Sprint Busted For Allegedly Defrauding The FCC Lifeline Program

Scams

from the whoops-a-daisy dept

For years, big cellular carriers have been busted defrauding the FCC Lifeline program, a fund that’s supposed to help subsidize telecom connectivity for low income users. Started by Reagan and expanded by Bush, the fairly modest program doles out a measly $9.25 per month subsidy that low-income homes can use to help pay a tiny fraction of their wireless, phone, or broadband bills (enrolled participants have to chose one). While the program (which you pay into via your telecom bills) has been a subject of fraud, the agency has done some solid work under both parties trying to rein in abuse of the program.

This week, the Pai FCC brought the hammer down on Sprint, alleging that the company has been collecting monthly subsidies for roughly 885,000 Lifeline customers who were no longer actually using the company’s services. From the FCC announcement (pdf):

“The Federal Communications Commission has learned that Sprint Corp. claimed monthly subsidies for serving approximately 885,000 Lifeline subscribers, even though those subscribers were not using the service. That would be a violation of a key rule?the ?non-usage? rule?designed to prevent waste, fraud, and abuse in the Lifeline program. The 885,000 subscribers represent nearly 30% of Sprint?s Lifeline subscriber base and nearly 10% of the entire Lifeline program?s subscriber base.

These kinds of “errors” aren’t uncommon in the subsidy-slathered telecom sector. AT&T was forced to pay $11 million in 2015 by the previous, Tom Wheeler FCC because it “forgot” to remove nonexistent subsidy recipients from its rolls. In this case, the Pai FCC makes it clear the discovery will lead to a broader investigation and at least some kind of fine for Sprint, which has been working overtime to gain approval for its $29 billion merger with T-Mobile.

Historically, the Lifeline program has seen pretty broad, bipartisan support. After improving reporting requirements to thwart fraud, the FCC under Tom Wheeler slightly expanded the program to include broadband. Pai voted that expansion down, and has been criticized for slowly attempting to kneecap the program. The courts however have argued that a number of Pai’s efforts to hamstring the program (like taking away subsidies from tribal residents) haven’t been supported by factual evidence.

To be clear, this is a good move by Pai. That said, Pai has been a bit discordant on this subject. He’ll profess his top priority is “closing the digital divide,” but will then either ignore issues at the root of the problem (limited broadband competition, high prices), or attempt to scale back programs like Lifeline that actually attempt to do something about it. With Sprint, Pai is back again insisting that Lifeline is something important that needs protecting, something his policy proposals don’t always reflect given his numerous attempts to neuter the program:

“Lifeline is an important component of our efforts to bring digital opportunity to low-income Americans, and stopping waste, fraud, and abuse in the program has been a top priority of mine since I?ve been at the Commission,? Chairman Pai said. ?It?s outrageous that a company would claim millions of taxpayer dollars for doing nothing. This shows a careless disregard for program rules and American taxpayers. I have asked our Enforcement Bureau to investigate this matter to determine the full extent of the problem and to propose an appropriate remedy.”

Despite Pai’s wishy washy positioning on whether we should help poor people get and stay connected, the crackdown is welcome and long overdue. That said, the fact that Sprint was likely defrauding the government isn’t likely to change the FCC’s decision to approve the Sprint T-Mobile merger; consolidation consumer groups say will only amplify many of the pricing and competition problems that make telecom services expensive for low-income users in the first place.

Filed Under: fcc, fraud, lifeline
Companies: sprint