Last Updated:November 29 @ 05:55 pm

Government 'free' phone program full of fraud and abuse

By The Washington Times

A federal program subsidizing phones for the poor increased from 6.8 million to 18 million recipients from 2008 -- the year it was expanded to include cell phones -- to May 2012.

And fraud and abuse from the expansion have been far more extensive than expected, to the extent that tougher enforcement of long-existing rules is projected to bring in enough money to finance the expansion of the program to provide low-income users with free Internet service, according to the Federal Communications Commission report released last week. Up to 15 percent of subscribers in the program are ineligible, the FCC found.

Only one member per family is eligible for a cellphone, but a recent review by FCC investigators found some 270,000 families, in just 12 states, who were violating that rule. Verification is taken only on an intermittent, state-by-state basis because a national database will not be ready until later this year, the report says.

Those early measures, combined with requiring recipients to self-certify their eligibility each year and terminating unused phones, saved $214 million in less than a year, or $1 of every $10 spent on the program. Reforms to weed out ineligible recipients, the FCC projects, could save $2 billion over the next three years.

The phones are intended for use in job searches and medical care. Receiving other government support, such as food stamps, subsidized housing and cash welfare makes a person eligible for the free phone service.

The industry has rapidly become dominated by TracFone Technologies Inc., whose business model has focused largely on taking advantage of the subsidies, spending $41 million advertising its "free" phones to the poor in 2010. The Miami-based company resells major providers' services, and it successfully petitioned for an exception to a rule that made only companies actually controlling cellular service eligible.

Whereas many providers pass on the Lifeline subsidy as a $9 discount, TracFone makes the phones and their service plans entirely free and goes door-to-door offering them to consumers. Providers have not always made clear that the phones are part of a government program with specific eligibility requirements, the FCC says.

As lawmakers have sought to rein in the program, TracFone's lobbyists have been there to push back. Last Congress, it lobbied against bills titled the Surcharge Fairness Act, the Stop Taxpayer Funded Cell Phones Act, and one that would "revisit the universal service support program ... to reduce waste, fraud and abuse," lobbying disclosures show.

Rep. Tim Griffin, Arkansas Republican, has reintroduced a bill to combat what he calls "Uncle Sam's Unlimited Plan," and restore it to landlines only. Mr. Griffin's attention was attracted to the program when his own wife received an application, and when constituents reported receiving unrequested phones mailed to deceased relatives. The program doesn't meet the efficacy threshold that would warrant the government requiring consumers to fund the program, and the FCC has done the "bare minimum" to rein in abuse, he said.

"There are people who own cars and are getting free cellphones," he said.

A car helps one find a job, too, he noted, asking whether free cars might be next. "Where do you draw the line?"

(c)2013 The Washington Times (Washington, DC)

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Distributed by MCT Information Services

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  1. shellyComment by shelly
    February 7, 2013 @ 9:48 am


    Get the government out of everything we have and do! Who needs to work anymore, when everything is free!

    “The Government will pay for my free stuff… Obama will give me free medical care”

    The Government has no money that it doesn’t TAKE from those of us who work – and I can’t afford to support more than my own family and give to some chosen charities (of MY choice).

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  2. Ollie_FanComment by Ollie_Fan
    February 7, 2013 @ 9:51 am

    Any statistics indicating how many of those phones are used for drug deals, or even worse, *gasp*, gun sales?

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    • mysticComment by mystic
      February 7, 2013 @ 11:14 am

      Darn fine question Ollie_Fan…darn fine!

      This program, which has been in place for land lines the last two almost three decades, should have stayed that way. Internet access should have been the only thing added to that program…not free cell phones and internet access.

      TracPhone…sounds like they lobbied this one just right. Wonder how much money they are sneaking/stealing out of the public coffers? Billions is what I would bet.

      Stop with the freebies! They don’t work, they don’t help, and they certainly are not bringing the neediest of us up to par with hard working American’s. If it’s broke..fix it!

      …and I’d say this is broke! In more ways then one.


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    • susieqComment by susieq
      February 7, 2013 @ 11:33 am

      I’d like to know how many people actually got jobs from this brilliant idea that is wreaked with loopholes…

      The more government giveth, the more the drones taketh…so what is their incentive for gainful employment?

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  3. sam236Comment by sam236
    February 7, 2013 @ 11:22 am

    Is there a government program that’s NOT full of fraud, waste, and abuse? NO!

    As a taxpayer, I’m sick of paying for other people to get the “freebies” I have to work hard for. Stop the cell phone subsidies and don’t even think anout providing “free” internet access. Stop the landline subsidies, too. Let private charities help with phones for those truly in need.

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  4. nickster99Comment by nickster99
    February 7, 2013 @ 3:05 pm

    Nobody needs to be a rocket scientist to know this! Come on we are talking about the obomination administration!

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  5. JackComment by Jack Moross
    February 7, 2013 @ 6:22 pm

    Just what good does it do to put this news in print? We read it, it makes us angry, we rant and rave about it, write to our Congress men and our Senators, and how much good does it do. Not one damm bit. We have the story in my old neighborhood of single family, two bedroom, one bath homes, of the single mother of three teen-aged girls, all with different fathers. There were two relatively new cars and each girl had her own cell phone and the family had no visible means of support. The mother petitioned HUD and was moved to a four bedroom, two bath home so that each of the girls could have a room of their own. This happened after the neighbors complained to the Social Worker that the family seemed to have it better then their working neighbors.

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  6. mach37Comment by mach37
    February 7, 2013 @ 7:19 pm

    This “free phone” thing is insidious in that it does not appear to be a tax, but it is actually a tax on phone numbers. It is sneaked in as a surcharge on the phone bill of every phone owner in the country. Unfortunately, as shown in the article, the “safeguards” to prevent misuse of the program are almost non-existent. Some entrepreneurs have managed to get large numbers of these phones and are selling them for their own profit; many YouTube videos show this in action.

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