Vitter trades fire with 'Obama phone' firm

Sen. David Vitter (R-La.) and TracFone Wireless, a pre-paid cellphone carrier, are hurling accusations at each other over a federal phone subsidy program for the poor.

The company has claimed that Vitter is trying to gut a program that was "born out of" Hurricane Katrina, while Vitter has accused TracFone of profiting from a wasteful government hand-out.

The program, called "Lifeline," has been pejoratively referred to as the "Obama phone" program, although it began long before Obama took office. It had its genesis as a subsidy for landline phones in 1985 and expanded to cover cellphones in 2008, during the George W. Bush administration.

The spat began when Vitter and other GOP senators introduced a bill earlier this month to end a provision that relates to the cellphones portion of the fund.

“This phone program has expanded far beyond its original intent, and as so many middle class Americans struggle underneath this economy, it is really offensive for Washington to make taxpayers pay for free cellphones for others,” Vitter said in a statement when he offered the bill.

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The program, which is managed by the Federal Communications Commission, subsidizes phone service, not the phones themselves. But many companies that receive funding through the program offer free and low-cost phones to their subscribers. The program is funded through fees that the telephone companies pass on to consumers on their monthly bills, not taxes.

The program accounts for about $.40 in fees on every monthly phone bill, according to TracFone.

Supporters of the program, including Acting FCC Chairwoman Mignon Clyburn, argue the program helps people call 911 during emergencies, stay connected with family members and get a job.

TracFone is the largest recipient of Lifeline funding, receiving $440 million last year to subsidize service for 3.9 million low-income households. The company has been running ads in Beltway publications defending the program, and it registered to lobby on the issue for the first time in March. TracFone is owned by Mexican billionaire Carlos Slim.

Last week, the company ran an advertisement in the New Orleans Times-Picayune attacking Vitter for his efforts to end the program.

The ad featured an aerial picture of a flooded New Orleans with the headline: "Lifeline's wireless benefit was born out of Katrina."

"Senator David Vitter must have forgotten," the company wrote.

The ad explained that in the aftermath of Katrina, the FCC created a temporary free cellphone service program for people displaced by the storm. Following that effort, the FCC decided to permanently expand Lifeline to cover cellphone service.

"Today, this vital benefit helps seniors, veterans and low-income families stay connected to their communities, first responders and employers," the company wrote.

TracFone warned that Vitter's bill would "hurt a lot of families in Louisiana who struggle each day to make ends meet."

In response, Vitter held a press conference last Monday in New Orleans to say a sardonic "thank you" to TracFone for paying for an ad that draws attention to "this out-of-control, fraud-ridden entitlement program.”

He claimed the ad was "misleading" for tying Katrina to the Lifeline program, noting that the FCC did not expand the program to cellphones until three years after the hurricane. He also noted that TracFone CEO F.J. Pollak and his wife have donated to Democratic campaigns.

"I fail to understand how our participation in the American political process (a constitutionally-protected right) or our party affiliation has relevance to TracFone's participation in the Lifeline program," Pollak shot back in a letter to Vitter.

He accused the GOP senator of spreading "falsehoods" about the program to score political points. He noted that Lifeline does not affect the federal budget deficit, is smaller than the FCC's subsidy for rural phone service and suggested that Vitter might want to "clarify" his remarks so as not to mislead his constituents.

But even the program's supporters have admitted that it has suffered from waste and fraud.

Last year, the FCC toughened Lifeline's eligibility standards and created a database to ensure that multiple companies were not receiving subsidies to provide service to the same customer.

Those reforms trimmed $200 million from the program last year and are on track to save $400 million this year, according to the FCC.

Although Vitter's bill to end the cellphone portion of Lifeline has yet to receive a Senate vote, he offered a similar proposal as a non-binding amendment to the budget resolution earlier this year.

The Senate rejected Vitter's proposal in a 53 to 46 vote, with Sen. Claire McCaskill (D-Mo.) as the only Democrat to join Republicans in voting to end the program.