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The Honorable Mignon Clyburn
Acting Chairwoman
Federal Communications Commission
445 12th Street, SW
Washington, DC 20554
Dear Chairwoman Clyburn:
'mnitEd ~tat£.S ~rnatc
COMMITTEE ON THE BUDGET
WASHINGTON, DC 2051()-61OQ
August 15, 2013
I write to express serious concerns about the Lifeline program, a part of the
Universal Service Fund (U5F) that, according to the Congressional Budget Office, outlayed
more than $9.3 billion in FY2012.
The original intent of the Lifeline program was to provide discounted, subsidized
phone service to qualifying low-income consumers so that they would have a way to
contact employers, family members, and emergency services. Although the initial program
was limited to land lines, it has now been expanded to include wireless or cellular phones.
Crucially, participation in the program is supposed to be limited to those who have an
income that is at or below 135% of the poverty level or participate in one of the many
federal assistance programs, such as SNAP or Medicaid. Federal rules limit Lifeline phones
to one per household. I am concerned that these basic, but fundamental, rules are not being
enforced.
In a recent article in National Review, "Me and My Obamaphones," the writer offers
a "confession" that readers are paying her phone bill and details how she does not meet any
of the eligibility requirements listed above, but has received three Lifeline phones. (That
article is attached.) The failure to check applicants' eligibility might be one of the reasons
the Lifeline program has more than doubled in recent years - from $822 million in 2008 to
over $2 billion in the latest arulUa} report from the Universal Service Administrative
Company (USAC).
I want to understand what your agency is doing to eliminate abuses within the
program, and why previous efforts appear to be insufficient. To this end, please respond to
the following:
1. What is the process for verifying eligibility from those seeking to enroll? Is this
controlled by the FCC, the states, or the service providers?
2. Is there a verification process for those currently enrolled to assure continued
eligibility? Please provide the details of the process and the number of
individuals found ineligible through this review.
3. In the initial verification process, how does the FCC or service provider
crosscheck to see whether a participant is participating in a qualified federal
program or not living in a household where a Lifeline phone is already present?
4. How long does it take to process an application for Lifeline service and are
providers required to delay providing a phone or service if they become aware
that another application is pending or that another provider is servicing an
account?
5. The underlying intent of Lifeline was to provide "security." Are the phones,
often provided free-of-charge by providers, limited in capability? That is, are the
phones capable of texting or using social media or other web-enabled
applications?
6. How much service does participation in the Lifeline program provide? Does the
program provide any funding for data or text transmissions? How many minutes
per month does the program pay for participants?
7. How are participating service providers selected and are there eligibility
requirements for providers? Explain the financial incentives for providers and
how they are compensated.
8. There appears to be an ongoing recruitment process to enroll people in Lifeline.
Is the FCC in charge of the recruiting process and how are those recruiters paid?
Is payment for recruiters provided through USF? Are recruiters offered bonuses
for the number of individuals enrolled or for those who apply, or are you aware
of any other type of incentives that could increase taxpayer costs by targeting
individuals for enrollment beyond the intended scope of the program? The
USAC Annual report indicates that in 2012, administrative expenses were $110
million. Of that, how much was spent on recruitment material and persOIUlel for
the Lifeline program?
9. What is the process for monitoring provider activity? Have any providers been
sanctioned or debarred by the FCC for over-enrollment or failing to properly
verify eligibility?
10. According to the FCes own review, a number of customers have been found to
be in violation of the one phone per household limit. In those instances, are those
customers disqualified from participation the program? Are there any sanctions
for customers that violate the parameters of the program, criminal or otherwise?
It is important that all federal programs be effectively administered and that these
programs adhere to the highest standards in order to protect the funds provided by the
American people. The news article suggests serious flaws in this program. These public
concerns must be addressed.
Please have your staff provide this information both in hard copy and in an
electronic, searchable format no later than September 26, 2013, to William Smith on the
Senate Committee on the Budget. If you have any questions, please contact me or have your
staff contact Mr. Smith at (202) 224-6308 or william_smith@budget.senate.gov.
verytr~
Jeff Sessions
Ranking Member
cc: FCC Commissioner Ajit Pai
FCC Commissioner Jessica Rosenworcel
National Review Online I Print http://www.nationalreview.comlnode/354867/print
PRINT\fNoI'.N.NATK>NALRE\IlEW.COMNATK>NAL REVIEW ONLINE
AUGUST 1, 2013 4:00 AM
Me and My Obamaphones
Not on welfare or below the poverty line? Never mind - here's your free phone.
By Jillian Kay Melchior
ConfeSSion: You're paying my phone bill.
In the past month, 1 have received three shiny new cell phones, courtesy of American
taxpayers, that should never have fallen into my hands.
The Federal Communications Commission oversees the so-called Lifeline program,
created in 1984 to make sure impoverished Americans had telephone service available
to call their moms, bosses, and 911. In 2008, the FCC expanded the program to offer
subsidized cell-phone service, and since then, the expenses of running the program have
soared. In 2012, the program's costs had risen to $2.189 billion, up from $822 million
before wireless carriers were included. As of June, there were 13.8 million active
Lifeline subscriptions.
To be eligible for Lifeline, the applicant is supposed to be receiving some significant
government benefit - food stamps, Medicaid, Supplemental Security Income, public
housing assistance, etc. But because welfare eligibility has expanded under the Obama
administration, more people than ever before are qualified to receive "free" cell-phone
service - part of the reason why Lifeline mobiles have become commonly known as
Obamaphones. Alternatively, applicants can qualifY if their household income is less
than 136 percent of the federal poverty line.
But as with any federal program with too much funding, too little oversight, and
perverse fmancial incentives, Lifeline has become infamous for rampant fraud and
abuse. There have been news reports about recipients flaunting dozens of subsidized
phones. And in February, the Wall Street Journal reported on an FCC audit of the top
five Lifeline providers, which found that "41 % of their more than six million subscribers
either couldn't demonstrate their eligibility or didn't respond to requests for
certification."
The FCC supposedly buckled down on eligibility standards last year and established
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other safeguards aimed at reducing fraud. I was curious about how tough it was to get
one of these phones, so last month, I hit the streets of New York. And out of respect for
the law and my journalistic integrity, I did not lie to obtain a phone.
Now is the point, I suppose, where I should explain that I really, really shouldn't have
received a single phone. Despite what you hear, not all 20-something writers in the Big
City are starving. Given my earnings, even if I were supporting a family of eight, my
income would still rule me out. Nor do I receive any type of government benefit. By the
Lifeline program's standards, I am unambiguously ineligible.
My first task was figuring out where to register. The rule of thumb is that wherever you
can sign up for food stamps, you can apply for an Obamaphone.
Representatives from SafeLink and Assurance, two of the leading New York Lifeline
vendors, stand outside the food-stamp offices, paired like Mormon missionaries, young
and polite and earnest. They carry electronic tablets and ask all passersby whether
they've received their free phone "yet" - as if it were an inevitability.
They approached me for the first time outside the food-stamp office at Tenth Avenue
and 216th Street, on the northern tip of Manhattan. The SafeLink vendor, a man
probably in his mid 20s, asked me whether I was enrolled in any benefit programs.
"No," I said, "but I'd certainly like to be. I'm hoping to be." And indeed, while doing
research for another story, I had gone through the motions of applying for New York
City welfare, which Talso don't qualify for. I showed him my Human Resources
Administration paperwork packet and the case number assigned to me. 1reiterated that
though I had once applied, I had never been approved for any sort of benefit.
He brought out his electronic tablet immediately to sign me up for phone service. He
asked if I had an insurance card, so I pulled out my trusty Blue Cross Blue Shield. He
looked at it for a second, puzzled, then asked if I had Medicaid. No, I told him, just
private insurance through my work plan.
"Private insurance? What's that?" he asked, maybe not facetiously. My BCBS card was
nevertheless photographed, as well as the first page of my Human Resources
Administration paperwork. He asked for my name and my home address, and that was
about it. The whole process took less than five minutes, and I had to provide no
documentation verifying my income level or (nonexistent) welfare status.
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The SafeLink vendor then referred me to his opposite number, a rep from Assurance.
She too took down my information, registering me for another Obamaphone.
Traveling to several of the welfare offices in the city, I learned this was common
practice. Obamaphone reps come in twos, and both will sign you up if they can.
That's a very questionable practice, given the Lifeline program's rules: Each eligible
household may receive only one Lifeline subsidy, and obtaining multiple subsidized
phones from multiple Lifeline carriers is "a flat-out violation of our rules," says
Michelle Schaefer, an attorney-adviser from the FCC's Telecommunications Access
Policy Division, Wireline Competition Bureau.
Schaefer also tells me that "consumers are, on their applications, required to certify
under penalty of perjury that they will only be receiving one Lifeline discount."
But when I went around New York signing up for multiple phones, I never even saw the
applications; SafeLink and Assurance vendors filled out the necessary forms on their
tablets on my behalf, clicking through so quickly that it must have been nearly muscle
memory. And nobody mentioned perjury.
Granted, the first question the wireless reps asked was usually whether I was already
enrolled in the Lifeline program. I told the truth: I had signed up recently, but the phone
hadn't arrived in the mail yet. Almost always, that got me re-entered into the system
without hesitation.
When I did receive my SafeLink phone a few days later, I started informing vendors that
I did have one Lifeline phone. They assured me that the Lifeline program permitted me
to have one phone from each participating wireless provider - which simply isn't true.
Maybe there's a disconnect between the corporate offices of wireless providers and their
men on the street; a letter I later received from Assurance mentioned that "a household
is not permitted to receive Lifeline benefits from multiple providers. Violation of the
one-per-household rule constitutes a violation of federal rules and will result in
de-enrollment from the Lifeline program and potentially prosecution by the United
States government."
But the wireless providers aren't doing much due diligence, if my experience is
indicative.
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At the Union Square location, a SafeLink rep noted that I was already approved for a
phone and declined to re-enter my information - but the rep from Assurance, standing
only a few feet away, readily signed me up.
At the welfare office on Schermerhorn Street in Brooklyn, a vendor hesitated when I
told her that I'd already applied but the phone had not yet been delivered. "Surely your
system will catch ifI'm actually enrolled," I told her. She sluugged and signed me up
once more.
At the DeKalb Avenue office in Brooklyn, when I told the rep I wasn't receiving
welfare, I was signed up for a phone but cautioned that I might well be denied upon
secondary review.
And at one Lifeline location in East Harlem, I walked up to the wireless representative
talking very loudly on my own smartphone. I hung up only to answer her questions.
Now, keep in mind that the program is supposed to provide cell-phone service to people
too poor to afford any phone whatsoever - but my application for a subsidized mobile
was happily submitted, even as I dinked around very obviously on my existing
smartphone.
So here's the final count: I was able to apply on the street for one SafeLink phone and
seven Assurance phones. I received one SafeLink phone and two Assurance phones, no
questions asked. For several other applications, Assurance sent me requests for more
financial information.
Finally, I received one other letter, full of grammatical errors, informing me that "there
is already an Assurance Wireless account established at this address" and requesting
further information about my application. I find it curious that Assurance caught a
duplicate only once, considering that I've got seven entries in their system, and that they
have on file my name, address, HRA case number, and, in some instances, photos of my
insurance card and driver's license. SafeLink was slightly better about catching
duplications on the street, but it still gave me a phone when it shouldn't have.
Since receiving my undeserved phones, I've repeatedly tried to reach both SafeLink and
Assurance press reps for comment, all to no avail. Their corporate offices have sent me
the numbers of their customer-service centers, which are easily accessible and happy to
offer plan upgrades to Lifeline clients.
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Representative Tim Griffin (R., Ark.) has long opposed the Lifeline wireless subsidies,
making it a pet cause. He reiterated the basic point 1 had learned from this experience:
The problems began when the federal government got in the business of providing free
cell phones, and the FCC's recent reforms aren't sufficient.
"I sawall the horror stories of people getting 10, 20, 30, 40 phones," Griffin says, "the
[wireless] companies not paying a lot of attention and in some cases no attention to who
was getting them and whether they were getting duplicates."
And if you've been wondering why the companies are so eager to hand out free phones,
the incentive is built into the program. As Griffin explains, "Ofcourse, the way the
program was set up, [wireless companies] were getting money for every one they could
give out, so they gave out as many as they could."
And still do.
- Jillian Kay Melchior is a Thomas L. Rhodes Fellow for the Franklin Center for
Government and Public Integrity.
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