On March 29, 2017, FCC Chairman Pai announced plans to initiate a proceeding at the FCC to eliminate the Lifeline Broadband Provider (“LBP”) designation process administered by its Wireline Competition Bureau. He also announced that the FCC will ask the D.C. Circuit Court of Appeals to send the pending court case concerning the LBP process back to the FCC. These announcements mark the end of the recently created one-stop application process through the FCC for prospective Lifeline providers seeking to offer broadband services.

As we have previously described, the LBP designation process was adopted by the FCC, in the Lifeline Modernization Order, in an effort to encourage market entry and increase competition among Lifeline providers. By and large the FCC accomplished its goal as several unique and innovative broadband providers applied for the LBP designation, which ultimately resulted in nine approvals – including the approval of two facilities-based broadband providers. Within weeks of the new Republican administration, however, the Bureau revoked each of the nine LBP designations, primarily citing program-level waste, fraud and abuse concerns.

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. The previous FCC Chairman had determined that it was in the public interest to preempt the states from this approval process. Multiple states, and then-Commissioner Pai, disagreed. The states had sued the FCC challenging the decision to keep them from the approval process for new broadband providers. Yesterday’s announcements were not surprising in that they are consistent with his consistent views on the states’ role in the Lifeline program.

It is noteworthy, however, that any attempt by the FCC to eliminate the LBP designation process will likely receive significant pushback from former LBP designees, public interest groups and other participants in the Lifeline industry. The Bureau recently sought comment on two appeals of the Bureau’s own cancellation of the LBP designations, and a significant portion of the record that was generated opposed the Bureau’s action.  If the LBP designation process is eliminated, broadband providers seeking to participate in the Lifeline program will be required to apply for the requisite licenses on a state-to basis – an expensive and time-consuming task that may deter innovative broadband providers from entering the program.

While Chairman Pai’s statement mainly focused on the LBP process, it also included the clearest statement to date of his support for the Lifeline program generally, and for the inclusion of broadband as a service eligible for Lifeline funding, which many questioned when the nine LBP designations were cancelled last month.