T-Mobile US (NYSE:TMUS) indicated it plans to discontinue its support for the federal Lifeline phone program, which provides subsidized phone service to low-income Americans, as of the end of 2014. The carrier said the move will impact its operations in Alabama, Connecticut, Delaware, New Hampshire, New York and Tennessee and Washington, D.C.
In a filing with the FCC, T-Mobile said it is relinquishing its "eligible telecommunications carrier ('ETC') designation for the purpose of providing Lifeline services," effective Dec. 31, 2014. The company said that "upon reviewing its on-going business plans, T-Mobile has decided that it will not continue operating as a Lifeline ETC" in the states it is exiting from service. The FCC designated T-Mobile as an ETC to provide Lifeline services in the states on Aug. 16, 2012.
The shutdown comes after AT&T Mobility's (NYSE: T) Cricket prepaid brand said in June that it is planning to phase out its support for the government's Lifeline service. Cricket said it will continue to support its existing Lifeline customers on CDMA phones for the next 18 months or so, and that it will not sign up any new Lifeline customers on Cricket GSM phones.
However, T-Mobile's move to discontinue Lifeline support is not going to affect many people and it likely won't have a material impact on the company's business. According to T-Mobile's filing, it currently has just 400 Lifeline customers in the states.
In contrast, as of June, Cricket counted around 671,000 Lifeline customers, according to a source familiar with the government's Lifeline program.
T-Mobile said that other providers will continue to offer Lifeline services in the states it is exiting. "To the best of T-Mobile's knowledge, each incumbent LEC within these areas has been designated as an ETC," the carrier noted. "In addition, many areas will continue to be served by at least one competitive ETC that provides Lifeline service, including carriers such as TracFone, Virgin Mobile and iWireless. To the best of T-Mobile's knowledge, none of the remaining ETCs in the designated service areas will be required to purchase or construct additional facilities to continue to provide service within the areas" it is exiting from Lifeline service.
The federal government's Lifeline program is designed to provide telecommunications services to eligible, low-income Americans. The government gives participating Lifeline carriers a subsidy of up to $10 per month per subscriber; the program is part of the $9 billion Universal Service Fund. 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).
The FCC in 2012 instituted a major Lifeline overhaul, via a new accountability database, geared toward stamping out waste and fraud by preventing people in the program from claiming subsidized handsets from multiple wireless carriers. That action dramatically affected the Lifeline business of some carriers.
- see this FCC filing
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