Response: Lifeline Phones Fulfill Name, But Program Needs Better Oversight

Response: Lifeline Phones Fulfill Name, But Program Needs Better Oversight

Commentary in The Beacon, July 22, 2013

Many challenges face the future of the Universal Service Fund Lifeline telephone program, which extends affordable, discounted telecommunication service to elderly people, people with low incomes or disabilities, and those receiving government assistance. It has been successful in connecting and keeping millions of customers on the telecommunications network and thereby linked to 21st century life.

Unfortunately, Lifeline, as with many worthy programs that assist our society’s most vulnerable members, has been a victim of waste, abuse and fraud. As a result, the program must also contend with perceptions of it formed by half-truths, rumors and confusion, as evidenced in the recent commentary by M.W. Guzy.

Part of Lifeline’s problem has been lax policing, poor reporting and less than diligent accountability. Services to disadvantaged people often seem to be the target of opportunists and scam artists.

The program was begun in 1985 under the Reagan administration landline service. But as technology advanced, in 2005 the Bush II administration expanded it to include cell phone service. In January 2012, the Federal Communications Commission adopted comprehensive reform and modernization of the program.

Calls to end Lifeline are better directed to monitoring the FCC’s efforts and looking for new ways to address universal service and access to new technologies in the future.

The telecommunications companies that participate in the Lifeline program process the applications, verify eligibility by reviewing qualifying affidavits and documents and connect service. It’s a federal crime to misrepresent facts concerning eligibility.

To obtain the “eligible telecommunications carrier” designation, the wireless carriers who join the program offer a cell phone and a fixed number of minutes of use – 250 minutes a month -- at a price discounted from normal retail price. The Universal Service Fund pays the cell carriers for the revenue they lose due to the discounted basic package, just as it does for landline carriers. Over the years, the payment has been about $10 a month per household.

Of course, the wireless companies do not want to miss an opportunity to “sell up.” Many of them offer additional minutes, upgraded plans and extra equipment to the Lifeline enrollees. But the extras do not qualify for USF reimbursement. Under the rules of the program, only one Lifeline landline or cell phone line is permitted per household. The customer may have one or the other, but not both.

Another confusing aspect of the program is the USF surcharge on telephone bills, which many customers read to be a federal tax. It is confusing because the telecom companies make it look like a tax and do little to clarify it. It actually is the USF’s assessment on the companies. But the companies pass it through as a direct surcharge on customers, which goes back to the companies. It appears on the bill with the service rate, taxes and other surcharges, thereby requiring customers to subsidize the full cost of providing the Lifeline program. The Federal Communications Commission and the USF Board allow the companies to present the pass-through as they do as a “business decision.”

Lifeline’s problem is also one of identity and public relations. Lifeline carriers are required to make diligent efforts to publicize the availability of their Lifeline plans. Mass media advertising, cold call telephone solicitations and internet ads for Lifeline intermix similar or similarly named services. That makes it difficult for customers to sort out which is a Lifeline provider and what are the authorized reimbursable benefits.

Companies have been known to give away a phone and call it “lifeline” or a government-issued cell phone. But that does not make it part of the USF Lifeline program. With the cost of a cell phone and service declining, a company can afford to charge $10 or give away a phone with the expectation that the customer will “buy up” by adding lines, texting and more minutes. Nothing prohibits a company from selling more minutes, texting or other upgrades in connection with its USF Lifeline solicitation or program since USF doesn’t pay for those items outside of the Lifeline benefits.

Companies that are not USF Lifeline providers or are just sharp operators have also been known to use a free phone giveaway to make it sound like the federal government is handing out taxpayer-paid cell phones to everyone who wants one. The internet is littered with websites with pitches that use the terms “lifeline,” “government program” and even set out the federal eligibility requirements. Of course, those companies include solicitations for more minutes and more expensive plans.

The Lifeline program is also haunted by internet rumors that it provides an “Obama Phone,” a free cell phone and free minutes given out to garner votes. The rumor is easily debunked as a myth. Street-corner and parking-lot phone giveaways that Mr. Guzy saw, and the internet rumors, would not be lawful under the USF Lifeline program. They have no eligibility screening and would not otherwise be anywhere close to compliance. They should be reported to the FCC because fraudulent enrollment is a federal crime.

A USF Lifeline lookalike is probably being offered by a company that resells someone else’s service, like AT&T’s or Verizon’s, and gives away a cheap phone with a small number of minutes. Credit cards or prepaid phone cards can be used to reload the phone with minutes for higher-than-normal rates, and the phone may be upgraded at an additional prepaid price.

Lifeline serves poor people -- primarily rural, elderly and families with children -- and promotes national interests by enabling them to more fully engage in productive lives.  -The program fulfills the congressional mandate of the Communications Act of 1934 to ensure the availability of communications to all Americans at just, reasonable and affordable prices. Since then, Lifeline has helped tens of millions of low-income Americans afford basic phone service that has enabled them to find jobs, stay in touch with their families and access emergency services.

Many assistance programs are plagued by people who game the system and ruin it for those who deserve benefits. Lifeline should not fall prey to the spoilers. It should meet accountability tests and continue to work to include all Americans in our hyper-connected society.

The authors:  Joan Bray is interim director of Consumers Council of Missouri. Mike Dandino is the retired chief legal adviser for the Missouri Office of Public Counsel and a former board member of  Consumers Council of Missouri.

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