O F F I C E O F T H E C H A I R M A N F E D E R A L C O M M U N I C A T I O N S C O M M I S S I O N W A S H I N G T O N M a r c h 2 2 , 2 0 1 7 T h e H o n o r a b l e G r e g o r y W . M e e k s U . S . H o u s e o f R e p r e s e n t a t i v e s 2 2 3 4 R a y b u m H o u s e O f f i c e B u i l d i n g W a s h i n g t o n , D . C . 2 0 5 1 5 D e a r C o n g r e s s m a n M e e k s : T h a n k y o u f o r y o u r l e t t e r s r e g a r d i n g t h e W i r e l i n e C o m p e t i t i o n B u r e a u ' s O r d e r o n R e c o n s i d e r a t i o n , w h i c h a f f e c t e d n i n e c o m p a n i e s ' p a r t i c i p a t i o n i n t h e L i f e l i n e p r o g r a m . I a p p r e c i a t e y o u r v i e w s , w h i c h w i l l b e e n t e r e d i n t o t h e r e c o r d o f t h e p r o c e e d i n g . O n e o f m y m a i n g o a l s a s F C C C h a i r m a n i s c l o s i n g t h e d i g i t a l d i v i d e . A n d I r e c o g n i z e u n a f f o r d a b i l i t y a s a k e y b a r r i e r t o d i g i t a l o p p o r t u n i t y . L a s t S e p t e m b e r , I e x p l a i n e d w h e n a n n o u n c i n g m y D i g i t a l E m p o w e r m e n t A g e n d a t h a t " [ a ] l t h o u g h g i g a b i t s e r v i c e s a n d m o b i l e b r o a d b a n d a r e b e c o m i n g c o m m o n f e a t u r e s o f w e a l t h i e r , m e t r o p o l i t a n a r e a s , t h e y a r e n ' t u n i v e r s a l . " T h e r e i s a r e a l d i g i t a l d i v i d e i n o u r c o u n t r y , a n d a s w e s e e k t o a d d r e s s t h i s p r o b l e m , I b e l i e v e t h e L i f e l i n e p r o g r a m i s a n i m p o r t a n t t o o l f o r h e l p i n g t o c o n n e c t a l l A m e r i c a n s . R e g a r d i n g t h e O r d e r , I w o u l d m a k e s e v e r a l i m p o r t a n t p o i n t s . F i r s t , t h e O r d e r a f f e c t e d o n l y n i n e o f t h e m o r e t h a n 9 0 0 c a r r i e r s p a r t i c i p a t i n g i n t h e L i f e l i n e p r o g r a m - t h a t ' s l e s s t h a n 1 % . N o r d i d t h e O r d e r a f f e c t t h e d e s i g n a t i o n o f L i f e l i n e b r o a d b a n d c a r r i e r s b y s t a t e c o m m i s s i o n s ; t h a t p r o c e s s p r o c e e d s a p a c e . S e c o n d , e i g h t o f t h e n i n e a f f e c t e d c a r r i e r s h a d n o L i f e l i n e c u s t o m e r s . T h i r d , t h e p r i o r C o m m i s s i o n d i s r e g a r d e d t h e w e l l - e s t a b l i s h e d p r o c e s s f o r a p p r o v i n g a p p l i c a t i o n s l i k e t h e s e . T h e N a t i o n a l T r i b a l T e l e c o m m u n i c a t i o n s A s s o c i a t i o n f i l e d a p e t i t i o n f o r r e c o n s i d e r a t i o n p o i n t i n g o u t t h a t s e v e r a l o f t h e p r o v i d e r s n e v e r c o m p l i e d w i t h t h e i r o b l i g a t i o n u n d e r o u r r u l e s t o c o o r d i n a t e t h e i r a p p l i c a t i o n s w i t h T r i b e s . T h e s e T r i b a l r e p r e s e n t a t i v e s t h u s r e q u e s t e d t h a t t h e d e s i g n a t i o n s b e r e v e r s e d . M o r e o v e r , t w o p r o v i d e r s ' d e s i g n a t i o n s w e r e i m p r o p e r l y g r a n t e d p r i o r t o t h e p u b l i c c o m m e n t d e a d l i n e f o r f i l i n g c o m m e n t s - t h a t i s , b e f o r e t h e p u b l i c e v e n h a d a f u l l a n d f a i r c h a n c e t o w e i g h i n o n t h e d e s i g n a t i o n . T h i s c u r t a i l e d t h e p u b l i c ' s a b i l i t y t o p a r t i c i p a t e i n t h e s e p r o c e e d i n g s a n d l i m i t e d t h e C o m m i s s i o n ' s a b i l i t y t o c o n s i d e r a l l d e s i g n a t i o n c r i t e r i a w i t h a f u l s o m e r e c o r d . W h a t e v e r o n e t h i n k s o f t h e m e r i t s o f t h e s e a p p l i c a t i o n s , t h a t a c t i o n w a s p l a i n l y i m p r o p e r . F o u r t h , t h e r e i s a s e r i o u s q u e s t i o n a s t o w h e t h e r t h e F C C h a s t h e l e g a l a u t h o r i t y t o d e s i g n a t e L i f e l i n e p r o v i d e r s o r w h e t h e r s u c h d e s i g n a t i o n s m u s t b e m a d e b y s t a t e g o v e r n m e n t s , a s Page 2-The Honorable Gregory W. Meeks has long been the case. State regulatory agencies have a substantial legal challenge to the entire process of the FCC designating Lifeline Broadband Providers, arguing that it is unlawful, and the FCC itself recently asked the court for additional time to consider this issue. For instance, Section 214 of the Communications Act explicitly says that states must make designations for purposes of allowing companies to receive Lifeline subsidies. The FCC has repeatedly, and for many years, recognized states' primary role in this area. By preempting the states' role in certification, the federal designations could run afoul of this legal framework. Putting the designations on hold gives the FCC the chance to make sure the process is legally defensible and avoids potentially stranding customers if the courts ultimately deem the process unlawful. Lastly, every dollar that is spent on subsidizing somebody who doesn't need the help by definition does not go to someone who does. That means that the Commission needs to make sure that there are strong safeguards against waste, fraud, and abuse before expanding the program to new providers. But our federal safeguards are insufficient: My investigation last year into these matters revealed that providers could indiscriminately override checks that are supposed to prevent wasteful and fraudulent activities. (These checks include common-sense steps like verifying the identity of would-be Lifeline recipients.) From October 2014 until June 2016, wireless resellers had overridden such safeguards 4,291,647 times in total. The investigation also uncovered other loopholes, including one that let a company claim subsidies for approximately 22,000 phantom subscribers each month in the state of Michigan. And the National Verifier-a new database intended to verify eligibility to participate in the Lifeline program-does not currently exist and will not start operating until the end of 2017. Further, it is not scheduled to cover all states until 2019. We need to make sure that safeguards are strong and effective in order to direct subsidies to American consumers who most need the help. I appreciate your interest in this matter. Please let me know if I can be of any further assistance. Sincerely, Ajit V. Pai OFFICE OF THE CHAIRMAN FEDERAL COMMUNICATIONS COMMISSION WASHINGTON March 22, 2017 The Honorable Grace Meng U.S. House of Representatives 1317 Longworth House Office Building Washington, D.C. 20515 Dear Congresswoman Meng: Thank you for your letter regarding the Wireline Competition Bureau's Order on Reconsideration, which affected nine companies' participation in the Lifeline program. I appreciate your views, which will be entered into the record of the proceeding. One of my main goals as FCC Chairman is closing the digital divide. And I recognize unaffordability as a key barrier to digital opportunity. Last September, I explained when announcing my Digital Empowerment Agenda that "{a]lthough gigabit services and mobile broadband are becoming common features of wealthier, metropolitan areas, they aren't universal." There is a real digital divide in our country, and as we seek to address this problem, I believe the Lifeline program is an important tool for helping to connect all Americans. Regarding the Order, I would make several important points. First, the Order affected only nine of the more than 900 carriers participating in the Lifeline program----that' s less than 1%. Nor did the Order affect the designation of Lifeline broadband carriers by state commissions; that process proceeds apace. Second, eight of the nine affected carriers had no Lifeline customers. Third, the prior Commission disregarded the well-established process for approving applications like these. The National Tribal Telecommunications Association filed a petition for reconsideration pointing out that several of the providers never complied with their obligation under our rules to coordinate their applications with Tribes. These Tribal representatives thus requested that the designations be reversed. Moreover, two providers' designations were improperly granted prior to the public comment deadline for filing comments-that is, before the public even had a full and fair chance to weigh in on the designation. This curtailed the public's ability to participate in these proceedings and limited the Commission's ability to consider all designation criteria with a fulsome record. Whatever one thinks of the merits of these applications, that action was plainly improper. Fourth, there is a serious question as to whether the FCC has the legal authority to designate Lifeline providers or whether such designations must be made by state governments, as Page 2-The Honorable Grace Meng has long been the case. State regulatory agencies have a substantial legal challenge to the entire process of the FCC designating Lifeline Broadband Providers, arguing that it is unlawful, and the FCC itself recently asked the court for additional time to consider this issue. For instance, Section 214 of the Communications Act explicitly says that states must make designations for purposes of allowing companies to receive Lifeline subsidies. The FCC has repeatedly, and for many years, recognized states' primary role in this area. By preempting the states' role in certification, the federal designations could run afoul of this legal framework. Putting the designations on hold gives the FCC the chance to make sure the process is legally defensible and avoids potentially stranding customers if the courts ultimately deem the process unlawful. Lastly, every dollar that is spent on subsidizing somebody who doesn't need the help by definition does not go to someone who does. That means that the Commission needs to make sure that there are strong safeguards against waste, fraud, and abuse before expanding the program to new providers. But our federal safeguards are insufficient: My investigation last year into these matters revealed that providers could indiscriminately override checks that are supposed to prevent wasteful and fraudulent activities. (These checks include common-sense steps like verifying the identity of would-be Lifeline recipients.) From October 2014 until June 2016, wireless resellers had overridden such safeguards 4,291,647 times in total. The investigation also uncovered other loopholes, including one that let a company claim subsidies for approximately 22,000 phantom subscribers each month in the state of Michigan. And the National Verifier-a new database intended to verify eligibility to participate in the Lifeline program-does not currently exist and will not start operating until the end of 2017. Further, it is not scheduled to cover all states until 2019. We need to make sure that safeguards are strong and effective in order to direct subsidies to American consumers who most need the help. I appreciate your interest in this matter. Please let me know if I can be of any further assistance. Sincerely, Ajit V. Pal J\j OFFICE OF THE CHAIRMAN FEDERAL COMMUNICATIONS COMMISSION WASHINGTON March 22, 2017 The Honorable Gwen Moore U.S. House of Representatives 2252 Rayburn House Office Building Washington, D.C. 20515 Dear Congresswoman Moore: Thank you for your letters regarding the Wireline Competition Bureau's Order on Reconsideration, which affected nine companies' participation in the Lifeline program. I appreciate your views, which will be entered into the record of the proceeding. One of my main goals as FCC Chairman is closing the digital divide. And I recognize unaffordability as a key barrier to digital opportunity. Last September, I explained when announcing my Digital Empowerment Agenda that "[a]lthough gigabit services and mobile broadband are becoming common features of wealthier, metropolitan areas, they aren't universal." There is a real digital divide in our country, and as we seek to address this problem, I believe the Lifeline program is an important tool for helping to connect all Americans. Regarding the Order, I would make several important points. First, the Order affected only nine of the more than 900 carriers participating in the Lifeline program-that's less than 1%. Nor did the Order affect the designation of Lifeline broadband carriers by state commissions; that process proceeds apace. Second, eight of the nine affected carriers had no Lifeline customers. Third, the prior Commission disregarded the well-established process for approving applications like these. The National Tribal Telecommunications Association filed a petition for reconsideration pointing out that several of the providers never complied with their obligation under our rules to coordinate their applications with Tribes. These Tribal representatives thus requested that the designations be reversed. Moreover, two providers' designations were improperly granted prior to the public comment deadline for filing comments-that is, before the public even had a full and fair chance to weigh in on the designation. This curtailed the public's ability to participate in these proceedings and limited the Commission's ability to consider all designation criteria with a fulsome record. Whatever one thinks of the merits of these applications, that action was plainly improper. Fourth, there is a serious question as to whether the FCC has the legal authority to designate Lifeline providers or whether such designations must be made by state governments, as Page 2-The Honorable Gwen Moore has long been the case. State regulatory agencies have a substantial legal challenge to the entire process of the FCC designating Lifeline Broadband Providers, arguing that it is unlawful, and the FCC itself recently asked the court for additional time to consider this issue. For instance, Section 214 of the Communications Act explicitly says that states must make designations for purposes of allowing companies to receive Lifeline subsidies. The FCC has repeatedly, and for many years, recognized states' primary role in this area. By preempting the states' role in certification, the federal designations could run afoul of this legal framework. Putting the designations on hold gives the FCC the chance to make sure the process is legally defensible and avoids potentially stranding customers if the courts ultimately deem the process unlawful. Lastly, every dollar that is spent on subsidizing somebody who doesn't need the help by definition does not go to someone who does. That means that the Commission needs to make sure that there are strong safeguards against waste, fraud, and abuse before expanding the program to new providers. But our federal safeguards are insufficient: My investigation last year into these matters revealed that providers could indiscriminately override checks that are supposed to prevent wasteful and fraudulent activities. (These checks include common-sense steps like verifying the identity of would-be Lifeline recipients.) From October 2014 until June 2016, wireless resellers had overridden such safeguards 4,291,647 times in total. The investigation also uncovered other loopholes, including one that let a company claim subsidies for approximately 22,000 phantom subscribers each month in the state of Michigan. And the National Verifier-a new database intended to verify eligibility to participate in the Lifeline program-does not currently exist and will not start operating until the end of 2017. Further, it is not scheduled to cover all states until 2019. We need to make sure that safeguards are strong and effective in order to direct subsidies to American consumers who most need the help. I appreciate your interest in this matter. Please let me know if I can be of any further assistance. OFFICE OF THE CHAIRMAN FEDERAL COMMUNICATIONS COMMISSION WASHINGTON March 22, 2017 The Honorable Jerrold Nadler U.S. House of Representatives 2109 Rayburn House Office Building Washington, D.C. 20515 Dear Congressman Nadler: Thank you for your letters regarding the Wireline Competition Bureau's Order on Reconsideration, which affected nine companies' participation in the Lifeline program. I appreciate your views, which will be entered into the record of the proceeding. One of my main goals as FCC Chairman is closing the digital divide. And I recognize unaffordability as a key barrier to digital opportunity. Last September, I explained when announcing my Digital Empowerment Agenda that "[alithough gigabit services and mobile broadband are becoming common features of wealthier, metropolitan areas, they aren't universal." There is a real digital divide in our country, and as we seek to address this problem, I believe the Lifeline program is an important tool for helping to connect all Americans. Regarding the Order, I would make several important points. First, the Order affected only nine of the more than 900 carriers participating in the Lifeline program-that's less than 1%. Nor did the Order affect the designation of Lifeline broadband carriers by state commissions; that process proceeds apace. Second, eight of the nine affected carriers had no Lifeline customers. Third, the prior Commission disregarded the well-established process for approving applications like these. The National Tribal Telecommunications Association filed a petition for reconsideration pointing out that several of the providers never complied with their obligation under our rules to coordinate their applications with Tribes. These Tribal representatives thus requested that the designations be reversed. Moreover, two providers' designations were improperly granted prior to the public comment deadline for filing comments-that is, before the public even had a full and fair chance to weigh in on the designation. This curtailed the public's ability to participate in these proceedings and limited the Commission's ability to consider all designation criteria with a fulsome record. Whatever one thinks of the merits of these applications, that action was plainly improper. Fourth, there is a serious question as to whether the FCC has the legal authority to designate Lifeline providers or whether such designations must be made by state governments, as Page 2-The Honorable Jerrold Nadler has long been the case. State regulatory agencies have a substantial legal challenge to the entire process of the FCC designating Lifeline Broadband Providers, arguing that it is unlawful, and the FCC itself recently asked the court for additional time to consider this issue. For instance, Section 214 of the Communications Act explicitly says that states must make designations for purposes of allowing companies to receive Lifeline subsidies. The FCC has repeatedly, and for many years, recognized states' primary role in this area. By preempting the states' role in certification, the federal designations could run afoul of this legal framework. Putting the designations on hold gives the FCC the chance to make sure the process is legally defensible and avoids potentially stranding customers if the courts ultimately deem the process unlawful. Lastly, every dollar that is spent on subsidizing somebody who doesn't need the help by definition does not go to someone who does. That means that the Commission needs to make sure that there are strong safeguards against waste, fraud, and abuse before expanding the program to new providers. But our federal safeguards are insufficient: My investigation last year into these matters revealed that providers could indiscriminately override checks that are supposed to prevent wasteful and fraudulent activities. (These checks include common-sense steps like verifying the identity of would-be Lifeline recipients.) From October 2014 until June 2016, wireless resellers had overridden such safeguards 4,291,647 times in total. The investigation also uncovered other loopholes, including one that let a company claim subsidies for approximately 22,000 phantom subscribers each month in the state of Michigan. And the National Verifier-a new database intended to verify eligibility to participate in the Lifeline program-does not currently exist and will not start operating until the end of 2017. Further, it is not scheduled to cover all states until 2019. We need to make sure that safeguards are strong and effective in order to direct subsidies to American consumers who most need the help. I appreciate your interest in this matter. Please let me know if I can be of any further assistance. Sincerely, AjitV.Pai OFFICE OF THE CHAIHMAN FEDERAL COMMUNICATIONS COMMISSION WASHINGTON March 22,2017 The Honorable Richard E. Neal U.S. House of Representatives 341 Cannon House Office Building Washington, D.C. 20515 Dear Congressman Neal: Thank you for your letter regarding the Wireline Competition Bureau's Order on Reconsideration, which affected nine companies' participation in the Lifeline program. I appreciate your views, which will be entered into the record of the proceeding. One of my main goals as FCC Chairman is closing the digital divide. And I recognize unaffordability as a key barrier to digital opportunity. Last September, I explained when announcing my Digital Empowerment Agenda that "{a]lthough gigabit services and mobile broadband are becoming common features of wealthier, metropolitan areas, they aren't universal." There is a real digital divide in our country, and as we seek to address this problem, I believe the Lifeline program is an important tool for helping to connect all Americans. Regarding the Order, I would make several important points. First, the Order affected only nine of the more than 900 carriers participating in the Lifeline program-that's less than 1%. Nor did the Order affect the designation of Lifeline broadband carriers by state commissions; that process proceeds apace. Second, eight of the nine affected carriers had no Lifeline customers. Third, the prior Commission disregarded the well-established process for approving applications like these. The National Tribal Telecommunications Association filed a petition for reconsideration pointing out that several of the providers never complied with their obligation under our rules to coordinate their applications with Tribes. These Tribal representatives thus requested that the designations be reversed. Moreover, two providers' designations were improperly granted prior to the public comment deadline for filing comments-that is, before the public even had a full and fair chance to weigh in on the designation. This curtailed the public's ability to participate in these proceedings and limited the Commission's ability to consider all designation criteria with a fulsome record. Whatever one thinks of the merits of these applications, that action was plainly improper. Fourth, there is a serious question as to whether the FCC has the legal authority to designate Lifeline providers or whether such designations must be made by state governments, as Page 2-The Honorable Richard E. Neal has long been the case. State regulatory agencies have a substantial legal challenge to the entire process of the FCC designating Lifeline Broadband Providers, arguing that it is unlawful, and the FCC itself recently asked the court for additional time to consider this issue. For instance, Section 214 of the Communications Act explicitly says that states must make designations for purposes of allowing companies to receive Lifeline subsidies. The FCC has repeatedly, and for many years, recognized states' primary role in this area. By preempting the states' role in certification, the federal designations could run afoul of this legal framework. Putting the designations on hold gives the FCC the chance to make sure the process is legally defensible and avoids potentially stranding customers if the courts ultimately deem the process unlawful. Lastly, every dollar that is spent on subsidizing somebody who doesn't need the help by definition does not go to someone who does. That means that the Commission needs to make sure that there are strong safeguards against waste, fraud, and abuse before expanding the program to new providers. But our federal safeguards are insufficient: My investigation last year into these matters revealed that providers could indiscriminately override checks that are supposed to prevent wasteful and fraudulent activities. (These checks include common-sense steps like verifying the identity of would-be Lifeline recipients.) From October 2014 until June 2016, wireless resellers had overridden such safeguards 4,291,647 times in total. The investigation also uncovered other loopholes, including one that let a company claim subsidies for approximately 22,000 phantom subscribers each month in the state of Michigan. And the National Verifier-a new database intended to verify eligibility to participate in the Lifeline program-does not currently exist and will not start operating until the end of 2017. Further, it is not scheduled to cover all states until 2019. We need to make sure that safeguards are strong and effective in order to direct subsidies to American consumers who most need the help. I appreciate your interest in this matter. Please let me know if I can be of any further assistance. Sincerely, Ajit V. Pai OFFICE OF THE CHAIRMAN FEDERAL COMMUNICATIONS COMMISSION WASHINGTON March 22, 2017 The Honorable Eleanor Holmes Norton U.S. House of Representatives 2136 Rayburn House Office Building Washington, D.C. 20515 Dear Congresswoman Norton: Thank you for your letters regarding the Wireline Competition Bureau's Order on Reconsideration, which affected nine companies' participation in the Lifeline program. I appreciate your views, which will be entered into the record of the proceeding. One of my main goals as FCC Chairman is closing the digital divide. And I recognize unaffordability as a key barrier to digital opportunity. Last September, I explained when announcing my Digital Empowerment Agenda that "[a]lthough gigabit services and mobile broadband are becoming common features of wealthier, metropolitan areas, they aren't universal." There is a real digital divide in our country, and as we seek to address this problem, I believe the Lifeline program is an important tool for helping to connect all Americans. Regarding the Order, I would make several important points. First, the Order affected only nine of the more than 900 carriers participating in the Lifeline program-that's less than 1%. Nor did the Order affect the designation of Lifeline broadband carriers by state commissions; that process proceeds apace. Second, eight of the nine affected carriers had no Lifeline customers. Third, the prior Commission disregarded the well-established process for approving applications like these. The National Tribal Telecommunications Association filed a petition for reconsideration pointing out that several of the providers never complied with their obligation under our rules to coordinate their applications with Tribes. These Tribal representatives thus requested that the designations be reversed. Moreover, two providers' designations were improperly granted prior to the public comment deadline for filing comments-that is, before the public even had a full and fair chance to weigh in on the designation. This curtailed the public's ability to participate in these proceedings and limited the Commission's ability to consider all designation criteria with a fulsome record. Whatever one thinks of the merits of these applications, that action was plainly improper. Fourth, there is a serious question as to whether the FCC has the legal authority to designate Lifeline providers or whether such designations must be made by state governments, as Page 2-The Honorable Eleanor Holmes Norton has long been the case. State regulatory agencies have a substantial legal challenge to the entire process of the FCC designating Lifeline Broadband Providers, arguing that it is unlawful, and the FCC itself recently asked the court for additional time to consider this issue. For instance, Section 214 of the Communications Act explicitly says that states must make designations for purposes of allowing companies to receive Lifeline subsidies. The FCC has repeatedly, and for many years, recognized states' primary role in this area. By preempting the states' role in certification, the federal designations could run afoul of this legal framework. Putting the designations on hold gives the FCC the chance to make sure the process is legally defensible and avoids potentially stranding customers if the courts ultimately deem the process unlawful. Lastly, every dollar that is spent on subsidizing somebody who doesn't need the help by definition does not go to someone who does. That means that the Commission needs to make sure that there are strong safeguards against waste, fraud, and abuse before expanding the program to new providers. But our federal safeguards are insufficient: My investigation last year into these matters revealed that providers could indiscriminately override checks that are supposed to prevent wasteful and fraudulent activities. (These checks include common-sense steps like verifying the identity of would-be Lifeline recipients.) From October 2014 until June 2016, wireless resellers had overridden such safeguards 4,291,647 times in total. The investigation also uncovered other loopholes, including one that let a company claim subsidies for approximately 22,000 phantom subscribers each month in the state of Michigan. And the National Verifier-a new database intended to verify eligibility to participate in the Lifeline program-does not currently exist and will not start operating until the end of 2017. Further, it is not scheduled to cover all states until 2019. We need to make sure that safeguards are strong and effective in order to direct subsidies to American consumers who most need the help. I appreciate your interest in this matter. Please let me know if I can be of any further assistance. OFFICE OF THE CHAIRMAN FEDERAL COMMUNICATIONS COMMISSION WASHINGTON March 22, 2017 The Honorable Jimmy Panetta U.S. House of Representatives 228 Cannon House Office Building Washington, D.C. 20515 Dear Congressman Panetta: Thank you for your letter regarding the Wireline Competition Bureau's Order on Reconsideration, which affected nine companies' participation in the Lifeline program. I appreciate your views, which will be entered into the record of the proceeding. One of my main goals as FCC Chairman is closing the digital divide. And I recognize unaffordability as a key barrier to digital opportunity. Last September, I explained when announcing my Digital Empowerment Agenda that "fa]lthough gigabit services and mobile broadband are becoming common features of wealthier, metropolitan areas, they aren't universal." There is a real digital divide in our country, and as we seek to address this problem, I believe the Lifeline program is an important tool for helping to connect all Americans. Regarding the Order, I would make several important points. First, the Order affected only nine of the more than 900 carriers participating in the Lifeline program-that's less than 1%. Nor did the Order affect the designation of Lifeline broadband carriers by state commissions; that process proceeds apace. Second, eight of the nine affected carriers had no Lifeline customers. Third, the prior Commission disregarded the well-established process for approving applications like these. The National Tribal Telecommunications Association filed a petition for reconsideration pointing out that several of the providers never complied with their obligation under our rules to coordinate their applications with Tribes. These Tribal representatives thus requested that the designations be reversed. Moreover, two providers' designations were improperly granted prior to the public comment deadline for filing comments-that is, before the public even had a full and fair chance to weigh in on the designation. This curtailed the public's ability to participate in these proceedings and limited the Commission's ability to consider all designation criteria with a fulsome record. Whatever one thinks of the merits of these applications, that action was plainly improper. Fourth, there is a serious question as to whether the FCC has the legal authority to designate Lifeline providers or whether such designations must be made by state governments, as Page 2-The Honorable Jimmy Panetta has long been the case. State regulatory agencies have a substantial legal challenge to the entire process of the FCC designating Lifeline Broadband Providers, arguing that it is unlawful, and the FCC itself recently asked the court for additional time to consider this issue. For instance, Section 214 of the Communications Act explicitly says that states must make designations for purposes of allowing companies to receive Lifeline subsidies. The FCC has repeatedly, and for many years, recognized states' primary role in this area. By preempting the states' role in certification, the federal designations could run afoul of this legal framework. Putting the designations on hold gives the FCC the chance to make sure the process is legally defensible and avoids potentially stranding customers if the courts ultimately deem the process unlawful. Lastly, every dollar that is spent on subsidizing somebody who doesn't need the help by definition does not go to someone who does. That means that the Commission needs to make sure that there are strong safeguards against waste, fraud, and abuse before expanding the program to new providers. But our federal safeguards are insufficient: My investigation last year into these matters revealed that providers could indiscriminately override checks that are supposed to prevent wasteful and fraudulent activities. (These checks include common-sense steps like verifying the identity of would-be Lifeline recipients.) From October 2014 until June 2016, wireless resellers had overridden such safeguards 4,291,647 times in total. The investigation also uncovered other loopholes, including one that let a company claim subsidies for approximately 22,000 phantom subscribers each month in the state of Michigan. And the National Verifier-a new database intended to verify eligibility to participate in the Lifeline program-does not currently exist and will not start operating until the end of 2017. Further, it is not scheduled to cover all states until 2019. We need to make sure that safeguards are strong and effective in order to direct subsidies to American consumers who most need the help. I appreciate your interest in this matter. Please let me know if I can be of any further assistance. 0 AjitV.Pai Sincerely, I.' OFFICE OF THE CHAIRMAN FEDERAL COMMUNICATIONS COMMISSION WASHINGTON March 22, 2017 The Honorable Mark Pocan U.S. House of Representatives 1421 Longworth House Office Building Washington, D.C. 20515 Dear Congressman Pocan: Thank you for your letter regarding the Wireline Competition Bureau's Order on Reconsideration, which affected nine companies' participation in the Lifeline program. I appreciate your views, which will be entered into the record of the proceeding. One of my main goals as FCC Chairman is closing the digital divide. And I recognize unaffordability as a key barrier to digital opportunity. Last September, I explained when announcing my Digital Empowerment Agenda that "[ajithough gigabit services and mobile broadband are becoming common features of wealthier, metropolitan areas, they aren't universal." There is a real digital divide in our country, and as we seek to address this problem, I believe the Lifeline program is an important tool for helping to connect all Americans. Regarding the Order, I would make several important points. First, the Order affected only nine of the more than 900 carriers participating in the Lifeline program-that's less than 1%. Nor did the Order affect the designation of Lifeline broadband carriers by state commissions; that process proceeds apace. Second, eight of the nine affected carriers had no Lifeline customers. Third, the prior Commission disregarded the well-established process for approving applications like these. The National Tribal Telecommunications Association filed a petition for reconsideration pointing out that several of the providers never complied with their obligation under our rules to coordinate their applications with Tribes. These Tribal representatives thus requested that the designations be reversed. Moreover, two providers' designations were improperly granted prior to the public comment deadline for filing comments-that is, before the public even had a full and fair chance to weigh in on the designation. This curtailed the public's ability to participate in these proceedings and limited the Commission's ability to consider all designation criteria with a fulsome record. Whatever one thinks of the merits of these applications, that action was plainly improper. Fourth, there is a serious question as to whether the FCC has the legal authority to designate Lifeline providers or whether such designations must be made by state governments, as Page 2-The Honorable Mark Pocan has long been the case. State regulatory agencies have a substantial legal challenge to the entire process of the FCC designating Lifeline Broadband Providers, arguing that it is unlawful, and the FCC itself recently asked the court for additional time to consider this issue. For instance, Section 214 of the Communications Act explicitly says that states must make designations for purposes of allowing companies to receive Lifeline subsidies. The FCC has repeatedly, and for many years, recognized states' primary role in this area. By preempting the states' role in certification, the federal designations could run afoul of this legal framework. Putting the designations on hold gives the FCC the chance to make sure the process is legally defensible and avoids potentially stranding customers if the courts ultimately deem the process unlawful. Lastly, every dollar that is spent on subsidizing somebody who doesn't need the help by definition does not go to someone who does. That means that the Commission needs to make sure that there are strong safeguards against waste, fraud, and abuse before expanding the program to new providers. But our federal safeguards are insufficient: My investigation last year into these matters revealed that providers could indiscriminately override checks that are supposed to prevent wasteful and fraudulent activities. (These checks include common-sense steps like verifying the identity of would-be Lifeline recipients.) From October 2014 until June 2016, wireless resellers had overridden such safeguards 4,291,647 times in total. The investigation also uncovered other loopholes, including one that let a company claim subsidies for approximately 22,000 phantom subscribers each month in the state of Michigan. And the National Verifier-a new database intended to verify eligibility to participate in the Lifeline program-does not currently exist and will not start operating until the end of 2017. Further, it is not scheduled to cover all states until 2019. We need to make sure that safeguards are strong and effective in order to direct subsidies to American consumers who most need the help. I appreciate your interest in this matter. Please let me know if I can be of any further assistance. FEDERAL COMMUNICATIONS COMMISSION WASHINGTON March 22, 2017 The Honorable Jared Polis U.S. House of Representatives 1727 Longworth House Office Building Washington, D.C. 20515 Dear Congressman Polis: Thank you for your letter regarding the Wireline Competition Bureau's Order on Reconsideration, which affected nine companies' participation in the Lifeline program. I appreciate your views, which will be entered into the record of the proceeding. One of my main goals as FCC Chairman is closing the digital divide. And I recognize unaffordability as a key barrier to digital opportunity. Last September, I explained when announcing my Digital Empowerment Agenda that "[a]lthough gigabit services and mobile broadband are becoming common features of wealthier, metropolitan areas, they aren't universal." There is a real digital divide in our country, and as we seek to address this problem, I believe the Lifeline program is an important tool for helping to connect all Americans. Regarding the Order, I would make several important points. First, the Order affected only nine of the more than 900 carriers participating in the Lifeline program-that's less than 1%. Nor did the Order affect the designation of Lifeline broadband carriers by state commissions; that process proceeds apace. Second, eight of the nine affected carriers had no Lifeline customers. Third, the prior Commission disregarded the well-established process for approving applications like these. The National Tribal Telecommunications Association filed a petition for reconsideration pointing out that several of the providers never complied with their obligation under our rules to coordinate their applications with Tribes. These Tribal representatives thus requested that the designations be reversed. Moreover, two providers' designations were improperly granted prior to the public comment deadline for filing comments-that is, before the public even had a full and fair chance to weigh in on the designation. This curtailed the public's ability to participate in these proceedings and limited the Commission's ability to consider all designation criteria with a fulsome record. Whatever one thinks of the merits of these applications, that action was plainly improper. Fourth, there is a serious question as to whether the FCC has the legal authority to designate Lifeline providers or whether such designations must be made by state governments, as OFFICE OF THE CHAIRMAN P a g e 2 - T h e H o n o r a b l e J a r e d P o l i s h a s l o n g b e e n t h e c a s e . S t a t e r e g u l a t o r y a g e n c i e s h a v e a s u b s t a n t i a l l e g a l c h a l l e n g e t o t h e e n t i r e p r o c e s s o f t h e F C C d e s i g n a t i n g L i f e l i n e B r o a d b a n d P r o v i d e r s , a r g u i n g t h a t i t i s u n l a w f u l , a n d t h e F C C i t s e l f r e c e n t l y a s k e d t h e c o u r t f o r a d d i t i o n a l t i m e t o c o n s i d e r t h i s i s s u e . F o r i n s t a n c e , S e c t i o n 2 1 4 o f t h e C o m m u n i c a t i o n s A c t e x p l i c i t l y s a y s t h a t s t a t e s m u s t m a k e d e s i g n a t i o n s f o r p u r p o s e s o f a l l o w i n g c o m p a n i e s t o r e c e i v e L i f e l i n e s u b s i d i e s . T h e F C C h a s r e p e a t e d l y , a n d f o r m a n y y e a r s , r e c o g n i z e d s t a t e s ' p r i m a r y r o l e i n t h i s a r e a . B y p r e e m p t i n g t h e s t a t e s ' r o l e i n c e r t i f i c a t i o n , t h e f e d e r a l d e s i g n a t i o n s c o u l d r u n a f o u l o f t h i s l e g a l f r a m e w o r k . P u t t i n g t h e d e s i g n a t i o n s o n h o l d g i v e s t h e F C C t h e c h a n c e t o m a k e s u r e t h e p r o c e s s i s l e g a l l y d e f e n s i b l e a n d a v o i d s p o t e n t i a l l y s t r a n d i n g c u s t o m e r s i f t h e c o u r t s u l t i m a t e l y d e e m t h e p r o c e s s u n l a w f u l . L a s t l y , e v e r y d o l l a r t h a t i s s p e n t o n s u b s i d i z i n g s o m e b o d y w h o d o e s n ' t n e e d t h e h e l p b y d e f i n i t i o n d o e s n o t g o t o s o m e o n e w h o d o e s . T h a t m e a n s t h a t t h e C o m m i s s i o n n e e d s t o m a k e s u r e t h a t t h e r e a r e s t r o n g s a f e g u a r d s a g a i n s t w a s t e , f r a u d , a n d a b u s e b e f o r e e x p a n d i n g t h e p r o g r a m t o n e w p r o v i d e r s . B u t o u r f e d e r a l s a f e g u a r d s a r e i n s u f f i c i e n t : M y i n v e s t i g a t i o n l a s t y e a r i n t o t h e s e m a t t e r s r e v e a l e d t h a t p r o v i d e r s c o u l d i n d i s c r i m i n a t e l y o v e r r i d e c h e c k s t h a t a r e s u p p o s e d t o p r e v e n t w a s t e f u l a n d f r a u d u l e n t a c t i v i t i e s . ( T h e s e c h e c k s i n c l u d e c o m m o n - s e n s e s t e p s l i k e v e r i f y i n g t h e i d e n t i t y o f w o u l d - b e L i f e l i n e r e c i p i e n t s . ) F r o m O c t o b e r 2 0 1 4 u n t i l J u n e 2 0 1 6 , w i r e l e s s r e s e l l e r s h a d o v e r r i d d e n s u c h s a f e g u a r d s 4 , 2 9 1 , 6 4 7 t i m e s i n t o t a l . T h e i n v e s t i g a t i o n a l s o u n c o v e r e d o t h e r l o o p h o l e s , i n c l u d i n g o n e t h a t l e t a c o m p a n y c l a i m s u b s i d i e s f o r a p p r o x i m a t e l y 2 2 , 0 0 0 p h a n t o m s u b s c r i b e r s e a c h m o n t h i n t h e s t a t e o f M i c h i g a n . A n d t h e N a t i o n a l V e r i f i e r - a n e w d a t a b a s e i n t e n d e d t o v e r i f y e l i g i b i l i t y t o p a r t i c i p a t e i n t h e L i f e l i n e p r o g r a m - d o e s n o t c u r r e n t l y e x i s t a n d w i l l n o t s t a r t o p e r a t i n g u n t i l t h e e n d o f 2 0 1 7 . F u r t h e r , i t i s n o t s c h e d u l e d t o c o v e r a l l s t a t e s u n t i l 2 0 1 9 . W e n e e d t o m a k e s u r e t h a t s a f e g u a r d s a r e s t r o n g a n d e f f e c t i v e i n o r d e r t o d i r e c t s u b s i d i e s t o A m e r i c a n c o n s u m e r s w h o m o s t n e e d t h e h e l p . I a p p r e c i a t e y o u r i n t e r e s t i n t h i s m a t t e r . P l e a s e l e t m e k n o w i f I c a n b e o f a n y f u r t h e r a s s i s t a n c e . S i n c e r e l y , A j i t V . P a i O F F I C E O F T H E C H A I R M A N F E D E R A L C O M M U N I C A T I O N S C O M M I S S I O N W A S H I N G T O N M a r c h 2 2 , 2 0 1 7 T h e H o n o r a b l e J a m i e R a s k i n U . S . H o u s e o f R e p r e s e n t a t i v e s 4 3 1 C a n n o n H o u s e O f f i c e B u i l d i n g W a s h i n g t o n , D . C . 2 0 5 1 5 D e a r C o n g r e s s m a n R a s k i n : T h a n k y o u f o r y o u r l e t t e r r e g a r d i n g t h e W i r e l i n e C o m p e t i t i o n B u r e a u ' s O r d e r o n R e c o n s i d e r a t i o n , w h i c h a f f e c t e d n i n e c o m p a n i e s ' p a r t i c i p a t i o n i n t h e L i f e l i n e p r o g r a m . I a p p r e c i a t e y o u r v i e w s , w h i c h w i l l b e e n t e r e d i n t o t h e r e c o r d o f t h e p r o c e e d i n g . O n e o f m y m a i n g o a l s a s F C C C h a i r m a n i s c l o s i n g t h e d i g i t a l d i v i d e . A n d I r e c o g n i z e u n a f f o r d a b i l i t y a s a k e y b a r r i e r t o d i g i t a l o p p o r t u n i t y . L a s t S e p t e m b e r , I e x p l a i n e d w h e n a n n o u n c i n g m y D i g i t a l E m p o w e r m e n t A g e n d a t h a t " [ a ] l t h o u g h g i g a b i t s e r v i c e s a n d m o b i l e b r o a d b a n d a r e b e c o m i n g c o m m o n f e a t u r e s o f w e a l t h i e r , m e t r o p o l i t a n a r e a s , t h e y a r e n ' t u n i v e r s a l . " T h e r e i s a r e a l d i g i t a l d i v i d e i n o u r c o u n t r y , a n d a s w e s e e k t o a d d r e s s t h i s p r o b l e m , I b e l i e v e t h e L i f e l i n e p r o g r a m i s a n i m p o r t a n t t o o l f o r h e l p i n g t o c o n n e c t a l l A m e r i c a n s . R e g a r d i n g t h e O r d e r , I w o u l d m a k e s e v e r a l i m p o r t a n t p o i n t s . F i r s t , t h e O r d e r a f f e c t e d o n l y n i n e o f t h e m o r e t h a n 9 0 0 c a r r i e r s p a r t i c i p a t i n g i n t h e L i f e l i n e p r o g r a m - t h a t ' s l e s s t h a n 1 % . N o r d i d t h e O r d e r a f f e c t t h e d e s i g n a t i o n o f L i f e l i n e b r o a d b a n d c a r r i e r s b y s t a t e c o m m i s s i o n s ; t h a t p r o c e s s p r o c e e d s a p a c e . S e c o n d , e i g h t o f t h e n i n e a f f e c t e d c a r r i e r s h a d n o L i f e l i n e c u s t o m e r s . T h i r d , t h e p r i o r C o m m i s s i o n d i s r e g a r d e d t h e w e l l - e s t a b l i s h e d p r o c e s s f o r a p p r o v i n g a p p l i c a t i o n s l i k e t h e s e . T h e N a t i o n a l T r i b a l T e l e c o m m u n i c a t i o n s A s s o c i a t i o n f i l e d a p e t i t i o n f o r r e c o n s i d e r a t i o n p o i n t i n g o u t t h a t s e v e r a l o f t h e p r o v i d e r s n e v e r c o m p l i e d w i t h t h e i r o b l i g a t i o n u n d e r o u r r u l e s t o c o o r d i n a t e t h e i r a p p l i c a t i o n s w i t h T r i b e s . T h e s e T r i b a l r e p r e s e n t a t i v e s t h u s r e q u e s t e d t h a t t h e d e s i g n a t i o n s b e r e v e r s e d . M o r e o v e r , t w o p r o v i d e r s ' d e s i g n a t i o n s w e r e i m p r o p e r l y g r a n t e d p r i o r t o t h e p u b l i c c o m m e n t d e a d l i n e f o r f i l i n g c o m m e n t s - t h a t i s , b e f o r e t h e p u b l i c e v e n h a d a f u l l a n d f a i r c h a n c e t o w e i g h i n o n t h e d e s i g n a t i o n . T h i s c u r t a i l e d t h e p u b l i c ' s a b i l i t y t o p a r t i c i p a t e i n t h e s e p r o c e e d i n g s a n d l i m i t e d t h e C o m m i s s i o n ' s a b i l i t y t o c o n s i d e r a l l d e s i g n a t i o n c r i t e r i a w i t h a f u l s o m e r e c o r d . W h a t e v e r o n e t h i n k s o f t h e m e r i t s o f t h e s e a p p l i c a t i o n s , t h a t a c t i o n w a s p l a i n l y i m p r o p e r . F o u r t h , t h e r e i s a s e r i o u s q u e s t i o n a s t o w h e t h e r t h e F C C h a s t h e l e g a l a u t h o r i t y t o d e s i g n a t e L i f e l i n e p r o v i d e r s o r w h e t h e r s u c h d e s i g n a t i o n s m u s t b e m a d e b y s t a t e g o v e r n m e n t s , a s P a g e 2 - T h e H o n o r a b l e J a m i e R a s k i n h a s l o n g b e e n t h e c a s e . S t a t e r e g u l a t o r y a g e n c i e s h a v e a s u b s t a n t i a l l e g a l c h a l l e n g e t o t h e e n t i r e p r o c e s s o f t h e F C C d e s i g n a t i n g L i f e l i n e B r o a d b a n d P r o v i d e r s , a r g u i n g t h a t i t i s u n l a w f u l , a n d t h e F C C i t s e l f r e c e n t l y a s k e d t h e c o u r t f o r a d d i t i o n a l t i m e t o c o n s i d e r t h i s i s s u e . F o r i n s t a n c e , S e c t i o n 2 1 4 o f t h e C o m m u n i c a t i o n s A c t e x p l i c i t l y s a y s t h a t s t a t e s m u s t m a k e d e s i g n a t i o n s f o r p u r p o s e s o f a l l o w i n g c o m p a n i e s t o r e c e i v e L i f e l i n e s u b s i d i e s . T h e F C C h a s r e p e a t e d l y , a n d f o r m a n y y e a r s , r e c o g n i z e d s t a t e s ' p r i m a r y r o l e i n t h i s a r e a . B y p r e e m p t i n g t h e s t a t e s ' r o l e i n c e r t i f i c a t i o n , t h e f e d e r a l d e s i g n a t i o n s c o u l d r u n a f o u l o f t h i s l e g a l f r a m e w o r k . P u t t i n g t h e d e s i g n a t i o n s o n h o l d g i v e s t h e F C C t h e c h a n c e t o m a k e s u r e t h e p r o c e s s i s l e g a l l y d e f e n s i b l e a n d a v o i d s p o t e n t i a l l y s t r a n d i n g c u s t o m e r s i f t h e c o u r t s u l t i m a t e l y d e e m t h e p r o c e s s u n l a w f u l . L a s t l y , e v e r y d o l l a r t h a t i s s p e n t o n s u b s i d i z i n g s o m e b o d y w h o d o e s n ' t n e e d t h e h e l p b y d e f i n i t i o n d o e s n o t g o t o s o m e o n e w h o d o e s . T h a t m e a n s t h a t t h e C o m m i s s i o n n e e d s t o m a k e s u r e t h a t t h e r e a r e s t r o n g s a f e g u a r d s a g a i n s t w a s t e , f r a u d , a n d a b u s e b e f o r e e x p a n d i n g t h e p r o g r a m t o n e w p r o v i d e r s . B u t o u r f e d e r a l s a f e g u a r d s a r e i n s u f f i c i e n t : M y i n v e s t i g a t i o n l a s t y e a r i n t o t h e s e m a t t e r s r e v e a l e d t h a t p r o v i d e r s c o u l d i n d i s c r i m i n a t e l y o v e r r i d e c h e c k s t h a t a r e s u p p o s e d t o p r e v e n t w a s t e f u l a n d f r a u d u l e n t a c t i v i t i e s . ( T h e s e c h e c k s i n c l u d e c o m m o n - s e n s e s t e p s l i k e v e r i f y i n g t h e i d e n t i t y o f w o u l d - b e L i f e l i n e r e c i p i e n t s . ) F r o m O c t o b e r 2 0 1 4 u n t i l J u n e 2 0 1 6 , w i r e l e s s r e s e l l e r s h a d o v e r r i d d e n s u c h s a f e g u a r d s 4 , 2 9 1 , 6 4 7 t i m e s i n t o t a l . T h e i n v e s t i g a t i o n a l s o u n c o v e r e d o t h e r l o o p h o l e s , i n c l u d i n g o n e t h a t l e t a c o m p a n y c l a i m s u b s i d i e s f o r a p p r o x i m a t e l y 2 2 , 0 0 0 p h a n t o m s u b s c r i b e r s e a c h m o n t h i n t h e s t a t e o f M i c h i g a n . A n d t h e N a t i o n a l V e r i f i e r - a n e w d a t a b a s e i n t e n d e d t o v e r i f y e l i g i b i l i t y t o p a r t i c i p a t e i n t h e L i f e l i n e p r o g r a m - d o e s n o t c u r r e n t l y e x i s t a n d w i l l n o t s t a r t o p e r a t i n g u n t i l t h e e n d o f 2 0 1 7 . F u r t h e r , i t i s n o t s c h e d u l e d t o c o v e r a l l s t a t e s u n t i l 2 0 1 9 . W e n e e d t o m a k e s u r e t h a t s a f e g u a r d s a r e s t r o n g a n d e f f e c t i v e i n o r d e r t o d i r e c t s u b s i d i e s t o A m e r i c a n c o n s u m e r s w h o m o s t n e e d t h e h e l p . I a p p r e c i a t e y o u r i n t e r e s t i n t h i s m a t t e r . P l e a s e l e t m e k n o w i f I c a n b e o f a n y f u r t h e r a s s i s t a n c e . S i n c e r e l y , A j i t V . P a i O F F I C E O F T H E C H A I R M A N F E D E R A L C O M M U N I C A T I O N S C O M M I S S I O N W A S H I N G T O N M a r c h 2 2 , 2 0 1 7 T h e H o n o r a b l e B o b b y L . R u s h U . S . H o u s e o f R e p r e s e n t a t i v e s 2 1 8 8 R a y b u r n H o u s e O f f i c e B u i l d i n g W a s h i n g t o n , D . C . 2 0 5 1 5 D e a r C o n g r e s s m a n R u s h : T h a n k y o u f o r y o u r l e t t e r r e g a r d i n g t h e W i r e l i n e C o m p e t i t i o n B u r e a u ' s O r d e r o n R e c o n s i d e r a t i o n , w h i c h a f f e c t e d n i n e c o m p a n i e s ' p a r t i c i p a t i o n i n t h e L i f e l i n e p r o g r a m . I a p p r e c i a t e y o u r v i e w s , w h i c h w i l l b e e n t e r e d i n t o t h e r e c o r d o f t h e p r o c e e d i n g . O n e o f m y m a i n g o a l s a s F C C C h a i r m a n i s c l o s i n g t h e d i g i t a l d i v i d e . A n d I r e c o g n i z e u n a f f o r d a b i l i t y a s a k e y b a r r i e r t o d i g i t a l o p p o r t u n i t y . L a s t S e p t e m b e r , I e x p l a i n e d w h e n a n n o u n c i n g m y D i g i t a l E m p o w e r m e n t A g e n d a t h a t " { a ] l t h o u g h g i g a b i t s e r v i c e s a n d m o b i l e b r o a d b a n d a r e b e c o m i n g c o m m o n f e a t u r e s o f w e a l t h i e r , m e t r o p o l i t a n a r e a s , t h e y a r e n ' t u n i v e r s a l . " T h e r e i s a r e a l d i g i t a l d i v i d e i n o u r c o u n t r y , a n d a s w e s e e k t o a d d r e s s t h i s p r o b l e m , I b e l i e v e t h e L i f e l i n e p r o g r a m i s a n i m p o r t a n t t o o l f o r h e l p i n g t o c o n n e c t a l l A m e r i c a n s . R e g a r d i n g t h e O r d e r , I w o u l d m a k e s e v e r a l i m p o r t a n t p o i n t s . F i r s t , t h e O r d e r a f f e c t e d o n l y n i n e o f t h e m o r e t h a n 9 0 0 c a r r i e r s p a r t i c i p a t i n g i n t h e L i f e l i n e p r o g r a m - t h a t ' s l e s s t h a n 1 % . N o r d i d t h e O r d e r a f f e c t t h e d e s i g n a t i o n o f L i f e l i n e b r o a d b a n d c a r r i e r s b y s t a t e c o m m i s s i o n s ; t h a t p r o c e s s p r o c e e d s a p a c e . S e c o n d , e i g h t o f t h e n i n e a f f e c t e d c a r r i e r s h a d n o L i f e l i n e c u s t o m e r s . T h i r d , t h e p r i o r C o m m i s s i o n d i s r e g a r d e d t h e w e l l - e s t a b l i s h e d p r o c e s s f o r a p p r o v i n g a p p l i c a t i o n s l i k e t h e s e . T h e N a t i o n a l T r i b a l T e l e c o m m u n i c a t i o n s A s s o c i a t i o n f i l e d a p e t i t i o n f o r r e c o n s i d e r a t i o n p o i n t i n g o u t t h a t s e v e r a l o f t h e p r o v i d e r s n e v e r c o m p l i e d w i t h t h e i r o b l i g a t i o n u n d e r o u r r u l e s t o c o o r d i n a t e t h e i r a p p l i c a t i o n s w i t h T r i b e s . T h e s e T r i b a l r e p r e s e n t a t i v e s t h u s r e q u e s t e d t h a t t h e d e s i g n a t i o n s b e r e v e r s e d . M o r e o v e r , t w o p r o v i d e r s ' d e s i g n a t i o n s w e r e i m p r o p e r l y g r a n t e d p r i o r t o t h e p u b l i c c o m m e n t d e a d l i n e f o r f i l i n g c o m m e n t s - t h a t i s , b e f o r e t h e p u b l i c e v e n h a d a f u l l a n d f a i r c h a n c e t o w e i g h i n o n t h e d e s i g n a t i o n . T h i s c u r t a i l e d t h e p u b l i c ' s a b i l i t y t o p a r t i c i p a t e i n t h e s e p r o c e e d i n g s a n d l i m i t e d t h e C o m m i s s i o n ' s a b i l i t y t o c o n s i d e r a l l d e s i g n a t i o n c r i t e r i a w i t h a f u l s o m e r e c o r d . W h a t e v e r o n e t h i n k s o f t h e m e r i t s o f t h e s e a p p l i c a t i o n s , t h a t a c t i o n w a s p l a i n l y i m p r o p e r . F o u r t h , t h e r e i s a s e r i o u s q u e s t i o n a s t o w h e t h e r t h e F C C h a s t h e l e g a l a u t h o r i t y t o d e s i g n a t e L i f e l i n e p r o v i d e r s o r w h e t h e r s u c h d e s i g n a t i o n s m u s t b e m a d e b y s t a t e g o v e r n m e n t s , a s P a g e 2 - T h e H o n o r a b l e B o b b y L . R u s h h a s l o n g b e e n t h e c a s e . S t a t e r e g u l a t o r y a g e n c i e s h a v e a s u b s t a n t i a l l e g a l c h a l l e n g e t o t h e e n t i r e p r o c e s s o f t h e F C C d e s i g n a t i n g L i f e l i n e B r o a d b a n d P r o v i d e r s , a r g u i n g t h a t i t i s u n l a w f u l , a n d t h e F C C i t s e l f r e c e n t l y a s k e d t h e c o u r t f o r a d d i t i o n a l t i m e t o c o n s i d e r t h i s i s s u e . F o r i n s t a n c e , S e c t i o n 2 1 4 o f t h e C o m m u n i c a t i o n s A c t e x p l i c i t l y s a y s t h a t s t a t e s m u s t m a k e d e s i g n a t i o n s f o r p u r p o s e s o f a l l o w i n g c o m p a n i e s t o r e c e i v e L i f e l i n e s u b s i d i e s . T h e F C C h a s r e p e a t e d l y , a n d f o r m a n y y e a r s , r e c o g n i z e d s t a t e s ' p r i m a r y r o l e i n t h i s a r e a . B y p r e e m p t i n g t h e s t a t e s ' r o l e i n c e r t i f i c a t i o n , t h e f e d e r a l d e s i g n a t i o n s c o u l d r u n a f o u l o f t h i s l e g a l f r a m e w o r k . P u t t i n g t h e d e s i g n a t i o n s o n h o l d g i v e s t h e F C C t h e c h a n c e t o m a k e s u r e t h e p r o c e s s i s l e g a l l y d e f e n s i b l e a n d a v o i d s p o t e n t i a l l y s t r a n d i n g c u s t o m e r s i f t h e c o u r t s u l t i m a t e l y d e e m t h e p r o c e s s u n l a w f u l . L a s t l y , e v e r y d o l l a r t h a t i s s p e n t o n s u b s i d i z i n g s o m e b o d y w h o d o e s n ' t n e e d t h e h e l p b y d e f i n i t i o n d o e s n o t g o t o s o m e o n e w h o d o e s . T h a t m e a n s t h a t t h e C o m m i s s i o n n e e d s t o m a k e s u r e t h a t t h e r e a r e s t r o n g s a f e g u a r d s a g a i n s t w a s t e , f r a u d , a n d a b u s e b e f o r e e x p a n d i n g t h e p r o g r a m t o n e w p r o v i d e r s . B u t o u r f e d e r a l s a f e g u a r d s a r e i n s u f f i c i e n t : M y i n v e s t i g a t i o n l a s t y e a r i n t o t h e s e m a t t e r s r e v e a l e d t h a t p r o v i d e r s c o u l d i n d i s c r i m i n a t e l y o v e r r i d e c h e c k s t h a t a r e s u p p o s e d t o p r e v e n t w a s t e f u l a n d f r a u d u l e n t a c t i v i t i e s . ( T h e s e c h e c k s i n c l u d e c o m m o n - s e n s e s t e p s l i k e v e r i f y i n g t h e i d e n t i t y o f w o u l d - b e L i f e l i n e r e c i p i e n t s . ) F r o m O c t o b e r 2 0 1 4 u n t i l J u n e 2 0 1 6 , w i r e l e s s r e s e l l e r s h a d o v e r r i d d e n s u c h s a f e g u a r d s 4 , 2 9 1 , 6 4 7 t i m e s i n t o t a l . T h e i n v e s t i g a t i o n a l s o u n c o v e r e d o t h e r l o o p h o l e s , i n c l u d i n g o n e t h a t l e t a c o m p a n y c l a i m s u b s i d i e s f o r a p p r o x i m a t e l y 2 2 , 0 0 0 p h a n t o m s u b s c r i b e r s e a c h m o n t h i n t h e s t a t e o f M i c h i g a n . A n d t h e N a t i o n a l V e r i f i e r - a n e w d a t a b a s e i n t e n d e d t o v e r i f y e l i g i b i l i t y t o p a r t i c i p a t e i n t h e L i f e l i n e p r o g r a m - d o e s n o t c u r r e n t l y e x i s t a n d w i l l n o t s t a r t o p e r a t i n g u n t i l t h e e n d o f 2 0 1 7 . F u r t h e r , i t i s n o t s c h e d u l e d t o c o v e r a l l s t a t e s u n t i l 2 0 1 9 . W e n e e d t o m a k e s u r e t h a t s a f e g u a r d s a r e s t r o n g a n d e f f e c t i v e i n o r d e r t o d i r e c t s u b s i d i e s t o A m e r i c a n c o n s u m e r s w h o m o s t n e e d t h e h e l p . I a p p r e c i a t e y o u r i n t e r e s t i n t h i s m a t t e r . P l e a s e l e t m e k n o w i f I c a n b e o f a n y f u r t h e r a s s i s t a n c e . OFFICE OF THE CHAIRMAN FEDERAL COMMUNICATIONS COMMISSION WASH I NGTON March 22, 2017 The Honorable Jose E. Serrano U.S. House of Representatives 2354 Rayburn House Office Building Washington, D.C. 20515 Dear Congressman Serrano: Thank you for your letters regarding the Wireline Competition Bureau's Order on Reconsideration, which affected nine companies' participation in the Lifeline program. I appreciate your views, which will be entered into the record of the proceeding. One of my main goals as FCC Chairman is closing the digital divide. And I recognize unaffordability as a key barrier to digital opportunity. Last September, I explained when announcing my Digital Empowerment Agenda that "[alithough gigabit services and mobile broadband are becoming common features of wealthier, metropolitan areas, they aren't universal." There is a real digital divide in our country, and as we seek to address this problem, I believe the Lifeline program is an important tool for helping to connect all Americans. Regarding the Order, I would make several important points. First, the Order affected only nine of the more than 900 carriers participating in the Lifeline program-that's less than 1%. Nor did the Order affect the designation of Lifeline broadband carriers by state commissions; that process proceeds apace. Second, eight of the nine affected carriers had no Lifeline customers. Third, the prior Commission disregarded the well-established process for approving applications like these. The National Tribal Telecommunications Association filed a petition for reconsideration pointing out that several of the providers never complied with their obligation under our rules to coordinate their applications with Tribes. These Tribal representatives thus requested that the designations be reversed. Moreover, two providers' designations were improperly granted prior to the public comment deadline for filing comments-that is, before the public even had a full and fair chance to weigh in on the designation. This curtailed the public's ability to participate in these proceedings and limited the Commission's ability to consider all designation criteria with a fulsome record. Whatever one thinks of the merits of these applications, that action was plainly improper. Fourth, there is a serious question as to whether the FCC has the legal authority to designate Lifeline providers or whether such designations must be made by state governments, as P a g e 2 - T h e H o n o r a b l e J o s e E . S e r r a n o h a s l o n g b e e n t h e c a s e . S t a t e r e g u l a t o r y a g e n c i e s h a v e a s u b s t a n t i a l l e g a l c h a l l e n g e t o t h e e n t i r e p r o c e s s o f t h e F C C d e s i g n a t i n g L i f e l i n e B r o a d b a n d P r o v i d e r s , a r g u i n g t h a t i t i s u n l a w f u l , a n d t h e F C C i t s e l f r e c e n t l y a s k e d t h e c o u r t f o r a d d i t i o n a l t i m e t o c o n s i d e r t h i s i s s u e . F o r i n s t a n c e , S e c t i o n 2 1 4 o f t h e C o m m u n i c a t i o n s A c t e x p l i c i t l y s a y s t h a t s t a t e s m u s t m a k e d e s i g n a t i o n s f o r p u r p o s e s o f a l l o w i n g c o m p a n i e s t o r e c e i v e L i f e l i n e s u b s i d i e s . T h e F C C h a s r e p e a t e d l y , a n d f o r m a n y y e a r s , r e c o g n i z e d s t a t e s ' p r i m a r y r o l e i n t h i s a r e a . B y p r e e m p t i n g t h e s t a t e s ' r o l e i n c e r t i f i c a t i o n , t h e f e d e r a l d e s i g n a t i o n s c o u l d r u n a f o u l o f t h i s l e g a l f r a m e w o r k . P u t t i n g t h e d e s i g n a t i o n s o n h o l d g i v e s t h e F C C t h e c h a n c e t o m a k e s u r e t h e p r o c e s s i s l e g a l l y d e f e n s i b l e a n d a v o i d s p o t e n t i a l l y s t r a n d i n g c u s t o m e r s i f t h e c o u r t s u l t i m a t e l y d e e m t h e p r o c e s s u n l a w f u l . L a s t l y , e v e r y d o l l a r t h a t i s s p e n t o n s u b s i d i z i n g s o m e b o d y w h o d o e s n ' t n e e d t h e h e l p b y d e f i n i t i o n d o e s n o t g o t o s o m e o n e w h o d o e s . T h a t m e a n s t h a t t h e C o m m i s s i o n n e e d s t o m a k e s u r e t h a t t h e r e a r e s t r o n g s a f e g u a r d s a g a i n s t w a s t e , f r a u d , a n d a b u s e b e f o r e e x p a n d i n g t h e p r o g r a m t o n e w p r o v i d e r s . B u t o u r f e d e r a l s a f e g u a r d s a r e i n s u f f i c i e n t : M y i n v e s t i g a t i o n l a s t y e a r i n t o t h e s e m a t t e r s r e v e a l e d t h a t p r o v i d e r s c o u l d i n d i s c r i m i n a t e l y o v e r r i d e c h e c k s t h a t a r e s u p p o s e d t o p r e v e n t w a s t e f u l a n d f r a u d u l e n t a c t i v i t i e s . ( T h e s e c h e c k s i n c l u d e c o m m o n - s e n s e s t e p s l i k e v e r i f y i n g t h e i d e n t i t y o f w o u l d - b e L i f e l i n e r e c i p i e n t s . ) F r o m O c t o b e r 2 0 1 4 u n t i l J u n e 2 0 1 6 , w i r e l e s s r e s e l l e r s h a d o v e r r i d d e n s u c h s a f e g u a r d s 4 , 2 9 1 , 6 4 7 t i m e s i n t o t a l . T h e i n v e s t i g a t i o n a l s o u n c o v e r e d o t h e r l o o p h o l e s , i n c l u d i n g o n e t h a t l e t a c o m p a n y c l a i m s u b s i d i e s f o r a p p r o x i m a t e l y 2 2 , 0 0 0 p h a n t o m s u b s c r i b e r s e a c h m o n t h i n t h e s t a t e o f M i c h i g a n . A n d t h e N a t i o n a l V e r i f i e r - a n e w d a t a b a s e i n t e n d e d t o v e r i f y e l i g i b i l i t y t o p a r t i c i p a t e i n t h e L i f e l i n e p r o g r a m - d o e s n o t c u r r e n t l y e x i s t a n d w i l l n o t s t a r t o p e r a t i n g u n t i l t h e e n d o f 2 0 1 7 . F u r t h e r , i t i s n o t s c h e d u l e d t o c o v e r a l l s t a t e s u n t i l 2 0 1 9 . W e n e e d t o m a k e s u r e t h a t s a f e g u a r d s a r e s t r o n g a n d e f f e c t i v e i n o r d e r t o d i r e c t s u b s i d i e s t o A m e r i c a n c o n s u m e r s w h o m o s t n e e d t h e h e l p . I a p p r e c i a t e y o u r i n t e r e s t i n t h i s m a t t e r . P l e a s e l e t m e k n o w i f I c a n b e o f a n y f u r t h e r a s s i s t a n c e . O S i n c e r e l y , A j i t V . P a i OFFICE OF THE CHAIRMAN FEDERAL COMMUNICATIONS COMMISSION WASHINGTON March 22, 2017 The Honorable Darren Soto U.S. House of Representatives 1429 Longworth House Office Building Washington, D.C. 20515 Dear Congressman Soto: Thank you for your letter regarding the Wireline Competition Bureau's Order on Reconsideration, which affected nine companies' participation in the Lifeline program. I appreciate your views, which will be entered into the record of the proceeding. One of my main goals as FCC Chairman is closing the digital divide. And I recognize unaffordability as a key barrier to digital opportunity. Last September, I explained when announcing my Digital Empowerment Agenda that "[a]lthough gigabit services and mobile broadband are becoming common features of wealthier, metropolitan areas, they aren't universal." There is a real digital divide in our country, and as we seek to address this problem, I believe the Lifeline program is an important tool for helping to connect all Americans. Regarding the Order, I would make several important points. First, the Order affected only nine of the more than 900 carriers participating in the Lifeline program-that's less than 1%. Nor did the Order affect the designation of Lifeline broadband carriers by state commissions; that process proceeds apace. Second, eight of the nine affected carriers had no Lifeline customers. Third, the prior Commission disregarded the well-established process for approving applications like these. The National Tribal Telecommunications Association filed a petition for reconsideration pointing out that several of the providers never complied with their obligation under our rules to coordinate their applications with Tribes. These Tribal representatives thus requested that the designations be reversed. Moreover, two providers' designations were improperly granted prior to the public comment deadline for filing comments-that is, before the public even had a full and fair chance to weigh in on the designation. This curtailed the public's ability to participate in these proceedings and limited the Commission's ability to consider all designation criteria with a fulsome record. Whatever one thinks of the merits of these applications, that action was plainly improper. Fourth, there is a serious question as to whether the FCC has the legal authority to designate Lifeline providers or whether such designations must be made by state governments, as , V. Sincerely, Page 2-The Honorable Darren Soto has long been the case. State regulatory agencies have a substantial legal challenge to the entire process of the FCC designating Lifeline Broadband Providers, arguing that it is unlawful, and the FCC itself recently asked the court for additional time to consider this issue. For instance, Section 214 of the Communications Act explicitly says that states must make designations for purposes of allowing companies to receive Lifeline subsidies. The FCC has repeatedly, and for many years, recognized states' primary role in this area. By preempting the states' role in certification, the federal designations could run afoul of this legal framework. Putting the designations on hold gives the FCC the chance to make sure the process is legally defensible and avoids potentially stranding customers if the courts ultimately deem the process unlawful. Lastly, every dollar that is spent on subsidizing somebody who doesn't need the help by definition does not go to someone who does. That means that the Commission needs to make sure that there are strong safeguards against waste, fraud, and abuse before expanding the program to new providers. But our federal safeguards are insufficient: My investigation last year into these matters revealed that providers could indiscriminately override checks that are supposed to prevent wasteful and fraudulent activities. (These checks include common-sense steps like verifying the identity of would-be Lifeline recipients.) From October 2014 until June 2016, wireless resellers had overridden such safeguards 4,291,647 times in total. The investigation also uncovered other loopholes, including one that let a company claim subsidies for approximately 22,000 phantom subscribers each month in the state of Michigan. And the National Verifier-a new database intended to verify eligibility to participate in the Lifeline program-does not currently exist and will not start operating until the end of 2017. Further, it is not scheduled to cover all states until 2019. We need to make sure that safeguards are strong and effective in order to direct subsidies to American consumers who most need the help. I appreciate your interest in this matter. Please let me know if I can be of any further assistance. AjitV.Pai O F F I C E O F T H E C H A I R M A N F E D E R A L C O M M U N I C A T I O N S C O M M I S S I O N W A S H I N G T O N M a r c h 2 2 , 2 0 1 7 T h e H o n o r a b l e J a c k i e S p e i e r U . S . H o u s e o f R e p r e s e n t a t i v e s 2 4 6 5 R a y b u r n H o u s e O f f i c e B u i l d i n g W a s h i n g t o n , D . C . 2 0 5 1 5 D e a r C o n g r e s s w o m a n S p e i e r : T h a n k y o u f o r y o u r l e t t e r r e g a r d i n g t h e W i r e l i n e C o m p e t i t i o n B u r e a u ' s O r d e r o n R e c o n s i d e r a t i o n , w h i c h a f f e c t e d n i n e c o m p a n i e s ' p a r t i c i p a t i o n i n t h e L i f e l i n e p r o g r a m . I a p p r e c i a t e y o u r v i e w s , w h i c h w i l l b e e n t e r e d i n t o t h e r e c o r d o f t h e p r o c e e d i n g . O n e o f m y m a i n g o a l s a s F C C C h a i r m a n i s c l o s i n g t h e d i g i t a l d i v i d e . A n d I r e c o g n i z e u n a f f o r d a b i l i t y a s a k e y b a r r i e r t o d i g i t a l o p p o r t u n i t y . L a s t S e p t e m b e r , I e x p l a i n e d w h e n a n n o u n c i n g m y D i g i t a l E m p o w e r m e n t A g e n d a t h a t " [ a ] l t h o u g h g i g a b i t s e r v i c e s a n d m o b i l e b r o a d b a n d a r e b e c o m i n g c o m m o n f e a t u r e s o f w e a l t h i e r , m e t r o p o l i t a n a r e a s , t h e y a r e n ' t u n i v e r s a l . " T h e r e i s a r e a l d i g i t a l d i v i d e i n o u r c o u n t r y , a n d a s w e s e e k t o a d d r e s s t h i s p r o b l e m , I b e l i e v e t h e L i f e l i n e p r o g r a m i s a n i m p o r t a n t t o o l f o r h e l p i n g t o c o n n e c t a l l A m e r i c a n s . R e g a r d i n g t h e O r d e r , I w o u l d m a k e s e v e r a l i m p o r t a n t p o i n t s . F i r s t , t h e O r d e r a f f e c t e d o n l y n i n e o f t h e m o r e t h a n 9 0 0 c a r r i e r s p a r t i c i p a t i n g i n t h e L i f e l i n e p r o g r a m - t h a t ' s l e s s t h a n 1 % . N o r d i d t h e O r d e r a f f e c t t h e d e s i g n a t i o n o f L i f e l i n e b r o a d b a n d c a r r i e r s b y s t a t e c o m m i s s i o n s ; t h a t p r o c e s s p r o c e e d s a p a c e . S e c o n d , e i g h t o f t h e n i n e a f f e c t e d c a r r i e r s h a d n o L i f e l i n e c u s t o m e r s . T h i r d , t h e p r i o r C o m m i s s i o n d i s r e g a r d e d t h e w e l l - e s t a b l i s h e d p r o c e s s f o r a p p r o v i n g a p p l i c a t i o n s l i k e t h e s e . T h e N a t i o n a l T r i b a l T e l e c o m m u n i c a t i o n s A s s o c i a t i o n f i l e d a p e t i t i o n f o r r e c o n s i d e r a t i o n p o i n t i n g o u t t h a t s e v e r a l o f t h e p r o v i d e r s n e v e r c o m p l i e d w i t h t h e i r o b l i g a t i o n u n d e r o u r r u l e s t o c o o r d i n a t e t h e i r a p p l i c a t i o n s w i t h T r i b e s . T h e s e T r i b a l r e p r e s e n t a t i v e s t h u s r e q u e s t e d t h a t t h e d e s i g n a t i o n s b e r e v e r s e d . M o r e o v e r , t w o p r o v i d e r s ' d e s i g n a t i o n s w e r e i m p r o p e r l y g r a n t e d p r i o r t o t h e p u b l i c c o m m e n t d e a d l i n e f o r f i l i n g c o m m e n t s - t h a t i s , b e f o r e t h e p u b l i c e v e n h a d a f u l l a n d f a i r c h a n c e t o w e i g h i n o n t h e d e s i g n a t i o n . T h i s c u r t a i l e d t h e p u b l i c ' s a b i l i t y t o p a r t i c i p a t e i n t h e s e p r o c e e d i n g s a n d l i m i t e d t h e C o m m i s s i o n ' s a b i l i t y t o c o n s i d e r a l l d e s i g n a t i o n c r i t e r i a w i t h a f u l s o m e r e c o r d . W h a t e v e r o n e t h i n k s o f t h e m e r i t s o f t h e s e a p p l i c a t i o n s , t h a t a c t i o n w a s p l a i n l y i m p r o p e r . F o u r t h , t h e r e i s a s e r i o u s q u e s t i o n a s t o w h e t h e r t h e F C C h a s t h e l e g a l a u t h o r i t y t o d e s i g n a t e L i f e l i n e p r o v i d e r s o r w h e t h e r s u c h d e s i g n a t i o n s m u s t b e m a d e b y s t a t e g o v e r n m e n t s , a s Page 2-The Honorable Jackie Speier has long been the case. State regulatory agencies have a substantial legal challenge to the entire process of the FCC designating Lifeline Broadband Providers, arguing that it is unlawful, and the FCC itself recently asked the court for additional time to consider this issue. For instance, Section 214 of the Communications Act explicitly says that states must make designations for purposes of allowing companies to receive Lifeline subsidies. The FCC has repeatedly, and for many years, recognized states' primary role in this area. By preempting the states' role in certification, the federal designations could run afoul of this legal framework. Putting the designations on hold gives the FCC the chance to make sure the process is legally defensible and avoids potentially stranding customers if the courts ultimately deem the process unlawful. Lastly, every dollar that is spent on subsidizing somebody who doesn't need the help by definition does not go to someone who does. That means that the Commission needs to make sure that there are strong safeguards against waste, fraud, and abuse before expanding the program to new providers. But our federal safeguards are insufficient: My investigation last year into these matters revealed that providers could indiscriminately override checks that are supposed to prevent wasteful and fraudulent activities. (These checks include common-sense steps like verifying the identity of would-be Lifeline recipients.) From October 2014 until June 2016, wireless resellers had overridden such safeguards 4,291,647 times in total. The investigation also uncovered other loopholes, including one that let a company claim subsidies for approximately 22,000 phantom subscribers each month in the state of Michigan. And the National Verifier-a new database intended to verify eligibility to participate in the Lifeline program-does not currently exist and will not start operating until the end of 2017. Further, it is not scheduled to cover all states until 2019. We need to make sure that safeguards are strong and effective in order to direct subsidies to American consumers who most need the help. I appreciate your interest in this matter. Please let me know if I can be of any further assistance. Sincerely, AjitV.Pai OFFICE OF THE CHAIRMAN FEDERAL COMMUNICATIONS COMMISSION WASHINGTON March 22, 2017 The Honorable Eric Swaiwell U.S. House of Representatives 129 Cannon House Office Building Washington, D.C. 20515 Dear Congressman Swalwell: Thank you for your letter regarding the Wireline Competition Bureau's Order on Reconsideration, which affected nine companies' participation in the Lifeline program. I appreciate your views, which will be entered into the record of the proceeding. One of my main goals as FCC Chairman is closing the digital divide. And I recognize unaffordability as a key barrier to digital opportunity. Last September, I explained when announcing my Digital Empowerment Agenda that "[alithough gigabit services and mobile broadband are becoming common features of wealthier, metropolitan areas, they aren't universal." There is a real digital divide in our country, and as we seek to address this problem, I believe the Lifeline program is an important tool for helping to connect all Americans. Regarding the Order, I would make several important points. First, the Order affected only nine of the more than 900 carriers participating in the Lifeline program-that's less than 1%. Nor did the Order affect the designation of Lifeline broadband carriers by state commissions; that process proceeds apace. Second, eight of the nine affected carriers had no Lifeline customers. Third, the prior Commission disregarded the well-established process for approving applications like these. The National Tribal Telecommunications Association filed a petition for reconsideration pointing out that several of the providers never complied with their obligation under our rules to coordinate their applications with Tribes. These Tribal representatives thus requested that the designations be reversed. Moreover, two providers' designations were improperly granted prior to the public comment deadline for filing comments-that is, before the public even had a full and fair chance to weigh in on the designation. This curtailed the public's ability to participate in these proceedings and limited the Commission's ability to consider all designation criteria with a fulsome record. Whatever one thinks of the merits of these applications, that action was plainly improper. Fourth, there is a serious question as to whether the FCC has the legal authority to designate Lifeline providers or whether such designations must be made by state governments, as Page 2-The Honorable Eric Swalwell has long been the case. State regulatory agencies have a substantial legal challenge to the entire process of the FCC designating Lifeline Broadband Providers, arguing that it is unlawful, and the FCC itself recently asked the court for additional time to consider this issue. For instance, Section 214 of the Communications Act explicitly says that states must make designations for purposes of allowing companies to receive Lifeline subsidies. The FCC has repeatedly, and for many years, recognized states' primary role in this area. By preempting the states' role in certification, the federal designations could run afoul of this legal framework. Putting the designations on hold gives the FCC the chance to make sure the process is legally defensible and avoids potentially stranding customers if the courts ultimately deem the process unlawful. Lastly, every dollar that is spent on subsidizing somebody who doesn't need the help by definition does not go to someone who does. That means that the Commission needs to make sure that there are strong safeguards against waste, fraud, and abuse before expanding the program to new providers. But our federal safeguards are insufficient: My investigation last year into these matters revealed that providers could indiscriminately override checks that are supposed to prevent wasteful and fraudulent activities. (These checks include common-sense steps like verifying the identity of would-be Lifeline recipients.) From October 2014 until June 2016, wireless resellers had overridden such safeguards 4,291,647 times in total. The investigation also uncovered other loopholes, including one that let a company claim subsidies for approximately 22,000 phantom subscribers each month in the state of Michigan. And the National Verifier-a new database intended to verify eligibility to participate in the Lifeline program-does not currently exist and will not start operating until the end of2017. Further, it is not scheduled to cover all states until 2019. We need to make sure that safeguards are strong and effective in order todirect subsidies to American consumers who most need the help. I appreciate your interest in this matter. Please let me know if I can be of any further assistance. Sincerely, y Ajit V. Pai O F F I C E O F T H E C H A I R M A N F E D E R A L C O M M U N I C A T I O N S C O M M I S S I O N W A S H I N G T O N M a r c h 2 2 , 2 0 1 7 T h e H o n o r a b l e M a r k T a k a n o U . S . H o u s e o f R e p r e s e n t a t i v e s 1 5 0 7 L o n g w o r t h H o u s e O f f i c e B u i l d i n g W a s h i n g t o n , D . C . 2 0 5 1 5 D e a r C o n g r e s s m a n T a k a n o : T h a n k y o u f o r y o u r l e t t e r s r e g a r d i n g t h e W i r e l i n e C o m p e t i t i o n B u r e a u ' s O r d e r o n R e c o n s i d e r a t i o n , w h i c h a f f e c t e d n i n e c o m p a n i e s ' p a r t i c i p a t i o n i n t h e L i f e l i n e p r o g r a m . I a p p r e c i a t e y o u r v i e w s , w h i c h w i l l b e e n t e r e d i n t o t h e r e c o r d o f t h e p r o c e e d i n g . O n e o f m y m a i n g o a l s a s F C C C h a i r m a n i s c l o s i n g t h e d i g i t a l d i v i d e . A n d I r e c o g n i z e u n a f f o r d a b i l i t y a s a k e y b a r r i e r t o d i g i t a l o p p o r t u n i t y . L a s t S e p t e m b e r , I e x p l a i n e d w h e n a n n o u n c i n g m y D i g i t a l E m p o w e r m e n t A g e n d a t h a t " [ a ] l t h o u g h g i g a b i t s e r v i c e s a n d m o b i l eb r o a d b a n d a r e b e c o m i n g c o m m o n f e a t u r e s o f w e a l t h i e r , m e t r o p o l i t a n a r e a s , t h e y a r e n ' t u n i v e r s a l . " T h e r e i s a r e a l d i g i t a l d i v i d e i n o u r c o u n t r y , a n d a s w e s e e k t o a d d r e s s t h i s p r o b l e m , Ib e l i e v e t h e L i f e l i n e p r o g r a m i s a n i m p o r t a n t t o o l f o r h e l p i n g t o c o n n e c t a l l A m e r i c a n s . R e g a r d i n g t h e O r d e r , I w o u l d m a k e s e v e r a l i m p o r t a n t p o i n t s . F i r s t , t h e O r d e r a f f e c t e d o n l y n i n e o f t h e m o r e t h a n 9 0 0 c a r r i e r s p a r t i c i p a t i n g i n t h e L i f e l i n e p r o g r a m - t h a t ' s l e s s t h a n 1 % . N o r d i d t h e O r d e r a f f e c t t h e d e s i g n a t i o n o f L i f e l i n eb r o a d b a n d c a r r i e r s b y s t a t e c o m m i s s i o n s ; t h a t p r o c e s s p r o c e e d s a p a c e . S e c o n d , e i g h t o f t h e n i n e a f f e c t e d c a r r i e r s h a d n o L i f e l i n e c u s t o m e r s . T h i r d , t h e p r i o r C o m m i s s i o n d i s r e g a r d e d t h e w e l l - e s t a b l i s h e d p r o c e s s f o r a p p r o v i n g a p p l i c a t i o n s l i k e t h e s e . T h e N a t i o n a l T r i b a l T e l e c o m m u n i c a t i o n s A s s o c i a t i o n f i l e d a p e t i t i o n f o r r e c o n s i d e r a t i o n p o i n t i n g o u t t h a t s e v e r a l o f t h e p r o v i d e r s n e v e r c o m p l i e d w i t h t h e i r o b l i g a t i o n u n d e r o u r r u l e s t o c o o r d i n a t e t h e i r a p p l i c a t i o n s w i t h T r i b e s . T h e s e T r i b a l r e p r e s e n t a t i v e s t h u s r e q u e s t e d t h a t t h e d e s i g n a t i o n s b e r e v e r s e d . M o r e o v e r , t w o p r o v i d e r s ' d e s i g n a t i o n s w e r e i m p r o p e r l y g r a n t e d p r i o r t o t h e p u b l i c c o m m e n t d e a d l i n e f o r f i l i n g c o m m e n t s - t h a t i s , b e f o r e t h e p u b l i c e v e n h a d a f u l l a n d f a i r c h a n c e t o w e i g h i n o n t h e d e s i g n a t i o n . T h i s c u r t a i l e d t h ep u b l i c ' s a b i l i t y t o p a r t i c i p a t e i n t h e s e p r o c e e d i n g s a n d l i m i t e d t h e C o m m i s s i o n ' s a b i l i t y t o c o n s i d e r a l l d e s i g n a t i o n c r i t e r i a w i t h a f u l s o m e r e c o r d . W h a t e v e r o n e t h i n k s o f t h e m e r i t s o f t h e s e a p p l i c a t i o n s , t h a t a c t i o n w a s p l a i n l y i m p r o p e r . F o u r t h , t h e r e i s a s e r i o u s q u e s t i o n a s t o w h e t h e r t h e F C C h a s t h e l e g a l a u t h o r i t y t o d e s i g n a t e L i f e l i n e p r o v i d e r s o r w h e t h e r s u c h d e s i g n a t i o n s m u s t b e m a d e b y s t a t e g o v e r n m e n t s , a s P a g e 2 - T h e H o n o r a b l e M a r k T a k a n o h a s l o n g b e e n t h e c a s e . S t a t e r e g u l a t o r y a g e n c i e s h a v e a s u b s t a n t i a l l e g a l c h a l l e n g e t o t h e e n t i r e p r o c e s s o f t h e F C C d e s i g n a t i n g L i f e l i n e B r o a d b a n d P r o v i d e r s , a r g u i n g t h a t i t i s u n l a w f u l , a n d t h e F C C i t s e l f r e c e n t l y a s k e d t h e c o u r t f o r a d d i t i o n a l t i m e t o c o n s i d e r t h i s i s s u e . F o r i n s t a n c e , S e c t i o n 2 1 4 o f t h e C o m m u n i c a t i o n s A c t e x p l i c i t l y s a y s t h a t s t a t e s m u s t m a k e d e s i g n a t i o n s f o r p u r p o s e s o f a l l o w i n g c o m p a n i e s t o r e c e i v e L i f e l i n e s u b s i d i e s . T h e F C C h a s r e p e a t e d l y , a n d f o r m a n y y e a r s , r e c o g n i z e d s t a t e s ' p r i m a r y r o l e i n t h i s a r e a . B y p r e e m p t i n g t h e s t a t e s ' r o l e i n c e r t i f i c a t i o n , t h e f e d e r a l d e s i g n a t i o n s c o u l d r u n a f o u l o f t h i s l e g a l f r a m e w o r k . P u t t i n g t h e d e s i g n a t i o n s o n h o l d g i v e s t h e F C C t h e c h a n c e t o m a k e s u r e t h e p r o c e s s i s l e g a l l y d e f e n s i b l e a n d a v o i d s p o t e n t i a l l y s t r a n d i n g c u s t o m e r s i f t h e c o u r t s u l t i m a t e l y d e e m t h e p r o c e s s u n l a w f u l . L a s t l y , e v e r y d o l l a r t h a t i s s p e n t o n s u b s i d i z i n g s o m e b o d y w h o d o e s n ' t n e e d t h e h e l p b y d e f i n i t i o n d o e s n o t g o t o s o m e o n e w h o d o e s . T h a t m e a n s t h a t t h e C o m m i s s i o n n e e d s t o m a k e s u r e t h a t t h e r e a r e s t r o n g s a f e g u a r d s a g a i n s t w a s t e , f r a u d , a n d a b u s e b e f o r e e x p a n d i n g t h e p r o g r a m t o n e w p r o v i d e r s . B u t o u r f e d e r a l s a f e g u a r d s a r e i n s u f f i c i e n t : M y i n v e s t i g a t i o n l a s t y e a r i n t o t h e s e m a t t e r s r e v e a l e d t h a t p r o v i d e r s c o u l d i n d i s c r i m i n a t e l y o v e r r i d e c h e c k s t h a t a r e s u p p o s e d t o p r e v e n t w a s t e f u l a n d f r a u d u l e n t a c t i v i t i e s . ( T h e s e c h e c k s i n c l u d e c o m m o n - s e n s e s t e p s l i k e v e r i f y i n g t h e i d e n t i t y o f w o u l d - b e L i f e l i n e r e c i p i e n t s . ) F r o m O c t o b e r 2 0 1 4 u n t i l J u n e 2 0 1 6 , w i r e l e s s r e s e l l e r s h a d o v e r r i d d e n s u c h s a f e g u a r d s 4 , 2 9 1 , 6 4 7 t i m e s i n t o t a l . T h e i n v e s t i g a t i o n a l s o u n c o v e r e d o t h e r l o o p h o l e s , i n c l u d i n g o n e t h a t l e t a c o m p a n y c l a i m s u b s i d i e s f o r a p p r o x i m a t e l y 2 2 , 0 0 0 p h a n t o m s u b s c r i b e r s e a c h m o n t h i n t h e s t a t e o f M i c h i g a n . A n d t h e N a t i o n a l V e r i f i e r - a n e w d a t a b a s e i n t e n d e d t o v e r i f y e l i g i b i l i t y t o p a r t i c i p a t e i n t h e L i f e l i n e p r o g r a m - d o e s n o t c u r r e n t l y e x i s t a n d w i l l n o t s t a r t o p e r a t i n g u n t i l t h e e n d o f 2 0 1 7 . F u r t h e r , i t i s n o t s c h e d u l e d t o c o v e r a l l s t a t e s u n t i l 2 0 1 9 . W e n e e d t o m a k e s u r e t h a t s a f e g u a r d s a r e s t r o n g a n d e f f e c t i v e i n o r d e r t o d i r e c t s u b s i d i e s t o A m e r i c a n c o n s u m e r s w h o m o s t n e e d t h e h e l p . I a p p r e c i a t e y o u r i n t e r e s t i n t h i s m a t t e r . P l e a s e l e t m e k n o w i f I c a n b e o f a n y f u r t h e r a s s i s t a n c e . S i n c e r e l y , A j i t V . P a i O F F I C E O F T H E C H A I R M A N F E D E R A L C O M M U N I C A T I O N S C O M M I S S I O N W A S H I N G T O N M a r c h 2 2 , 2 0 1 7 T h e H o n o r a b l e J u a n C . V a r g a s U . S . H o u s e o f R e p r e s e n t a t i v e s 1 6 0 5 L o n g w o r t h H o u s e O f f i c e B u i l d i n g W a s h i n g t o n , D . C . 2 0 5 1 5 D e a r C o n g r e s s m a n V a r g a s : T h a n k y o u f o r y o u r l e t t e r r e g a r d i n g t h e W i r e l i n e C o m p e t i t i o n B u r e a u ' s O r d e r o n R e c o n s i d e r a t i o n , w h i c h a f f e c t e d n i n e c o m p a n i e s ' p a r t i c i p a t i o n i n t h e L i f e l i n e p r o g r a m . I a p p r e c i a t e y o u r v i e w s , w h i c h w i l l b e e n t e r e d i n t o t h e r e c o r d o f t h e p r o c e e d i n g . O n e o f m y m a i n g o a l s a s F C C C h a i r m a n i s c l o s i n g t h e d i g i t a l d i v i d e . A n d I r e c o g n i z e u n a f f o r d a b i l i t y a s a k e y b a r r i e r t o d i g i t a l o p p o r t u n i t y . L a s t S e p t e m b e r , I e x p l a i n e d w h e n a n n o u n c i n g m y D i g i t a l E m p o w e r m e n t A g e n d a t h a t " [ a j l t h o u g h g i g a b i t s e r v i c e s a n d m o b i l e b r o a d b a n d a r e b e c o m i n g c o m m o n f e a t u r e s o f w e a l t h i e r , m e t r o p o l i t a n a r e a s , t h e y a r e n ' t u n i v e r s a l . " T h e r e i s a r e a l d i g i t a l d i v i d e i n o u r c o u n t r y , a n d a s w e s e e k t o a d d r e s s t h i s p r o b l e m , I b e l i e v e t h e L i f e l i n e p r o g r a m i s a n i m p o r t a n t t o o l f o r h e l p i n g t o c o n n e c t a l l A m e r i c a n s . R e g a r d i n g t h e O r d e r , I w o u l d m a k e s e v e r a l i m p o r t a n t p o i n t s . F i r s t , t h e O r d e r a f f e c t e d o n l y n i n e o f t h e m o r e t h a n 9 0 0 c a r r i e r s p a r t i c i p a t i n g i n t h e L i f e l i n e p r o g r a m - t h a t ' s l e s s t h a n 1 % . N o r d i d t h e O r d e r a f f e c t t h e d e s i g n a t i o n o f L i f e l i n e b r o a d b a n d c a r r i e r s b y s t a t e c o m m i s s i o n s ; t h a t p r o c e s s p r o c e e d s a p a c e . S e c o n d , e i g h t o f t h e n i n e a f f e c t e d c a r r i e r s h a d n o L i f e l i n e c u s t o m e r s . T h i r d , t h e p r i o r C o m m i s s i o n d i s r e g a r d e d t h e w e l l - e s t a b l i s h e d p r o c e s s f o r a p p r o v i n g a p p l i c a t i o n s l i k e t h e s e . T h e N a t i o n a l T r i b a l T e l e c o m m u n i c a t i o n s A s s o c i a t i o n f i l e d a p e t i t i o n f o r r e c o n s i d e r a t i o n p o i n t i n g o u t t h a t s e v e r a l o f t h e p r o v i d e r s n e v e r c o m p l i e d w i t h t h e i r o b l i g a t i o n u n d e r o u r r u l e s t o c o o r d i n a t e t h e i r a p p l i c a t i o n s w i t h T r i b e s . T h e s e T r i b a l r e p r e s e n t a t i v e s t h u s r e q u e s t e d t h a t t h e d e s i g n a t i o n s b e r e v e r s e d . M o r e o v e r , t w o p r o v i d e r s ' d e s i g n a t i o n s w e r e i m p r o p e r l y g r a n t e d p r i o r t o t h e p u b l i c c o m m e n t d e a d l i n e f o r f i l i n g c o m m e n t s - t h a t i s , b e f o r e t h e p u b l i c e v e n h a d a f u l l a n d f a i r c h a n c e t o w e i g h i n o n t h e d e s i g n a t i o n . T h i s c u r t a i l e d t h e p u b l i c ' s a b i l i t y t o p a r t i c i p a t e i n t h e s e p r o c e e d i n g s a n d l i m i t e d t h e C o m m i s s i o n ' s a b i l i t y t o c o n s i d e r a l l d e s i g n a t i o n c r i t e r i a w i t h a f u l s o m e r e c o r d . W h a t e v e r o n e t h i n k s o f t h e m e r i t s o f t h e s e a p p l i c a t i o n s , t h a t a c t i o n w a s p l a i n l y i m p r o p e r . F o u r t h , t h e r e i s a s e r i o u s q u e s t i o n a s t o w h e t h e r t h e F C C h a s t h e l e g a l a u t h o r i t y t o d e s i g n a t e L i f e l i n e p r o v i d e r s o r w h e t h e r s u c h d e s i g n a t i o n s m u s t b e m a d e b y s t a t e g o v e r n m e n t s , a s P a g e 2 - T h e H o n o r a b l e J u a n C . V a r g a s h a s l o n g b e e n t h e c a s e . S t a t e r e g u l a t o r y a g e n c i e s h a v e a s u b s t a n t i a l l e g a l c h a l l e n g e t o t h e e n t i r e p r o c e s s o f t h e F C C d e s i g n a t i n g L i f e l i n e B r o a d b a n d P r o v i d e r s , a r g u i n g t h a t i t i s u n l a w f u l , a n d t h e F C C i t s e l f r e c e n t l y a s k e d t h e c o u r t f o r a d d i t i o n a l t i m e t o c o n s i d e r t h i s i s s u e . F o r i n s t a n c e , S e c t i o n 2 1 4 o f t h e C o m m u n i c a t i o n s A c t e x p l i c i t l y s a y s t h a t s t a t e s m u s t m a k e d e s i g n a t i o n s f o r p u r p o s e s o f a l l o w i n g c o m p a n i e s t o r e c e i v e L i f e l i n e s u b s i d i e s . T h e F C C h a s r e p e a t e d l y , a n d f o r m a n y y e a r s , r e c o g n i z e d s t a t e s ' p r i m a r y r o l e i n t h i s a r e a . B y p r e e m p t i n g t h e s t a t e s ' r o l e i n c e r t i f i c a t i o n , t h e f e d e r a l d e s i g n a t i o n s c o u l d r u n a f o u l o f t h i s l e g a l f r a m e w o r k . P u t t i n g t h e d e s i g n a t i o n s o n h o l d g i v e s t h e F C C t h e c h a n c e t o m a k e s u r e t h e p r o c e s s i s l e g a l l y d e f e n s i b l e a n d a v o i d s p o t e n t i a l l y s t r a n d i n g c u s t o m e r s i f t h e c o u r t s u l t i m a t e l y d e e m t h e p r o c e s s u n l a w f u l . L a s t l y , e v e r y d o l l a r t h a t i s s p e n t o n s u b s i d i z i n g s o m e b o d y w h o d o e s n ' t n e e d t h e h e l p b y d e f i n i t i o n d o e s n o t g o t o s o m e o n e w h o d o e s . T h a t m e a n s t h a t t h e C o m m i s s i o n n e e d s t o m a k e s u r e t h a t t h e r e a r e s t r o n g s a f e g u a r d s a g a i n s t w a s t e , f r a u d , a n d a b u s e b e f o r e e x p a n d i n g t h e p r o g r a m t o n e w p r o v i d e r s . B u t o u r f e d e r a l s a f e g u a r d s a r e i n s u f f i c i e n t : M y i n v e s t i g a t i o n l a s t y e a r i n t o t h e s e m a t t e r s r e v e a l e d t h a t p r o v i d e r s c o u l d i n d i s c r i m i n a t e l y o v e r r i d e c h e c k s t h a t a r e s u p p o s e d t o p r e v e n t w a s t e f u l a n d f r a u d u l e n t a c t i v i t i e s . ( T h e s e c h e c k s i n c l u d e c o m m o n - s e n s e s t e p s l i k e v e r i f y i n g t h e i d e n t i t y o f w o u l d - b e L i f e l i n e r e c i p i e n t s . ) F r o m O c t o b e r 2 0 1 4 u n t i l J u n e 2 0 1 6 , w i r e l e s s r e s e l l e r s h a d o v e r r i d d e n s u c h s a f e g u a r d s 4 , 2 9 1 , 6 4 7 t i m e s i n t o t a l . T h e i n v e s t i g a t i o n a l s o u n c o v e r e d o t h e r l o o p h o l e s , i n c l u d i n g o n e t h a t l e t a c o m p a n y c l a i m s u b s i d i e s f o r a p p r o x i m a t e l y 2 2 , 0 0 0 p h a n t o m s u b s c r i b e r s e a c h m o n t h i n t h e s t a t e o f M i c h i g a n . A n d t h e N a t i o n a l V e r i f i e r - a n e w d a t a b a s e i n t e n d e d t o v e r i f y e l i g i b i l i t y t o p a r t i c i p a t e i n t h e L i f e l i n e p r o g r a m - d o e s n o t c u r r e n t l y e x i s t a n d w i l l n o t s t a r t o p e r a t i n g u n t i l t h e e n d o f 2 0 1 7 . F u r t h e r , i t i s n o t s c h e d u l e d t o c o v e r a l l s t a t e s u n t i l 2 0 1 9 . W e n e e d t o m a k e s u r e t h a t s a f e g u a r d s a r e s t r o n g a n d e f f e c t i v e i n o r d e r t o d i r e c t s u b s i d i e s t o A m e r i c a n c o n s u m e r s w h o m o s t n e e d t h e h e l p . I a p p r e c i a t e y o u r i n t e r e s t i n t h i s m a t t e r . P l e a s e l e t m e k n o w i f I c a n b e o f a n y f u r t h e r a s s i s t a n c e . S i n c e r e l y , ( j A j i t V . P a i O F F I C E O F T H E C H A I R M A N F E D E R A L C O M M U N I C A T I O N S C O M M I S S I O N W A S H I N G T O N M a r c h 2 2 , 2 0 1 7 T h e H o n o r a b l e P e t e r J . V i s c l o s k y U . S . H o u s e o f R e p r e s e n t a t i v e s 2 3 2 8 R a y b u r n H o u s e O f f i c e B u i l d i n g W a s h i n g t o n , D . C . 2 0 5 1 5 D e a r C o n g r e s s m a n V i s c i o s k y : T h a n k y o u f o r y o u r l e t t e r r e g a r d i n g t h e W i r e l i n e C o m p e t i t i o n B u r e a u ' s O r d e r o n R e c o n s i d e r a t i o n , w h i c h a f f e c t e d n i n e c o m p a n i e s ' p a r t i c i p a t i o n i n t h e L i f e l i n e p r o g r a m . I a p p r e c i a t e y o u r v i e w s , w h i c h w i l l b e e n t e r e d i n t o t h e r e c o r d o f t h e p r o c e e d i n g . O n e o f m y m a i n g o a l s a s F C C C h a i r m a n i s c l o s i n g t h e d i g i t a l d i v i d e . A n d I r e c o g n i z e u n a f f o r d a b i l i t y a s a k e y b a r r i e r t o d i g i t a l o p p o r t u n i t y . L a s t S e p t e m b e r , I e x p l a i n e d w h e n a n n o u n c i n g m y D i g i t a l E m p o w e r m e n t A g e n d a t h a t " [ a ] l t h o u g h g i g a b i t s e r v i c e s a n d m o b i l e b r o a d b a n d a r e b e c o m i n g c o m m o n f e a t u r e s o f w e a l t h i e r , m e t r o p o l i t a n a r e a s , t h e y a r e n ' t u n i v e r s a l . " T h e r e i s a r e a l d i g i t a l d i v i d e i n o u r c o u n t r y , a n d a s w e s e e k t o a d d r e s s t h i s p r o b l e m , I b e l i e v e t h e L i f e l i n e p r o g r a m i s a n i m p o r t a n t t o o l f o r h e l p i n g t o c o n n e c t a l l A m e r i c a n s . R e g a r d i n g t h e O r d e r , I w o u l d m a k e s e v e r a l i m p o r t a n t p o i n t s . F i r s t , t h e O r d e r a f f e c t e d o n l y n i n e o f t h e m o r e t h a n 9 0 0 c a r r i e r s p a r t i c i p a t i n g i n t h e L i f e l i n e p r o g r a m - t h a t ' s l e s s t h a n 1 % . N o r d i d t h e O r d e r a f f e c t t h e d e s i g n a t i o n o f L i f e l i n e b r o a d b a n d c a r r i e r s b y s t a t e c o m m i s s i o n s ; t h a t p r o c e s s p r o c e e d s a p a c e . S e c o n d , e i g h t o f t h e n i n e a f f e c t e d c a r r i e r s h a d n o L i f e l i n e c u s t o m e r s . T h i r d , t h e p r i o r C o m m i s s i o n d i s r e g a r d e d t h e w e l l - e s t a b l i s h e d p r o c e s s f o r a p p r o v i n g a p p l i c a t i o n s l i k e t h e s e . T h e N a t i o n a l T r i b a l T e l e c o m m u n i c a t i o n s A s s o c i a t i o n f i l e d a p e t i t i o n f o r r e c o n s i d e r a t i o n p o i n t i n g o u t t h a t s e v e r a l o f t h e p r o v i d e r s n e v e r c o m p l i e d w i t h t h e i r o b l i g a t i o n u n d e r o u r r u l e s t o c o o r d i n a t e t h e i r a p p l i c a t i o n s w i t h T r i b e s . T h e s e T r i b a l r e p r e s e n t a t i v e s t h u s r e q u e s t e d t h a t t h e d e s i g n a t i o n s b e r e v e r s e d . M o r e o v e r , t w o p r o v i d e r s ' d e s i g n a t i o n s w e r e i m p r o p e r l y g r a n t e d p r i o r t o t h e p u b l i c c o m m e n t d e a d l i n e f o r f i l i n g c o m m e n t s - t h a t i s , b e f o r e t h e p u b l i c e v e n h a d a f u l l a n d f a i r c h a n c e t o w e i g h i n o n t h e d e s i g n a t i o n . T h i s c u r t a i l e d t h e p u b l i c ' s a b i l i t y t o p a r t i c i p a t e i n t h e s e p r o c e e d i n g s a n d l i m i t e d t h e C o m m i s s i o n ' s a b i l i t y t o c o n s i d e r a l l d e s i g n a t i o n c r i t e r i a w i t h a f u l s o m e r e c o r d . W h a t e v e r o n e t h i n k s o f t h e m e r i t s o f t h e s e a p p l i c a t i o n s , t h a t a c t i o n w a s p l a i n l y i m p r o p e r . F o u r t h , t h e r e i s a s e r i o u s q u e s t i o n a s t o w h e t h e r t h e F C C h a s t h e l e g a l a u t h o r i t y t o d e s i g n a t e L i f e l i n e p r o v i d e r s o r w h e t h e r s u c h d e s i g n a t i o n s m u s t b e m a d e b y s t a t e g o v e r n m e n t s , a s Page 2-The Honorable Peter J. Visciosky has long been the case. State regulatory agencies have a substantial legal challenge to the entire process of the FCC designating Lifeline Broadband Providers, arguing that it is unlawful, and the FCC itself recently asked the court for additional time to consider this issue. For instance, Section 214 of the Communications Act explicitly says that states must make designations for purposes of allowing companies to receive Lifeline subsidies. The FCC has repeatedly, and for many years, recognized states' primary role in this area. By preempting the states' role in certification, the federal designations could run afoul of this legal framework. Putting the designations on hold gives the FCC the chance to make sure the process is legally defensible and avoids potentially stranding customers if the courts ultimately deem the process unlawful. Lastly, every dollar that is spent on subsidizing somebody who doesn't need the help by definition does not go to someone who does. That means that the Commission needs to make sure that there are strong safeguards against waste, fraud, and abuse before expanding the program to new providers. But our federal safeguards are insufficient: My investigation last year into these matters revealed that providers could indiscriminately override checks that are supposed to prevent wasteful and fraudulent activities. (These checks include common-sense steps like verifying the identity of would-be Lifeline recipients.) From October 2014 until June 2016, wireless resellers had overridden such safeguards 4,291,647 times in total. The investigation also uncovered other loopholes, including one that let a company claim subsidies for approximately 22,000 phantom subscribers each month in the state of Michigan. And the National Verifier-a new database intended to verify eligibility to participate in the Lifeline program-does not currently exist and will not start operating until the end of2017. Further, it is not scheduled to cover all states until 2019. We need to make sure that safeguards are strong and effective in order to direct subsidies to American consumers who most need the help. I appreciate your interest in this matter. Please let me know if I can be of any further assistance. Sincerely, V. Ajit V. Pai T h O M M O 4 F E D E R A L C O M M U N I C A T I O N S C O M M I S S I O N W A S H I N G T O N M a r c h 2 2 , 2 0 1 7 T h e H o n o r a b l e P e t e r W e l c h U . S . H o u s e o f R e p r e s e n t a t i v e s 2 3 0 3 R a y b u r n H o u s e O f f i c e B u i l d i n g W a s h i n g t o n , D . C . 2 0 5 1 5 D e a r C o n g r e s s m a n W e l c h : T h a n k y o u f o r y o u r l e t t e r r e g a r d i n g t h e W i r e l i n e C o m p e t i t i o n B u r e a u ' s O r d e r o n R e c o n s i d e r a t i o n , w h i c h a f f e c t e d n i n e c o m p a n i e s ' p a r t i c i p a t i o n i n t h e L i f e l i n e p r o g r a m . I a p p r e c i a t e y o u r v i e w s , w h i c h w i l l b e e n t e r e d i n t o t h e r e c o r d o f t h e p r o c e e d i n g . O n e o f m y m a i n g o a l s a s F C C C h a i r m a n i s c l o s i n g t h e d i g i t a l d i v i d e . A n d I r e c o g n i z e u n a f f o r d a b i l i t y a s a k e y b a r r i e r t o d i g i t a l o p p o r t u n i t y . L a s t S e p t e m b e r , I e x p l a i n e d w h e n a n n o u n c i n g m y D i g i t a l E m p o w e r m e n t A g e n d a t h a t " [ a ] l t h o u g h g i g a b i t s e r v i c e s a n d m o b i l e b r o a d b a n d a r e b e c o m i n g c o m m o n f e a t u r e s o f w e a l t h i e r , m e t r o p o l i t a n a r e a s , t h e y a r e n ' t u n i v e r s a l . " T h e r e i s a r e a l d i g i t a l d i v i d e i n o u r c o u n t r y , a n d a s w e s e e k t o a d d r e s s t h i s p r o b l e m , I b e l i e v e t h e L i f e l i n e p r o g r a m i s a n i m p o r t a n t t o o l f o r h e l p i n g t o c o n n e c t a l l A m e r i c a n s . R e g a r d i n g t h e O r d e r , I w o u l d m a k e s e v e r a l i m p o r t a n t p o i n t s . F i r s t , t h e O r d e r a f f e c t e d o n l y n i n e o f t h e m o r e t h a n 9 0 0 c a r r i e r s p a r t i c i p a t i n g i n t h e L i f e l i n e p r o g r a m - t h a t ' s l e s s t h a n 1 % . N o r d i d t h e O r d e r a f f e c t t h e d e s i g n a t i o n o f L i f e l i n e b r o a d b a n d c a r r i e r s b y s t a t e c o m m i s s i o n s ; t h a t p r o c e s s p r o c e e d s a p a c e . S e c o n d , e i g h t o f t h e n i n e a f f e c t e d c a r r i e r s h a d n o L i f e l i n e c u s t o m e r s . T h i r d , t h e p r i o r C o m m i s s i o n d i s r e g a r d e d t h e w e l l - e s t a b l i s h e d p r o c e s s f o r a p p r o v i n g a p p l i c a t i o n s l i k e t h e s e . T h e N a t i o n a l T r i b a l T e l e c o m m u n i c a t i o n s A s s o c i a t i o n f i l e d a p e t i t i o n f o r r e c o n s i d e r a t i o n p o i n t i n g o u t t h a t s e v e r a l o f t h e p r o v i d e r s n e v e r c o m p l i e d w i t h t h e i r o b l i g a t i o n u n d e r o u r r u l e s t o c o o r d i n a t e t h e i r a p p l i c a t i o n s w i t h T r i b e s . T h e s e T r i b a l r e p r e s e n t a t i v e s t h u s r e q u e s t e d t h a t t h e d e s i g n a t i o n s b e r e v e r s e d . M o r e o v e r , t w o p r o v i d e r s ' d e s i g n a t i o n s w e r e i m p r o p e r l y g r a n t e d p r i o r t o t h e p u b l i c c o m m e n t d e a d l i n e f o r f i l i n g c o m m e n t s - t h a t i s , b e f o r e t h e p u b l i c e v e n h a d a f u l l a n d f a i r c h a n c e t o w e i g h i n o n t h e d e s i g n a t i o n . T h i s c u r t a i l e d t h e p u b l i c ' s a b i l i t y t o p a r t i c i p a t e i n t h e s e p r o c e e d i n g s a n d l i m i t e d t h e C o m m i s s i o n ' s a b i l i t y t o c o n s i d e r a l l d e s i g n a t i o n c r i t e r i a w i t h a f u l s o m e r e c o r d . W h a t e v e r o n e t h i n k s o f t h e m e r i t s o f t h e s e a p p l i c a t i o n s , t h a t a c t i o n w a s p l a i n l y i m p r o p e r . F o u r t h , t h e r e i s a s e r i o u s q u e s t i o n a s t o w h e t h e r t h e F C C h a s t h e l e g a l a u t h o r i t y t o d e s i g n a t e L i f e l i n e p r o v i d e r s o r w h e t h e r s u c h d e s i g n a t i o n s m u s t b e m a d e b y s t a t e g o v e r n m e n t s , a s O F F I C E O F T H E C H A I R M A N P a g e 2 - T h e H o n o r a b l e P e t e r W e l c h h a s l o n g b e e n t h e c a s e . S t a t e r e g u l a t o r y a g e n c i e s h a v e a s u b s t a n t i a l l e g a l c h a l l e n g e t o t h e e n t i r e p r o c e s s o f t h e F C C d e s i g n a t i n g L i f e l i n e B r o a d b a n d P r o v i d e r s , a r g u i n g t h a t i t i s u n l a w f u l , a n d t h e F C C i t s e l f r e c e n t l y a s k e d t h e c o u r t f o r a d d i t i o n a l t i m e t o c o n s i d e r t h i s i s s u e . F o r i n s t a n c e , S e c t i o n 2 1 4 o f t h e C o m m u n i c a t i o n s A c t e x p l i c i t l y s a y s t h a t s t a t e s m u s t m a k e d e s i g n a t i o n s f o r p u r p o s e s o f a l l o w i n g c o m p a n i e s t o r e c e i v e L i f e l i n e s u b s i d i e s . T h e F C C h a s r e p e a t e d l y , a n d f o r m a n y y e a r s , r e c o g n i z e d s t a t e s ' p r i m a r y r o l e i n t h i s a r e a . B y p r e e m p t i n g t h e s t a t e s ' r o l e i n c e r t i f i c a t i o n , t h e f e d e r a l d e s i g n a t i o n s c o u l d r u n a f o u l o f t h i s l e g a l f r a m e w o r k . P u t t i n g t h e d e s i g n a t i o n s o n h o l d g i v e s t h e F C C t h e c h a n c e t o m a k e s u r e t h e p r o c e s s i s l e g a l l y d e f e n s i b l e a n d a v o i d s p o t e n t i a l l y s t r a n d i n g c u s t o m e r s i f t h e c o u r t s u l t i m a t e l y d e e m t h e p r o c e s s u n l a w f u l . L a s t l y , e v e r y d o l l a r t h a t i s s p e n t o n s u b s i d i z i n g s o m e b o d y w h o d o e s n ' t n e e d t h e h e l p b y d e f i n i t i o n d o e s n o t g o t o s o m e o n e w h o d o e s . T h a t m e a n s t h a t t h e C o m m i s s i o n n e e d s t o m a k e s u r e t h a t t h e r e a r e s t r o n g s a f e g u a r d s a g a i n s t w a s t e , f r a u d , a n d a b u s e b e f o r e e x p a n d i n g t h e p r o g r a m t o n e w p r o v i d e r s . B u t o u r f e d e r a l s a f e g u a r d s a r e i n s u f f i c i e n t : M y i n v e s t i g a t i o n l a s t y e a r i n t o t h e s e m a t t e r s r e v e a l e d t h a t p r o v i d e r s c o u l d i n d i s c r i m i n a t e l y o v e r r i d e c h e c k s t h a t a r e s u p p o s e d t o p r e v e n t w a s t e f u l a n d f r a u d u l e n t a c t i v i t i e s . ( T h e s e c h e c k s i n c l u d e c o m m o n - s e n s e s t e p s l i k e v e r i f y i n g t h e i d e n t i t y o f w o u l d - b e L i f e l i n e r e c i p i e n t s . ) F r o m O c t o b e r 2 0 1 4 u n t i l J u n e 2 0 1 6 , w i r e l e s s r e s e l l e r s h a d o v e r r i d d e n s u c h s a f e g u a r d s 4 , 2 9 1 , 6 4 7 t i m e s i n t o t a l . T h e i n v e s t i g a t i o n a l s o u n c o v e r e d o t h e r l o o p h o l e s , i n c l u d i n g o n e t h a t l e t a c o m p a n y c l a i m s u b s i d i e s f o r a p p r o x i m a t e l y 2 2 , 0 0 0 p h a n t o m s u b s c r i b e r s e a c h m o n t h i n t h e s t a t e o f M i c h i g a n . A n d t h e N a t i o n a l V e r i f i e r - a n e w d a t a b a s e i n t e n d e d t o v e r i f y e l i g i b i l i t y t o p a r t i c i p a t e i n t h e L i f e l i n e p r o g r a m - d o e s n o t c u r r e n t l y e x i s t a n d w i l l n o t s t a r t o p e r a t i n g u n t i l t h e e n d o f 2 0 1 7 . F u r t h e r , i t i s n o t s c h e d u l e d t o c o v e r a l l s t a t e s u n t i l 2 0 1 9 . W e n e e d t o m a k e s u r e t h a t s a f e g u a r d s a r e s t r o n g a n d e f f e c t i v e i n o r d e r t o d i r e c t s u b s i d i e s t o A m e r i c a n c o n s u m e r s w h o m o s t n e e d t h e h e l p . I a p p r e c i a t e y o u r i n t e r e s t i n t h i s m a t t e r . P l e a s e l e t m e k n o w i f I c a n b e o f a n y f u r t h e r a s s i s t a n c e . ° ? S i n c e r e l y , A j i t V . P a i OFFICE OF THE CHAIRMAN FEDERAL COMMUNICATIONS COMMISSION WASHINGTON March 22, 2017 The Honorable John Yarmuth U.S. House of Representatives 131 Cannon House Office Building Washington, D.C. 20515 Dear Congressman Yarmuth: Thank you for your letter regarding the Wireline Competition Bureau's Order on Reconsideration, which affected nine companies' participation in the Lifeline program. I appreciate your views, which will be entered into the record of the proceeding. One of my main goals as FCC Chairman is closing the digital divide. And I recognize unaffordability as a key barrier to digital opportunity. Last September, I explained when announcing my Digital Empowerment Agenda that "[a]Ithough gigabit services and mobile broadband are becoming common features of wealthier, metropolitan areas, they aren't universal." There is a real digital divide in our country, and as we seek to address this problem, I believe the Lifeline program is an important tool for helping to connect all Americans. Regarding the Order, I would make several important points. First, the Order affected only nine of the more than 900 carriers participating in the Lifeline program-that's less than 1%. Nor did the Order affect the designation of Lifeline broadband carriers by state commissions; that process proceeds apace. Second, eight of the nine affected carriers had no Lifeline customers. Third, the prior Commission disregarded the well-established process for approving applications like these. The National Tribal Telecommunications Association filed a petition for reconsideration pointing out that several of the providers never complied with their obligation under our rules to coordinate their applications with Tribes. These Tribal representatives thus requested that the designations be reversed. Moreover, two providers' designations were improperly granted prior to the public comment deadline for filing comments-that is, before the public even had a full and fair chance to weigh in on the designation. This curtailed the public's ability to participate in these proceedings and limited the Commission's ability to consider all designation criteria with a fulsome record. Whatever one thinks of the merits of these applications, that action was plainly improper. Fourth, there is a serious question as to whether the FCC has the legal authority to designate Lifeline providers or whether such designations must be made by state governments, as P a g e 2 - T h e H o n o r a b l e J o h n Y a r m u t h h a s l o n g b e e n t h e c a s e . S t a t e r e g u l a t o r y a g e n c i e s h a v e a s u b s t a n t i a l l e g a l c h a l l e n g e t o t h e e n t i r e p r o c e s s o f t h e F C C d e s i g n a t i n g L i f e l i n e B r o a d b a n d P r o v i d e r s , a r g u i n g t h a t i t i s u n l a w f u l , a n d t h e F C C i t s e l f r e c e n t l y a s k e d t h e c o u r t f o r a d d i t i o n a l t i m e t o c o n s i d e r t h i s i s s u e . F o r i n s t a n c e , S e c t i o n 2 1 4 o f t h e C o m m u n i c a t i o n s A c t e x p l i c i t l y s a y s t h a t s t a t e s m u s t m a k e d e s i g n a t i o n s f o r p u r p o s e s o f a l l o w i n g c o m p a n i e s t o r e c e i v e L i f e l i n e s u b s i d i e s . T h e F C C h a s r e p e a t e d l y , a n d f o r m a n y y e a r s , r e c o g n i z e d s t a t e s ' p r i m a r y r o l e i n t h i s a r e a . B y p r e e m p t i n g t h e s t a t e s ' r o l e i n c e r t i f i c a t i o n , t h e f e d e r a l d e s i g n a t i o n s c o u l d r u n a f o u l o f t h i s l e g a l f r a m e w o r k . P u t t i n g t h e d e s i g n a t i o n s o n h o l d g i v e s t h e F C C t h e c h a n c e t o m a k e s u r e t h e p r o c e s s i s l e g a l l y d e f e n s i b l e a n d a v o i d s p o t e n t i a l l y s t r a n d i n g c u s t o m e r s i f t h e c o u r t s u l t i m a t e l y d e e m t h e p r o c e s s u n l a w f u l . L a s t l y , e v e r y d o l l a r t h a t i s s p e n t o n s u b s i d i z i n g s o m e b o d y w h o d o e s n ' t n e e d t h e h e l p b y d e f i n i t i o n d o e s n o t g o t o s o m e o n e w h o d o e s . T h a t m e a n s t h a t t h e C o m m i s s i o n n e e d s t o m a k e s u r e t h a t t h e r e a r e s t r o n g s a f e g u a r d s a g a i n s t w a s t e , f r a u d , a n d a b u s e b e f o r e e x p a n d i n g t h e p r o g r a m t o n e w p r o v i d e r s . B u t o u r f e d e r a l s a f e g u a r d s a r e i n s u f f i c i e n t : M y i n v e s t i g a t i o n l a s t y e a r i n t o t h e s e m a t t e r s r e v e a l e d t h a t p r o v i d e r s c o u l d i n d i s c r i m i n a t e l y o v e r r i d e c h e c k s t h a t a r e s u p p o s e d t o p r e v e n t w a s t e f u l a n d f r a u d u l e n t a c t i v i t i e s . ( T h e s e c h e c k s i n c l u d e c o m m o n - s e n s e s t e p s l i k e v e r i f i i n g t h e i d e n t i t y o f w o u l d - b e L i f e l i n e r e c i p i e n t s . ) F r o m O c t o b e r 2 0 1 4 u n t i l J u n e 2 0 1 6 , w i r e l e s s r e s e l l e r s h a d o v e r r i d d e n s u c h s a f e g u a r d s 4 , 2 9 1 , 6 4 7 t i m e s i n t o t a l . T h e i n v e s t i g a t i o n a l s o u n c o v e r e d o t h e r l o o p h o l e s , i n c l u d i n g o n e t h a t l e t a c o m p a n y c l a i m s u b s i d i e s f o r a p p r o x i m a t e l y 2 2 , 0 0 0 p h a n t o m s u b s c r i b e r s e a c h m o n t h i n t h e s t a t e o f M i c h i g a n . A n d t h e N a t i o n a l V e r i f i e r - a n e w d a t a b a s e i n t e n d e d t o v e r i f y e l i g i b i l i t y t o p a r t i c i p a t e i n t h e L i f e l i n e p r o g r a m - d o e s n o t c u r r e n t l y e x i s t a n d w i l l n o t s t a r t o p e r a t i n g u n t i l t h e e n d o f 2 0 1 7 . F u r t h e r , i t i s n o t s c h e d u l e d t o c o v e r a l l s t a t e s u n t i l 2 0 1 9 . W e n e e d t o m a k e s u r e t h a t s a f e g u a r d s a r e s t r o n g a n d e f f e c t i v e i n o r d e r t o d i r e c t s u b s i d i e s t o A m e r i c a n c o n s u m e r s w h o m o s t n e e d t h e h e l p . I a p p r e c i a t e y o u r i n t e r e s t i n t h i s m a t t e r . P l e a s e l e t m e k n o w i f I c a n b e o f a n y f u r t h e r a s s i s t a n c e .