Fraud-Plagued Cellphone Giveaway Program Expanded

By Daily Editorials

August 6, 2015 3 min read

The Federal Communications Commission's Lifeline program, intended to offer low-income people access to basic telephone services, has become notorious for its waste, fraud, abuse and lack of strategic planning and oversight. So, naturally, the FCC recently voted 3-2 to expand the program to provide subsidized broadband service.

Though the Lifeline program was established by the FCC in 1985, it really took off after prepaid wireless carriers began offering wireless Lifeline service in 2008, along with free cellphones, prompting it to be dubbed the "Obamaphone" program. From 2008-12, enrollment soared from 6.8 million households to 18.1 million, and the cost of the program, which does not have a cap on spending, rose 167 percent, from $820 million to $2.2 billion.

It is paid for out of the Universal Service Fund, through a tax imposed on landline and wireless customers. That fee has increased by 83 percent since 2008.

The Lifeline program has been plagued by fraud, from both consumers and telecommunications companies, which typically receive a subsidy of $9.25 per month for every person enrolled in the program. It is supposed to be limited to one phone per household for those with household income at or below 135 percent of the federal poverty line or who receive means-tested welfare benefits. Numerous investigative reports, however, have shown how easy it is to bypass the rules, and many people have obtained multiple free phones, oftentimes from the same company.

An undercover report by NBC4 Denver last year showed vendors signing up ineligible consumers using other people's food stamp cards. The workers claimed they were paid $3 for every phone they gave away.

Now the FCC has decided to expand the program to subsidize broadband service, despite failing to conduct a needs assessment or develop implementation and evaluation plans for its broadband pilot program, as the Government Accountability Office recommended in 2010, and the fact that only 12 percent of the estimated 74,000 low-income consumers enrolled in the pilot program.

It is bad enough to take from some to give to others a questionable "essential" benefit like free cellphone service. It is even worse when most recipients take advantage of a benefit they do not need or would have purchased on their own, anyway. The FCC should end the Lifeline program, not expand its waste, fraud and abuse with new broadband subsidies.


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