After years of investigation and negotiation, TracFone Wireless, a mobile service provider in the USA, has reached a settlement with the Federal Communications Commission (FCC) following multiple violations of programs that subsidize services provided to low-income users. USD17,487,000 will be paid as a civil penalty in addition to a USD6,013,000 fine that was first proposed in 2020. The violations relate to the decades-old Lifeline program for mobile services and the Emergency Broadband Benefit (EBB) scheme introduced at the beginning of the COVID-19 pandemic.
A press release from the FCC quoted their Enforcement Bureau Chief, Loyaan Egal:
Whether attributable to fraud or lax internal controls, or both, we will vigorously pursue allegations of misconduct that harms critical FCC programs designed to help those most in need of communications-related services.
I am not sure that the American taxpayer will agree with Egal’s assessment of how well the integrity of government expenditure is being protected. TracFone is being punished for failings that date back to 2019, but the national Lifeline program of subsidized mobile phones has a long and shabby history of fraud and waste. The US government spends USD9.25 per month for every recipient of a discounted Lifeline mobile phone. The FCC estimated that up to 15 percent of Lifeline recipients were ineligible as far back as 2012. However, not much seems to have improved in the meantime. T-Mobile US agreed to a USD200mn penalty in 2020 after admitting a subsidiary they acquired had wrongly enrolled nearly 10 percent of all Lifeline users. Despite this, the FCC continues to have such lax methods of auditing expenditure that they appealed to the public for help with identifying abuses in 2022.
TracFone made what should have been glaring errors in how they determined if a customer was eligible for government subsidies. Perhaps they did not notice because those errors were also in TracFone’s favor. It would be naïve to expect the recipients of such services to complain, so the absence of any meaningful government audit means there is a near-total reliance on the revenue assurance controls effected within telcos.
Lax controls can cause enormous waste, but it is even harder to excuse what should have been obvious conflicts of interest permitted by TracFone. Their agents were given incentive payments for enrolling customers for Lifeline services despite such payments being expressly prohibited by the government’s scheme. It cannot then be considered surprising that…
…a group of its field enrollment representatives used falsified tax documents to enroll subscribers…
Perhaps the most important fact in this case is the one that the public has not been told. The total penalty agreed by TracFone is similar to that paid by T-Mobile US in 2020, and we know that T-Mobile US received subsidies for 885,000 ineligible customers. At the time it was first proposed, it was stated that the USD6mn component of TracFone’s settlement related to the enrollment of 5,738 ineligible customers in June 2018. The tariff for this particular fine was increased because TracFone’s abuses were deemed ‘egregious’ by the FCC in 2020. However, none of the FCC paperwork now released to the public for this final settlement with TracFone discloses how many other customers were wrongfully enrolled for government subsidies. Did TracFone also add hundreds of thousands of ineligible subscribers to Lifeline, or is their punishment greater than T-Mobile’s because their failings are harder to excuse? It seems to me that the current FCC administration is choosing to be less transparent about tackling fraud than the agency has been in the past.
The FCC press release and consent decree for this case can be found here.
