T-Mobile’s business selling service to low-income users whose costs are paid, at least in part, through the Universal Service Fund (USF) Lifeline program is “non-sustainable,” said Braxton Carter, T-Mobile chief financial officer today. T-Mobile Lifeline customers represent 4.4 million of the carrier’s 73 million subscribers and “we’re going to eliminate them from the base,” Carter told attendees at a financial conference today.
Carter attributed the change in direction to changes in the Lifeline program associated with requirements for voice and data service.
“We don’t think Lifeline is a valuable or sustainable product for our base,” he said.
Based on Carter’s comments, some or all of those customers apparently are sold through companies that buy service from T-Mobile on a wholesale basis.
The Lifeline program provides $9.25 per month per low-income household toward the cost of communications services, which can be either wired or wireless. Previously the program only covered voice service but the FCC said last year that the subsidy could be used for broadband, voice or both.
T-Mobile is the latest of a range of carriers that have become disenchanted with the Lifeline program. Other major carriers that have opted not to participate in the program or to participate on a limited basis include AT&T, Cox, Windstream, Charter, CenturyLink, FairPoint, Frontier and Verizon. AT&T opted to limit participation in the program because an initial FCC plan to establish an eligibility verification database has been delayed and the carrier apparently didn’t want the liability associated with making those decisions on its own.
Meanwhile, smaller rural carriers have been reluctant to offer Lifeline broadband because the rate they would have to charge for the service would be in the range of $100, which the $9.25 discount wouldn’t go far to cover – a situation the rural carriers attribute to an insufficient USF program budget.
The changes to the Lifeline data requirements that T-Mobile said triggered its decision apparently relate to the FCC’s plan to raise the minimum monthly allotment to 2 gigabytes in 2018 from an initial 500 megabytes.
Some view the Lifeline program as being under attack from the current Republican administration. Program reforms were adopted under the previous Democratic administration amid harsh protests from Republican commissioners, who argued that the program should have a funding cap. Since taking over as FCC chairman, Republican Ajit Pai has negated the approvals of several Lifeline providers made in the final days of the Democratic administration and has turned approval for Lifeline providers back to the states. Would-be providers now must gain approvals on a state-by-state basis – a responsibility the Democrats wanted the FCC to assume as a means of streamlining the approval process.
Carter made his comments at Barclays High Yield Bond & Syndicated Loan Conference, which was also webcast.