Pai Cites Almost $500 Million in Lifeline Support as Questionable or Wasteful
At least $476 million in annual Lifeline USF spending remains questionable and perhaps wasteful, FCC Commissioner Ajit Pai said Wednesday. Pai said it appears that "unscrupulous" wireless resellers continue to take advantage of "override" processes to get around a commission rule aimed at preventing duplicative Lifeline telecom support to low-income consumers. "We need to get to the bottom of it and we need to root out the waste, fraud and abuse that has persisted in the program for a long time,” he told reporters at a briefing Wednesday on his latest letter seeking answers from the Universal Service Administrative Co., which runs USF for the commission.
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Pai said his staff analyzed data from the National Lifeline Accountability Database (NLAD) that was provided by USAC in response to a previous query. "I am now concerned that abuse of the Universal Service Fund's Lifeline Program is more widespread than I first thought," he said in a Wednesday letter to USAC CEO Chris Henderson, which followed two previous letters (see 1604180074 and 1605310061).
In response, an FCC spokesman noted recent remedial actions. "The Lifeline program must be designed both to prevent abuses and to make sure that Lifeline is available to those that need it most, including the homeless population," he emailed. "A critical piece of the Lifeline reforms adopted by the majority of the Commission in March included creation of an independent National Lifeline Eligibility Verifier, which will take the responsibility for verifying subscriber eligibility out of the hands of the provider and transfer it to a third party. Taking this determination away from the companies that stand to benefit financially will remove the program’s major remaining vulnerability to waste, fraud and abuse.”
The FCC needs to do more to address the problems now, Pai told reporters. A Pai aide said the national verifier isn't expected to be fully operational until 2019. Lifeline provides about $1.6 billion in annual voice service support and the FCC recently created a budget of $2.25 billion in expanding the program to broadband coverage. Carriers generally receive $9.25 in monthly support for each Lifeline subscriber they serve.
Pai's letter said the FCC created the NLAD to enforce a "one-per-household" rule, which generally bars more than one Lifeline subscription from going to a single household. The NLAD is designed to help carriers identify and resolve duplicative Lifeline service claims and prevent duplicative enrollments going forward, he wrote. Although the NLAD rejects multiple subscribers at the same address, the FCC directed USAC to create procedures to allow applicants with the same address to show they are part of separate households, Pai wrote. USAC did this by allowing carriers to override NLAD rejections of applicants having the same address as another subscriber, he wrote.
"To carry out an independent economic household (IEH) override (as USAC calls it), an applicant must merely check a box on a form and need not provide any supporting documentation," Pai wrote. "Unfortunately, this well-intentioned exception to the override process appears to be undermining the one-per-household rule. The NLAD is not preventing a large number of duplicative subscribers from claiming Lifeline subsidies."
Pai said an FCC enforcement proceeding against Total Call Mobile had shown "how unscrupulous carriers could regularly register duplicate subscribers by fraudulently using the address of a local homeless shelter, altering a person's name, and using fake Social Security numbers to evade detection." The FCC proposed a $51 million fine against Total Call Mobile because of its apparent duplicate and ineligible enrollments (see 1604080032). Pai had credited USAC in February 2015 with changing the process for overriding "third-party identity verification" safeguards.
But Pai said Henderson's May 25 letter revealed "an even greater problem" persisted with IEHs. "Specifically, USAC's data reveal that carriers enrolled 4,291,647 subscribers between October 2014 and April 2016 using the IEH override process," he wrote. "That's more than 35.3% of all subscribers enrolled in the NLAD-participating states during that period. ... And the price to the taxpayer is steep -- just one year of service for these apparent duplicates cost taxpayers $476 million." The Pai aide said there could be legitimate reasons for some of the overrides, but he said the number appears higher than would be expected, and points to a lack of Lifeline oversight.
Pai's letter asked Henderson to answer a series of questions about the IEH overrides, and the NLAD in general. He also asked what the USAC and the FCC could do to address the verification issues. In addition, Pai's office supplied reporters with data that showed various forms of overrides accounted for 48 percent of Lifeline enrollments between October 2014 and April 2016.
“The fact that almost 50 percent of all of these lifeline subscribers for the relevant period were garnered through some sort of override process where the carrier would be the one saying, ‘No, the standard safeguards, we can bypass those in order to enroll the subscriber' -- that is a shocking number," Pai told reporters. "Almost one out of every two times the carrier on the carrier’s own say-so is telling the FCC effectively, ‘Don’t worry, we’ve got this. ... We pinky swear that this is a legitimate subscriber.’ It does make you wonder, both as taxpayers and people charged with administering the program, what exactly is going on here?"
"I think we’ve seen through the Total Call Mobile and other enforcement actions that there are all kinds of unscrupulous carriers who are going to fill that vacuum if they don’t sense that there is a cop on the beat," Pai said. "That is the bottom line we draw from this information overall.”