The Lifeline program is the US government’s way of providing subsidized mobile phones to America’s poorer citizens. Despite the good intentions, the program is regularly attacked as being mired in fraud and waste, as talkRA has covered before. The political nature of the criticism is illustrated by how the Lifeline mobile phones are now commonly referred to as ‘Obamaphones’ even though the extension of the Lifeline program to provide mobile services occurred whilst George W. Bush was in office. But very straightforward investigative journalism continues to highlight stories about corruption and abuse.
In particular, there is a common trend where communications providers have lax controls over the supply of Lifeline phones, handing phones to people who do not qualify for them. This story from the National Review Online covers yet another example of how easy it is for an individual to obtain multiple subsidized phones, in clear contravention of the scheme’s rules. Part of the blame lies with government, for exercising inadequate oversight. However, the failures of the Lifeline program also illustrate how the private sector can easily become prone to waste, if it adopts an approach of incentivizing some staff to maximize ‘sales’, whilst failing to implement controls to prevent abuse.
Economics – and life – is all about incentives. Carriers have an incentive to give out phones to get money plus the more phones out there the more calls made. So the incentive is on the wrong side. Why give a rich company an incentive to make even more money – they should not be given one at all. The subsidy is given to the wrong side of the transaction. Plus there are no controls whatsoever on the government’s side – so they are leaking money… :P
@ml, I completely agree. Though this example is about government, it represents a far more general problem about human motivation and how incentives lead to leakage. Whilst the typical software vendor repeatedly claims they are being ‘proactive’ by suggesting you implement real-time reconciliations of huge amounts of data, a genuinely proactive approach to revenue assurance and fraud management would start by designing incentives so there’s no motive for anyone to make ‘mistakes’. For example, do not pay commission to sales staff if they provide incomplete/inadequate data about orders. That is the kind of proactive thinking that is barred from discussion in any vendor-dominated RA group ***cough, Gadi, cough***. So when RA people think ‘big’, too often they are guilty of thinking small, and failing to see the really big picture. As a result, they make it less likely they will ever deserve to be promoted to the executive ranks.