Why Over 1 Billion of Your Tax Dollars Goes To Providing Other People With Free Cell Phones

In 2011, a federal program, overseen by the FCC, paid out $1.6 billion to buy cell phones and pay the monthly bills of 12.5 million wireless accounts for low-income Americans. Participation in the program has risen sharply since 2008, when the government paid out only $772 million. Critics of the program are pointing to poor oversight, phones going to people who don’t qualify, and hundreds of thousands of those who do qualify having more than one phone as causes for the spike in the amount of tax payer money being paid out.

Last summer, a Pittsburgh Tribune-Review story shed some light on a government program that relatively few Americans even knew existed. The Lifeline program provides low-income Americans with free cell phones and covers up to 250 free minutes each month, which is funded primarily by the Universal Service Fund fee added to the bills of land-line and wireless customers. The fund came about after the Telecommunications Act of 1996 was passed to help “to promote the availability of quality services at just, reasonable, and affordable rates,” among other things. All telecommunications carriers must pay into the fund, and do so by adding a fee to each of their customers’ bills.

Americans who receive food stamps, Medicaid, other federal aid or who earn up to 135% of the federal poverty guidelines, qualify for the program which provides  discounts on or in a lot of cases, entirely free service. The fund helps pay for landlines or cell phones, whichever the recipient prefers as well as a one-time discount of up to $30 to cover an installation fee or a cell phone.

Bloomberg Businessweek report revealed how much the program pays out, how quickly it’s growing as more people find out about it and that 269,000 wireless Lifeline subscribers were receiving free phones and monthly service from two or more carriers.

Senator Claire McCaskill (D-Mo.) has been taking a closer look at the program since she personally received an invitation to apply for a free, government-subsidized cell phone in the mail. McCaskill has asked the FCC to investigate Lifeline. As a result, the FCC is building a database to track subscribers to make sure they are not receiving more than one subsidized phone. No such database previously existed.

The FCC has set a goal of saving $200 million on the program in 2012. After eliminating nearly 270,000 of the duplicate subscriptions discovered in the audit last year, the FCC said it has already “saved” $33 million.


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