Sprint Busted For Allegedly Defrauding The FCC Lifeline Program

from the whoops-a-daisy dept

For years, big cellular carriers have been busted defrauding the FCC Lifeline program, a fund that's supposed to help subsidize telecom connectivity for low income users. Started by Reagan and expanded by Bush, the fairly modest program doles out a measly $9.25 per month subsidy that low-income homes can use to help pay a tiny fraction of their wireless, phone, or broadband bills (enrolled participants have to chose one). While the program (which you pay into via your telecom bills) has been a subject of fraud, the agency has done some solid work under both parties trying to rein in abuse of the program.

This week, the Pai FCC brought the hammer down on Sprint, alleging that the company has been collecting monthly subsidies for roughly 885,000 Lifeline customers who were no longer actually using the company's services. From the FCC announcement (pdf):

"The Federal Communications Commission has learned that Sprint Corp. claimed monthly subsidies for serving approximately 885,000 Lifeline subscribers, even though those subscribers were not using the service. That would be a violation of a key rule—the “non-usage” rule—designed to prevent waste, fraud, and abuse in the Lifeline program. The 885,000 subscribers represent nearly 30% of Sprint’s Lifeline subscriber base and nearly 10% of the entire Lifeline program’s subscriber base.

These kinds of "errors" aren't uncommon in the subsidy-slathered telecom sector. AT&T was forced to pay $11 million in 2015 by the previous, Tom Wheeler FCC because it "forgot" to remove nonexistent subsidy recipients from its rolls. In this case, the Pai FCC makes it clear the discovery will lead to a broader investigation and at least some kind of fine for Sprint, which has been working overtime to gain approval for its $29 billion merger with T-Mobile.

Historically, the Lifeline program has seen pretty broad, bipartisan support. After improving reporting requirements to thwart fraud, the FCC under Tom Wheeler slightly expanded the program to include broadband. Pai voted that expansion down, and has been criticized for slowly attempting to kneecap the program. The courts however have argued that a number of Pai's efforts to hamstring the program (like taking away subsidies from tribal residents) haven't been supported by factual evidence.

To be clear, this is a good move by Pai. That said, Pai has been a bit discordant on this subject. He'll profess his top priority is "closing the digital divide," but will then either ignore issues at the root of the problem (limited broadband competition, high prices), or attempt to scale back programs like Lifeline that actually attempt to do something about it. With Sprint, Pai is back again insisting that Lifeline is something important that needs protecting, something his policy proposals don't always reflect given his numerous attempts to neuter the program:

"Lifeline is an important component of our efforts to bring digital opportunity to low-income Americans, and stopping waste, fraud, and abuse in the program has been a top priority of mine since I’ve been at the Commission,” Chairman Pai said. “It’s outrageous that a company would claim millions of taxpayer dollars for doing nothing. This shows a careless disregard for program rules and American taxpayers. I have asked our Enforcement Bureau to investigate this matter to determine the full extent of the problem and to propose an appropriate remedy."

Despite Pai's wishy washy positioning on whether we should help poor people get and stay connected, the crackdown is welcome and long overdue. That said, the fact that Sprint was likely defrauding the government isn't likely to change the FCC's decision to approve the Sprint T-Mobile merger; consolidation consumer groups say will only amplify many of the pricing and competition problems that make telecom services expensive for low-income users in the first place.

Filed Under: fcc, fraud, lifeline
Companies: sprint

FCC Boss Under Fire For Facts-Optional Attack On Low-Income Broadband Programs

from the science-schmience dept

For a while now, we've noted how FCC boss Ajit Pai professes to be some kind of a hero to the poor, despite the fact that his policies are quickly making broadband and TV services more expensive for Americans. His extremely unpopular net neutrality repeal, for example, will only wind up driving up costs for consumers as entrenched ISPs jack up costs for competitors and consumers alike. And when Pai wasn't busy killing net neutrality, he was busy killing efforts to make cable boxes more competitive and affordable, or making it easier for prison phone monopolies to rip off inmate families via absurdly over-priced services.

Pai has also been taking aim at a government program dubbed Lifeline, which makes expensive American telecom services slightly less expensive for poor families. The program, started under Reagan and expanded under Bush Jr., simply gives low-income homes a $9.25 credit they can use for home phone, broadband, or wireless service (they have to pick one). Traditionally, this program has had pretty broad, bipartisan support, and is uniformly seen as pretty much the least the government can do to help those struggling to make ends meet.

But Pai's attack on Lifeline has come via death by a thousand cuts, and is starting to alarm folks that actually try to help poor people for a living. Most recently, Pai tabled a proposal that would declare that smaller wireless MVNOs (mobile virtual network operators, like Boost or Virgin Mobile) could no longer participate in Lifeline. While Pai has claimed that these changes will somehow magically boost broadband deployment, he hasn't been able to offer the slightest shred of data to support that contention.

Even Pai allies like Verizon, who didn't even ask for this deregulation favor, have stated that Pai's changes won't do what he claims and will harm the poor. It's pretty strange to see an instance of deregulation pushed through that the industry itself didn't push for, just as it's strange to see Verizon and consumer advocates agreeing on something.

That said, a group of 10 Senators including Ron Wyden wrote Pai last week expressing concern that Pai's actions are in stark contrast to his breathless support of closing the digital divide:

"Your proposal impacts over 70 percent of current Lifeline-recipient households by eliminating their wireless providers from the program, leaving less affordable and fewer Lifeline options, while making it more difficult for the companies trying to serve Lifeline customers," Senate Democrats wrote in the letter to Pai yesterday. "Instead of cutting the program, we should ensure Lifeline reaches more Americans in need of access to communication services."

The Senators were also quick to point out that the FCC offered no hard evidence to support its claim that reducing participation in the program will somehow expand broadband availability:

"The December 1, 2017, Notice of Proposed Rulemaking (NPRM) provides no evidence, analysis, or data to support its assumption that the FCC’s proposed changes to Lifeline will spur facilities-based broadband deployment and additional affordable services for low-income families. Provide any specific data, analysis, academic studies, economic reports, etc. that you relied on to support this assumption. Explain why the NPRM included no evidence or data to support this assumption."

The FCC has yet to vote on this proposal (the public comment period ended last week), but is likely to in the coming months. Hopefully Pai shows a little more flexibility than he did during his attack on net neutrality when he not only used debunked lobbyist data to justify his positions, but directed journalists to telecom lobbying organizations if they had questions. That said, if Pai has made anything clear, it's that he's on an ideological crusade that's not only viciously unpopular, but isn't likely to have its trajectory altered by pesky things like the welfare of the public, or, say... facts.

Filed Under: ajit pai, broadband, fcc, lifeline, low income, ron wyden

Nobody (Even His Industry BFFs) Likes Ajit Pai's Latest Attack On Low Income Broadband Programs

from the death-by-a-thousand-cuts dept

So we've noted a few times how Trump FCC boss Ajit Pai enjoys wandering the country informing everyone he's a massive champion of closing the digital divide. But those claims have been repeatedly and consistently undermined by Pai's own actions, whether that involves rolling back net neutrality (a move that will make life harder and more expensive for countless consumers, non-profits, minority communities and startups alike), or his slow but steady dismantling of programs intended to make life a little bit easier for the poor.

One of Pai's biggest targets has been the FCC's Lifeline program. It's an arguably modest program that was started by Reagan and expanded by Bush, and it long enjoyed bipartisan support until the post-truth era rolled into town. Lifeline doles out a measly $9.25 per month subsidy that low-income homes can use to help pay a tiny fraction of their wireless, phone, or broadband bills (enrolled participants have to chose one). The FCC under former FCC boss Tom Wheeler had voted to expand the service to cover broadband connections, something Pai (ever a champion to the poor) voted down.

Now Pai is back with a new proposal that would prevent anybody but the nation's biggest carriers from helping provide service to the poor via the Lifeline program. According to Pai's new proposal, only "facilities-based broadband" providers (companies that own and operate their own networks) could participate in the program, forcing millions of the nations' poor off of existing MVNOs and other resellers, and forcing them onto the networks of incumbent wireless carriers.

If you've followed Pai's ideological rhetoric, it's pretty clear he sees government as a pesky impediment to the miracles of the broadband free market, which, in Pai's head, will always do the right thing if left in an accountability vacuum. But if you've also followed the broadband industry, you'll know it's not a free market. It's a mish-mash of regional monopolies that enjoy regulatory capture on the state and federal level, resulting in limited competition, high prices, and awful service. In telecom, history shows us that mindlessly gutting regulatory oversight instead of reforming it doesn't magically fix this problem, it makes it worse.

Still, it's clear that Pai believes that slowly dismantling the FCC as both an agent of altruism (empathy is painfully unfashionable) and oversight is the path to nirvana. And he's justifying his latest efforts to scale back Lifeline by insisting that booting resellers off the program somehow will magically boost broadband deployment:

"[W]e believe Lifeline support will best promote access to advanced communications services if it is focused to encourage investment in broadband-capable networks...We believe this proposal would do more than the current reimbursement structure to encourage access to quality, affordable broadband service for low-income Americans. In particular, Lifeline support can serve to increase the ability to pay for services of low-income households. Such an increase can thereby improve the business case for deploying facilities to serve low-income households."

Consumer advocates argue in their own filings with the FCC (pdf) that the effort is a pointless attempt to help drive additional revenue to incumbent carriers. And former FCC staffer Gigi Sohn recently noted in Wired how this is part of a broader effort that will make life more difficult for low-income Americans to actually get broadband:

"One of Pai’s first acts as chair was to chill competition and innovation in the Lifeline program. Pai reversed a decision made by former FCC chair Tom Wheeler that allowed nine new Lifeline providers into the program. In the process Pai got rid of new competitors who could drive down prices and improve services.

Now, Pai proposes to limit Lifeline even further. Eliminating a Wheeler-era designation that welcomed new broadband providers into the program, the FCC said in December, will “better reflect the structure, operation, and goals of the Lifeline program.” But if the goal of the program is to ensure that low-income Americans have affordable access to broadband, reducing competition in the program will do the exact opposite.

The problem is only compounded by Pai's failure to do anything about a lack of competition in general in the telecom market. And while incumbent ISPs (like Pai's former employer Verizon) routinely applaud Pai's efforts on these fronts, even they doubt the effectiveness of Pai's proposal. For example Verizon was quick to point out in its own filing (pdf) that Pai's plan wouldn't do what he claims and would actually be harmful:

"The proposed exclusion of resellers from the Lifeline program would be highly disruptive to existing Lifeline beneficiaries and is at odds with the Commission's goal of supporting affordable voice telephony and high-speed broadband for low-income households."

Even all of the dollar per hollar think tankers, academics, and others the industry uses to parrot anti-consumer policies aren't impressed by Pai's proposal. US Telecom, a lobbying group spearheaded by AT&T, also panned Pai's plan for Lifeline, saying it wouldn't accomplish what Pai says it would (pdf):

"[T]he proposed elimination of resellers from the Lifeline program would not materially further the deployment of broadband infrastructure, because revenue from resellers already contributes to facilities-based carriers' deployment of broadband facilities."

Again, you've got industry and consumer advocates agreeing here that Pai is wrong and his plan will actually harm the poor.

But as his attack on net neutrality made pretty clear, Pai's blinded by an ideological vision of the telecom market that may or may not be supported by actual reality. And whereas a good leader would listen to opposition to his plans and reconsider positions that run in contrast to the will of the public, the insight of experts, and the facts -- Pai's default tendency is almost always to double down on bad ideas. And it this case Pai's bad idea is pretty clear: dismantling telecom programs that help the poor via death by a thousand cuts, no matter how counterproductive it is.

There's still time for Pai to back off his plan, given the FCC isn't expected to vote on the proposal until sometime after the public comment period ends on March 23. Still, when your definition of "helping the poor" includes ensuring cable boxes stay expensive and closed, allowing duopolies to abuse net neutrality and drive up service costs, protecting prison monopoly telcos that have price-gouged families for years, and preventing smaller ISPs from actually helping the poor you profess to love -- you have to wonder what it looks like when Pai actively wants to harm something.

Filed Under: ajit pai, broadband access, digital divide, fcc, lifeline, poverty

FCC Boss Takes Aim At Efforts To Bring Broadband To The Poor

from the with-friends-like-these... dept

So we've noted how new FCC boss Ajit Pai has breathlessly claimed that closing the digital divide will be the top priority for his commission. But we've also noted how his actions as FCC boss have run in stark, dramatic contrast to that stated goal. Whether it's making it easier for prison phone monopolies to rip off inmate families, his decision to kill a plan to bring much-needed competition to the cable box, or his attacks on net neutrality, so far Pai has made it painfully clear that protecting AT&T, Comcast and Verizon is actually where his priorities lie.

In the last week Pai took his "love for the poor" to soaring new heights by falsely taking credit for year-old job plans at Charter Communications, and cheering as Congress dismantled consumer privacy protections at large ISP behest. But Pai also took what most analysts believe will be the opening salvo in a war against subsidized broadband service for the poor.

Last year the Wheeler-lead FCC voted to expand the Lifeline program, first created by the Reagan administration and expanded by the Bush administration. Originally, low-income homes received a $9.25 monthly credit that could be used toward wireless or traditional phone service. The 2015 changes not only gave these homes the option to use this money for broadband in an attempt to modernize the fund, but also placed the lion's share of ISP eligibility administration in the hands of the FCC in an attempt, in part, to better police fraud.

A number of states sued over the move, in part because large ISPs (which enjoy even greater regulatory capture on the state level) didn't want the federal government spending money on anything that might improve regional competition. This week, Pai issued a statement saying (pdf) that he would be killing the FCC's legal defense of the 2015 changes, and freezing all federal approval of federal provider eligibility. Why? This power belongs in the hands of the states, not the FCC, claims Pai:

"Congress established our universal service programs as a joint federal-state partnership. And through the years, many states have helped consumers and protected taxpayers by enforcing the rules of the road. As Senator Tom Udall (D-N.M.) recently observed in introducing bipartisan Lifeline legislation with Senator Deb Fischer (R-Neb.), we need to ‘return the role of state utility commissions in determining Lifeline eligibility. State utility commissions are key to policing against fraud and harmonizing federal and state initiatives that will help us close the digital divide.’ By letting states take the lead on certification as envisioned by Congress, we will strengthen the Lifeline program and put the implementation of last year’s order on a solid legal footing. This will benefit all Americans, including those participating in the program."

On a superficial level Pai does a wonderful job making this all sound perfectly reasonable, obfuscating much of the motivation for the shift as a noble quest to restore states rights (which is what most news coverage will focus on). The problem, again, is that companies like AT&T, Comcast and Verizon (a former Pai employer) have an absolutely incredible amount of control over state legislatures and regulators. It's a primary reason why more than twenty states have passed laws banning your town or city from upgrading its broadband networks -- even if nobody else will.

Pay-to-play state-level politics is also responsible for the kind of utter shitshows we've seen in states like West Virginia, where state leaders threw millions of dollars in subsidies at companies like Frontier and Verizon, then tried to bury the fact that these companies spent this money on over-priced, un-used hardware and redundant consultants, while doing little to nothing for the benefit of state residents. Tennessee Representative Marsha Blackburn is another perfect example of what state "oversight" of broadband providers looks like.

So yes, there's a reason large ISPs prefer regulatory oversight of these kinds of programs in the hands of the states, and it has absolutely nothing to do with state rights. It has everything to do with ensuring that these funds aren't used in a way that might increase competition, and decrease their bottom lines. It's simply easier, and by proxy cheaper, to accomplish via lobbying on the state level. Especially after Wheeler's FCC did an arguably-good job finally cracking down on fraud in the E-Rate and Lifeline programs (I'll note here that Pai voted against holding AT&T accountable for ripping off the program in 2015).

Granted while this reconfiguration takes place, carriers waiting to learn if they can actually service the poor will be prohibited from doing so. Those growing familiar with the arguably-massive chasm between Pai's words and his actions were quick to cry foul, stating that this is just an attempt to begin applying the death by a thousand cuts "solution" to the program. Others, like consumer advocate and former FCC staffer Gigi Sohn (who, unlike Pai, actually has a reputation for caring about low-income communities) issued fairly clear warnings:

"The Chairman is masterful in using the argument "the FCC lacks legal power" to undercut just about every pro-consumer and pro-competition policy he doesn’t like. He used this excuse recently in declining to defend the FCC rules that lowered prison phone rates, and he will certainly do the same when addressing the FCC’s privacy rules for broadband and, ultimately, its network neutrality rules.

I won’t get into the details about how Chairman Pai committed his own process foul by having his Wireline Bureau, in the order revoking the nine Lifeline designations, undercut a legal determination voted on by the full Commission in the Lifeline Modernization Order. Instead, I’ll repeat what should now be obvious – the new FCC majority fundamentally dislikes the Lifeline Program and will seek to weaken it by any means possible."

While Pai's approach is certainly eloquent and clever, the folks that have actually spent years fighting for the poor are quick to note that the claims about state rights are little more than a hollow show pony. Meanwhile, somebody might want to tell Ajit Pai that to be considered a champion of the poor, you need to start by, you know, actually being a champion for the poor.

Filed Under: ajit pai, digital divide, fcc, lifeline, poor, state's rights

AT&T Fined Yet Again For Shady Behavior, This Time For Milking Low-Income Lifeline Program

from the are-we-sensing-a-pattern-yet dept

After a fifteen-year slumber, regulators have apparently decided it might be a good idea to start cracking down on rampant fraud in the telecom market. Not long ago, we noted how AT&T was finally fined for abusing the IP Relay network for the hearing impaired, intentionally turning a blind eye to scammers on the network just to haul in the $1.50 per minute subsidies tied to the network. AT&T strung regulators along for years, implementing "solutions" that it knew wouldn't work but technically met flimsy FCC requirements. As a result, simply stopping AT&T from profiting off of defrauding the deaf (it's estimated that 95% of AT&T's IP Relay traffic at one point was credit card or other scammers) only took regulators the better part of two decades.

Last year, regulators finally cracked down on AT&T for helping scammers of a different sort: crammers. Crammers had been gouging AT&T customers for most of the last decade, charging them $10 a month for garbage "premium" text messaging, horoscopes and other un-asked-for detritus. There again, AT&T intentionally turned a blind eye to the criminal behavior, in large part because the company was netting around 35% of the proceeds from the scams. Worse perhaps, regulators found AT&T was actively making its bills harder to understand so the fraud would be more difficult to detect.

This month, the FCC has announced that it has struck a settlement with AT&T and former subsidiary SNET, over charges the companies were collecting undeserved subsidies under the agency's "Lifeline" program, a low-income community subsidy effort created by the Reagan administration in 1985 and expanded by Bush in 2005. According to the FCC's findings, AT&T apparently "forgot" to audit its Lifeline subscriber rolls and purge them of non-existent or no-longer-eligible customers, allowing it to continue taking taxpayer money from a fund intended to aid the poor:

"AT&T and SNET’s failure to remove ineligible Lifeline customers from their rolls was discovered in 2013 during an FCC audit of two AT&T Lifeline affiliates. The audit found that a number of Lifeline subscribers who no longer qualified for the program had not been de-enrolled following the annual recertification process for 2012 and 2013, a process in which consumers are required to certify their continued eligibility for Lifeline. These subscribers were given one extra month of Lifeline support, and AT&T improperly claimed reimbursement from the government for this extra month. Additionally, the Enforcement Bureau found other de-enrollment and recordkeeping violations."

The FCC announcement goes well out of its way to avoid calling this fraud, but unless you believe AT&T honestly forgot to purge its rolls (pretty difficult to do in full context of AT&T's historical behavior), it's hard to call it anything but. The FCC doesn't specify how great the discrepancy was, but given the speed at which AT&T has been backing away from unwanted DSL and phone markets, the revised differences likely aren't modest. This latest fine comes as AT&T is busy trying to convince the government that there's an endless parade of amazing benefits to be had by letting AT&T acquire DirecTV, effectively eliminating a competitor from the pay TV space.

Historically, telecom regulators love slam dunk cases against small scammers, but were willfully oblivious or too timid to acknowledge the larger players' culpability. With regulators no longer napping in regards to obvious fraud by bigger telecom players like AT&T, companies have unsurprisingly started grumbling that Travis LeBlanc, Chief of the FCC’s Enforcement Bureau, is being too hard on industry and therefore not actually curbing bad behavior:

"Two telecom-industry advocates complained that LeBlanc has been successful at grabbing headlines, but less effective at actually curbing bad behavior. By not being lenient on companies that self-report violations, he is discouraging future companies from coming forward, they said. "The FCC's new approach will discourage cooperation and self-disclosure, and it's going to force regulatees to beef up on litigation instead of compliance with the rules," one industry lobbyist said. "Ultimately, that's a poor use of resources for taxpayers, and it will lead to a worse result for consumers."

Yes, doing the bare minimum to prevent AT&T from ripping off taxpayers and consumers is just an atrocious affront to taxpayers and consumers.

While overreach is certainly possible, most of the stuff LeBlanc is cracking down on is either outright fraud, or the kind of enforcement that's hard to seriously cry foul about (like fining companies for failing to report 911 outages or airing porn during prime time). By and large, LeBlanc appears to be following the lead of FCC boss Tom Wheeler, breaking FCC tradition and actually standing up to large telecom companies. If there's a place LeBlanc (former aide to California AG Kamala Harris) may overreach, it's as the FCC begins using newfound Title II authority to re-examine broadband privacy rules.

For the moment, however, it's just interesting to see the FCC no longer turning a blind eye to scams and fraud when the country's biggest telecom campaign contributors are involved, even if the fines being levied are likely a small fraction of the total money AT&T has made off of a decade of very shady behavior.

Filed Under: fcc, fines, lifeline, scam, travis leblanc
Companies: at&t