Money talks
Critics in Congress balk at tax hike to subsidize cellphone service for poor
By M.L. Nestel Sunday, October 2, 2011
Your phone bill will likely be higher this year — $7 more, in one scenario — to help pay for a government program you may never have heard of.
Last month, the Federal Communications Commission increased a tax on long-distance charges to help fund a government-sponsored phone service called Lifeline that provides more than 12 million low-income Americans with discounted or free cellular plans.
The tax, known as the universal connectivity fee, is assessed of carriers and generally passed along directly to customers. After the recent increase, the fee stands at an all-time high of 15.3 percent, up from 14.4 percent.
Last year, Lifeline ran up a $1.34 billion bill, exceeding the revenue generated by the fee. For many customers, the adjustment will cost just a “few extra pennies” a month, an FCC spokesman told The Daily.
Others may see a bit more of an effect: For the hypothetical customer whose monthly bill totals includes $50 in relevant long-distance charges, the universal connectivity fee would jump by about 60 cents, according to a scenario authenticated with the FCC. On an annual basis, the fee increase would cost this customer about $7.
Though that’s pocket change for some, the move has shined a new spotlight on a program that critics in Congress say is flawed and subject to abuse. “This government giveaway is another example of unnecessary and wasteful spending,” said Rep. Blake Farenthold, R-Texas, who wants to eliminate the subsidy he labels a backdoor tax.
But supporters say the program saves lives and keeps people in tough economic straits connected to the world. Many participants say they would have trouble getting by without it. “It saves me half as much as I was paying before,” said Helen Phillips, 40, of Tulsa, Okla. She supplements her temp jobs with SSI payments and receives help from a food pantry as well as subsidized cellular service under Lifeline. “Most of the time I use it for work and to call my family and friends,” she said.
To qualify for the program, a person must have an income at or less than 135 percent of the poverty level and already be accepting government support like food stamps or Medicaid. For a family of four, the eligibility threshold would be about $30,000. Verizon, AT&T and Sprint all offer Lifeline, as do many smaller carriers. The program also provides assistance to customers in rural and tribal areas and discounts on Internet access for eligible schools, libraries and health care providers.
But not all users are happy with the program. Teressa Brown, 42, also of Tulsa, said she received faulty equipment from her provider, one of the many independent carriers that have jumped into the business. “My phone went out on me in less than a month,” she said. “I requested for another one and they said they would replace it, but they told me I needed to rush them $40. I told them I would not do that.”
Cases like Brown’s have lawmakers in a twist. The poor service reports plus accusations of customers using multiple cellphones when permitted only one a household have sparked action in Washington.
Rep. Fred Upton, R-Mich., chairman of the House Committee on Energy and Commerce, is pushing for a more stringent steward at the phone switch.
“If this program is to be sustainable,” he said, “the FCC must reform it promptly, ending duplicative support for multiple carriers to serve a single household, preventing carriers from receiving support for services that consumers do not use, and pushing carriers to actually verify that their customers are eligible to participate in the program.”
The FCC is not directly in charge of Lifeline but has oversight and polices it. The service is outsourced to the Universal Service Administration Co., a nongovernmental, not-for-profit agency.
The talk of fraud is overstated, said Universal Service Administration spokesman Eric Iverson. “The consumer has to complete this certification saying under perjury, ‘I am eligible for this service,’” he said. “The companies tell us how many eligible consumers there are every month and we provide them up to $10 dollars per consumer as a subsidy.”
All states provide federal discounts of as much as $10 a month to those qualifying and all but nine offer added discounts of varying rates. The total of free minutes granted can range from 98 to 250.
Mark Wigfield of the FCC said that the Department of Justice deals with consumer fraud. “We’re responding to [critics] and reforming the rules,” he said. “It is one phone line per household. We recently clarified the rules to make sure people understood that.” He acknowledged, though, that multiple families can reside at the same address.
Economic woes have led more people to reach for Lifeline. “It’s gone up in recent years with more companies participating in the program,” Iverson said. “More people are qualifying.”
Cheryl Leanza, a media policy consultant, emphasized Lifeline’s cost benefits. “Your phone is more valuable if you can call anyone instead of just an assortment of people,” she said.
“Everybody with a telephone benefits the people that are on the network. We’re not talking about a lot of money,” she said.
After suffering two brain aneurisms, retired bottling factory worker Virginia Bandy, 71, moved from Chicago to Auburn, Ala., to be closer to family. Her concerned daughter insisted she get a cellphone and Lifeline helped. “Hopefully I don’t have to have an emergency and need to use it,” Bandy said.
