FCC overhauls Lifeline program to crack down on fraudulent subsidized phones

The FCC voted to reform its Lifeline phone subsidy program and to stamp out waste and fraud by limiting people in the program from claiming subsidized handsets from multiple wireless carriers.

In a unanimous 3-0 vote, the FCC approved the creation of a national Lifeline database to prevent multiple carriers from receiving support for the same subscriber. The FCC said the new National Lifeline Accountability Database will build on FCC efforts in 2011, which the commission said eliminated nearly 270,000 duplicate subscriptions in 12 states following a review of more than 3.6 million subscriber records, saving $33 million.

Additionally, the FCC ordered carriers to remove from their subscriber lists Lifeline customers who don't use the free wireless service fo 60 days. The FCC also said that only one person per household can get a subsidized phone and service, though it defined a household as an "economic unit" so that separate, low-income families living at the same address can get service. 

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).

Sprint Nextel (NYSE:S) has used Lifeline, under Sprint's Assurance Wireless brand, to generate subscriber growth during the past year. However, Sprint is not the only carrier using Lifeline. Verizon Wireless (NYSE:VZ), AT&T Mobility (NYSE:T) and T-Mobile USA also use the program to offer plans to low-income customers. América Móvil's U.S. TracFone unit is the largest Lifeline service provider via its SafeLink offering, which counts more than 2 million customers (TracFone had 19.3 million total subscribers at the end of the third quarter). 

The FCC also set up a $25 million pilot program to explore how Lifeline can be expanded to include broadband access in addition to landline and wireless phone use. Though the FCC's three commissioners clashed over whether to cap the total Lifeline fund, which has grown from $488 million in 2000 to $1.3 billion in 2010, they agreed that the reforms were important first steps.

For more:
- see this release
- see this Bloomberg article
- see WSJ article (sub. req.)
- see this IDG News Service article

Related Articles:
Consumer groups question whether FCC's Lifeline program reforms go far enough
Sprint leans on low-income Assurance Wireless subs for growth
TracFone expands SafeLink service to compete with Sprint offering
Straight Talk MVNO TracFone adds 515K subs in Q3

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