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July 25, 2014 • 11:59 am

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FCC to Expand Obama Phones into Internet Subsidy Print
By Ashton Ellis
Wednesday, October 24 2012
As it was originally conceived, Lifeline is supposed to help low-income Americans have telephone access to first responders during an emergency. Now the FCC is proposing to change the program into a vehicle to subsidize internet access – all with money collected from mandatory fees on non-eligible consumers.

When a Barack Obama supporter said the reason to reelect the President was because of a free cell phone program, she drew attention to an abusive waste of taxpayer money.  Unfortunately for the FCC, she also spotlighted its attempt to spend even more of other people’s money. 

In response to a question on a video that went viral on the Internet, a boisterous woman in Ohio said, “Yes, everybody in Cleveland, all minorities got an Obama phone.  Keep Obama president, you know?  He gave us a phone, he gonna do more.  You sign up if you on food stamps, you on Social Security, you got low income, you [on] disability.”

The program is called Lifeline, a federal cost-shifting scheme implemented in 1985 to help low-income Americans call first responders in case of an emergency.  Lifeline is subsidized by the Universal Service Fee imposed by the Federal Communications Commission on telephone service operators.  Almost all carriers pass on the cost of the fee to subscribers, many as a line item on monthly phone bills. 

As for eligibility requirements, the animated woman in the YouTube video is exactly right.  To access the program, “consumers must either have an income that is at or below 135% of the federal Poverty Guidelines or participate” in at least one federal assistance program like Medicaid, Food Stamps, Supplemental Security Income or Section 8 housing, among others, according to the FCC website

In 2005, the law was changed to cover cell phones in addition to landlines.  By 2008, the cost of the Lifeline program was $772 million.  Then Barack Obama was elected President.  As of 2011, the cost of the program was a staggering $1.6 billion. 

It’s not hard to see why.  Just days before Obama was elected President in 2008, supporter Peggy Joseph told a news reporter, “I never thought this day would ever happen.  I won’t have to worry about putting gas in my car. I won’t have to worry about paying my mortgage.  If I help him [i.e. elect Barack Obama], he’s gonna help me.” 

Indeed he has, if greater government dependency is your definition of helping.  Though the price of gas is higher than when President Obama took office and millions of mortgages are still underwater, there are more people on Food Stamps now than at any other time in history.  The Health and Human Services Department recently gutted work requirements central to welfare reform, and Medicaid under ObamaCare operates in a way to capture middle income Americans. 

There’s more.  Under the Obama administration, the Lifeline cell phone program has been rife with abuse.  A news report from Baltimore, Maryland, shows how one woman amassed 30 cell phones without being penalized.  In Benton, Arkansas, recipients were not required to submit proof of eligibility to get a phone.  The brazenness is so out-of-hand that Senator Claire McCaskill (D-MO) received a mailed solicitation to request a phone even though she and her husband have a net worth in the millions.   

A big part of the reason Lifeline cell phones are proliferating is because of the incentive structure the FCC uses to promote the program.  In order to get the maximum amount of participation – a seeming mantra inside the Obama Administration when it comes to entitlement spending – the FCC gives a $10 bounty to prepaid cell phone companies for every “Obama phone” they distribute. 

Each phone is loaded with 250 prepaid minutes that are not charged to the receiver.  Moreover, some of the biggest participants in the bounty program, like Miami-based TracFone, do not charge recipients for the phone itself or any activation fees.  Thus, the Lifeline phones are “free” thanks to Universal Service Fees paid by non-eligible telephone subscribers.  With 3.8 million Lifeline users, TracFone has already netted $38 million in bounties.  It also has zero reason to verify eligibility.   

But there’s more to the FCC’s complicity in the abuse of the Lifeline program than merely failing to ensure quality control.  In response to congressional demands for greater accountability, FCC Chairman Julius Genakowski announced a peculiar series of reforms.  Of course, there are the expected –and belated – promises to create a National Lifeline Accountability Database, and eliminate the usual waste, fraud and abuse.  But according to the FCC website, the agency also plans to “modernize” Lifeline by transforming it into a vehicle for subsidizing internet access. 

Much like its deal with TracFone, the FCC wants to “solicit applications from broadband providers and will select projects to fund” pilot programs that “increase broadband adoption among Lifeline-eligible consumers.”  The agency also wants to allow Lifeline users to get discounts – or should we say “free” – “bundled services plans combining voice and broadband or packages including optional calling features.” 

Remember, as it was originally conceived, Lifeline is supposed to help low-income Americans have telephone access to first responders during an emergency.  Now the FCC is proposing to change the program into a vehicle to subsidize Internet access – all with money collected from mandatory fees on non-eligible consumers. 

If that’s not change you can believe in, it is for people who support Barack Obama.

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