The Federal Communications Commission (FCC) seems to be taking a fast and furious ride through America’s pockets lately.  The FCC, under the helm of Chairman Tom Wheeler, announced plans to expand the Lifeline program to give away broadband Internet subsidies to low-income individuals.  What this means for the average consumer is an increase in their telephone bills, by requiring the payment of higher contributions to the Universal Service Fund (USF).

A previous expansion of the Lifeline program to include wireless services to low-income individuals was fraught with waste, fraud, and abuse.  The program’s problems were so bad, that in January 2012, the FCC took steps to reform the program.  These supposedly “free phones” are anything but free.  Out of the more than $8.6 billion in total 2015 USF contributions, more than $1.4 billion was allocated to fund the Low-Income program.  It is this same program the FCC Chairman is now planning to use to give away subsidized broadband Internet service.  The amount of money taxpayers have had to pay in USF fees has been on a steady increase since 2009 when the annual contribution factor averaged 11.5 percent.  The contribution factor for the first quarter of 2016 has been set at 18.2 percent.

According to the Pew Research Center, of households earning $20,000 per year or less, 41 percent have adopted broadband in their homes, while another 21 percent do not have broadband at home, but have Internet access through their Smartphones.  This leaves a remaining 38 percent of U.S. households with less than $20,000 in earnings who have not adopted broadband or Internet access either in their homes or through Smartphones.  While there is a benefit to greater Internet adoption, the FCC has apparently forgotten about who will be forced to pay for the grandiose gesture.

FCC Commissioner Michael O’Rielly recently noted that the increase to the Lifeline program could amount to $750 million.  FCC Commissioner Ajit Pai also stated “It’s telling that the agency is already spending money in anticipation of getting a greater amount of revenue from the Universal Service Fund … That money is already being spent, and it has to come from somewhere.  I would respectfully submit to you that ultimately, it’s going to be in the form of a broadband tax.”

While trying to expand Internet adoption among low-income households, the Chairman’s proposal may end up having the opposite effect.  When things become more expensive, fewer people will engage in the activity.  If the burden of paying the USF fees become too large, households that pay these fees may need to make around the kitchen table financial decisions on whether Internet access is the best way to spend their hard earned income.