Millions Improperly Claimed U.S. Phone Subsidies

Spencer E. Ante, Wall Street Journal, February 11, 2013

The U.S. government spent about $2.2 billion last year to provide phones to low-income Americans, but a Wall Street Journal review of the program shows that a large number of those who received the phones haven’t proved they are eligible to receive them.

The Lifeline program—begun in 1984 to ensure that poor people aren’t cut off from jobs, families and emergency services—is funded by charges that appear on the monthly bills of every landline and wireless-phone customer. Payouts under the program have shot up from $819 million in 2008, as more wireless carriers have persuaded regulators to let them offer the service.

Suspecting that many of the new subscribers were ineligible, the Federal Communications Commission tightened the rules last year and required carriers to verify that existing subscribers were eligible. The agency estimated 15% of users would be weeded out, but far more were dropped.

A review of five top recipients of Lifeline support conducted by the FCC for the Journal showed that 41% of their more than six million subscribers either couldn’t demonstrate their eligibility or didn’t respond to requests for certification.


The program is open to people who meet federal poverty guidelines or are on food stamps, Medicaid or other assistance programs, and only one Lifeline subscriber is allowed per household.

The program, which is administered by the nonprofit Universal Service Administrative Co., has grown rapidly as wireless carriers persuaded regulators to let people use the program for cellphone service. It pays carriers $9.25 a customer per month toward free or discounted wireless service.

Americans pay an average of $2.50 a month per household to fund a number of subsidized communications programs, including Lifeline.

For the carriers, the program is a chance for them to sign up more subscribers and make a small profit, plus more money if customers go over their small initial allotment and need to buy more minutes or text messages. {snip}

Until last year, FCC rules didn’t require carriers to certify to the FCC that subscribers were eligible. Consumers could self-certify, and in many states documentation wasn’t required.

Carriers said many of the disqualified subscribers simply didn’t reply when asked to prove their eligibility. They also said the FCC rules on self-certification, and the absence of a national database of participants, made it hard to keep ineligible people from signing up.

The FCC said it is investigating allegations that some Lifeline providers violated the rules, though it declined to comment on that probe. {snip}


The agency [FCC] pushed through new rules last year, requiring documentation when a Lifeline customer signs up. Consumers also must certify that no one else in their households is using the program. Carriers now have to check a state or federal social-service database to confirm eligibility and must reverify eligibility every year.


The FCC said new verification procedures saved nearly $214 million last year, and projected total savings over the next three years would reach $2 billion. Disbursements under the program began to drop in the third quarter after 12 consecutive quarters of increases.

Topics: ,

Share This

We welcome comments that add information or perspective, and we encourage polite debate. If you log in with a social media account, your comment should appear immediately. If you prefer to remain anonymous, you may comment as a guest, using a name and an e-mail address of convenience. Your comment will be moderated.
  • The__Bobster

    Suspecting that many of the new subscribers were ineligible, the Federal
    Communications Commission tightened the rules last year and required
    carriers to verify that existing subscribers were eligible. The agency
    estimated 15% of users would be weeded out, but far more were dropped.


    Yet the cost of the program went from $1.6 billion to $2.2 billion in a year?

    Where be muh Obongophone?

    The Democrats say they can’t find any programs to cut. Why not start here and move on to Head Start?

    • Garrett Brown


    • SintiriNikos

      This video is the first thing I thought of when I read the article. Thanks for putting it up. This unhinged woman is hilarious. This almost reminds me of the scene in Boardwalk Empire when the commodore quizzes his black housekeeper on some political issues on which she is wholly ignorant, and then turns to Nucky and says ‘there’s your woman vote’. of course the Boardwalk creators use this to illustrate sexism and racism, and there are many lefty themes in the show.

      This Obamaphone woman to me illustrates the folly of giving the vote indiscriminately to certain groups.

  • bubo

    I encourage everyone I know to go prepaid. I’ll never be tied to a contract where they can add fees like this free phone subsidy at will.

    I have an iPhone 4s running on AT$T’s network through Walmart’s Straight Talk. 45 dollars a month with no fees.

    • jfly

      I don’t know if prepaid are exempt. Somewhere in that $45 is a charge for the Obamaphone

      • Prepaid is exempt. I went this direction two years ago because my $60 phone bill cose $86.

    • Bud

      You almost certainly do pay a “Universal Service Fund” fee for your prepaid, and part of the USF goes for this free service. I helped someone set up a Net10 phone with a 6 month/$100 dollar plan, and the total with tax and other fees was $112.70 of which $1.50 was this USF fee. As far as I know, the ONLY phone service exempt from this fee is this Lifeline service, i.e. “Obama phones.” How they work this with prepaid cards, I don’t know, maybe they deduct airtime equal to the fee. I also don’t know whether you pay less of a fee with a prepaid or how the fee is assessed for prepaid, but somebody has to pay it and it ain’t going to be the phone companies. You pay it one way or another, it’s a cost of business expense the phone companies pass on to their customers.

  • bigone4u

    Food (beans, rice, salt pork,–the basics), clothing (from Goodwill), and shelter (small enclosed space bigger than a dog house) are the necessities of life. Cash strapped middle class Americans should not be having to pay for the luxuries of the parasite class, and I see cell phones as luxuries. Since this idiotic program will continue (they never kill em off), at least weed out the fraud and waste.

    • Formerly_Known_as_Whiteplight

      The one problem with your view is that once someone arrives to this level, there is no leaving it. It’s difficult enough to get a job, but with no phone (cell phone is mandatory now), few or none will ever get jobs. The numbers eventually swell and then you have revolution.

  • lessthantolerant

    Breeders and other animals need to have their phones shut off for a week, it would be fun to watch drug sales go down.

  • Garrett Brown

    Do any of them have those “OBAMABAMA PHONEZ”?

  • Karen Frances

    The elementary school my daughter attended in eastern Long Island NY was over 50% free lunch. The people in that area were not 50% poor by any means; they had plenty of money to spend on sports, dance and other activities for the kids. With the school lunches, you were allowed to “self certify.”
    Allowing people to self certify is an invitation to steal. I don’t know why the taxpayers should pay for free phones or free lunches anyway.

    • Luca

      Here in LA-LA Land it’s 80% and I can guarantee you 85% of those are hispanic and of that 85% probably 80% are illegal or anchor babies. Welcome to the New Liberal World Order.

  • Howard W. Campbell

    A tracfone costs less than a weave. Or twice weekly nails, or heaven only knows how much other bling that is standard fare.

  • George

    Entitlements spending is slated to increase, even if the economy improves, and minority unemployment rates reach white norms.

    What’s interesting is that when verification of eligibility is required, recipients melt away. Is *this* why black & hispanic groups, along with the Democratic Party in general, so adamantly oppose a reasonable Voter ID law?

    Lifeline can serve a useful purpose. $30.00 per American household per year isn’t much, but it’s still money out of our pockets. Far better that the requirement is that a Lifeline phone is a landline, connected to one’s house. The homeless, of course, are usually asking for quarters, so should have no problem using a payphone should the need arise.

    I have made a conscious decision not to have a cell phone. When I’m out on the streets, I really don’t want to hear a bunch of useless gibberish, knowing that I’m footing part of the bill.

  • Steelfly

    I have often thought that the welfare load could be cut in half if the government only gave it to people who didn’t have cable and big-screen TVs.

    • bigone4u

      I love your comment, but will add that maybe the cable and expensive TVs keep them off the streets where they would be committing crimes.

  • Chicago PO

    I work in probation, many of my caseload, (ALL Obummer fans) have their Obama phone. Most have two or three, one has five. NONE buy extra minutes, but just get another 250 free minutes with another phone.

  • SirKevin1231

    Self-certify. Asking those that are criminally disposed to act responsibily and answer truthfully is equally as bad as giving a robber your house key, the safe combination, and your schedule of when you’ll be out of town.

  • $2.2 billion last year to provide phones to low-income Americans …. It pays carriers $9.25 a customer per month

    $2.2b/(9.25*12 months) = 19,819,819 Obama phones