FCC Hopes to Crack Down on Scams in the Lifeline Program

It’s been pretty easy to vilify the FCC under Trump-appointed Ajit Pai because, well, so much of what it plans to do is bad for the American people (and good for the telecommunications companies). But mobile app developers are split over Pai’s crackdown on Lifeline, a federal program that provides cheap phone and broadband service for low-income Americans. Pai wants to plug gaping loopholes in Lifeline and give the states the power to oversee the program. At first blush, his overhaul of the program sounds like a scheme to swipe affordable communications from down-on-their-luck Americans. However, the fact is that the program is seriously problematic, with $137 million in Lifeline payouts disappearing in 2017.

So where are those millions going? Before answering that, it’s necessary to give a brief overview of how the Lifeline program is structured. The program receives its funding not from our tax dollars, as mobile app developers might expect, but from telecommunications companies, who chip in a fraction of their revenues to the Universal Service Fund at the behest of the FCC. (Not-so-fun fact: that fraction of their revenues comes from hidden fees in our phone and internet bills — so it might as well be a tax.)This Universal Service Fund makes a variety of noble public services possible, including affordable internet connections for schools and libraries and subsidies for rural telecom services.

Unfortunately, the regulations on the eligible telecommunications providers that provide Lifeline services are unforgivably slack. They get a cut of the Universal Service Fund for every customer they sign up, which has lead enterprising (and very sketchy) telecom companies to exploit every loophole they can find in order to cash in. Scams include fudging subscription numbers, creating duplicate subscriptions, and signing up ineligible applicants, including the dead. One of these fly-by-night Lifeline providers, Total Call Mobile, scored $10 million by creating almost 100,000 fake subscribers. It’s exactly this kind of scam that Pai is hoping to deal with by applying stricter regulations to the Lifeline program. But San Diego mobile app developers with a largely justified distrust of Pai worry that these regulations will go too far and leave Americans who really need the program with no way to communicate.