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January 30, 2015

Mobile Phone Service Provider Responds to Denver TV Station Discovery of Fraud in 'Obamaphone' Program

A mobile phone provider has responded to a Denver television station’s undercover report that found several representatives circumvented eligibility requirements when they signed applicants up for a low income cell phone program.

In November 2014, KCNC reporter Brian Maass conducted an undercover investigation into how Total Call Mobile, a national mobile service provider based in Gardena, Calif., improperly signed applicants up for the federally-funded Lifeline program.

Lifeline was originally created in 1985 by the FCC to provide discount landline service to low income consumers. In 2005, the program expanded under the Bush Administration to include wireless service. The program has expanded significantly under President Obama, and as a result, the free phones provided by the program are often referred to as ‘Obamaphones’.

Lifeline is funded from taxes tacked on to mobile phone bills. It typically appears in statements as a line item reading ‘Universal Service Tax’ or something similar. According to KCNC, the program costs $2 billion per year.

There are strict eligibility requirements for Lifeline, among them is the requirement that the applicant is on a low income program like food stamps, Medicaid or housing assistance.

Undercover KCNC employees posing as Lifeline applicants were still able to receive free cell phones even after stating they could not document they were in a low income program. Their applications were accepted using someone else’s food stamp card, Medicaid card or other proof of low income.

Another form of fraud the report found was that many people who already had separate mobile service with smartphones had successfully signed up for Lifeline. One applicant in particular showed a KCNC reporter that he had a smartphone with service costing $57 a month. He was initially turned down for Lifeline, because he did not have a food stamp card, but after obtaining one with no money on it, was able to re-apply and get a free cell phone.

Total Call sent a letter to KCNC expressing outrage over the actions of the representatives and the applicants. The company claimed that it would report these actions to authorities. According to KCNC’s November report, the FCC claims it has fined vendors more than $95 million since 2012 for actions similar to those in the report. Total Call has also set up a hotline to report fraud; whistleblowers can call 1-800-589-6316. The company has also identified all agents in the report and blocked them from accessing its systems.

While Total Mobile has responded appropriately to the fraudulent actions of these agents, several doubts arise about the sincerity of the company’s actions. Nothing was done to discourage this kind of behavior until after the KCNC report. Some may view the million in fines compared to the billions that have been collected as a cost of doing business.

It’s unacceptable that people who can afford regular mobile service are also obtaining Lifeline phones. At a time when payphones have all but disappeared from the landscape, cell phones can literally be a lifeline in an emergency. Hopefully those who should have Lifeline but don’t, won’t be in a situation where they need to make a call. 

Edited by Maurice Nagle

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