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FCC urges state officials, others to address phone fraud

States asked to be more aggressive in policing the free phone program.

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By Josh Sweigart, Staff Writer 11:59 PM Wednesday, December 14, 2011

The Federal Communications Commission this week urged officials in Ohio and other states to start taking a stronger role in addressing fraud in a federal program that provides free cellphones and discounted land lines to low-income households.

This follows an enforcement advisory last week saying the agency recently learned that certain phone companies were in violation of requirements that they make sure someone doesn’t already receive the service before enrolling them for another line.

The Dayton Daily News reported last month that the FCC had identified 26,500 people in Ohio — and 269,000 people in 12 states — suspected of abusing the program, called Lifeline, by having more than one line.

Other efforts being taken nationwide to address suspected misuse of the program include a $1.5 million settlement reached in February with an Alaskan company suspected of getting paid for signing up ineligible subscribers. Wisconsin officials ended subsidies this month to a company under suspicion of fraud there.

“Fraud or abuse in the Lifeline program is simply unacceptable, and we are moving aggressively to identify and stop bad actors,” said FCC Spokesman Mark Wigfield.

The FCC urges utilities commissions to “join the FCC in our efforts to reform the Lifeline program by closely scrutinizing the requests for (a) designation pending before you, to be on guard for abuse by (companies) designated to provide Lifeline service in your states, and to take swift action when necessary to protect the program.”

The program pays up to $10 a month to phone companies that provide free or discounted cellphone or land-line service to people who qualify for other federal programs, such as food stamps or Medicaid. It is paid for by a Universal Service fee tacked onto most consumers’ phone bills.

Four prepaid cellphone companies offer the service in Ohio; four more companies are awaiting approval from the Ohio Public Utilities Commission. There are nearly 600,000 participants in the program in Ohio, the Daily News found, and the program last year cost $58.9 million. Federal regulators say this growth is driven by the prepaid services.

The FCC also is considering setting a cap in how costly the program could become, creating a national database of users and cutting off service to users whose phones go unused for months. This process is nearing completion, officials said.

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