Government Watch

Government Waste – $2.2 Billion for “Free” Cell Phones

By Spencer E. Ante –

The U.S. government spent about $2.2 billion last year to provide phones to low-income Americans, but a Wall Street Journal review of the program shows that a large number of those who received the phones haven’t proved they are eligible to receive them. This is another all too familiar example of Government Waste.

WSJ’s Spencer Ante has details of a $2.2 billion government program to give cell phones to poor people that resulted in phones winding up in the hands of people ineligible for the program.

The Lifeline program—begun in 1984 to ensure that poor people aren’t cut off from jobs, families and emergency services—is funded by charges that appear on the monthly bills of every landline and wireless-phone customer. Payouts under the program have shot up from $819 million in 2008, as more wireless carriers have persuaded regulators to let them offer the service.
Suspecting that many of the new subscribers were ineligible, the Federal Communications Commission tightened the rules last year and required carriers to verify that existing subscribers were eligible. The agency estimated 15% of users would be weeded out, but far more were dropped.

A review of five top recipients of Lifeline support conducted by the FCC for the Journal showed that 41% of their more than six million subscribers either couldn’t demonstrate their eligibility or didn’t respond to requests for certification.
The carriers—AT&TT +0.28% Inc.; Telrite Corp.; Tag Mobile USA; Verizon CommunicationsVZ +0.41% Inc.; and the Virgin Mobile USA unit of Sprint NextelS 0.00% Corp.—accounted for 34% of total Lifeline subscribers last May. Two of the other largest providers, TracFone Wireless Inc. and Nexus Communications Inc., asked the FCC to keep their counts confidential. Results for the full program weren’t available.

The program is open to people who meet federal poverty guidelines or are on food stamps, Medicaid or other assistance programs, and only one Lifeline subscriber is allowed per household.

The program, which is administered by the nonprofit Universal Service Administrative Co., has grown rapidly as wireless carriers persuaded regulators to let people use the program for cellphone service. It pays carriers $9.25 a customer per month toward free or discounted wireless service.

Americans pay an average of $2.50 a month per household to fund a number of subsidized communications programs, including Lifeline.

For the carriers, the program is a chance for them to sign up more subscribers and make a small profit, plus more money if customers go over their small initial allotment and need to buy more minutes or text messages. Carriers can set prices for their Lifeline subscribers as the companies wish.

Until last year, FCC rules didn’t require carriers to certify to the FCC that subscribers were eligible. Consumers could self-certify, and in many states documentation wasn’t required.

Carriers said many of the disqualified subscribers simply didn’t reply when asked to prove their eligibility. They also said the FCC rules on self-certification, and the absence of a national database of participants, made it hard to keep ineligible people from signing up.

The FCC said it is investigating allegations that some Lifeline providers violated the rules, though it declined to comment on that probe. Carriers that don’t properly confirm eligibility can be fined up to $150,000 for each violation for each day of a continuing violation, up to a maximum of $1.5 million. In egregious cases, a carrier could lose its ability to participate in the program.

Telrite said it confirms Lifeline eligibility but said it had been difficult to verify the one-phone-per-household rule.

A Verizon spokesman said the “vast majority” of the subscribers removed from its rolls didn’t respond to eligibility checks. While Sprint found that some of its subscribers were no longer eligible, it, too, found that many others didn’t respond, a person familiar with the carrier’s operations said.

AT&T hadn’t detected the ineligible subscribers because customers self-certified under old rules and because some states required the company to provide Lifeline service to people enrolled in certain state assistance programs, according to a person familiar with the company’s thinking.

Tag Mobile didn’t respond to requests for comment.

TracFone Chief Executive F.J. Pollak declined to say how many customers his company shed. Nexus Communications didn’t respond to a request for comment.

Two years ago General Communication Inc. GNCMA +0.59% paid more than $1.5 million to settle allegations that Alaska DigiTel LLC, an Alaskan company it owns, submitted false claims to the FCC for more than four years. General Communication said the alleged misuse occurred before the company took day-to-day control of Alaska DigiTel.

Lifeline users have been a source of subscriber growth in the otherwise saturated U.S. market and helped fuel the expansion of companies like TracFone, now the fifth-largest U.S. wireless carrier.

The FCC until last year allowed consumers to self-certify, without requiring documentation, that they met federal poverty guidelines. Subscribers didn’t have to recertify once they were enrolled in the program, and there were few checks on whether households signed up for more than one cellphone.

“The program rules we inherited were designed for the age of the rotary phone and failed to protect the program from abuse,” FCC Chairman Julius Genachowski said.

The agency pushed through new rules last year, requiring documentation when a Lifeline customer signs up. Consumers also must certify that no one else in their households is using the program. Carriers now have to check a state or federal social-service database to confirm eligibility and must reverify eligibility every year.

Carriers were required by Jan. 31 to report the number of subscribers they had removed from Lifeline as of the end of last year. The data reviewed by The Wall Street Journal came from those reports.

The FCC said new verification procedures saved nearly $214 million last year, and projected total savings over the next three years would reach $2 billion. Disbursements under the program began to drop in the third quarter after 12 consecutive quarters of increases.

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14 Comments on "Government Waste – $2.2 Billion for “Free” Cell Phones"

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iris campbell
10 months 21 days ago

dear sir, im claiming the refund check for cell phone that did not work at all and it was returned broken and requesting a new cell phone today. asking for rebate check for $3,000 plus cell phone insurance and flash drives at $60 dollars too. also, asking for walmart gift card at $35,000 entry winner. still waiting for the cards in the mail soon. waited all summer and please hurry now. its the holidays and I desperately need these things and gift cards and cell-phone and flash drives for library usages on reports. thanks, thanks, thanks, happy sunday, thanks, iris Campbell.

Steve Thacker
3 years 6 months ago

Did any of the last ten people to comment actually read the article????
the “Lifeline” program was started in 1984…. when Ronald Reagan was president, fast forward thru all of the Bush years that this plan was administered under and somehow all you come up with the simplistic answer that this was all Obama’s doing. the article even goes on to say that the phones companies basically ran the program so they could make money on the overage charges.

Wake up people, and think things thru beyond the headlines, this is why your kids and all your neighbors look at you like your crazy. I will now get off your lawn. BTW your cream of wheat is being manipulated by the FDA.

BARBARA J RIDDLE
3 years 6 months ago

THIS MARXIST PRESIDENT MAKES ME SICK TO MY STOMACH. I AM ON SSI , 72 YRS OLD AND COULD GET ONE OF THOSE PHONES,BUT I LOVE MY COUNTRY AND WILL NOT BE A PART OF THAT VOTE BRIBERY SCHEME..
MAY GOD WAKE UP, THE UNINFORMED BEFORE IT IS TOO LATE

DrJCA1
3 years 6 months ago

The entire concept of the war on poverty is simply garbage. We’ve spents trillions of the poor and now have more people living in poverty than we did 50 years ago. The truly stupid liberal thought process of “send out checks evey month and soon there will be no more poor people” is just about the most ignorant and desturctive thing I’ve ever heard. Howeve, unless many conservatives get off their high “holier-than-thou” horse, we will never win anything again. The economic destruction of this country is far more important than some woman getting an abortion or birth control for free, and certainly far more important tha gays getting married. If you all don’t drop the social garbage and focus on the issues that actually matter to the people of this country, we are doomed.

Charline Ivey
3 years 6 months ago

I wonder what would happen if each of us refused to pay this charge on our telephone bill?

JWilbanks
3 years 6 months ago

This program has gotten totally out of hand. There is no one in this country that “NEEDS” a cell phone. How could the government not shut this program down? Is it for votes..I suspect so. How sad that our government has come to this. Can’t the government officials that can do something about the waste see what is happening in this country? I for one thank they just don’t care. They just like to run their mouths.

joe1cr
3 years 6 months ago

With Obama stocking the welfare rolls with more parasites and illegal immigrants, the need to cut
public welfare back has never been greater. We can no longer keep people that cant or will not work.
They expect to have free housing,health insurance,food stamp debit card,monthly check,cell
phones,meals at school three times a day, clothing allowances and free gas for their autos.
Women and their husbands, boyfriends,live in buddies bilk the tax payer year after year with
no end in sight.
With some it’s passed on from one generation to the next generation it has to end.
They have made this their job!!!! This is the group that broke the social security fund begging in the 60’s
thanks to L.B.J war on poverty and in the 2000;s brought down the housing market thanks to Barney Frank
and Chris Dodd.
It’s time to stop this welfare insanity before it drags our country into another depression .

DaveP326
3 years 6 months ago

It was just a bribe to get votes for Obama. They couldn’t resurrect enough dead people from the cemetaries, so they gave the live ones a free* phone. This past election was Chicago thug politics at its very best.

*not exactly “free – somebody (that would be us, the taxpayers) has to pay.

DaveP326
3 years 6 months ago

It was a bribe to get votes.They aren’t even being subtle about it anymore. Chicago thug politics at its very best.

Barbara
3 years 6 months ago

Romney planned to go line by line through all federal programs to find waste and fraud. That would have been refreshing!
Now who is going to save us from this administration’s quest to bring down our country by spending us into a third world country?
Each of us must learn how we can make a difference by learning more about waste and fraud and reporting it when we see it, writing letters to editors, joining groups that will make changes by helping to elect responsible candidates. Do not sit on your hands and let anyone take our country away from us!!
Each of us is powerful! Use your voice to discuss any problems and help find solutions to help yourselves and others.
Amac is a good place to start!!! Let’s make our voices heard across this country. Complaints followed by ACTION!

MJKjr
3 years 6 months ago

Next time your out and about, and see all the “CHILLDEN” talkin’ on “OBAMAMAMA” fones, take note… See, not all are drug dealers, some are just “milking the system”….. Thats what it is there for….

Bill Cannon
3 years 6 months ago

This is one program that needs to be shutdown! This is ridiculous, I can understand helping the poor but this goes to far! We need to attend to their basic needs and then show them how to help themselves. It is better to teach a person how to fish than to provide them with fish. Oboma should be ashamed.

PaulE
3 years 6 months ago

You obviously didn’t see the video of the woman last year before the election screaming about her free “Obama phone” and how she was going to vote for Obama. That was the purpose of this program and several others just like it. Simple vote buying and it worked! We taxpayers just get the “privilege” of paying for all this “free stuff”

Boom
3 years 6 months ago

The solution is going to have to be Internet/cloud based e-learning and intocurtisnal video materials that can be self-directed and self-paced. The moderator will be a motivator and faciliator of learning, not a teacher in the conventional sense. We’re working on some proposals for a pilot along those lines right now.In addition, you might want to review some of the blog postings on the community Senior Internet Training Network that I described in two blog entires in August and September. In rural areas the public housing or Section 8 (or Farmer’s Home) senior building can function as a hub for a network of senior training and other service providers, involving the local library, senior center, community college, local high school and other senior housing facilities and churches. Happy to review and comment on your specific situation. I’m at , or .

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