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TracFone, Icon and others face fines in FCC Lifeline crackdown

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In its ongoing effort to clean the Lifeline program of waste and fraud, the FCC came down hard on five carriers that use the service, including TracFone Wireless, and proposed around $14.4 million in fines against the companies accused of breaking the commission's rules. The Lifeline program helps provide wireless service to low-income Americans.

The FCC said in a statement violations involve thousands of consumers who had more than one Lifeline subscription from the same carrier, resulting in duplicative support requests and payments. The commission said the actions, formally known as Notices of Apparent Liability (NALs), were brought against Icon Telecom, which faces $4.8 million in forfeitures; TracFone ($4.57 million); Assist Wireless ($2.2 million); Easy Telephone Services, which operates as Easy Wireless ($1.58 million); and UTPhone ($1.23 million).

In each case, the FCC said, the carrier knew or should have known, based on its own internal data, that the consumers were ineligible under Lifeline program rules. The proposed penalties are in addition to the recovery of universal service funds paid to the carriers for duplicative Lifeline service.

In a statement, TracFone said the FCC is disputing TracFone Lifeline wireless billing involving less than $8,000 and involving fewer than 850 people. "With almost 4 million Lifeline customers, obviously this is a very small percent," the company said.

"We do not believe that our conduct violated any rules or that the proposed FCC action is warranted," TracFone said. "We believe that we have the most sound program in the industry when it comes to wireless Lifeline."

The FCC's rules prohibit Lifeline service providers from requesting and/or receiving support for consumers who already receive Lifeline service. Additionally, the FCC requires Lifeline carriers to carefully monitor their compliance with the Lifeline rules and recently cautioned that not following the rules would result in enforcement action.

Last year the FCC instituted new rules that required carriers that received Lifeline funds to certify that their Lifeline subscribers were eligible for the program, an effort to streamline the program and reduce waste. To date, the FCC said its new rules have eliminated more than 1.1 million duplicate subscriptions, saved nearly $214 million in 2012 and are on track to save over $2 billion over three years.

The Lifeline program offers participating carriers a subsidy of up to $10 per month per subscriber, and the program is part of the $9 billion Universal Service Fund, which the FCC is in the process of reforming. USF is paid for by wireless subscribers. Customers who qualify for Lifeline are often those who qualify for other federal benefit programs such as the Supplemental Nutrition Assistance Program (SNAP, or food stamps). Verizon Wireless (NYSE:VZ), AT&T Mobility (NYSE:T), Sprint (NYSE:S) and T-Mobile US (NYSE:TMUS) use the Lifeline program to offer plans to low-income customers. América Móvil's U.S. TracFone unit is considered the largest Lifeline service provider via its SafeLink offering.

"Our goal is to be tough, but fair. The fines in these cases are purposely large," Acting FCC Chairwoman Mignon Clyburn said in a statement. "However, I want to ensure adequate deterrence without harming the legitimate service these providers bring to their subscribers. Accordingly, I have instructed the Enforcement Bureau to carefully consider the companies' responses to these NALs. Ultimately, our objective is to eliminate fraud, waste and abuse, while preserving and promoting the availability of communications service s to those in need. I will do all I can to ensure that we achieve this balanced result."

For more:
- see this release
- see this FCC site

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FCC overhauls Lifeline program to crack down on fraudulent subsidized phones

Article updated Oct. 1 with response from TracFone.