Wall Street Journal - Georgia Slaps $5 Fee on Free Cellphone Service for Poor

January 29, 2014
In The News

State Is Nation's First to Charge Low-Income People Who Participate in Federal Lifeline Program

By Gautham Nagesh

Georgia has become the first state to charge a fee to low-income people who receive free cellphone service through a federal program, saying the move would combat fraud.

The Georgia Public Service Commission voted 3-2 Tuesday to approve a $5-a-month charge on participants in the Lifeline program, which is designed to ensure low-income households have access to basic communications services.

Georgia Public Service Commissioner Doug Everett, who proposed the rule, said the program's structure encourages wireless providers to sign up as many customers as possible to rake in taxpayer-funded subsidies, without first verifying their eligibility. Each eligible household is supposed to get only one phone with free service.

Mr. Everett, a Republican, said his rule was motivated as much by carriers' aggressive sales tactics as by consumer abuse. "I believe the program is broken," he said. "We found multiple phones in the same household because no one is verifying or checking information."

Carriers that sign up a participant receive a $9.25 monthly subsidy from the Universal Service Fund, money that comes from a monthly charge on consumer phone bills.

Under the new rule, participating carriers in Georgia must bill Lifeline consumers $5 every month starting Jan. 31, or provide them with 500 minutes of call time per month. Currently, carriers typically provide much less than that. The rationale is that having to offer 500 minutes would be enough to deter companies from aggressively courting Lifeline customers.

Defenders of the program said the new charge was a burden on low-income households that rely on Lifeline for emergency communications.

"Lots of people, especially targets of the Lifeline program, don't have a bank account," said National Hispanic Media Coalition general counsel Jessica Gonzalez. "This is an amount of money that forces some to make decisions about food versus communications."

Lifeline is limited to households at or near the poverty line, or those participating in other federal assistance programs such as food stamps or Medicaid. Federal spending on Lifeline swelled to $2.19 billion in 2012 from $819 million in 2008, fueling criticism in Congress.

Rep. Tim Griffin (R., Ark.) said waste, fraud and abuse in the program has been "overwhelming, rampant, and well-documented." Mr. Griffin praised Georgia's new rule, arguing it would cut back on the more abusive practices. "I think it's a small price to pay, and I think it will deter some of the folks that are getting 10, 20, and 30 phones," he said. Participants who receive multiple phones could use them to get around monthly limits on minutes.

But Rep. Anna Eshoo (D., Calif.) said the measure wouldn't prevent fraud and said federal efforts were the best way to improve the program.

The Federal Communications Commission has been building a national database that would verify participants' eligibility. The FCC recently moved to fine five carriers a total of $14 million for allegedly abusing the program. Officials at the FCC, which has been closed during the government shutdown, didn't respond to requests for comment.

TracFone Wireless, a unit of Mexican telecommunications company América Móvil, is one of the leading Lifeline providers. TracFone spokesman Jose Fuentes criticized Georgia's commission for intervening in what he said was a federal issue. "Clearly it's purely political gain and motives behind this," Mr. Fuentes said.

Mr. Everett and Mr. Fuentes agreed that a legal challenge by Georgia's Lifeline carriers is likely. If it stands up in court, the state rule could be the start of a "snowball effect" and lead other states to move against the telecom subsidy, Mr. Fuentes said.