The U.S. Senate voted against a proposal that would have cut cell phones out of the FCC's Lifeline program. The vote, largely along party lines, likely will generate a sigh of relief among the likes of TracFone, AT&T Mobility (NYSE:T), Sprint Nextel (NYSE:S) and other wireless carriers that receive Lifeline funds in order to provide wireless service to low-income Americans.
Republicans, led by fiscal conservatives, have blasted the FCC's Lifeline program as a wasteful and unnecessary government program. The program has been ridiculed as the "Obama phone" program, though it was started in the 1980s under President Reagan.
The Senate rejected the Lifeline proposal in a 46-to-53 vote, according to a report in The Hill. The non-binding proposal was to have been added to the budget resolution as an amendment.
The government's Lifeline program was created in order to help low-income Americans obtain telecommunications services--those who qualify can get around $10 per month for cell phone service. During the past few years, companies like Sprint and TracFone tapped into the program with the goal of obtaining new subscribers they could sell additional services to.
Last year the FCC instituted new rules that required carriers that received Lifeline funds certify that their Lifeline subscribers were eligible for the program, an effort to streamline the program and reduce waste. As a result, according to a recent report from the Wall Street Journal, is that 41 percent of the roughly 6 million subscribers in the Lifeline program "either couldn't demonstrate their eligibility or didn't respond to requests for certification."
The WSJ report found that AT&T, Telrite Corp., Tag Mobile USA, Verizon Wireless (NYSE:VZ) and Sprint's Virgin Mobile USA unit together accounted for 34 percent of total Lifeline subscribers last May (the article didn't clarify if there was a difference between wireless and wireline funds).
The FCC's changes to the Lifeline program have cut into wireless carriers' net additions. For example, Sprint noted that the Lifeline recertification process will result in a one-time net subscriber loss of around 1.3 million to 1.4 million to its prepaid base in the second quarter of 2013.
Lifeline supporters praised the Senate's vote. "The Lifeline program has helped some of our most vulnerable citizens connect to emergency services, doctors and family in times of crisis," said outgoing FCC Chairman Julius Genachowski in a statement, according to The Hill. "It has been a literal lifeline for these Americans--and in today's era, with a third of Americans having cut the cord to wireline phone service, it's appropriate that Lifeline supports wireless service."
- see this The Hill article
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