Massive Scam In US Lifeline Program
February 12, 2013

U.S. Lifeline Phone Subsidy Scam Uncovered

Enid Burns for — Your Universe Online

It was uncovered this week as many as 41 percent of users of the government-funded phones under the Lifeline program are not qualified to take part in the program. An investigation conducted by the Wall Street Journal uncovered the misuse of resources.

That Universal Service Fee you see on your cell phone and land line bill each month funds the program, which provides cell phones, Internet service, and land lines to low-income families so they won't be cut off from jobs, families and emergency services. Last year, the US government spent about $2.2 billion on the program, with much of the funds coming from those fees incurred by phone services.

Government payouts have increased over the past few years. The Wall Street Journal reports the government supplied $819 million in 2008, which has risen to the $2.2 billion spent last year. The increase in funds is due to increased interest from wireless carriers in offering the service.

As the program grew, the FCC tightened the rules on the program and required carriers to verify existing subscribers were eligible. The expectation was 15 percent of users would be eliminated from the program, due to ineligibility.

The FCC and the Journal conducted a review of the five top recipients to the Lifeline program, which showed 41 percent of over six million subscribers "either couldn't demonstrate their eligibility or didn't respond to requests for certification," the article said.

The five top carriers include AT&T; Telrite Corp; Tag Mobile USA; Verizon Communications; and the Virgin Mobile USA unit of Sprint Nextel. The five companies accounted for 34 percent of total Lifeline subscribers last May. The investigation identified 41 percent of subscribers taking advantage of the subsidy who had not qualified for the program. Two of the largest providers, TracFone Wireless and Nexus Communications, asked the FCC to keep their counts confidential. The article reports results for the full program weren't available.

Of the five carriers listed, the article reports the investigation identified 44 percent of the 3.69 million subscribers on the program under Virgin Mobile were disqualified. AT&T had a higher percentage, 47 percent, but that's out of AT&T's 1.3 million subscribers. Twenty percent of Telrite's 650,000 subscribers were disqualified. Tag Mobile was found to have 33 percent of its 310,000 subscribers in the program deemed ineligible. Verizon participates in the program with about 230,000 subscribers, of which 44 percent were disqualified as a result of the report.

The FCC recently changed its rules on the program last year. Previously, the FCC didn't require carriers to certify to the FCC subscribers were eligible. Consumers were allowed to self-certify and documentation wasn't required in many states.

After the FCC changed its rules, it requested each carrier obtain proper certification from participants in the Lifeline program. The rate of certification was the result of the study. Many participants did not certify their eligibility but continued to get service on their phones provided by Lifeline.