TracFone defends its FCC Lifeline pilot program to expand mobile broadband access

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América Móvil's U.S. MVNO, TracFone, offered additional details on its pilot program to deliver mobile broadband to low-income Americans as part of the FCC's Lifeline initiative. The action was a response to criticism that TracFone called in political favors in order to participate in the program, and that the program itself is not effective.

At issue is a $13.8 million program the FCC established last year to solicit ideas on how its Lifeline program could be structured to deliver broadband services to low-income households. The FCC selected 14 projects from a range of companies, including T-Mobile Puerto Rico and Sprint Nextel (NYSE:S) prepaid brand Virgin Mobile, that will use the money to deliver broadband to select areas.

TracFone said it submitted two different pilot project proposals, one of which was selected by the FCC. TracFone said that Lifeline support for its pilot project is capped at $915,000.

In a statement, TracFone said its project will be carried out in Florida, Maryland, Massachusetts, Texas, Washington and Wisconsin. The MVNO is working with a firm called Technology Goes Home, and will test different combinations of free or discounted hardware, including smartphones, and plans priced at $10 or $20 per month, using four test groups and a control group. In an FCC filing, the pilot program's description said that "by comparing the two variations in offers with the control group, which is priced at market rate, TracFone will be able to estimate the take-rate for each price point with 2 GB on data limits."

After TracFone was selected for the program, the company came under scrutiny by news outlets such as the Washington Times and Fox News because TracFone CEO F.J. Pollak and his wife, Abigail, hosted a $40,000-a-plate fundraising dinner for President Obama in June. Abigail Pollak has raised a total $1.56 million for Obama since 2007, according to a financial documents obtained by the New York Times.  

TracFone denied it was selected for the FCC's program because of Pollak's work for Obama. "That has absolutely nothing to do with business," América Móvil spokesman Jose Fuentes told the Washington Times. "There's been no pay-for-play--or even favors. What he does in his private time is his."

Some critics, such as John Horrigan, a researcher at the Pew Internet & American Life Project, contend that smartphones limit users from engaging "as deeply with the Internet" as home broadband users. TracFone's pilot program involves the use of smartphones. 

"We selected diverse projects with different amounts and duration of subsidies, different types of geographic areas (e.g., urban, rural, Tribal) and different types of broadband technologies (e.g., fixed and mobile)," the FCC said in a public filing on the pilot program. "Additionally, we considered whether applications included partners that would test different variables such as digital literacy training, the cost and type of equipment used, broadband speeds and usage limits."

This is not the first time TracFone has come under criticism. The company is a major recipient of Lifeline funds, which it uses to provide low-cost cell phone service to low-income Americans. Critics have called the program a handout and poorly managed, though the FCC has taken steps to reform the Lifeline program--the agency said its efforts have so far saved $214 million.

For more:
- see this TracFone release
- see this FCC filing
- see this Washington Times article
- see this Fox News article

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