Ep. 243 - Danielle Perry & JD Hilzendager

Danielle Perry and JD Hilzendager join us to discuss low-income access to wireless service and data, and how the California Public Utilities Commission is widening the digital divide.

(Originally aired 29Nov22)

 

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Episode Transcript

Bryan (00:00):
The views and opinions expressed in this program are those
of the Speaker's and do not necessarily reflect the views
or positions of any entities they represent, including Olas Media. Oh,
Lost media. Olas media presents Nation state of play. Welcome

(00:37):
to the Nation State of Play podcast. I'm your host,
Brian Miller. And each episode we explore the political stories
that are driving public policy in California. We explore these
stories with political insiders, business leaders, journalists and policymakers themselves.
To get below the surface of the headlines and show
you the true forces shaping our nation's state. Thanks for listening. Today,
we have a really interesting show, JD Hilzendager and Danielle

(01:01):
Perry from the National Rifle Association are our guests. And
we're here to talk about a really important program that
helps low income folks across the state and across the
country get the data access that they need to live
in our modern world. Some really strange issues where this
program held up at the CPAC here in California. It's
preventing millions of people from getting federally approved subsidies that

(01:25):
they need to be able to live in the digital world.
And so some stranger issues. We talk about what the
CPAC is doing, what Congress has done on this, what
federal regulators are doing on this. And so just some
ways that you might want to get involved to help
if this issue is as concerning to you as it
is to me. So thanks for listening today. National Rifle

(01:48):
Association coming up right after this. JD, Danielle, thanks so
much for being on the show today. It's a pleasure
to have you.

Danielle (01:55):
Thank you. It's a pleasure being here.

Bryan (01:56):
And so much for the time. So this is such
an important topic. We've talked about access issues in a
few different contexts before, but we're excited to have you
guys on because this part of the program, the Lifeline program,
but also the Affordable Connectivity program, impacts so many people
across the country, this particular issue here in California. So
why don't we start with the Lifeline program and can

(02:18):
you give us a little bit of overview as to
what the program is, how it was created and where
it currently stands?

Danielle (02:24):
Sure, I can take that question. So the Lifeline program
was started by Ronald Reagan, and it was started to
provide phone service to low income Americans. And when he
started the program, it was a home phone service and
it provided a discount off of the subscriber's bill. And
as time has gone on and we have cellular service

(02:45):
available right around the time of Katrina, we really saw
the need to expand the program into wireless. So today,
the federal government subsidizes a program to allow consumers to
have wireless or wireline service for that matter. But you
provide voice, text and four and a half gigs of
data to the consumer each month.

Bryan (03:07):
And where does that program live? In the in the
federal agencies?

Danielle (03:11):
It lives it's managed by the FCC. So it's regulated
by the FCC and it's managed by the Use Act,
the Universal Service Administrative Company.

Bryan (03:21):
So tell us a little bit about the issues you've
been facing with the program to expand coverage, keep it funded.
Where does this where does this debate get hung up
in Washington? Paula, I'll start with a couple of things
that Danielle, there's going to be about 20 things I
probably forget because it's a it's an interesting space. You know,

(03:41):
she said it started with Reagan and it's it's a
program that has enjoyed a great deal of bipartisan support
over the years. But we did find as as many
things happened in 2016 and beyond that, things started becoming
more polarized. And a lot of the pressure that we
started feeling in this program, I would say were ill

(04:03):
effects of well-intentioned ideas. And we had a lot of
policies come out in 2016 that at the time, Chairman
Tom Wheeler had said, Hey, here's what we're going to do.
We're going to modernize the program. And we believe data
is the future for low income and rural Americans, which
we completely agree with. And he said we're going to

(04:25):
start instituting a stair step, a minimum service standard, and
we want to make sure that customers get a certain
amount of services every single month so that they can
connect to the world like any other consumer would. So far,
we're all on the same page. And we said, you know,
make sure that we can keep the program solvent and
make sure that companies can continue to offer it at

(04:46):
a rate that keeps them in business so that the
customers actually have a provider. We needed some type of
protection that kept a customer in a certain amount of time,
you know, to make sure that customers didn't pull up
or move benefits too often and would allow companies the
chance to recoup some of their costs. Because a lot
of times the Lifeline program, it's not just providing service,

(05:06):
you're providing a phone, you're paying distribution networks, your call centers,
your network operators. There's a lot of costs running a
small telecom to make sure that customers are getting service.
And again, you're getting $9.25 in reimbursement. So there's not
a lot of meat on that bone when you start
getting into high users. So we were we were in

(05:27):
support of it. But unfortunately, in 2016, when Trump came in,
he said, I like the idea of minimum service standards.
I don't like the idea, however, of a customer staying
with a carrier for a set amount of time. And
so he removed some of the protections that were built
into the 2016 Modernization Act that allowed us to kind

(05:47):
of forecast out what revenues would look like so that
we could meet the minimum service standards on the basis
that they were going to grow over the next 4
to 6 years. That took the industry over a four
year period from about 13 million subscribers to where it
stands today, which is somewhere right around 7 million. And
so it got harder and harder to service customers in

(06:08):
a lot of places in the country. And you saw
a lot of rural areas that used to be able
to rely on providers being there no longer have service
providers because the cost became far too great for a
company to be able to absorb anymore. So there were
a lot of cost pressures that hit the industry from
2016 to 2020 that made it very untenable for the

(06:31):
industry to grow at that time. So where does that
stand now in Washington? Have you been able to make
any progress with regulators on getting some of that ground back?

Danielle (06:41):
So every year the minimum service standards increase. So they
started in 2016 and at that time we were providing
a small amount of voice and data on a consumer's
cell phone. They started increasing each year, adding in the
data requirement and increasing the amount of voice and text
that we would provide. And every year they continued to
go up, and every year the amount of the subsidies

(07:03):
stayed the same. And every year we lobbied and we said,
We can't keep doing this. We you know, there's not
enough margin here. We're giving more. We're getting the same amount.
In addition, the part that J.D. mentioned about the subscriber
being asked to stay with the provider for a certain
amount of time is super important because what would happen
is that, you know, we're not giving them a lot

(07:23):
of data. The program is never really, in my opinion,
been designed to give consumers the amount of data that
they need to actually be successful in life. So what
the consumer will do is they'll they'll find out what
company and they'll use the full amount of data that
he's required to offer. And when that's gone, they'll transfer
their benefit to my company and then they'll use all

(07:45):
of my data for the month and then they may
go to a third company, just depending on how much
they use. And before Pi removed that requirement, the benefit
transfer or the port freezes, what we called it back then,
a consumer would need to stay with the provider for
90 days. And then it went down, I think, to 30.
There have been varying policies over the years, but we

(08:06):
don't have that at all today. And so we continue
to advocate for Lifeline for there to be some sort
of port praise that allows the provider to be able
to at least say, I know, even though I have
to provide this large amount of data for what we're
getting paid, at least we're going to get that subsidy
from this consumer for two months, 12 months, whatever it is.

(08:28):
But we've not been super successful. I think. This year.
There's no change in the minimum service requirements, but I
think that's strictly because of the ACP program. I don't
know that it's because we've been successful in lobbying. JD
You may disagree with that.

JD (08:44):
Yeah, well, there's probably a couple of answers they could
throw to it because I would say we haven't successfully
changed anything, but we have successfully paused things, which is
a win in a way, because it has allowed carriers
to at least maintain the level of service and distribution
points to a consumer as possible. And you have to

(09:05):
understand these are low income rural. They may be in
health and rehabilitation facilities, they could be in temporary housing,
they could be housing challenged. You may have tribal designated
persons or veterans that that have fallen on hard times
or veterans families that that lost a member that was

(09:28):
in the service. And so there's a wide range of
people that you're trying to service. And so having distribution
points that are not only available in a population that's areas,
but being able to support a distribution network and means
to get out into rural America and to get out
into very, you know, population sparse areas, but where a
lot of people are going to qualify need that kind

(09:50):
of service. That was a big challenge. And so getting
them to pause some of the increases and getting service
standards helped us. The ACP program getting created has definitely
also been something that I think is helped because they're
their first cousins to each other. The Lifeline program in
the ACP program have a lot of similarities and they
work very well together. And what we find is that

(10:11):
a great number of customers like to take their lifeline
benefits and their ACP benefits benefits and combine them and
put them on a single device in a single plan
which allows the customer effectively, you know, unlimited talk a
little bit of text, you know, anywhere from 10 to
20 something gigs of data, you know, which is a

(10:31):
really compelling offer for a customer who may be struggling
to pay a $40 phone bill every single month or
a $20 phone bill or a $10 phone bill. So
being able to get the ACP program brought a new
level of funding into this space that allowed us to
start going back into rural America and back into some
of the underserved communities that we just weren't able to

(10:52):
touch from 2016 to 2020. And what we're starting to
see now is we're having meetings on the Hill and
with policymakers and decision makers. We are hearing from both
Democrats and Republicans that they understand that the Lifeline program
is crucial and that the ACP program, despite some of
the I would say, the growing pains of trying to

(11:15):
launch such a large, aggressive program in such a short
amount of time. And we applaud everybody that was involved,
tried to roll that out because that was a heavy lift.
It has been a success. 15 million people are on
that program. And so when you can look at the
reach that that is given the program and couple that
with wi fi, they've realized that the 925 subsidy that's

(11:36):
been in place for, what, 12 years? I think that's
just not plausible anymore. The needs of a consumer, the
quality of device has changed. It went from being a
candy bar phone ten years ago to being a five
and a half inch Android phone with plenty of storage
and cameras that you could use to do telemedicine. You

(11:57):
can use it to update your resumes and job boards.
You can use it for your children's schooling because they
have hotspots installed on them. There's a lot of things
that they can use these devices for today that when
they originally set the 925, that was not in the
cards that didn't exist at that time. So we are
starting to hear a lot of people realize that 925

(12:17):
is not sufficient. And at the ACP, not having it
has allowed us to create a compelling offer that got
the type of penetration into that underserved communities that they
were hoping to do. So we do believe that it's
at least being talked about, and it's a very open
conversation that we're probably going to hear a lot about
over the next 9 to 12 months from both sides,

(12:40):
because both sides understand the value of it. They might
have different views of how to solve the problem and
how they want to get to it. But they both
understand it's a problem that needs to be solved and
that that is a huge step in the right direction
for us. That's really helpful background. And I'd like to
talk down about what's going on here in California. This
is obviously we've got millions of people who are enrolled

(13:04):
in both of these programs here. But I think it
makes sense to have some unique, shall we say, regulatory
issues in California. So, yeah, Can you just give us
sort of a high level to start with? And then
then I want to drill down at some of the
specifics of what's going on with the CPC.

Danielle (13:19):
Sure. So in California, California is one of the states
in the United States that offers their own state lifeline subsidy.
So if you're a resident of the state of California,
you can benefit from the California state. Eight Lifeline program,
as well as the Federal Lifeline program by benefiting from
both programs that allows you to have access to more voice,

(13:41):
more data, more tax cuts, just combining the two programs
together so you can take your subsidy from the state
of California and the federal subsidy and combine them together.
When IB was the original program before it turned into
a c p, so when that program launched. Subscribers wanted
to be able to use all three of their benefits together.

(14:04):
So they were getting a benefit for Lifeline, for voice
and text and a little bit of data from the
state and from the federal program for Lifeline, ACP or IB,
And now ACP came along and it added data benefits.
So subscribers wanted to combine all three benefits. So in reality,
what you could do for a subscriber is that you

(14:25):
could give them a tablet if they qualify for a
one time tablet subsidy from the ACP or IB program,
you could give them a tablet and you could give
them a handset and you could give them all of
their service together. The state of California was fine with
doing this during the E V program, but for for ACP,

(14:47):
when that launched, they said that if you lived in
the state of California and you are receiving California Lifeline subsidy,
you could not apply your ACP subsidy to that service.
Just again, as an example, if I if I give
to a consumer in California, a handset and it's got

(15:07):
California Lifeline and federal Lifeline, I can't give them the
added benefit of the data from the ACP program because
the state of California has said, I can't do it now.
The order for ACP says that you can do it,
and then they just kind of give it up. That
leaves it to the states to decide how to handle it.
But it does say that it's intended for this use.

(15:30):
California is the only state in the United States that
does this. There are a handful of other states that
have state subsidy, but they allow the consumer to combine
all of their benefits. Originally, the CPSC said that you
could combine all your benefits if you were getting wireline data,
but not if you were giving wireless data. And we
reminded them that that's prejudice toward technology and that they

(15:53):
can't do that. So they came back and restated that
the way they would do it is that they would say,
if you're receiving federal subsidy from Lifeline, you can't also
receive the ACP subsidy that we've been fighting to connect company.
I work for No. One and Judy's company. We've all
kind of banded together and we've been battling this with

(16:14):
the CPSC now for months, and they had a proposed
decision that they were going to vote on to make
this a regulation to really, you know, concrete it. And
so we couldn't do this. We're able to get that stopped.
And right now, they've issued a pilot, what they call
a pilot. They want to do a study on this
that's going to take over a year. So while they

(16:34):
do this study and figure out what's happening, consumers are
not able to benefit from all of the subsidy that
the government intends them to have simply because the state
of California can't get out of its way.

Bryan (16:48):
Latter. I want to pack something. And that's great. Great.
Great to hear. And as somebody who has appeared before
the CBC and many occasions, I wish I could say
I've never heard anything as crazy as this, but I
but I can't say that. So it may. My first
question is, why do you think the CBC has taken

(17:09):
that position? Boy, if you can answer that. You know,
I would like to know the lottery numbers because there
are some things that that don't make a lot of sense.
And what I've always found curious is that California has
traditionally been very aggressive at making sure that its citizens

(17:29):
had access to the programs that they're entitled to in life.
That has been an overwhelming success in the state of California.
The amount of customers that are enrolled there, if it's
not the highest state, it's the second highest state and
total enrollments. And it is one where a lot of
our companies have spent the most effort and time because
there's so much opportunity and there's a lot of support

(17:51):
from the state for the state to take the stance
to no longer be technology agnostic and to go from
being exceptionally pro-consumer to exceptionally anti-consumer choice. It's an odd
stance for them to take that we we haven't fully
wrapped our arms around it. And what we find is

(18:12):
that nationwide, close to 90% of the consumers that sign
up with Lifeline also choose to combine their A.P. service
offering with it. So the customer, is it looking for
landline Internet? You know, imagine being a customer that's in
temporary housing. You may not have a computer, you may

(18:33):
not have a need for a landline service. You may
not even have the ability for one to be installed.
There are certain types of buildings that that's not even
available in in California. And those customers just say, well, fine,
give it to me. I'll buy wireless service. Up until recently,
that was completely fine. And then California, for some reason,

(18:53):
kind of changed its stance and said, hey, we want
these things to be separate. If you want Lifeline, not
a problem, you can have it. It's limited. You know,
you get unlimited talk over the text and four and
a half gigs of data. And if you want extra data,
then you need to do it in a different way.
Whereas everywhere else in the country says, Hey, you are
entitled to both benefits. And if you want both those

(19:15):
benefits on a single device and a single plan, that
you can maximize the use of the product that you
deemed best for, you go for it. We're all about it. Absolutely.
That's what the program was designed to do. But California disagreed,
and that has been a constant point of contention for
the last four or five months.

Danielle (19:36):
And so I think that it feels like maybe that
I can't speak for the PUC, but it feels like
they believe that they know better than the consumer what
the consumer needs. So they've said the consumer does not
need more than six gigs of data. They're making that
decision and they're saying that the A.P. program should be
used for wireline, not wireless. So they're making that decision.

(20:00):
But especially in California, we have so many transit subscribers
and so many under housed subscribers that it doesn't make
sense to limit the ACP subsidy to wireline only. I
think our consumers know what they need to meet their
lifestyle and even even the low income consumer that is

(20:23):
in a stable home, they may not be able to
afford to. Jody's point the laptop or the router or
everything that they need, and if they have to choose,
if I'm a single mom and I've got three or
four children and I have to choose, well, am I
going to have Internet just at home or can I
have Internet on my phone so that when I'm at
work and I need to do something, I'm able to Obviously,

(20:47):
you're going to choose what meets your needs best and
nobody knows what you need. Better than yourself. So the CPC, though,
feels like they can come in and they can make
that decision. And it really, you know, it just feels
like kind of that elitist attitude of we know what
the poor people need, they don't know, so let us

(21:09):
try to take care of them. And you know, it's terrible.
And then especially, you know, Gavin Newsom gets up there
and talks about bridging the digital divide, but I don't
think he understands his own staff. And the CPC is
doing more than anybody else to widen the digital divide
by not allowing the residents to benefit from both of

(21:33):
these programs.

Bryan (21:34):
And these are people that are for life 135% below
the federal poverty line. These are not people living particularly blessed,
abundant lifestyles. These are people that have fallen on hard times,
that are on fixed income, that that are absolutely needing support.
And discretionary income does not exist in many of these

(21:55):
customers worlds. And so for them to say we don't
want them to have this benefit, for them to take
advantage of this benefit, they're going to need to go
acquire or own a different piece of hardware that would
allow them access to it. It's it's wrong headed to
put that consumer in that kind of place. And I'm sure.

(22:17):
In that room as they discuss it. There's a reason
that they all said, Yeah, this makes sense to us.
But when we get into the reality of what's happening
in the actual consumer that uses this program, it is
the absolute wrong decision for that customer. That customer needs
the freedom to use services that they're entitled to the
way that they need it in their lives. Just taking

(22:37):
that position. Save the state of California money in any way.

Danielle (22:41):
No.

Bryan (22:42):
No. And that's why that's what I want to draw
out here. Yeah, because. Because I am just I don't
want to do that for them in terms of arguing
this nonsensical position. But. But that can't be it, right?
It's not a budgetary reason.

Danielle (22:52):
No, it's no money. This is federal subsidy that they're
saying the consumer is not able to apply to their
or their federal and state benefits. So it's just.

Bryan (23:04):
I mean, it's the kind of thing that you might expect.
I mean, that's the irony, right? Is this is the CPC.
They sit in San Francisco, they're in the tech capital
of the world. You'd expect them to be more attuned
to maybe understand if an Indiana regulator didn't understand that.
But but the idea that regulators sitting in San Francisco
can't understand that is is strange, but. But you said

(23:25):
something there, Danielle, that they don't want to follow up
on because because as you actually point out, these are
Newsom's appointees and of course, his staff, but his appointees
and he certainly weighs in on a lot of CPAC
proceedings when they get to be high profile. And so
have you had a chance to discuss this with the administration?
What what do they say?

Danielle (23:44):
We we've reached out. We've had I think that's why
we were successful in getting the proposed decision pulled from
the vote. So the CPAC has come back with this
pilot that they want to study. I don't think we
have spoken to the governor's office about the pilot itself.
I think we're working on a meeting to do just that,

(24:04):
because all the pilot does is delay this. It pushes
it further out. The consumers are the ones that are
going to suffer because they're not you know, they're not
getting any any subsidy. The proposed pilot calls for comments
by the end of November and then reply comments by
the end of December. So we'll be well into the
first quarter of next year before anything happens. If they

(24:26):
do approve the pilot and there are some subscribers that
are able to benefit from all three subsidies, it'll be
like I said that, you know, first quarter of next
year before that happens and we'll be one full year
into the launch of ACP with California preventing residents from
being able to benefit from this program.

Bryan (24:46):
This is one of these strange areas where you've got
sort of multiple jurisdictions. It's federal money, but the state
is preventing implementation of it. So have you considered or
have you had the chance to go back to the
California congressional delegation or, you know, particular federal regulators and
say the state is hanging up on implementation of this
money that you approved and now you're making it in backwards?

Danielle (25:09):
We have to take that. Go ahead. JD.

Bryan (25:12):
Well, I would say, you know, I can speak to
the conversation we've had with Chairwoman Rosenworcel office, you know,
and they they understand it. This is a situation that
they're watching. They are trying to understand. They believe that
the order is pretty clear, that the consumer should have

(25:32):
the right to do it. They don't believe the way
that it's written should allow the state to supersede the
federal program for the customer to be able to utilize.
But they also understand that, you know, this is one
of about 10,000 things on her desk. And so, you know,
a lot of the guidance right now is, you know, hey,
fight it out a little bit, push back, see what

(25:53):
kind of headway you can make, and then circle back
to us with an update, because it's just not a
top priority right now for that, because it's not it's
just not pressing enough at the federal level, considering it's
just one state doing it. I think if this was
a concerted effort across all the states to do this,
it would be it would be a top, top of

(26:15):
the mind issue. But right now it is a fight
like hell. Let us know how it's go and we'll
talk about it at a later date. And so they're watching,
but not intervening quite yet. The California legislature intervened on this.
It's this is getting into sort of a complicated jurisdictional issue.
But you've got you've got the state you've got a

(26:36):
state regulatory authority who, I mean, is a creature of
the legislature, theoretically. Right. So, you know, do you see
any role for Sacramento and trying to move this along?

Danielle (26:47):
We're exploring all, all angles. The campaign that we ran
to have, the PD, the decision stopped. We used some
in some of the legislative contacts that we have to
try to help us get the word out and to
discuss it more. We're still going through the proposed decision

(27:08):
and deciding how I'm sorry, not the proposed decision, but
the pilot and deciding how we're going to answer the
questions and how we should support the pilot. So a
lot of different options that we have. But as you know,
in California, nothing happens quickly. And when they dig their
heels in, it's just so hard to combat.

Bryan (27:29):
Sure. Okay. So it sounds like if people are listening
and they want to do something on this, there's a
chance to. Final comments on the pilot, is that correct?
Is that is that is that sort of open docket?

Danielle (27:41):
Yes, it is.

Bryan (27:42):
Okay. If people want to find out more about your
organization and find out more about your work, where's the
best place for them to go? The National Lifeline Association website.
So that Lifeline is our our trade group that's representing
these consumers, handset manufacturers, distribution partners and carriers. All member

(28:03):
of this out there talking daily about what happens in
this program, how to protect it, how to grow it.
So now the lifeline dot org. Right. Well JD, Danielle,
thanks so much for being on the show today. A pleasure.
Pleasure to have you. And thank you for doing everything
here on this important topic.

Danielle (28:22):
Thank you for having us.

Bryan (28:23):
A pleasure. Yeah. Thanks so much for the time.

JD (28:27):
We invite you to share story, ideas, comments and questions.
Find us at Neptune OP WSJ.com or on Twitter at
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Bryan (28:41):
To all of our episodes as we continue to explore
the inside stories driving California policy. This is the nation's
State of Play podcast. I'm your host, Brian Miller, and
thank you for listening. Olas Media.