Poor Americans are driving the mobile-only trend, according to a survey by the Centers for Disease Control and Prevention.
According to Bloomberg, the CDC survey found that around 55 percent of adults whose income falls below the poverty line had only mobile phones in their homes during the first half of 2013, which is up 2.9 percentage points from a year earlier. That figures compares with 35 percent of adults whose incomes are at least double the poverty level who have mobile-only homes.
The data is not entirely surprising, since consumers with lower incomes are less likely to have money to spend on both mobile service and landline home phones. Additionally, over the last several years in the recession and its aftermath, the number of people using the government's Lifeline mobile service for low-income Americans has grown.
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. The FCC disbursed $772 million in 2008 and $2.2 billion last year, according to Bloomberg, which cited the Universal Service Administrative Co., a Washington-based nonprofit that oversees the subsidies. 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).
In 2012 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. 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 has said that not following the rules will result in enforcement action.
Last week, the FCC proposed nearly $44 million in fines against three companies that it said appeared to have violated its Lifeline rules. The three new proposed fines were against Telrite Corporation ($22.4 million), Global Connection ($11.7 million) and Cintex Wireless ($9.46 million). In the past 90 days, the FCC has issued a total of $90 million in Lifeline fines.
América Móvil's U.S. TracFone unit is considered the largest Lifeline service provider via its SafeLink offering. Verizon Wireless (NYSE:VZ), AT&T Mobility (NYSE:T), Sprint (NYSE:S) and T-Mobile US (NYSE:TMUS) all use the Lifeline program to offer plans to low-income customers.
In late September, the FCC proposed fining TracFone $4.57 million for violating Lifeline rules. According to an FCC filing, on Dec. 3 TracFone CEO F.J. Pollak met with Commissioner Mignon Clyburn and her staff to discuss TracFone and the proposed fine. The company disputed the fine and said that such fines would drive "well-run, responsible Lifeline providers from the market since the potential risks outweighed any benefit of providing Lifeline services."
In a presentation it made to the FCC, TracFone argued its systems minimize waste, fraud and abuse. TracFone said in the presentation that it violated no FCC rules.
"The Commission should respond to public and congressional critics of Lifeline by adopting rules to tighten the program and prevent fraud, not by imposing multimillion dollar penalties for minor enrollment problems which were identified and corrected, and which neither benefitted the ETCs nor harmed the USF," TracFone said in its presentation.
- see this Bloomberg article
- see this FCC release (PDF)
- see this FCC filing
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