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FCC Shifts Broadband-Subsidy Oversight to State Governments Incapable of Handling It

Brian Feldman

This morning, FCC chairman Ajit Pai announced that he would shift authority over the Lifeline telecom subsidy program from the federal government to state governments. Under the program, low-income households receive a subsidy covering telephone and broadband service. The move places state governments in charge of which internet-service providers are allowed to participate in the program.

“Congress gave state governments, not the FCC, the primary responsibility for approving which companies can participate in the Lifeline program under Section 214 of the Communications Act. This is how the program worked over two decades, over three Administrations, and over eight Chairmanships,” Pai wrote in his letter. Last year, the FCC established its own designation process for broadband providers, and a dozen states sued to determine authority on the matter. Pai announced that in handing authority over to the states, he would also decline to have the FCC defend itself in court. A few months ago, the FCC denied Lifeline access to nine internet-service providers.

The main issue with this legally justified move is that it places internet governance in the hands of state and local governments that have a terrible track record of allowing competition in these areas. Laying internet cable and establishing a physical network require getting permission from hundreds of local bodies to dig up streets, and incumbents often enjoy government protection on this front, which prevents competition from growing. It’s why most major cable companies have a regional monopoly and rarely encroach on each others’ turf.

Allowing these same governments to have a greater say in where low-income households are allowed to spend their subsidy will almost definitely discourage competition, and pad the margins of networks already in place. Putting state governments in charge of deciding who gets to compete in their territory favors the incumbent.

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