Feature Article

April 11, 2013

US Cell Phone Service Program to Needy Incurs More Scrutiny as Controversy Continues

For decades, the U.S. government has been giving out discounted phone service to lower-income Americans. The program has continued during Barack Obama’s presidency and critics have called it the “Obama phones” subsidy program. Its official name is “Lifeline.”

The 28-year-old program gives lower-rate phone service to 13.3 million low-income Americans. In 2005, the FCC expanded the program to cover cell phone service. The program pays carriers $9.25 a customer per month for free or discounted wireless service, The Wall Street Journal reports.

But given the current desire to reduce federal spending among fiscal conservatives, the cell-phone program is a target of scrutiny.

“The program has nearly tripled in size from $800 million in 2009 to $2.2 billion per year in 2012,” several Republicans on the House Energy and Commerce Committee wrote in a March 26 statement quoted by The Washington Post. “American taxpayers — and we as their elected representatives — need to know how much of this growth is because of waste, fraud and abuse.”

The Washington Post reports Lifeline is not funded by tax revenue. “It subsists on fees that are tacked on to most phone bills,” The Post reported. “That fund subsidizes a number of programs, which in addition to Lifeline include telecommunications service to rural and remote areas and to schools and libraries.”

Lifeline is available to Americans who meet federal poverty guidelines or who get food stamps, Medicaid or other federal assistance programs, news reports said.

But the program has come under fire because some cellular providers approved subscribers for the service without ever confirming eligibility. Some recipients appear to have more than one phone in a household – another violation.

Many duplicate subscriptions were eliminated under tightened federal scrutiny.

“A review of five top recipients of Lifeline support conducted by the FCC for the (Wall Street) Journal showed that 41 percent of their more than six million subscribers either couldn't demonstrate their eligibility or didn't respond to requests for certification,” The Journal reported.

The top carriers were identified as AT&T, Telrite Corp, Tag Mobile USA, Verizon Communications, and the Virgin Mobile USA unit of Sprint Nextel. They represented some 34 percent of Lifeline subscribers as of last May, The Journal said.

“Two of the other largest providers, TracFone Wireless Inc. and Nexus Communications Inc., asked the FCC to keep their counts confidential,” The Journal added.

In addition, carriers may find the program is more lucrative if low-income customers buy additional minutes or text messages.

Meanwhile, there are still many supporters of the Lifeline program.

"Allow me to set the record straight," FCC Commissioner Mignon Clyburn said in a recent statement quoted by The Hill newspaper. "Without this program, 15 million low-income families would literally be choosing between feeding their children or going without a dial tone that potentially could save their lives and put them on a better economic path."

"We are open to making additional adjustments where necessary, but in no uncertain terms should qualifying low-income consumers who have followed the rules be refused service," Clyburn added.

Edited by Braden Becker

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