FCC to combat Lifeline fraud with new program rules

FCC headquarters
The Lifeline program has an improper payment rate of 18.5%, according to the FCC. (Ser Amantio di Nicolao/ CC BY-3.0)

The Federal Communications Commission is planning changes to its Lifeline program, a federal initiative meant to lower the monthly cost of phone and internet for low-income individuals but one that has been plagued by fraud.

Lifeline provides a $9.25 discount per month on phone and broadband services for users near or beneath the poverty line, and participating carriers receive funds for each subscriber. However, the FCC previously flagged certain carriers’ abuse of the program, where they enrolled duplicate or non-existent subscribers and submitted claims for individuals not using their Lifeline service.

According to the FCC, the Lifeline program has an improper payment rate of 18.5%.

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RELATED: Consumer watchdog group urges FCC to crack down harder on Lifeline abusers

The draft order, circulated Monday by FCC Chairman Ajit Pai, does not address some of the most drastic changes to the program that were floated in the agency’s 2017 proposal. Those proposed actions, which currently remain pending, include excluding wireless resellers like MVNOs from participation, setting a self-enforcing budget cap on the program, and establishing a mandatory minimum contribution from each subscriber.

The order takes steps to strengthen enrollment and reimbursement verification, specifically by requiring proof that a subscriber is living via the National Lifeline Accountability Database (NLAD) or the National Verifier.

It would also bar participating carriers from paying employees or sales agents commissions based on the number of consumers who apply or are enrolled in their Lifeline program.

The FCC’s Office of Inspector General in April found that a significant portion of fraud happened during the subscriber enrollment process where agents would, for example, reverse first and last names, add middle initials or generational suffixes to enroll duplicate subscribers. Participating carriers also used addresses of single-family homes to enroll “dozens and sometimes hundreds of Lifeline subscribers.”

In 2018 the FCC proposed a $63 million fine against wireless reseller American Broadband & Telecommunications for claiming funding for more than 42,000 ineligible Lifeline accounts in one month.

The Government Accountability Office (GAO) in 2017 identified more than 6,000 individuals reported as deceased who were enrolled or recertified for the program after the date of their death, according to the FCC. The agency said GAO was also unable to confirm the eligibility of about 36% of subscribers, or 1.2 million individuals, that it reviewed.

RELATED: Sprint, Tracfone, others implore regulators not to ban MVNOs and other resellers from Lifeline

Additional rules in the circulated order include requiring employees involved in enrollment to register with Lifeline program administrator the Universal Service Administrative Company (USAC) before accessing USAC’s Lifeline systems and databases; restoring states’ role in designating carriers to participate in the Lifeline program; and increasing transparency with states to improve oversight of the program.

Proposals not addressed in the proposed order, like limiting Lifeline support to facilities-based carriers, were met with opposition last year from Sprint, and unsurprisingly MVNO Tracfone. At the time, Sprint estimated the top five wireless resellers together accounted for half of the total number of Lifeline customers, or 5.5 million subscribers.

Also still pending is a petition filed by CTIA and others, seeking to delay a Dec. 1 increase in minimum standards for Lifeline supported services. The comment period on the CTIA petition closed just last week.

Fraud issues within the Lifeline program have been around for years. In 2013 major carriers were required to shed a significant number of Lifeline subscribers after stricter policies were implemented by the FCC in 2012.

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