CLAIRE McCASKILL
MISSOURI
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WASHINGTON, DC 20510
December 9, 2011
COMMITTEES
ARMED SERVICES
COMMERCE. SCIENCE AND
TRANSPORTAnON
HOMELAND SECURITY
AND GOVERNMENTAL AfFAIRS
SPECIAl COMMrTTEE ON AGING
AD HOC SUBCOMMIITEE ON
COJllTRACTING OVERSIGHT
"""""""
The Honorable Julius Genachowski
Chairman
Federal Communications Commission
445 12th Street, S.W., Room 8-B201
Washington, D.C., 20554
Dear Chairman Genachowski,
I write to bring to your attention to serious concerns I have with the Lifeline program, which the
Federal Communications Commission (FCC) oversees. I am aware that the FCC has begun to
scrutinize the Lifeline program closely and will soon be issuing a rule to increase controls on the
program. However, I remain troubled by the expansive potential for the program to be abused,
especially since Americans contribute to the program through their monthly phone bills.
I urge you to give the Lifeline program your personal attention to ensure all possible actions are
being undertaken by the FCC to prevent it from becoming a prominent source offraud, waste
and abuse. In the days ahead, I will also be exploring a range ofoptions to increase oversight of
the program, including launching a new Congressional investigation, seeking a Government
Accountability Office review and pursuing expanded reviews by the FCC Inspector General. I
would like to work with you on these options so thal we can address the problems that Lifeline
faces.
As you know, Lifeline is a program under the Universal Service Fund that has traditionally
provided discounts for wircline phones to qualified, low-income customers. In 2008, Lifeline
was expanded to provide prepaid wireless phones and discounts for wireless phone services.
Since the expansion of Lifeline to the provision of wireless services in 2008, there has been a
substantial increase in disbursements from the Universal Service Fund (USF). Startlingly, the
annual level ofdisburscments on the program has increased from $800 million in 2008 to
approximately $1.3 billion in 2010 and is expected to exceed $1.5 billion in 2011. In my home
Slatc of Missouri, the disbursements have more {han doubled from $8.05 million in 2008 to $17.1
million in 2011. I recognize that the poor economy has likely resulted in more people using the
program, resulting in some of the increase in disbursements. However, these two factors may
not alone account for a near doubling ofthe expenditures in the program injust three years.
The FCC and individual states designate private telephone carrier companies to administcr and
enroll individuals in Lifeline. The private carriers are responsible for verifying the eligibility of
any individual seeking to participate in Lifeline. However, the current requirements to determine
eligibility often do not require customer documentation for participation in Lifeline, which may
result in individuals receiving phones who should not be. In particular, once users receive cell
phones, there is little ability to control what is done with the phones. A user can potentially sell
or trade the phone in a barter transaction, putting the Lifeline phones into the hands ofthose for
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whom they are not intended. This leaves the intended recipient in the same scenario they were
before they received a phone, thereby completely undercutting the intent ofthe Lifeline program.
This scenario is troubling. It is among the key reasons why the Lifeline program demands
scrutiny, along with intense controls, in order to prevent fraud, waste and abuse.
As you likely know, on October 28, 20 I0, the Government Accountability Office (GAO) issued
a report on the status ofthe low-income phone provision programs overseen by the FCC and
funded by the USF. The report stated that lhe FCC has limited insight on the intent of the
programs, does not have proper goals and perfonnance measures and has not taken steps to
address the eligibility problems that are occurring. This report underscores the concerns I am
raising with Lifeline and the state ofthe FCC's controls on it.
I know that the FCC issued a Notice of Proposed Rulemaking (NPRM) in February, 2011,
regarding the Lifeline program in an effort to prevent abuse and improve the program's
performance measures. The proposed rule would require bener documentation for eligibility in
the program, increased controls to ensure households receive only one phone, and the
establishment ofa national database to bener track customers. A fmal order is due in the near
future.
I am pleased that the FCC is moving forward with the proposed rule. However, I fear that the
pending Order does not fully address the scope offraud, waste and abuse that may be occurring
in Lifeline. I request that the FCC provide the following infonnation to me so that I can further
explore the nature ofthe challenges facing Lifeline:
• The growth in the number ofcarriers participating in Lifeline since the wireless
expansIOn;
• The amount ofduplication and the number of ineligible customers the FCC has
discovered in the last three years;
• The number and scope of audits that have been conducted by the FCC since the wireless
expansion and details ofthe audit findings;
• The internal processes that the FCC has implemented to administer Lifeline and prevent
fraud, waste and abuse in the program.
As I consider options to expand oversight of the Lifeline program and to detennine ifchanges to
the program are required, I look forward to working with you to ensure this program is not
subject to expansive fraud, waste and abuse.
~re~,~c~~
Claire McCaskill
United States Senator