FCC Chairman Ajit Pai announced today that he has asked the agency’s Enforcement Bureau to investigate Sprint Corp.’s claims for monthly Lifeline subsidies for 885,000 subscribers who did not use the supported Lifeline service, in violation of the FCC’s “non-usage rule.”
The announcement triggered calls by some parties for the FCC to put its consideration of the proposed merger of T-Mobile US, Inc., and Sprint on hold while investigating the Lifeline issue. Chairman Pai circulated a draft order to approve the merger last month (TR Daily, Aug. 14).
In a press release announcing the discovery of Sprint’s claims, the FCC said that the 885,000 subscribers “represent nearly 30% of Sprint’s Lifeline subscriber base and nearly 10% of the entire Lifeline program’s subscriber base.”
“Under the non-usage rule, providers of free service may only be reimbursed for a Lifeline subscriber if that subscriber has used the service at least once in the past 30 days. Providers must de-enroll inactive subscribers after giving them 15 days’ notice. Program-wide, the rule resulted in approximately 3.1 million de-enrollments in 2018,” the FCC added.
Chairman Pai said, “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. 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.”
For consumers whose Lifeline service is free after the monthly $9.25 monthly subsidy—a typical result for consumers using the subsidy for a mobile Lifeline product such as Sprint provides, the FCC noted —— there is no incentive to cancel the service, even if they’re not using it, the agency observed.
“While ongoing FCC reforms have taken a bite out of waste, the latest report by the FCC Inspector General shows that 18.5% of payments made by the program were improper,” the FCC said in the press release.
It noted that “Sprint’s apparent disregard of the non-usage rule initially came to light as a result of an investigation by the Oregon Public Utility Commission.”
Chairman Pai thanked the Oregon PUC, adding, “States are an important partner with the FCC in both helping low-income consumers get access to affordable communications through Lifeline and cracking down on waste, fraud, and abuse in the program.”
Republican FCC Commissioner Mike O’Rielly was asked by reporters today if the FCC should delay consideration of the pending order to approve T-Mobile US, Inc.’s proposed merger with Sprint in light of today’s revelations. “I need to digest what’s actually happening,” he replied. He said he has already voted on the draft order but declined to say how he voted. He has said in the past that he was inclined to support the deal.
Commissioner O’Rielly also said he understood that Sprint reported the Lifeline issue to the FCC, which he commended.
In a tweet today, Democratic FCC Commissioner Jessica Rosenworcel said, “When companies abuse the Lifeline program we should throw the book at them.
“Here’s what we shouldn’t do: Kick off the millions of seniors, veterans, and domestic violence shelters nationwide that rely on this program to stay connected,” she added.
In a statement, Democratic FCC Commissioner Geoffrey Starks said, “The misconduct alleged today, if true, amounts to corporate malfeasance. A single company apparently misappropriated funds for nearly 10 percent of the entire Lifeline program. I am outraged. Our universal service dollars are precious. Every dollar must get to its intended recipient. This is particularly true for our Lifeline program, which makes communications services affordable for the most vulnerable communities. Addressing internet inequality is one of the FCC’s most pressing and important responsibilities, and Lifeline and our other universal service programs are our most powerful tools to do so, particularly for Americans in rural areas and communities of color.”
Commissioner Starks added that the announcement “directly impacts our review of the proposed merger between Sprint and T-Mobile, one of the largest wireless transactions in FCC history. Given the enormity of the apparent wrongdoing committed here, we must pause our Commission review. The draft order relies heavily on information submitted by Sprint, a company alleged to have over-collected Lifeline support, and inaccurately accounted for nearly 1 million inactive Lifeline accounts. How the merging parties were going to handle Lifeline was a prominent part of their merger pitch, so I am alarmed and concerned about such a massive inaccuracy in a core part of the transaction. And why was it that an outside party brought this issue to the FCC’s attention—shouldn’t the FCC have uncovered this? Such apparent misconduct raises serious questions about the accuracy and completeness of both the company’s filings in the merger proceeding and our review.”
He argued that “[t]here is no credible way that the merger before us can proceed until this Lifeline investigation is resolved and responsible parties are held accountable. Without the benefit of the findings of this investigation into what appears to be the worst case of Lifeline violations in FCC history, it is impossible for us to trust in the integrity and completeness of the record, evaluate the character and fitness of the applicants, and exercise our statutorily defined obligation to grant only license transfers that serve the public interest. I call for our staff to conduct a thorough review during this pause—the integrity of our merger review process is at stake.”
He added, “As a former enforcement official, I’m acutely aware of the Commission’s history of strong penalties against carriers that have violated the program’s rules. … Finally, with this latest disclosure, the Commission now has multiple high-profile investigations implicating Sprint and/or T-Mobile that, to this date, remain unresolved including allegations of the dangerous and unlawful disclosure of wireless customer geolocation information, and the submission of inaccurate coverage data in the agency’s Mobility Fund II proceeding.”
Sprint did not respond to TR Daily’s request for comment.
Debbie Goldman, director – research and telecommunications policy for the Communications Workers of America, said in a statement, “The FCC must pause the T-Mobile/Sprint merger review pending an investigation into Sprint's fraud and abuse of the Lifeline program. This fraud calls into question the character of Sprint as a licensee. FCC precedent is clear that a company cannot sell a license until the character issue is investigated and resolved.” —Lynn Stanton, [email protected], and Paul Kirby, [email protected]
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