The future of "Obamaphones" - Axios
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The future of "Obamaphones"

Photo illustration: Greg Ruben / Axios

The FCC subsidy program that pays for phone and internet service for low-income people — derisively called "Obamaphone" by critics—stands to be overhauled now that Republicans are in control.

The so-called Lifeline program, which was actually created during the Reagan administration, started to see signs of change last week when new FCC Chairman Ajit Pai revoked the participation of nine providers in the program, saying the applications needed more review.

Democrats worry the FCC will take more drastic measures. While Pai and Republicans in Congress have long argued the Lifeline program needs reform to cut waste and fraud, they haven't yet laid out a roadmap for how they'll change it.

Adding a budget cap: In 2015, as the FCC headed toward expanding the program to cover internet service, Pai said the agency should have considered placing a cap on the program's budget of $1.6 billion to align with spending on the subsidies that year. "A budget induces careful spending," he said in a dissent the next year. The idea has support in Congress, where one bill would set the cap at $1.5 billion.

  • The counterpoint: Opponents of a cap say that it would arbitrarily keep eligible Americans out of the program. "A cap on the Lifeline program will inherently exclude an undetermined number of the eligible low-income consumers," said Scott Bergmann, an executive with wireless trade group CTIA, in congressional testimony last year.

Targeting subsidies more narrowly: Pai and Republican Commissioner Michael O'Rielly both support the idea of targeting the program's subsidies. That's echoed in Congress. Marsha Blackburn, who now chairs the House subcommittee on Communications issues, wrote with O'Rielly in 2015 that "the program must be better targeted to eligible low-income individuals who would not otherwise sign up for service."

  • The counterpoint: Jessica Gonzalez, Deputy Director and Senior Counsel at advocacy group Free Press, said that restricting subsidies could cause trouble for poor people who are stretched thin financially. "When you're right on that line, you're making hard decisions," she said.

Asking subscribers to contribute: Pai floated the idea in 2015 of "requiring Lifeline subscribers to pitch in as a condition of getting service." (It wasn't included in a dissent he wrote the next year when the commission voted to expand the subsidy to broadband.) O'Reilly has also backed the idea of a minimum contribution.

  • The counterpoint: Gonzalez said that requiring even a small contribution would push some Lifeline recipients into making tough spending choices. "A dollar, five dollars, that can feed a family dinner," she said.
Looking closely at fraud: Republicans want to cut down what they see as significant fraud in the program. "I think all of us would say we want Lifeline to meet the needs of those that have a need, and we want to make certain that the waste, fraud and abuse of the program is routed out," Blackburn said Wednesday.
  • The counterpoint: Amina Fazlullah, the Director of Policy for the Benton Foundation, said the FCC has already been "diligently working" to make the program more efficient.
More power to the states: Pai recently questioned whether the FCC has the authority to designate providers for the program at all, rather than the state-level officials who have traditionally done so. He said that putting "the designations on hold gives the FCC the chance to make sure the process is legally defensible and to avoid potentially stranding customers if the courts ultimately deem the process unlawful."
What's next: We wait. The FCC recently asked a federal court to hold off for 90 days on proceeding with two cases related to the FCC's expansion of the program to broadband. Pai has declined to comment on his plans for the program, as did an FCC spokesman on Wednesday.
Congress is also not yet ready to announce concrete actions, but Blackburn indicated this week that lawmakers on the House Energy and Commerce Committee plan to take a look. "I think that E&C has jurisdiction over this issue and when we decide what the appropriate action is going to be, we will take it," she said.
The bottom line: Closing the digital divide is going to be an ongoing topic of conversation, especially as Pai has made it priority. Once again, Lifeline is going to be a flashpoint in that debate over how government subsidies should be used to connect poor people in hard-to-reach regions.
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Big business to Trump: Don't gut the State Department

Jacquelyn Martin / AP

Ahead of the White House's budget proposal this week, which is rumored to cut 31% from the budgets of State Department and USAID, hundreds of top business leaders have sent Secretary of State Rex Tillerson a letter urging him to fight for funding for State, per the WSJ.

A key quote: "With 95 percent of the world's consumers outside the United States and many of the fastest growing economies in the developing world, now is the time to double down on America's global economic leadership."

A taste of the signatories: Top executives from Walmart, Pfizer, Coca-Cola, GE, Nike, UPS, and Marriott.

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House and Trump administration to delay insurer subsidy case

(Atef Safadi / EPA Pool via AP)

The House and the Trump administration will seek an additional 90 days to resolve a pending court case over the legality of Affordable Care Act insurer subsidies, the Washington Examiner and CNBC report.

While the subsidies may continue to flow to plans operating on exchanges, the failure to reach a decision doesn't give insurers the certainty they're looking for. Plans must decide whether to participate in federal exchanges by June 21. If they don't get a guarantee that they'll keep receiving the subsidies, plans will likely drastically raise premiums or pull out of exchanges.

The Examiner reports the House and the White House are working on a plan to ensure the subsidies continue going to insurers, who pass them on to low-income enrollees.

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Supreme Court strikes down North Carolina redistricting

Jon Elswick / AP

The Supreme Court ruled Monday that North Carolina Republicans placed too many African-Americans in two congressional voting districts it re-mapped after the 2010 Census, according to the Associated Press.

Why it matters: The 5-3 ruling upholds a federal district court decision that argued North Carolina lawmakers packed more African American residents into the districts than was necessary, which was challenged by the state. But even with the new lines, Republicans continue to hold 10 of the state's 13 districts.

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Pittsburgh sours on Uber's driverless car experiment

Gene J. Puskar / AP

Nine months after Uber rolled out its self-driving car trials in Pittsburgh, the relationship is deteriorating, the New York Times reports.

Why it matters: Self-driving car companies are forming partnerships with cities that will allow them to test their vehicles on their streets. It's a high-risk, high-reward proposition for city leaders.

Pittsburgh Mayor Bill Peduto told The Washington Post this fall, "Is there going to be an accident in a robot car? Yes there is. But the greater goal is to make our streets safer in the long term. We have to start at some point and we can't wait for regulation to catch up with innovation."

The city's complaints: Uber began charging for rides that were expected to be free; it withdrew support from Pittsburgh's application for a major federal grant to overhaul transportation; and it hasn't hired local workers as it promised.

Uber's response: "Uber is proud to have put Pittsburgh on the self-driving map, an effort that included creating hundreds of tech jobs and investing hundreds of millions of dollars," Uber told the Times in a statement. "We hope to continue to have a positive presence in Pittsburgh by supporting the local economy and community."

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Another U.S. chemicals giant strikes global merger

Huntsman Corp. of Texas and Switzerland's Clariant have agreed to an all-stock merger that would create a specialty chemicals giant valued at around $20 billion (including debt). Clariant shareholders would hold around a 52% stake in the combined company, which is expected to generate $13.2 billion in annual sales and $2.3 billion of EBITDA.

Why it's a big deal: This tie-up is part of a trend of cross-border consolidation in the mega-chemicals space, following the pending deal between Praxair (Connecticut) and Linde (Germany) and PPG Industries (Pittsburgh) attempting to purchase Dutch rival Akzo Nobel. It's also notable for private equity buffs (yes, such people exist), as Huntsman was at the center of what arguably was the most contentious M&A failure failure of the financial crisis era.

Fun fact: "Huntsman... is best known for inventing the clam-shell styrofoam box for McDonald's Big Mac burgers." ― Reuters

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Report: Michael Flynn will plead 5th, decline subpoena

Saul Loeb / Pool Photo via AP

The Associated Press is reporting that Michael Flynn, the former general fired from his National Security Advisor role by President Trump for lying about his contacts with Russians, will decline a subpoena from the Senate Intelligence Committee.

  • The sourcing: "[A] person with direct knowledge of the matter... spoke on condition of anonymity to discuss the private interactions between Flynn and the committee."
  • Why this was coming: "Legal experts have said Flynn was unlikely to turn over the personal documents without immunity because he would be waiving some of his constitutional protections by doing so. Flynn has previously sought immunity from "unfair prosecution" to cooperate with the committee."

Background on the subpoena, here.

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First-class travel, hotel suites: WHO spending under scrutiny

Raphael Satter / AP

The World Health Organization nearly spent more on travel for its 7,000 staffers in 2016 — $201 million — than its combined programs for AIDS, hepatitis, malaria, tuberculosis, mental health, and substance abuse, which total $213.5 million, per the AP.

  • How it happened: Lax rules surrounding first-class travel and hotel bookings allowed WHO employees to ignore official travel policy. For example, the agency's Ebola head spent nearly $400,000 in West Africa during the crisis, often opting for helicopter travel.
  • Comparisons: Doctors Without Borders spent $43 million on travel for its 37,000 aid workers; UNICEF spent $140 million for its 13,000 staffers.
  • Worth noting: The agency's polio expenditures hit $450 million last year.
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Zuckerberg: I'm not using this trip to run for office

Jeff Chiu / AP

Facebook CEO Mark Zuckerberg announced in a Facebook post Sunday:

"Some of you have asked if this challenge means I'm running for public office. I'm not. I'm doing it to get a broader perspective to make sure we're best serving our community of almost 2 billion people at Facebook and doing the best work to promote equal opportunity at the Chan Zuckerberg Initiative."

His learned insight: Zuckerberg said he sees an opportunity for Facebook to connect users beyond people they already know, and is hoping to soon introduce a system that recommends "people you should know," like mentors and people outside of your social circle who can provide "a source of support and inspiration."

Read next: Inside Zuck's real political strategy

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Ford replaces CEO Mark Fields with autonomous driving exec

Carlos Osorio / AP

Ford will announce Monday morning that it is replacing CEO Mark Fields with Jim Hackett, who ran Steelcase furniture for 20 years before joining the car company, reports The New York Times. Hackett most recently headed Ford's autonomous vehicle subsidy, known as Ford Smart Mobility.

Under Fields, who served as CEO for three years, Ford shares dropped 40 percent. He also was criticized by investors and the board for failing to make Ford a competitive player in the development of high-tech vehicles for the future.

Between the lines: The shake-up shows that Ford is shifting its focus to accelerate its self-driving technology. As the NYT points out, Ford has lagged behind other large automakers like General Motors and tech companies like Google, both of which have already begun testing their own autonomous vehicles. Ford is promising it will have a fully operating driverless car on the road by 2021.

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Striking AT&T workers head back to bargaining table

CWA

Over the weekend, AT&T stores were closed in a number of cities — from San Francisco to Boston to D.C. — when 40,000 workers walked off the job on Friday after the company failed to reach an agreement with the Communications Workers of America union. (AT&T told Fortune the majority of stores stayed open.)

In Oregon, Sen. Jeff. Merkley joined the picket line with workers. In New York City, Mayor Bill DeBlasio signaled support on Twitter.

Why it matters: It's the first labor strike AT&T has faced since 2012. AT&T is the largest U.S. telecom company, and the only one with a major union presence in its wireless business — the fastest growing part of the company. As a result, AT&T is having to contend with the pressures of competing with nonunion rivals in the increasingly competitive wireless sector, a company spokesman told the NYT.

At issue: CWA says AT&T has cut 12,000 U.S. call center jobs while moving jobs overseas, and has shifted jobs from company-owned retail stories to third-party reseller chains. Workers are also frustrated about rising healthcare costs and changes to commission rates. AT&T, for its part, says it's offering fair wage and pension increases and healthcare benefits. "Our employees are returning to work, and we remain committed to reaching fair agreements in these contracts," a spokesperson said.

What's next: In an email to members Sunday evening, CWA rep Dennis Trainor said the union will be back at the bargaining table Monday: "We stood up not only for ourselves and for our families, but for all working Americans who are sick and tired of being taken advantage of by greedy corporations. This fight is even bigger than AT&T. Let's congratulate ourselves for a job well done and walk into work tomorrow very proud."

Updated to include AT&T statement.