to $348 million. We also 
note that while our staff analysis projects that adoption of an income-
based standard at or below 135% of the FPG could result in more than 
200,000 households newly subscribing to telephone service, that study 
also projects no net increase in new

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subscribers under an income-based standard at or below 150% of the FPG. 
We recognize that a few commenters are concerned about the potential 
financial burdens placed on the universal service fund due to increased 
participation in the Lifeline/Link-Up program, but we conclude that the 
benefits of adopting a 135% income-based standard now--namely, adding 
new low-income subscribers and retaining existing low-income 
subscribers on the network--outweigh the potential increased costs. In 
sum, we conclude that adopting a 135% income-based standard at this 
time represents a reasonable and cautious approach, while we explore 
further whether to adopt a 150% income standard.
b. Program-Based Criteria
    6. We also adopt the Joint Board's recommendation that the 
Temporary Assistance to Needy Families program (TANF) and the National 
School Lunch's free lunch program (NSL) be added to the federal default 
eligibility criteria. We believe adding these programs is likely to 
help improve participation in the Lifeline/Link-Up program, and in 
doing so, would increase telephone subscribership and/or make rates 
more affordable for low-income households. Additionally, low-income 
consumers that come into contact with state agencies while enrolling in 
one public assistance program are often made aware of their eligibility 
to participate in another public assistance program. Therefore, 
participation in Lifeline/Link-Up could be increased by adding these 
public assistance programs to the current program-based criteria 
because it increases the possibility that low-income consumers could be 
made aware of Lifeline/Link-Up when they enroll in TANF and NSL and 
thereby increases or maintains subscribership.
    7. Under the Commission's current rules, Tribal TANF is an 
eligibility criterion for enhanced Lifeline/Link-Up. The Commission 
extended Lifeline/Link-Up eligibility criteria to include the Tribal 
TANF program, as well as Bureau of Indian Affairs General Assistance, 
Tribal National School Lunch's free lunch program, and Tribal Head 
Start program (income qualifying standard only) concluding that the 
``household income thresholds for these newly added programs range[d] 
from 100-130 percent of the [FPG]'' and were therefore ``consistent 
with the [income thresholds of those] programs included in our current 
federal default list.'' Adding TANF to the current list of eligibility 
criteria may permit more low-income individuals, not just those living 
on tribal lands, to qualify for Lifeline/Link-Up support, thereby 
potentially increasing telephone subscribership and making rates more 
affordable for existing low-income subscribers. Although 5.1 million 
recipients currently participate in TANF, like the Joint Board, we 
cannot project how many additional persons may become eligible for 
Lifeline/Link-Up under this new criterion because many low-income 
households participate in more than one assistance program. 
Nevertheless, we share the Joint Board's belief that extending 
Lifeline/Link-Up benefits to TANF participants will promote the goals 
of universal service.
    8. We note that, in the 1997 Universal Service Order, the 
Commission rejected a proposal to add TANF's predecessor, Aid to 
Families with Dependent Children (AFDC), to the list of qualifying 
Lifeline/Link-Up programs. At the time, the Commission was concerned 
about the impact of PRWORA on that particular program. Although TANF 
participation rates have decreased since fiscal year 1996 and the 
implementation of PRWORA, participation rates remain high. Accordingly, 
adding this particular program to the federal default eligibility 
criteria may still potentially affect significant numbers of low-income 
consumers.
    9. We agree with the Joint Board that one benefit of adding TANF is 
the broad discretion that states are given to establish eligibility 
standards for each state's respective TANF program. This broad 
discretion enables states to tailor the TANF program to meet their 
constituents' needs. Therefore, we agree with the Joint Board and most 
commenters that adding TANF as an eligibility criterion for Lifeline/
Link-Up will help target the program to appropriate low-income 
households. Another advantage of adding TANF is that verification of 
Lifeline/Link-Up eligibility would simply involve checking TANF program 
records. We agree with NASUCA that monitoring participation in TANF is 
no more difficult than other programs.
    10. We agree with the Joint Board that adding NSL's free lunch 
program to the current list of federal default eligibility criteria may 
permit more low-income individuals, not just those living on tribal 
lands, to qualify for Lifeline/Link-Up support, thereby increasing 
subscribership and/or making rates more affordable for low-income 
households. Under the Commission's current rules, Tribal NSL is an 
eligibility criterion for enhanced Lifeline/Link-Up on tribal lands. In 
general, NSL's eligibility criteria are the same as for Tribal NSL. To 
be eligible for NSL's free lunch program, the household income must be 
at or below 130% of the FPG, which is $23,920 for a family of four. 
Children are automatically eligible for free school meals if their 
household receives Food Stamps, benefits under the Food Distribution 
Program on Indian Reservations or, in most cases, benefits under the 
TANF program. There were approximately 13.7 million children enrolled 
in NSL's free lunch program in fiscal year 2003. As with TANF, however, 
it is difficult to project how many additional persons may become 
eligible for Lifeline/Link-Up by adopting NSL because many low-income 
households typically participate in more than one assistance program 
once they meet the qualifying criteria. We are not aware of any data on 
the total number of households in which NSL participants reside, 
because more than one NSL participant may reside in a single household. 
Nevertheless, we agree with the Joint Board that adding NSL as an 
eligibility criterion could increase telephone subscribership and/or 
make rates more affordable for low-income households.
    11. There is significant support in the record for adding NSL's 
free lunch program to the federal default eligibility criteria. We 
agree with NCLC that adding NSL may improve telephone penetration among 
low-income subscribers because it may capture many low-income 
households that may not participate in other Lifeline/Link-Up 
qualifying public-assistance programs. According to NCLC, many 
households do not feel that children participating in NSL carries the 
same social stigma as participation in programs whose aim is assistance 
for adults. Also, adding NSL's free lunch program is consistent with 
the Commission's determination in the Twelfth Report and Order that 
eligibility for enhanced Lifeline/Link-Up should be limited to those 
qualifying for free lunch from NSL. We note that participation in the 
NSL program is increasing, unlike other assistance programs where 
PRWORA may have prompted decreased enrollment. It is also easy to 
verify eligibility under this criterion because it would simply involve 
checking NSL program records. We note that in the 1997 Universal 
Service Order, the Commission found that ``in the interest of 
administrative ease and avoiding fraud, waste, and abuse, the named 
subscriber to the local telecommunications service must participate in 
[the] program[ ] to qualify for Lifeline.'' Although the child is the 
named participant in the NSL program, it is the household's income

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that qualifies the child for participation in the program. No 
commenters have brought to our attention any evidence of problems with 
its use in the enhanced Lifeline/Link-Up federal default eligibility 
criteria for those living on tribal lands. Accordingly, we believe that 
adding NSL will help to target Lifeline/Link-Up support to the 
appropriate low-income households.

B. Duration of an Individual's Eligibility for Lifeline/Link-Up

    12. We agree with the Joint Board and several commenters that 
consumers should be given a period of time in which to show continued 
eligibility for Lifeline. As described, dispute resolution procedures 
are necessary to allow consumers to demonstrate continued eligibility. 
Moreover, such a timeframe will provide Lifeline customers, who may not 
be aware of a change to their eligibility status, a period of time in 
which to transition to the full cost of non-Lifeline service should 
they be found to be ineligible. This transitional period will reduce 
the likelihood that such customers would be subsequently disconnected 
from the network. Therefore, an appeal and transition period will 
promote the goals of section 254. Moreover, allowing Lifeline benefits 
to continue prior to a final decision to terminate enrollment should 
not burden the fund excessively, while providing administrative 
stability.
    13. We recognize that some states may have existing dispute 
resolution procedures between telephone companies and consumers 
governing termination of telephone service that could apply to 
termination of Lifeline benefits. For example, the Pennsylvania Public 
Utility Commission (PaPUC) asserts that ``Pennsylvania carriers would 
treat an appeal regarding termination of Lifeline service as a 
``dispute'' and would follow the PaPUC procedural rules regarding the 
resolution of disputes[.]'' The PaPUC explains that termination of 
service would be stayed pending resolution of the dispute. Accordingly, 
in such a state, consumers would have an opportunity to dispute 
Lifeline termination, and there would be no need for the eligible 
telecommunication carriers (ETC) to follow the federal default 
procedures, as described. Therefore, where a state maintains its own 
procedures that would require, at a minimum, written customer 
notification of impending termination of Lifeline benefits, similar to 
the federal default requirements, that state will retain the 
flexibility to develop its own appeals process. Moreover, we agree with 
the PaPUC and the Joint Board that preempting a state's existing 
appeals process could result in customer confusion and unnecessary 
expense for the carrier. States should make their own determination as 
to whether the state's existing laws could apply to termination of 
Lifeline benefits.
    14. In states that lack dispute resolution procedures applicable to 
Lifeline termination, we adopt the Joint Board's recommendation and 
require ETCs that have a reasonable basis to believe that consumers no 
longer qualify for Lifeline to notify consumers of their impending 
termination of Lifeline benefits and implement a 60-day period of time 
in which to demonstrate continued eligibility. For those states, we 
adopt the following federal default procedures. ETCs in such states 
will be required to notify consumers of their impending termination of 
Lifeline benefits by sending a termination of Lifeline benefits notice 
in a letter separate from the consumer's monthly bill. If a consumer 
receives such a termination notice, the consumer would have up to 60 
days from the date of the termination letter in which to demonstrate 
his or her continued eligibility before Lifeline support is 
discontinued. For example, a consumer who enrolled in Lifeline because 
he or she participated in Low Income Home Energy Assistance Program 
(LIHEAP) may nevertheless qualify for Lifeline after discontinuing 
participation in LIHEAP under a different program-based or income-based 
criterion. Consumers should be given a period of time in which to make 
such a showing of continued eligibility if they believe they have 
received a termination letter in error. The 60-day time period also 
should ensure that consumers have ample notice to make arrangements to 
pay the full cost of local service should they wish to continue 
telephone service after termination of Lifeline benefits. This 60-day 
time period thus furthers the goal of section 254 to provide access to 
telecommunications services for low-income consumers. A consumer who 
appeals must present proof of continued eligibility to the carrier 
consistent with his or her state's verification requirements or federal 
verification requirements, if relevant, as modified in the 
Certification and Verification Procedures section. This procedure is 
only required when the carrier has initiated termination of benefits. 
This 60-day period of time is not necessary when the Lifeline 
subscriber has notified the carrier that he or she is no longer 
eligible. Presumably such subscribers will be aware of their impending 
termination of benefits and will be able to budget their resources 
accordingly.

C. Certification and Verification Procedures

a. Automatic Enrollment
    15. We agree with the Joint Board and encourage all states, 
including federal default states, to adopt automatic enrollment as a 
means of certifying that consumers are eligible for Lifeline/Link-Up. 
In its Recommended Decision, the Joint Board observed that 
participation rates for Lifeline/Link-Up increased in states that 
employed automatic enrollment, aggressive outreach, and intrastate 
multi-agency cooperation. In particular, the Joint Board highlighted 
three states that have adopted some form of Lifeline/Link-Up automatic 
enrollment. In two states, an affirmative act by the participant, such 
as authorization to release qualifying information and submission of 
letter indicating participation in the qualifying program, is needed to 
secure enrollment in Lifeline/Link-Up. In a third state, the state 
automatically enrolls the consumer in Lifeline/Link-Up at the time of 
enrollment in a qualifying program, but offers the consumer an opt-out 
provision to cancel participation in Lifeline/Link-Up. Because we agree 
with the Joint Board that automatic enrollment may facilitate 
participation in Lifeline/Link-Up, we adopt the Joint Board's 
recommendation to encourage states to implement such measures.
    16. We decline, however, to require states to adopt automatic 
enrollment at this time. Instead, we encourage those states that 
currently do not employ automatic enrollment to consider states that 
operate automatic enrollment as a model for future implementation. As 
the Joint Board noted, implementation of automatic enrollment could 
impose significant administrative, technological, and financial burdens 
on states and ETCs. Although we recognize the benefits of automatic 
enrollment, we agree with the Joint Board that we should not force 
states that may be unable to afford to implement automatic enrollment 
to do so. We also recognize arguments that requiring automatic 
enrollment may deter ETCs from participating in the Lifeline/Link-Up 
program because of the technical requirements associated with 
interfacing with government agencies or third party administrators.
b. Certification of Program-Based Eligibility
    17. We agree with the Joint Board that the current certification 
procedures for

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program-based qualification are sufficient. Current rules require self-
certification, under penalty of perjury, for the federal default 
states, and allow states operating their own Lifeline/Link-Up programs 
to devise more strict measures as they deem appropriate. We agree with 
the Joint Board that the ease of self-certification encourages eligible 
consumers to participate in Lifeline/Link-Up. In addition, self-
certification imposes minimal burdens on consumers. Finally, we agree 
with the Joint Board that participation in need-based programs is 
easily verified. Accordingly, we conclude, consistent with the views of 
the Joint Board, that certification of qualified program participation, 
under penalty of perjury, serves as an effective disincentive to abuse 
the system at this time.
c. Certification of Income-Based Eligibility
    18. We adopt the Joint Board's recommendation to require all 
states, including federal default states, to adopt certification 
procedures to document income-based eligibility for Lifeline/Link-Up 
enrollment. Because it is easier to verify qualifying program 
enrollment, we share the Joint Board's concerns that there may be a 
greater potential for fraud and abuse when an individual self-certifies 
his/her income eligibility. We agree with the many commenters that 
requiring documentation of income eligibility should protect against 
waste, fraud, and abuse and ensure that only qualified individuals 
receive Lifeline/Link-Up assistance. Some commenters, however, contend 
that self-certification of income, under penalty of perjury, at the 
enrollment stage is the most cost-effective method to deter abuse of 
the program. The Florida PSC, on the other hand, notes that 
California's Lifeline program, which utilizes self-certification of 
income-based eligibility, appears to have more households receiving the 
Lifeline discount than the Current Population Survey of Households data 
would indicate are eligible for the discount. We do not agree with 
these commenters that argue income certification from another means-
tested program should be suitable documentation, because it could be 
difficult to verify that the means-tested program utilizes the same 
income eligibility threshold. Therefore, because self-certification of 
income presents additional vulnerabilities to the Lifeline/Link-Up 
program, we agree with the Joint Board and several commenters that 
certification of income-based eligibility must be accompanied by 
supporting documentation.
    19. We agree with the Joint Board that states that operate their 
own Lifeline/Link-Up programs should maintain the flexibility to 
develop their own certification procedures other than self-
certification, including acceptable documentation to certify consumer 
eligibility under an income-based criterion, and to determine the 
certifying entity, whether it is a state agency or an ETC. This 
flexibility will permit states to develop certification procedures that 
best accommodate their own Lifeline participants based on the available 
resources of ETCs and state commissions, each state's eligibility 
criteria, and local conditions. When developing their certification 
procedures, we remind states that eligible consumers living on tribal 
lands may qualify for Lifeline support even if they do not satisfy that 
state's eligibility criteria. In addition, ETCs must be able to 
document that they are complying with state regulations and 
recordkeeping requirements.
    20. For federal default states, we adopt rules reflecting the Joint 
Board's recommendation that consumers must provide documentation of 
income eligibility at enrollment. Specifically, we agree with the Joint 
Board's recommendation that the prior year's state, federal, or tribal 
tax return, current income statement from an employer or paycheck stub, 
a Social Security statement of benefits, a Veterans Administration 
statement of benefits, a retirement/pension statement of benefits, an 
Unemployment/Workmen's Compensation statement of benefits, federal or 
tribal notice letter of participation in Bureau of Indian Affairs 
General Assistance, a divorce decree, or child support document serve 
as the types of documents acceptable for income verification. We 
conclude that if a consumer chooses to proffer any document other than 
a previous year's tribal, federal, or state income tax return as 
evidence of income, such as current pay stubs, the consumer must 
present three consecutive months worth of the same type of statements 
within that calendar year. Three consecutive months of income 
statements represent one quarter of the calendar year and better 
substantiate the yearly stated income, without overly burdening 
consumers.
    21. For those states governed by the federal default Lifeline/Link-
Up rules, we require an officer of the ETC enrolling the consumer in 
Lifeline/Link-Up to certify, under penalty of perjury, that the ETC has 
procedures in place to review income documentation and that, to the 
best of his or her knowledge, the company was presented with 
documentation that the consumer's household income is at or below 135% 
of the FPG. Some commenters oppose certification procedures for income-
based eligibility because, they insist, such procedures would be overly 
burdensome to ETCs. AT&T argues that ETC employees are not trained to 
review and interpret complex government forms, such as tax forms, W-2 
statements, or pay stubs. The rules we adopt today, however, do not 
require difficult computations or interpretations; rather, they require 
the ETC to compare the annual income represented in the provided 
documentation and the number of individuals in the household to a FPG 
chart posted on the Universal Service Administrative Company's (USAC's) 
website. Moreover, our rules do not require ETCs to retain the 
consumer's corroborating documentation. ETCs need only retain records 
of their self-certifications and those made by the applicant. Where 
states operate their own Lifeline/Link-Up programs, an officer of the 
ETC must certify that the ETC is in compliance with state Lifeline/
Link-Up income certification procedures and that, to the best of his or 
her knowledge, documentation of income was presented.
    22. Finally, all consumers in all states qualifying under an 
income-based criterion must self-certify their eligibility to 
participate. Consumers must make this self-certification under penalty 
of perjury and must also present all required documentation. 
Specifically, consumers must self-certify, under penalty of perjury, 
that the presented documentation accurately represents their annual 
household income. Moreover, we adopt the Joint Board's recommendation 
that Lifeline/Link-Up applicants in all states qualifying under an 
income-based criterion should be required to self-certify, under 
penalty of perjury, the number of individuals in their households. 
Because the Federal Poverty Guidelines change depending upon the number 
of individuals in a household, this information is necessary to 
determine eligibility.
d. Verification of Continued Eligibility Under Program-Based and 
Income-Based Eligibility
    23. We adopt the Joint Board's recommendation that all states, 
including federal default states, be required to establish procedures 
to verify consumers' continued eligibility for the Lifeline/Link-Up 
program under both program and income-based eligibility criteria. 
Verification procedures could include random

[[Page 34595]]

beneficiary audits, periodic submission of documents, or annual self-
certification. We agree with those commenters that assert that 
verification of continued eligibility should ensure that the low-income 
support mechanism is updated, accurate, and carefully targeted to 
provide support only to eligible consumers. We disagree with other 
commenters that argue that these benefits do not outweigh the burden 
associated with a verification requirement. We agree with the Joint 
Board that verification is an effective way to prevent fraud and abuse 
and ensure that only eligible consumers receive benefits.
    24. We also adopt the Joint Board's recommendation to allow states 
that administer their own Lifeline/Link-Up programs the flexibility to 
design and implement their own verification procedures to validate 
consumers' continued eligibility. We note that several states already 
engage in verification of continued eligibility for Lifeline/Link-Up. 
For example, in some states, the ETC is responsible for verifying the 
consumer's continued eligibility, while other states require their 
state agencies to devise procedures for eligibility verification. 
Another state establishes eligibility verification procedures that 
involve state agency and carrier participation. This flexibility will 
permit states to develop verification procedures that best accommodate 
their own Lifeline participants based on the available resources of 
ETCs and state commissions, each state's eligibility criteria, and 
local conditions. We also note that eligible consumers living on tribal 
lands may qualify for Lifeline support even if they do not satisfy that 
state's eligibility criteria. In addition, ETCs must be able to 
document that they are complying with state regulations and 
verification requirements.
    25. With respect to federal default states, we adopt the Joint 
Board's recommendation to require ETCs to verify annually the continued 
eligibility of a statistically valid sample of their Lifeline 
subscribers. ETCs are free to verify directly with a state that 
particular subscribers continue to be eligible by virtue of 
participation in a qualifying program or income level. Alternatively, 
to the extent ETCs cannot obtain the necessary information from the 
state, they may survey the subscriber directly and provide the results 
of the sample to USAC. Subscribers who are subject to this verification 
and qualify under program-based eligibility criteria must prove their 
continued eligibility by presenting in person or sending a copy of 
their Medicaid card or other Lifeline-qualifying public assistance card 
and self-certifying, under penalty of perjury, that they continue to 
participate in the Lifeline-qualifying public assistance program. 
Subscribers who are subject to this verification and qualify under the 
income-based eligibility criteria must prove their continued 
eligibility by presenting current documentation consistent with the 
federal default certification process, as detailed. These subscribers 
must also self-certify, under penalty of perjury, the number of 
individuals in their household and that the documentation presented 
accurately represents their annual household income. As with 
certification of income-based eligibility, ETCs need not retain 
documentation of income; however, an officer of the ETC must certify, 
under penalty of perjury, that the ETC has income verification 
procedures in place and that, to the best of his or her knowledge, the 
company was presented with corroborating documentation and retain these 
records.
    26. In addition, we agree with the Joint Board that states should 
develop on-line verification systems. Several commenters highlight the 
effectiveness and efficiency of verifying eligibility via on-line 
databases. We agree with the Joint Board that an on-line verification 
process, where states can obtain and provide data to allow ETCs real-
time access to a database of low-income assistance program participants 
or income reports, could be a quick, easy, and accurate solution. 
Nevertheless, we decline to require states to adopt on-line 
verification at this time. Despite the benefits of on-line 
verification, we recognize, as did the Joint Board, that current 
financial constraints may make it difficult for some states to 
implement on-line verification.

D. Implementation and Recordkeeping

    27. States and ETCs will be required to implement measures to 
certify income of consumers before enrollment in Lifeline/Link-Up when 
income is the consumer's basis for Lifeline/Link-Up eligibility, and to 
implement measures to verify continued eligibility for Lifeline/Link-Up 
under any criteria within one year from the publication of this Order 
in the Federal Register. Given the flexibility afforded states to 
develop certification and verification procedures, we conclude that one 
year should provide more than enough time to come into full compliance 
with the rules we adopt today. Indeed, we encourage states and ETCs to 
implement certification and verification measures as quickly as 
possible, but no later than one year. For federal default states, level 
of income will not be acceptable as a means of qualifying for Lifeline/
Link-Up until certification procedures are in place.
    28. In addition, we specify that ETCs in federal default states 
must retain certifications regarding a consumer's eligibility for 
Lifeline for as long as the consumer receives Lifeline service from 
that ETC or until the ETC is audited by the Administrator. Section 
54.409 of the Commission's rules requires ETCs to obtain a self-
certification, under penalty of perjury, from a consumer that he or she 
receives benefits from one of the qualifying means-tested programs. 
However, this rule does not specify how long ETCs must retain consumer 
self-certifications regarding eligibility. In this Order, we clarify 
our rules to require ETCs in federal default states to retain 
consumers' self-certifications of eligibility, including self-
certifications that income documentation accurately reflects household 
income, for as long as the consumer receives Lifeline service from that 
ETC or until the ETC is audited by the Administrator. This requirement 
will strengthen the Commission's ability to ensure program integrity 
without unduly burdening ETCs. For example, requiring an ETC to retain 
a single certification document per consumer will allow the 
Administrator to confirm in any audit that a consumer was properly 
enrolled in Lifeline, regardless of when he or she was enrolled.
    29. Moreover, we codify the requirement that all ETCs must maintain 
records to document compliance with all Commission and state 
requirements governing the Lifeline/Link-Up programs and provide that 
documentation to the Commission or Administrator upon request. These 
records could include, for example, self-certifications verifying 
consumers' continued eligibility, documents demonstrating that ETCs 
have passed through the appropriate discounts to qualifying consumers, 
proof of advertising of Lifeline/Link-Up service, and billing records 
for Lifeline customers. All ETCs must retain such documentation for the 
three full preceding calendar years, e.g., in December 2004, an ETC 
would maintain records for calendar years 2001-2003, but in January 
2005, that ETC would only maintain records for calendar years 2002-
2004.
    30. Finally, we clarify the recordkeeping obligations of non-ETC 
resellers that purchase Lifeline-discounted wholesale services from 
ETCs to offer discounted services to low-income consumers. In such 
instances, the ETC would have no information regarding the eligibility 
of

[[Page 34596]]

the low-income consumer. Accordingly, in these circumstances, ETCs must 
obtain certifications from the non-ETC reseller that it is complying 
with the Commission's Lifeline/Link-Up requirements. Moreover, non-ETC 
resellers providing discounted services to low-income customers must 
comply with the applicable federal or state Lifeline/Link-Up 
requirements, including certification and verification procedures. 
Thus, such non-ETC resellers would be required to retain the required 
documentation to demonstrate that they are providing discounted 
services only to qualifying low-income consumers for the above-
specified periods.

E. Outreach

    31. We agree with the Joint Board that more vigorous outreach 
efforts could improve Lifeline/Link-Up subscribership and adopt the 
Joint Board's recommendation to provide outreach guidelines to states 
and carriers. We agree that we should not require specific outreach 
procedures, but should instead provide guidelines for states and 
carriers so that they can adopt their own specific standards and engage 
in outreach as they see fit. Commenters were supportive of the proposed 
outreach guidelines, outlined in the Recommended Decision and detailed. 
We believe that encouraging states to establish partnerships with other 
state agencies and telephone companies will maximize public awareness 
and participation in the Lifeline/Link-Up program. We do not believe it 
is necessary at this time to prescribe specific outreach procedures. 
Instead, we set forth these guidelines in order to provide states and 
carriers with examples of how to reach those likely to qualify. States 
and carriers will still have the flexibility to determine the most 
appropriate outreach mechanisms for their consumers, as long as they 
are reasonably designed to reach those likely to qualify for Lifeline/
Link-Up.
    32. Accordingly, we adopt the following outreach guidelines 
recommended by the Joint Board: (1) States and carriers should utilize 
outreach materials and methods designed to reach households that do not 
currently have telephone service; (2) states and carriers should 
develop outreach advertising that can be read or accessed by any 
sizeable non-English speaking populations within a carrier's service 
area; and (3) states and carriers should coordinate their outreach 
efforts with governmental agencies/tribes that administer any of the 
relevant government assistance programs. These guidelines are described 
in detail. An appendix compiling state practices was included in the 
Recommended Decision and is reproduced in this document. State 
practices include establishing marketing boards to devise outreach 
materials, providing multi-lingual customer support, and implementing 
innovative tribal outreach practices.
    33. The first recommended guideline is that states and carriers 
should utilize outreach materials and methods designed to reach 
households that do not currently have telephone service. States or 
carriers may wish to send regular mailings to eligible households in 
the form of letters or brochures. Posters could be placed in locations 
where low-income individuals are likely to visit, such as shelters, 
soup kitchens, public assistance agencies, and on public 
transportation. Multi-media outreach approaches could be utilized such 
as newspaper advertisements, articles in consumer newsletters, press 
releases, radio commercials, and radio and television public service 
announcements. For low-income consumers that live in remote areas, 
including those living on tribal lands, traveling throughout an area or 
setting up an information booth at a central location may be more 
suitable outreach methods. States and carriers should ensure that 
outreach materials and methods accommodate low-income individuals with 
sight, hearing, and speech disabilities by producing brochures, 
mailings, and posters in Braille. We also encourage carriers to provide 
customer service to disabled program participants on an equal basis by 
using telecommunications relay services (TRS), text telephone (TTY), 
and speech-to-speech (STS) services. States and carriers should also 
take into consideration that some low-income consumers may be 
illiterate or functionally illiterate, and therefore should consider 
how to supplement outreach materials and methods to accommodate those 
individuals. States and carriers may post outreach material on the 
Internet to provide general information; however, the Internet should 
not be relied on as the sole or primary means of Lifeline/Link-Up 
outreach. Similarly, although advertising Lifeline/Link-Up in carriers' 
telephone books may be effective in reaching some low-income 
individuals, it will not be effective for those without established 
phone service because carriers only distribute telephone books after 
phone service is established. States and carriers should also not rely 
on hotlines as a primary outreach method because many low-income 
individuals may not have access to a telephone from which to initiate 
an inquiry on Lifeline/Link-Up benefits.
    34. The second recommended guideline is that states and carriers 
should develop outreach advertising that can be read or accessed by any 
sizeable non-English speaking populations within the carrier's service 
area. For example, many of the suggestions can be implemented in 
languages other than English, including mailings, print advertisements, 
radio and television commercials, and posters. States with a large 
ethnically diverse population should have a toll-free call center to 
answer questions about Lifeline/Link-Up in the low-income population's 
native languages. Similarly, enrollment applications should be made 
available in other languages.
    35. The third recommended guideline is that states and carriers 
should coordinate their outreach efforts with governmental agencies 
that administer any of the relevant government assistance programs. 
Coordination should also include cooperative outreach efforts with 
state commissions, tribal organizations, carriers, social service 
agencies, community centers, nursing homes, public schools, and private 
organizations that may serve low-income individuals, such as American 
Association for Retired Persons and the United Way. Cooperative 
outreach among those most likely to have influential contact with low-
income individuals will help to target messages about Lifeline/Link-Up 
to the low-income community. For example, state agencies that conduct 
outreach efforts for a state's ``earned income tax credit,'' an income 
tax credit for low-income working individuals and families, could 
conduct simultaneous outreach efforts for Lifeline/Link-Up. 
Establishing a marketing or consumer advisory board with state, 
carrier, non-profit and consumer representatives may also be an 
effective way of developing outreach materials. States and carriers 
could also issue a joint report to the Commission as to their outreach 
practices.
    36. We also encourage states to utilize USAC as a resource for 
outreach to states and carriers, similar to USAC's outreach efforts 
with regard to the Rural Health Care and Schools and Libraries 
programs. USAC currently engages in outreach for the Lifeline/Link-Up 
program through its website, <www.lifelinesupport.org, which 
has information about state Lifeline/Link-Up programs, eligibility 
criteria, and information for carriers. USAC also speaks about 
Lifeline/Link-Up at public events such as the National Association

[[Page 34597]]

of Regulatory Utility Commissioners (NARUC) conference and the National 
Congress of American Indians, where USAC staff also meets with tribal 
members and managers of tribally-owned telephone companies. USAC 
distributes letters and emails to consumer groups, tribal leaders, and 
social service organizations to publicize the availability of Lifeline/
Link-Up and also sends letters to ETCs to remind them of their outreach 
obligations. USAC also frequently takes phone calls from consumers and 
others with questions about the Lifeline/Link-Up program. Finally, we 
agree with the Joint Board that in addition to USAC's current outreach 
efforts for Lifeline/Link-Up, USAC should assist in additional outreach 
efforts for Lifeline/Link-Up similar to what it currently does for the 
Rural Health Care and Schools and Libraries Programs.

F. Other Issues

a. Voluntary Survey
    37. We agree with the Joint Board that gathering data and 
information about state Lifeline/Link-Up programs through a voluntary 
survey will enable the Commission to make more informed decisions in 
any future Lifeline/Link-Up orders. In the Notice of Proposed 
Rulemaking, 68 FR 42333, July 17, 2003, we sought comment on the 
survey's format and questions to ask.
    38. To obtain feedback on the success of the modified Lifeline/
Link-Up program, we adopt a voluntary information collection from the 
states. This voluntary survey form asks states to provide information 
about the eligibility criteria, certification and verification 
procedures, and outreach efforts implemented as a result of the changes 
we adopt in this Order. Collection of this survey will assist us in 
learning about the reasons for variations in participation rates 
between and among states, and as a result could help shape Commission 
policy in the future. We agree with commenters that submission of this 
survey should be voluntary for states with the first survey due one 
year following the effective date of this Order. We direct USAC to mail 
the voluntary survey form to states. We have expanded on some of the 
Joint Board's recommended questions and added a few questions to the 
survey, at the suggestion of NCLC.
b. Unpaid Toll Charges
    39. We adopt the Joint Board's recommendation to encourage states 
to consider implementing rules that require ETCs to offer Lifeline 
service to consumers who may have been previously disconnected for 
unpaid toll charges. We acknowledge that ETCs often prohibit consumers 
who have prior outstanding balances for local and/or long distance 
services, but who otherwise qualify for Lifeline/Link-Up, from signing 
up for local telephone service. As a result, these outstanding balances 
stand as a barrier to expanding subscribership among low-income 
consumers. However, the Fifth Circuit found that the Commission lacked 
jurisdiction to prohibit ETCs from disconnecting Lifeline customers for 
failure to pay toll charges. In light of the Fifth Circuit ruling, we 
adopt the Joint Board's recommendation and take no action on 
disconnection requirements at this time. We encourage states, however, 
to consider ways to address this issue.
c. Vertical Services
    40. We adopt the Joint Board's recommendation not to adopt rules 
prohibiting Lifeline/Link-Up customers from purchasing vertical 
services, such as Caller ID, Call Waiting, and Three-way Calling. Like 
the Joint Board, we believe any restriction on the purchase of vertical 
services may discourage qualified consumers from enrolling and may 
serve as a barrier to participation in the program. No commenter 
supported prohibiting Lifeline/Link-Up subscribers from purchasing 
vertical services. However, some expressed concern that ETCs may be 
marketing vertical services to low-income customers who may be unable 
to afford these features. While we understand these concerns, we do not 
prohibit the marketing of vertical services to Lifeline/Link-Up 
customers at this time.
d. Support for Non-ETCs
    41. We agree with the Joint Board that we should decline to 
establish rules that would provide Lifeline/Link-Up support directly to 
carriers that are not ETCs. Contrary to AT&T's assertion, establishing 
such rules would be inconsistent with section 254(e), which states that 
only ETCs may receive universal service support. Extending Lifeline/
Link-Up universal service support to carriers that do not satisfy the 
requirements for designation as an ETC could also serve as a 
disincentive for other carriers to comply with their ETC obligations.
e. Minor Rule Changes
    42. In the Notice of Proposed Rulemaking, the Commission identified 
various proposals to clarify and streamline our rules. Specifically, 
the Commission proposed to modify Part 54 to reference a provision in 
Sec.  52.33(a)(1)(i)(C) of the Commission's rules that exempts Lifeline 
Assistance Program customers from monthly number-portability charges. 
The Commission also solicited comment on whether Sec.  54.401(c) should 
be amended by replacing ``toll blocking'' with ``toll limitation'' to 
accurately reflect the Commission's determination in the 1997 Universal 
Service Order that ETCs may not impose service deposit requirements on 
Lifeline customers who accept toll limitation services. Section 
54.401(c) incorrectly limits the service deposit prohibition to 
customers who accept toll blocking. Finally, the Commission sought 
comment on whether to delete subpart G of part 36, which states that 
``[t]his subpart shall be effective through December 31, 1997. On 
January 1, 1998, Lifeline Connection Assistance shall be provided in 
accordance with part 54, subpart E of this chapter.'' We believe these 
changes will clarify and streamline our Lifeline/Link-Up rules. 
Therefore, we adopt these minor rule changes as proposed in the Notice 
of Proposed Rulemaking.

III. Procedural Matters

A. Regulatory Flexibility Analysis

    43. As required by the Regulatory Flexibility Act of 1980, as 
amended (RFA) an Initial Regulatory Flexibility Analysis (IRFA) was 
incorporated in the Notice of Proposed Rulemaking. The Commission 
sought comment on the proposals in the Notice of Proposed Rulemaking, 
including comment on the IRFA. The present Final Regulatory Flexibility 
Analysis (FRFA) conforms to the RFA.

B. Need for, and Objectives of, the Order

    44. In this Order, we adopt rules that expand the federal default 
eligibility criteria for Lifeline/Link-Up to include an income-based 
criterion of 135% of the Federal Poverty Guidelines and additional 
means-tested programs. We also adopt rules requiring certification and 
verification procedures for eligibility under certain circumstances. In 
addition, we provide outreach guidelines for carriers and states and a 
voluntary Lifeline/Link-Up administrative survey to better target low-
income consumers and improve program operation. Collectively, these 
rules will improve the effectiveness of the low-income support 
mechanism and ensure quality telecommunications services are available 
to low-income consumers at just, reasonable, and affordable rates.

[[Page 34598]]

C. Summary of Significant Issues Raised by Public Comments in Response 
to the IRFA

    45. There were no comments filed specifically in response to the 
IRFA. Nevertheless, the agency has considered the potential impact of 
the rules proposed in the IRFA on small entities. Adding two means-
tested programs, Temporary Assistance to Needy Families (TANF) and 
National School Lunch's free lunch program (NSL), and household income 
as a basis for Lifeline/Link-Up eligibility does not raise significant 
issues for small business entities. Some commenters were concerned that 
certification and verification procedures might pose significant costs 
on small entities. However, the rules we adopt today strike a balance 
between minimizing compliance burdens and costs and preserving the 
integrity of the Lifeline/Link-Up program.

D. Description and Estimate of the Number of Small Entities to Which 
Rules Will Apply

    46. The RFA directs agencies to provide a description of, and where 
feasible, an estimate of the number of small entities that may be 
affected by the proposed rules, if adopted. The RFA generally defines 
the term ``small entity'' as having the same meaning as the terms 
``small business,'' ``small organization,'' and ``small governmental 
jurisdiction.'' In addition, the term ``small business'' has the same 
meaning as the term ``small business concern'' under the Small Business 
Act. A ``small business concern'' is one which: (1) Is independently 
owned and operated; (2) is not dominant in its field of operation; and 
(3) satisfies any additional criteria established by the Small Business 
Administration (SBA).
    47. The Commission's decision to adopt certification and 
verification requirements would apply to service providers that provide 
services to qualifying low-income consumers who receive Lifeline/Link-
Up support. According to the Universal Service Administrative Company's 
(USAC) 2002 Annual Report, only local exchange carriers, cellular/
personal communications services (PCS) providers, and competitive 
access providers would be subject to these requirements. Because many 
of these service providers could include small entities, we expect that 
the proposal in this proceeding could have a significant economic 
impact on local exchange carriers, small incumbent local exchange 
carriers, cellular/PCS providers, and competitive access providers that 
are small entities.
    48. We have included small incumbent local exchange carriers in 
this present RFA analysis. As noted, a ``small business'' under the RFA 
is on that, inter alia, meets the pertinent small business size 
standard (e.g., a telephone communications business having 1,500 or 
fewer employees), and ``is not dominant in its field of operation.'' 
The SBA's Office of Advocacy contends that, for RFA purposes, small 
incumbent local exchange carriers are not dominant in their field of 
operation because any such dominance is not ``national'' in scope. We 
have therefore included small incumbent local exchange carriers in this 
RFA analysis, although we emphasize that this RFA action has no effect 
on Commission analyses and determinations in other, non-RFA contexts.
    49. Incumbent Local Exchange Carrier. Neither the Commission nor 
the SBA has developed a size standard specifically for small providers 
of local exchange services. The closest applicable size standard under 
the SBA rules is for wired telecommunications carriers. This provides 
that a wired telecommunications carrier is a small entity if it employs 
no more than 1,500 employees. According to Commission data, 1,337 
incumbent carriers reported that they were engaged in the provision of 
local exchange services. Of these 1,337 carriers, an estimated 1,032 
have 1,500 or fewer employees and 305 carriers have more than 1,500 
employees. Consequently, the Commission estimates that most providers 
of incumbent local exchange service are small businesses that may be 
affected by the rules and policies adopted herein. According to 
Commission data, 1,337 incumbent carriers reported that they were 
engaged in the provision of local exchange services. Of these 1,337 
carriers, an estimated 1,032 have 1,500 or fewer employees and 305 
carriers have more than 1,500 employees. Consequently, the Commission 
estimates that most providers of incumbent local exchange service are 
small businesses that may be affected by the rules and policies adopted 
herein.
    50. Competitive Local Exchange Carriers, Competitive Access 
Providers, and Other Local Exchange Carriers. Neither the Commission 
nor the SBA has developed a size standard specifically for small 
providers of local exchange services. The closest applicable size 
standard under the SBA rules is for wired telecommunications carriers. 
This provides that a wired telecommunications carrier is a small entity 
if it employs no more than 1,500 employees. According to the most 
recent Commission data, 609 companies reported that they were engaged 
in the provision of either competitive access provider services or 
competitive local exchange carrier services. Of these 609 companies, an 
estimated 458 have 1,500 or fewer employees and 151 have more than 
1,500 employees. In addition, 35 carriers reported that they were 
``Other Local Exchange Carriers.'' Of the 35 ``Other Local Exchange 
Carriers,'' an estimated 34 have 1,500 or fewer employees and one has 
more than 1,500 employees. Consequently, the Commission estimates that 
most providers of competitive local exchange service, competitive 
access providers, and ``Other Local Exchange Carriers'' are small 
entities that may be affected by the rules and policies adopted herein.
    51. Cellular and Other Wireless Telecommunications. The SBA has 
developed a small business size standard for Cellular and Other 
Wireless Telecommunications, which consists of all such firms having 
1,500 or fewer employees. According to data for 1997, a total of 977 
such firms operated for the entire year. Of those, 965 firms employed 
999 or fewer persons for the year, and 12 firms employed of 1,000 or 
more. Therefore, nearly all such firms were small businesses. In 
addition, we note that there are 1,807 cellular licenses; however, a 
cellular licensee may own several licenses. According to Commission 
data, 858 carriers reported that they were engaged in the provision of 
cellular service, Personal Communications Service (PCS), or Specialized 
Mobile Radio telephony service, which are placed together in the data. 
We have estimated that 291 of these are small under the SBA small 
business size standard.
    52. Broadband Personal Communications Service (PCS). The broadband 
PCS spectrum is divided into six frequencies designated A through F, 
and the Commission has held auctions for each block. The Commission 
defined ``small entity'' for Blocks C and F as an entity that has 
average gross revenues of less than $40 million in the three previous 
calendar years. For Block F, an additional classification for ``very 
small business'' was added and is defined as an entity that, together 
with their affiliates, has average gross revenues of not more than $15 
million for the preceding three calendar years. These regulations 
defining ``small entity'' in the context of broadband PCS auctions have 
been approved by the SBA. No small businesses within the SBA-

[[Page 34599]]

approved definition bid successfully for licenses in Blocks A and B. 
There were 90 winning bidders that qualified as small entities in the 
Block C auctions. A total of 93 small and very small business bidders 
won approximately 40% of the 1,479 licenses for Blocks D, E, and F. On 
March 23, 1999, the Commission re-auctioned 347 C, D, E, and F Block 
licenses; there were 48 small business winning bidders. Based on this 
information, we conclude that the number of small broadband PCS 
licensees will include the 90 winning C Block bidders and the 93 
qualifying bidders in the D, E, and F blocks, plus the 48 winning 
bidders in the re-auction, for a total of 231 small entity PCS 
providers as defined by the SBA and the Commission's auction rules. On 
January 26, 2001, the Commission completed the auction of 422 C and F 
Broadband PCS licenses in Auction No. 35. Of the 35 winning bidders in 
this auction, 29 qualified as small or very small businesses.

E. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements for Small Entities

    53. Expanding the eligibility criteria will not create additional 
reporting, recordkeeping, or other compliance requirements.
    54. Several other requirements adopted in this Order, however, 
affect recordkeeping requirements. First, ETCs will be required to 
maintain records to document compliance with all Commission 
requirements governing the Lifeline/Link-Up programs, including 
numerous self-certifications, and provide that documentation to the 
Commission or Administrator upon request for the full three preceding 
calendar years. Specifically, ETCs in federal default states must 
retain certifications that documentation of income eligibility was 
presented when the customer was initially enrolled in Lifeline and when 
the customer was subject to verification of continued eligibility. ETCs 
in states operating their own Lifeline/Link-Up program must document 
compliance with state Lifeline regulations and recordkeeping 
requirements, including state certification and verification 
procedures. Second, non-ETC resellers must retain documentation to 
demonstrate that they are providing discounted services only to 
qualifying low-income customers. Records of customer eligibility must 
be maintained for as long as the customer receives Lifeline service 
from that ETC or until that ETC is audited by the Administrator.

F. Steps Taken To Minimize the Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered

    55. Although self-certification of income may be easily 
administered, we conclude that self-certification of income could 
invite abuse of the Lifeline/Link-Up program, because it is difficult 
to verify income. Accordingly, to address concerns of potential waste, 
fraud, and abuse, we will require consumers qualifying under the 
income-based criterion to present documentation of income. To minimize 
burdens on carriers, however, we do not require ETCs in federal default 
states to maintain this documentation of income. Rather, an officer of 
the ETC need only self-certify, under penalty of perjury, that the 
carrier has procedures in place to review income documentation and 
that, to the best of his or her knowledge, income documentation was 
presented. In addition, to ensure that only eligible consumers receive 
Lifeline/Link-Up benefits, we require ETCs in federal default states to 
verify directly with a state that particular subscribers continue to be 
eligible or survey subscribers directly by sending annual verification 
forms to a statistically valid sample of Lifeline subscribers, 
providing the results of the sample to USAC.
    56. We allow states operating their own Lifeline/Link-Up programs 
flexibility to develop their own certification of income and 
verification procedures. We note that resources of the carrier, among 
other things, should be taken into consideration when devising state 
certification and verification procedures. In addition, an officer of 
an ETC in states that operate their own Lifeline/Link-Up programs must 
certify, under of penalty of perjury, that the ETC complies with state 
certification procedures and that, to the best of his or her knowledge, 
documentation of income for consumers applying under an income-based 
criterion was presented.
    57. Finally, we provide carriers options regarding retaining 
records of consumer eligibility. Carriers may either retain such 
records for as long as the carrier provides Lifeline service to that 
consumer or until it is audited by the Administrator. These 
requirements are necessary to ensure program integrity. However, we 
provide carriers flexibility to choose the more appropriate 
recordkeeping method.

G. Report to Congress

    58. The Commission will send a copy of the Order, including this 
FRFA, in a report to be sent to Congress pursuant to the Congressional 
Review Act, see 5 U.S.C. 801(a)(1)(A). In addition, the Commission will 
send a copy of the Order, including the FRFA, to the Chief Counsel for 
Advocacy of the Small Business Administration. A copy of the Order and 
FRFA (or summaries thereof) will also be published in the Federal 
Register.

H. Paperwork Reduction Act Analysis

    59. The action contained herein has been analyzed with respect to 
the Paperwork Reduction Act of 1995 and found to impose new or modified 
reporting and recordkeeping requirements or burdens on the public. 
Implementation of these new or modified reporting and recordkeeping 
requirements will be subject to approval by the Office of Management 
and Budget (OMB) as prescribed by the Act, and will go into effect upon 
announcement in the Federal Register of OMB approval.

IV. Ordering Clauses

    60. Accordingly, it is ordered that, pursuant to the authority 
contained in sections 1, 4(i), 201-205, 214, 254, and 403 of the 
Communications Act of 1934, as amended, this Order is adopted.
    61. Part 54 of the Commission's rules, is amended as set forth, 
effective July 22, 2004 except for Sec. Sec.  54.405(c), 54.405(d), 
54.409(d), 54.409(d)(3), 54.410, 54.416, 54.417 which contain 
information collection requirements that have not been approved by the 
Office of Management Budget (OMB). The Commission will publish a 
document in the Federal Register announcing the effective date of those 
sections.

List of Subjects

47 CFR Part 36

    Communications common carrier, Reporting and recordkeeping 
requirements, Telephone.

47 CFR Part 54

    Communications common carriers, Reporting and recordkeeping 
requirements, Telecommunications, Telephone.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.

Final Rules

0
For the reasons discussed in the preamble, the Federal Communications 
Commission amends 47 CFR parts 36 and 54 as follows:

[[Page 34600]]

PART 36--JURISDICTIONAL SEPARATIONS PROCEDURES; STANDARD PROCEDURES 
FOR SEPARATING TELECOMMUNICATIONS PROPERTY COSTS, REVENUES, 
EXPENSES, TAXES AND RESERVES FOR TELECOMMUNICATIONS COMPANIES

0
1. The authority citation continues to read as follows:

    Authority: 47 U.S.C. Secs. 151, 154(i) and (j), 205, 221(c), 
254, 403, and 410.


Sec. Sec.  36.701 through 36.741  [Removed]

0
2. Remove Sec. Sec.  36.701 through 36.741.

PART 54--UNIVERSAL SERVICE

0
3. The authority citation for Part 54 continues to read as follows:

    Authority: 47 U.S.C. 1, 4(i), 201, 205, 214, and 254 unless 
otherwise noted.


0
4. Amend Sec.  54.400 by adding paragraph (f) to read as follows:


Sec.  54.400  Terms and definitions.

* * * * *
    (f) Income. ``Income'' is all income actually received by all 
members of the household. This includes salary before deductions for 
taxes, public assistance benefits, social security payments, pensions, 
unemployment compensation, veteran's benefits, inheritances, alimony, 
child support payments, worker's compensation benefits, gifts, lottery 
winnings, and the like. The only exceptions are student financial aid, 
military housing and cost-of-living allowances, irregular income from 
occasional small jobs such as baby-sitting or lawn mowing, and the 
like.

0
5. Amend Sec.  54.401 by revising paragraph (c) and by adding paragraph 
(e) to read as follows:


Sec.  54.401  Lifeline defined.

* * * * *
    (c) Eligible telecommunications carriers may not collect a service 
deposit in order to initiate Lifeline service, if the qualifying low-
income consumer voluntarily elects toll limitation service from the 
carrier, where available. If toll limitation services are unavailable, 
the carrier may charge a service deposit.
* * * * *
    (e) Consistent with Sec.  52.33(a)(1)(i)(C), eligible 
telecommunications carriers may not charge Lifeline customers a monthly 
number-portability charge.

0
6. Amend Sec.  54.405 by adding paragraphs (c) and (d) to read as 
follows:


Sec.  54.405  Carrier obligation to offer Lifeline.

* * * * *
    (c) Notify Lifeline subscribers of impending termination of 
Lifeline service if the carrier has a reasonable basis to believe that 
the subscriber no longer meets the Lifeline-qualifying criteria, as 
described in Sec.  54.409. Notification of impending termination shall 
be in the form of a letter separate from the subscriber's monthly bill. 
A carrier providing Lifeline service in a state that has dispute 
resolution procedures applicable to Lifeline termination, that 
requires, at a minimum, written notification of impending termination, 
must comply with the applicable state requirements.
    (d) Allow subscribers 60 days following the date of the impending 
termination letter required in paragraph (c) of this section in which 
to demonstrate continued eligibility. Subscribers making such a 
demonstration must present proof of continued eligibility to the 
carrier consistent with applicable state or federal verification 
requirements, as described in Sec.  54.410(c). Carriers must terminate 
subscribers who fail to demonstrate continued eligibility within the 
60-day time period. A carrier providing Lifeline service in a state 
that has dispute resolution procedures applicable to Lifeline 
termination must comply with the applicable state requirements.

0
7. Amend Sec.  54.409 by revising paragraph (b), adding a sentence at 
the end of paragraph (c), and by adding paragraph (d) to read as 
follows:


Sec.  54.409  Consumer qualification for Lifeline.

* * * * *
    (b) To qualify to receive Lifeline service in a state that does not 
mandate state Lifeline support, a consumer's income, as defined in 
Sec.  54.400(f), must be at or below 135% of the Federal Poverty 
Guidelines or a consumer must participate in one of the following 
federal assistance programs: Medicaid; Food Stamps; Supplemental 
Security Income; Federal Public Housing Assistance (Section 8); Low-
Income Home Energy Assistance Program; National School Lunch Program's 
free lunch program; or Temporary Assistance for Needy Families.
    (c) * * * Such qualifying low-income consumer shall also qualify 
for Tier-Three Lifeline support, if the carrier offering the Lifeline 
service is not subject to the regulation of the state and provides 
carrier-matching funds, as described in Sec.  54.403(a)(3).
    (d) In a state that does not mandate state Lifeline support, each 
eligible telecommunications carrier providing Lifeline service to a 
qualifying low-income consumer pursuant to paragraphs (b) or (c) of 
this section must obtain that consumer's signature on a document 
certifying under penalty of perjury that:
    (1) The consumer receives benefits from one of the programs listed 
in paragraphs (b) or (c) of this section, and identifying the program 
or programs from which that consumer receives benefits, or
    (2) The consumer's household meets the income requirement of 
paragraph (b) of this section, and that the presented documentation of 
income, as described in Sec. Sec.  54.400(f), 54.410(a)(ii), accurately 
represents the consumer's household income; and
    (3) The consumer will notify the carrier if that consumer ceases to 
participate in the program or programs or if the consumer's income 
exceeds 135% of the Federal Poverty Guidelines.
0
8. Add Sec.  54.410 to subpart E to read as follows:


Sec.  54.410  Certification and Verification of Consumer Qualification 
for Lifeline.

    (a) Certification of income. Consumers qualifying under an income-
based criterion must present documentation of their household income 
prior to enrollment in Lifeline.
    (1) By one year from the effective date of these rules, eligible 
telecommunications carriers in states that mandate state Lifeline 
support must comply with state certification procedures to document 
consumer income-based eligibility for Lifeline prior to that consumer's 
enrollment if the consumer is qualifying under an income-based 
criterion.
    (2) By one year from the effective date of these rules, eligible 
telecommunications carriers in states that do not mandate state 
Lifeline support must implement certification procedures to document 
consumer-income-based eligibility for Lifeline prior to that consumer's 
enrollment if the consumer is qualifying under the income-based 
criterion specified in Sec.  54.409(b). Acceptable documentation of 
income eligibility includes the prior year's state, federal, or tribal 
tax return, current income statement from an employer or paycheck stub, 
a Social Security statement of benefits, a Veterans Administration 
statement of benefits, a retirement/pension statement of benefits, an 
Unemployment/Workmen's Compensation statement of benefits, federal or 
tribal notice letter of participation in General Assistance, a divorce 
decree, child support, or other official document. If the consumer 
presents documentation of income that does not cover a full year, such 
as

[[Page 34601]]

current pay stubs, the consumer must present three consecutive months 
worth of the same types of document within that calendar year.
    (b) Self-certifications. After income certification procedures are 
implemented, eligible telecommunications carriers and consumers are 
required to make certain self-certifications, under penalty of perjury, 
relating to the Lifeline program.
    (1) An officer of the eligible telecommunications carrier in a 
state that mandates state Lifeline support must certify that the 
eligible telecommunications carrier is in compliance with state 
Lifeline income certification procedures and that, to the best of his/
her knowledge, documentation of income was presented.
    (2) An officer of the eligible telecommunications carrier in a 
state that does not mandate state Lifeline support must certify that 
the eligible telecommunications carrier has procedures in place to 
review income documentation and that, to the best of his/her knowledge, 
the carrier was presented with documentation of the consumer's 
household income.
    (3) Consumers qualifying for Lifeline under an income-based 
criterion must certify the number of individuals in their households on 
the document required in Sec.  54.409(d).
    (c) Verification of continued eligibility. Consumers qualifying for 
Lifeline may be required to verify continued eligibility on an annual 
basis.
    (1) By one year from the effective date of these rules, eligible 
telecommunications carriers in states that mandate state Lifeline 
support must comply with state verification procedures to validate 
consumers' continued eligibility for Lifeline.
    (2) By one year from the effective date of these rules, eligible 
telecommunications carriers in states that do not mandate state 
Lifeline support must implement procedures to verify the continued 
eligibility of a statistically valid random sample of their Lifeline 
consumers to verify continued eligibility and provide the results of 
the sample to the Administrator. If verifying income, an officer of the 
eligible telecommunications carrier must certify, under penalty of 
perjury, that the eligible telecommunications carrier has income 
verification procedures in place and that, to the best of his/her 
knowledge, the carrier was presented with corroborating income 
documentation. In addition, the consumer must certify, under penalty of 
perjury, that the consumer continues to participate in the Lifeline 
qualifying program or that the presented documentation accurately 
represents the consumer's household income and the number of 
individuals in the household.

0
9. Add Sec.  54.416 to subpart E to read as follows:


Sec.  54.416  Certification of consumer Qualification for Link Up.

    Consumers qualifying under an income-based criterion must present 
documentation of their household income prior to enrollment in Link Up 
consistent with requirements set forth in Sec. Sec.  54.410(a) and (b).

0
10. Add Sec.  54.417 to subpart E to read as follows:


Sec.  54.417  Recordkeeping requirements.

    (a) Eligible telecommunications carriers must maintain records to 
document compliance with all Commission and state requirements 
governing the Lifeline/Link Up programs for the three full preceding 
calendar years and provide that documentation to the Commission or 
Administrator upon request.
    Notwithstanding the preceding sentence, eligible telecommunications 
carriers must maintain the documentation required in Sec. Sec.  
54.409(d) and 54.410(b)(3) for as long as the consumer receives 
Lifeline service from that eligible telecommunications carrier or until 
audited by the Administrator. If an eligible telecommunications carrier 
provides Lifeline discounted wholesale services to a reseller, it must 
obtain a certification from that reseller that it is complying with all 
Commission requirements governing the Lifeline/Link Up programs.
    (b) Non-eligible-telecommunications-carrier resellers that purchase 
Lifeline discounted wholesale services to offer discounted services to 
low-income consumers must maintain records to document compliance with 
all Commission requirements governing the Lifeline/Link Up programs for 
the three full preceding calendar years and provide that documentation 
to the Commission or Administrator upon request. To the extent such a 
reseller provides discounted services to low-income consumers, it 
constitutes the eligible telecommunications carrier referenced in 
Sec. Sec.  54.405(c), 54.405(d), 54.409(d), 54.410, and 54.416.

[FR Doc. 04-13996 Filed 6-21-04; 8:45 am]
BILLING CODE 6712-01-P