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Over 26,000 Ohioans abusing free cell phone plan

Federally required fee on phone bills buys phones for the poor.

William Whiteman of Centerville has a lifeline phone that he says he needs and wants abuse of the program to end so he can continue the use of the phone.

Teesha McClam William Whiteman of Centerville has a lifeline phone that he says he needs and wants abuse of the program to end so he can continue the use of the phone.

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By Josh Sweigart, Staff Writer Updated 10:08 PM Wednesday, November 23, 2011

Companies are flooding low-income households with free cell phones and minutes under a plan overseen by the federal government that is prone to abuse, a Dayton Daily News investigation has found.

The investigation found the free cell phone program is growing rapidly because cell phone companies are promoting it heavily and is so commonly abused that 26,500 Ohioans this month have been notified they are violating the rules.

The program is paid for with fees mandated by the government and tacked onto most cellphone and home phone bills, often listed as the Universal Service fee.

It is redistributed to phone companies that provide free or discounted service to low-income residents.

Those companies get up to $10 each month for each person who signs up.

A program subsidizing basic phone service for the poor has been around since the 1980s, but the decision in 2005 to add prepaid cellphones to the program has led to ballooning costs and little oversight of the rule that each household only gets one free phone or discounted line, the Dayton Daily News investigation found.

Enrollment in the program in Ohio has grown from 280,000 in 2008 to nearly 600,000 this year, and the cost of the program in Ohio has grown from $30.4 million in 2008 to $58.9 million in 2010.

Letters went out last week to 26,500 people in Ohio — 5 percent of all subscribers — who are suspected of signing up for more than one line. This could mean as much as $265,000 a month in over payments. The letters give phone users 35 days to pick one carrier.

This is part of an effort by the Federal Communications Commission that has identified 269,000 people in 12 states suspected of abusing the system with more than one subsidized phone or land line.

The number of prepaid cellphone companies offering the service in Ohio grew from one last year to four this year. Four more companies are awaiting approval from the Ohio Public Utilities Commission. One provider, TracFone, which markets its free service by the brand name SafeLink, was the only provider offering the service in Ohio since 2009 and averaged $3.5 million in revenue a month through the fall. Assurance Wireless, which is owned by Sprint, entered the Ohio market in May and took in $2.2 million in October.

That competition has led to the program becoming more visible, but also more susceptible to abuse. The competing companies do not typically share information to check whether a new applicant is already receiving free service from another provider.

“The ... program itself, which provides subsidized cellphones, has been subjected to a lot of waste, fraud and abuse,” said Tom Schatz, president of the advocacy group Citizens Against Government Waste. “People were getting multiple cellphones, they were selling them on Craigslist, so clearly people know how to take advantage of a program like this.”

Proponents of the program say, when the service is used properly, it ensures that the poorest Americans still have basic access to call 911, emergency assistance or help them get and keep jobs.

To qualify for the program, someone must be enrolled in one of numerous federal programs — such as Medicaid, food stamps, Section 8 or free school lunch — or make below 150 percent of the federal poverty level, which is $33,525 for a family of four.

‘It’s a blessing’

Centerville resident Tommy Whiteman, 29, saw an ad for Assurance on television about six months ago, applied online and had his phone within a week.

Whiteman was diagnosed with cancer when he was 12. His cancer has been in remission since 1996, but the treatment caused a host of health problems that left him unable to work.

With four children under age 9, regular doctor’s appointments and occasional calls for an ambulance, Whiteman said being without a phone “would be kind of a scary situation.” But on a fixed Social Security income, he said his regular cellphone is frequently turned off when he can’t make the payments.

“This is what I bounce back on,” he said. “It’s a blessing actually.”

Whiteman said he knows numerous people who either get multiple phones through different vendors or get phones for which they don’t qualify.

“From what I’ve seen it isn’t clear they can’t have both,” he said. “That needs to be more clear.”

But any change to the program should preserve it, he said. “People need it.”

The FCC administers the program under a mandate to make basic service available to all Americans.

“More and more families are cutting the cord to their home phone and just using their wireless phones, which can be more helpful in emergencies, or if you’re on the road or if you need to give it to a kid to be safe,” said FCC Spokesman Mark Wigfield.

Program expands from 1 company to 8

The service has many names in Ohio. New TV commercials tout the Assurance phone, which was one of three prepaid wireless providers to enter the Ohio market this year. Assurance offers a free handset and up to 250 free minutes a month with the option of “topping up” 250 minutes for $5 more paid by the user. That phone is offered through Virgin Mobile.

The other new plans are i-wireless from Cincinnati Bell and ReachOut Wireless from Nexus Communications. Cincinnati Bell charges for the phone itself and roaming charges, and offers plans starting at 250 minutes a month for free. ReachOut closely resembles TracFone’s plan.

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