FCC Republican raises new questions about phone subsidy fraud

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The senior Republican on the Federal Communications Commission is raising new concerns about possible fraud in a federal program that provides phone and internet subsidies for low-income people.

The FCC’s Lifeline program has protections in place to prevent households from receiving more than one subsidy. But phone carriers are also able to override those safeguards if someone is eligible for the program and sign them up.

{mosads}FCC Commissioner Ajit Pai says his office has identified an abnormally high number of people being cleared for subsidies through that particular method and wants more scrutiny on phone and internet providers.

“It seems pretty clear to me that there are substantial problems with the way the program is being administered now and that unscrupulous actors have no problem filling the vacuum, so to speak, when the enforcement mechanism isn’t robust,” he said during a briefing with reporters.

“When 5.8 million out of 12 million, or roughly 48 percent, of the total number of enrollments are the result of an override where the carrier essentially … tells the FCC through [the Universal Service Administration Company], ‘We pinky swear that this is a legitimate subscriber,’ it does make you wonder as both taxpayers and people who are charged with administering this program what exactly is going on here,” he added.

His office said that one method accounts for more than a third of the subscribers in states that track enrollments using a certain database.

The exemptions are intended to deal with one potential issue in the program: Applicants can run into problems if they apply with an address where someone already receives a subsidy.

But it’s possible that more than one household could reside at the same address — as at a homeless shelter or a group house. Applicants can verify on a form that they are an independent economic household and override the system to get a subsidy.

In a Wednesday letter to Chris Henderson, the chief executive of the Universal Service Administrative Company, Pai asked several questions about the use of the exemption in question. [READ THE LETTER BELOW.]

He said that “just one year of service for these apparent duplicates costs taxpayers $476 million.”

The Lifeline program originally covered phone subsidies, but the commission approved an update in March expanding it to include internet service. Among the changes was a new national system for verifying that Lifeline customers were indeed eligible for the program. But that verification system has yet to be put into effect.

The FCC later announced a roughly $51 million fine against Total Call Mobile, a carrier that allegedly over-billed the government for Lifeline subsidies.

Pai said on Wednesday that the allegations against Total Call demonstrated that carriers could abuse the system to sign of duplicate customers and bilk the government.

“The Lifeline program must be designed both to prevent abuses and to make sure that lifeline is available to those that need it most, including the homeless population,” said FCC spokesperson Mark Wigfield in an email on Wednesday. “A critical piece of the Lifeline reforms adopted by the majority of the Commission in March included creation of an independent National Lifeline Eligibility Verifier, which will take the responsibility for verifying subscriber eligibility out of the hands of the provider and transfer it to a third party.”

“Taking this determination away from the companies that stand to benefit financially will remove the program’s major remaining vulnerability to waste, fraud and abuse.”

Pai Letter

–This report was updated at 2:40 p.m.


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