Many Americans have heard of the “Obamaphones” made infamous by the viral 2012 video of a Cleveland woman touting her “free” cellphone. The Lifeline program, which provided the taxpayer-subsidized phone, continues to be rife with waste and abuse that has lingered for nearly a decade.
Created in 1985, the Lifeline program provides subsidies for low-income households, so that they could communicate in an emergency. Subscription for the program is based on a household’s eligibility for other low-income or tribal assistance programs, and has been expanded to include wireless telephone service, as well as broadband Internet subsidies.
On Sept. 6, 2017, I testified before the Senate Commerce, Science and Transportation regarding waste, fraud, and abuse within the Universal Service Fund’s Lifeline program. While the program provides valuable service to low-income households through phone subsidies, some have unfairly taken advantage of the program, taking taxpayer resources from that might otherwise be used towards better purposes, such as expanding broadband access in high cost areas, rural hospitals, and schools and libraries.
Problems within Lifeline have been well-documented. An October 2010 GAO audit revealed multiple instances of programmatic fraud and abuse, noting that some recipients were advertising their Lifeline-subsidized phones and service for sale on Craigslist, while other beneficiaries violated the one phone-line restriction of the program by signing up for service through multiple carriers.
On June 12, 2015, a Consumer Reports exposé revealed how easy it was to get around the 2012 reforms. Investigators found that, in some cases, Lifeline plans were registered with forged signatures, assigned to vacant homes, or given to individuals with fake credentials. The investigative team also found that salesmen were routinely accepting fake food stamp cards, including one clearly marked as a training card, and another printed from the Internet.
Jeffrey Eisenach, an economist focused on telecommunications policy, also testified with me on Sept. 6, noting that the Lifeline program was flawed from its inception. Calling on policymakers to find a new approach to opening the doors to digital opportunity for low-income and disadvantaged Americans, he recommended that the federal and state governments work to reduce barriers to broadband deployment and adoption to allow for lower prices and increased availability of broadband services. This would include a reduction of taxes, including the universal service fees that consumers pay on their monthly communications bills. He also recommended that the program support be targeted to those who do not already have service.
Eisenach suggested that a Lifeline replacement program should reflect an assessment of who needs help, and what type of help they need. He noted the flaws in the current mechanism managed by the Universal Service Administrative Company, which sends a monthly check of $9.65 to telephone companies for each subscriber receiving services under the Lifeline program. Eisenach recommended that a Lifeline replacement “include ways for low-income recipients to acquire computers and other equipment they need to get online, perhaps drawing lessons from the old Link Up program.” Finally, he recommended that perhaps a different mechanism be implemented to provide subsidies than the current one in place at the FCC.
However, until structural changes are made to the Lifeline program, basic changes can still be implemented to reduce incidents of fraud and abuse.
During my testimony, I strongly recommended that the Universal Service Administrative Company, which is currently developing the National Lifeline Verification System as directed by the Federal Communications Commission in 2016, implement a front-end check on eligibility rather than pursuing violators of the program after they have already been enrolled in the program. In addition, I encouraged the agency to work with state governments in pursuing memorandums of understanding that would allow the verification system to check with state databases to validate subscribers.
While everyone would like a free phone, as demonstrated by the exuberance of the viral Obamaphone video, not everyone qualifies. For this reason, there must be more stringent oversight of the program. The Senate’s hearing on Sept. 6 was a good start to the process.
Deborah Collier is technology and telecommunications policy director for Citizens Against Government Waste.
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