Monthly Archive for July, 2015

Free Cellphones for Low-income Households

There is a federal program that offers a monthly subsidy of $9.25 per month to people with low-income (income that is at or below 135% of the federal Poverty Guidelines or participate in a select few assistance programs). It is called the Lifeline program and the FCC oversees it. The lifeline program is limited to one-per-household. It is not funded with Federal tax dollars; instead telephone service providers are required to fund the program. They usually do this by adding a separate charge to customers’ bills every month. In my cell phone bill it is called the ‘Federal Universal Service Charge’ and costs me $1.25 a month.

The program has in recent years been labeled as ‘Obama phones’. This may have something to do with a notorious and dubious video that went viral and that the media latched onto in 2012. Perhaps more appropriately, increased scrutiny over the program was due to the rampant corruption and fraud taking place in the Lifeline program and reported in 2012 and 2013 (“FCC: 41 percent of Lifeline phone subsidies in 2012 weren’t verified,” n.d.).

The Lifeline program actually began its life much earlier. The Telecommunications Act of 1996 created the Universal Service Fund (USF), which required all telecommunication carriers to contribute to the USF, used to provide low-income families with Lifeline Assistance.

(Note: Some sources are actually claiming the Lifeline program began in 1985, but I haven’t been able to verify that claim)

In 2005, Lifeline discounts were made available to qualifying low-income consumers on pre-paid wireless service plans in addition to traditional landline service (“Lifeline Program for Low-Income Consumers,” n.d.).

In 2008 the FCC allowed wireless carrier Tracfone to join the program’s list of approved providers (Malter, 2012). Tracfone is a subsidiary of Mexico’s largest telecommunications company América Móvil and has holding agreements with the United States’ largest wireless network operators to provide service using their networks, including Verizon Wireless, AT&T Mobility, Sprint Corporation, T-Mobile US, and U.S. Cellular.

In 2008 Tracfone wireless was building a big business and the FCC agreed for them to give eligible customers prepaid customers lifeline minutes upfront with a free phone changed the game. Tracfone has aggressively gone after Lifeline customers. It advertises its “free phone” on television, pays commissioned street teams to canvas low-income neighborhoods for new subscribers. They have over 4 million lifeline subscribers in their Safelink program, and collected $452 million in 2011 from the program’s subsidies (Malter, 2012). They are the largest provider in the Lifeline program.

Unfortunately when steps were taken in the 2000s to open the program to mobile wireless service, controls were not taken to protect against waste, fraud, and abuse. As a result of these decisions, the program almost tripled in size from 2008 (about $784 million) to 2012(almost $2.2 billion)(“STATEMENT OF CHAIRMAN TOM WHEELER,” n.d.)

 

Reforms

On January 31, 2012, the FCC adopted comprehensive reform and modernization of the Lifeline program (“Lifeline Program for Low-Income Consumers,” n.d.). The FCC implemented anti-fraud measures, increasing the use of eligibility databases to enable automated verification of consumers’ Lifeline eligibility and creating a National Lifeline Accountability Database to prevent multiple carriers from receiving support from the same subscriber. The agency said it canceled 800,000 duplicate contracts and expected to save $200 million in 2012 (Malter, 2012). These were much needed reforms as previously the FCC allowed consumers to self-certify (Ante, n.d.).

This year the FCC allowed Lifeline recipients to buy broadband with their subsidy too. The amount of the subsidy will stay the same.

 

Closing Thoughts

I support the Lifeline program now that it has been reformed. Communication is such an integral part of our society, and it is hard for me to imagine functioning without a cell phone. I was without a cellphone earlier last month for three days after it got wet in the rain and I felt deprived. Specifically looking at the homelessness, I believe this can be an enabler for the homeless to get connected with much needed services that are available to them. This can be an extremely cost-effective way to help people help themselves by providing them with a pathway to be connected with the rest of society. It is hard to get a job without a phone.

I was looking at the Safelink website (TracFone brand) and they advertise a free cell phone for Lifelink subscribers, 500 Free Minutes and unlimited texts per month for the first 4 Months, and 250 Minutes and Unlimited Texts per month thereafter. That is a pretty good deal for not paying anything.

Recently this month FCC has reached an agreement with TracFone for them to unlock all of their handsets.  The Bureau’s investigation found that TracFone violated agency rules by improperly certifying that it would unlock phones for its customers enrolled in the FCC’s Lifeline program (“FCC Reaches Agreement with TracFone to Unlock Mobile Phones,” n.d.).

 

Sources

Ante, S. E. (n.d.). Millions Improperly Claimed U.S. Phone Subsidies. Retrieved July 7, 2015, from http://www.wsj.com/articles/SB10001424127887323511804578296001368122888

FCC: 41 percent of Lifeline phone subsidies in 2012 weren’t verified. (n.d.). Retrieved July 7, 2015, from http://www.engadget.com/2013/02/13/fcc-41-percent-of-lifeline-phone-subsidies-werent-verified/

FCC Reaches Agreement with TracFone to Unlock Mobile Phones. (n.d.). Retrieved July 6, 2015, from https://www.fcc.gov/document/fcc-reaches-agreement-tracfone-unlock-mobile-phones-0

Goldman, D. (2015, June 18). “Obamaphones” expand to Internet use. Retrieved July 6, 2015, from http://money.cnn.com/2015/06/18/technology/obamaphone-lifeline-fcc-broadband/index.html

Lifeline Program for Low-Income Consumers. (n.d.). Retrieved July 6, 2015, from https://www.fcc.gov/lifeline

Malter, J. (2012, October 26). Who gets rich off “free” government phones. Retrieved July 6, 2015, from http://money.cnn.com/2012/10/26/technology/mobile/tracfone-free-phones/index.html

STATEMENT OF CHAIRMAN TOM WHEELER. (n.d.). Retrieved from http://transition.fcc.gov/Daily_Releases/Daily_Business/2015/db0622/FCC-15-71A2.pdf

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