The federal Lifeline program is managed by the Federal Communications Commission.

Edward Gately, Senior News Editor

September 14, 2017

3 Min Read
Telecom Lifeline Program Comes Under Fire For Alleged Waste, Fraud, Abuse

A federal subsidy for telephones and internet access for low-income Americans has come under fire for alleged fraud and waste.

According to a Reuters report, Sen. Ron Johnson, who chairs the Homeland Security and Government Affairs Committee, said at a hearing Thursday that Congress should consider ending the Universal Service Fund (USF) program, known as “Lifeline,” which spends about $1.5 billion annually to help 12.3 million U.S. households afford landline and mobile phones. The program is managed by the Federal Communications Commission.

“The Lifeline program has been plagued by waste, fraud and abuse,” Johnson said in the report. “This is a real head-shaker.”

During the hearing, FCC Chairman Ajit Pai said because the program “lacks adequate safeguards; it has paid for subscribers who are not eligible to participate, potentially to the tune of hundreds of millions of dollars a year.”


FCC’s Ajit Pai

“This is doubly destructive: Every dollar wasted comes from the pockets of ratepayers and does nothing to help low-income families actually in need of communications services,” he said. “The FCC owes it to everyone who contributes to or receives benefits from the Universal Service Fund to make sure the Lifeline program is efficient, effective, and free of waste, fraud and abuse.”

In its investigation, the U.S. Government Accountability Office was unable to confirm whether more than 1.2 million individuals, or 36 percent of the sample reviewed, were eligible for participation, Pai said. The GAO said this likely understates the magnitude of ineligible subscribers receiving benefits, he added.

“The GAO report also raised concerns regarding universal service funds being held in a private bank outside of the U.S. Treasury,” he said.

Because of this, the FCC is working to implement a plan to move Lifeline funds to the U.S. Treasury Department “as soon as possible in recognition of the fact that these are federal funds,” Pai said.

Wisconsin Congresswoman Gwen Moore, New Mexico congress members Michelle Lujan Grisham and Steve Pearce, and Minnesota Congressman Keith Ellison, sent a letter to Pai asking him to reconsider this “misguided action.”

“The USF is important to communities across the country and plays a key role in helping rural communities bridge the digital divide,” the letter said. “It provides access to telemedicine in rural areas through increased connectivity (Rural Health Care Program), phone and broadband services for low-income Americans (Lifeline Program), discounts to schools and libraries (E-Rate Program), and funding to companies working to maintain and expand broadband infrastructure in underserved or unserved areas (Connect America Fund).”

The funds are generated by telecommunications providers that pay a quarterly fee, and are overseen by the Universal Service Administrative Company (USAC), according to the letter.

“We do not condone waste or abuse in any program,” the letter said. “However, there are other options to pursue the goal of reform without resorting to transferring the USF to Treasury. The FCC has already begun implementation of its 2016 Lifeline Modernization Order, which outlines modernizing reforms to reduce fraud. One of the initiatives in the order directs USAC to develop a National Lifeline Eligibility Verifier (National Verifier) to determine subscriber eligibility. Under the 2016 Order, service providers would also be responsible for recertifying subscribers within a 12-month time period.”

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About the Author(s)

Edward Gately

Senior News Editor, Channel Futures

As news editor, Edward Gately covers cybersecurity, new channel programs and program changes, M&A and other IT channel trends. Prior to Informa, he spent 26 years as a newspaper journalist in Texas, Louisiana and Arizona.

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