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Aiding fraud: It’s what Uncle Sam seems to do well

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POSTED March 5, 2013 1:32 a.m.

It’s only $1.18 a month.

No big deal.

But to paraphrase the late Sen. Everett Dirksen $1.18 here and a $1.18 there and pretty soon we’re talking real money.

Is $2.2 billion a year real enough for you?

That’s what it is costing American cell phone customers annually to underwrite Lifeline cell service for those who supposedly can’t afford it.

To qualify for the heavily subsidized cell phone service involuntarily financed by paying cell phone customers, recipients have to be at or below 135 percent of the federal poverty guidelines. That means they should already have qualified and are receiving federal or state aid such as welfare, housing assistance, and Medicaid among others.

Lifeline has been a part of the telecommunications landscape since 1985. It was put in place to make sure the most vulnerable in society had a phone to access emergency services and such. Then in 2005 it was expanded to include prepaid cell plans in addition to land lines.

You may disagree with the philosophy or imposing mandatory fees that are basically taxes for the purpose of taking money from a paying customer to subsidize another customer at a significantly reduced rate. However, it appeared to be serving its purpose with little fraud.

That is until government bureaucrats and politicians decided that they needed to expand the program on the assumption there are more needy people out there who could not afford prepaid cell service.

So the Federal Communications Commission opened the program to smaller carriers. The amount of money spent subsidizing Lifeline services went from $819 million in 2008 to $2.2 billion last year.

How did that happen?

For starters up until last year the FCC allowed consumers to self-certify their eligibility. In addition, many states didn’t require documentation.

And until state public utilities oversight agencies started questioning the rapid growth of payments to primarily start-up cell phone services adding Lifeline customers, the FCC didn’t even start enforcing a key rule that limited households to one Lifeline discount.

In a number of cases some households were receiving as many as 10 Lifeline discounts. A household that can afford 10 cell phones even at a reduced rate obviously doesn’t need assistance.

Investigators in various states have documented cases were carriers were signing up customers in hospital rooms. They also were signing lifeline users by mailing them unsolicited phones. That is in addition to old-fashioned, straightforward fraud of knowingly signing up ineligible customers.

If this sounds familiar, think of the housing crisis. The government not only relaxed lending standards but then pressured many conservative lenders to go after people they normally wouldn’t loan money to because of their risk. That, in turn, encouraged new players to enter the field to do liar loans and such.

Uncle Sam is great at lowering standards and pushing instant gratification for those with little or no skin in the game.

What started out as a noble program to offer a hand up for basic needs such as accessing emergency services degenerated into a scam making unscrupulous private sector firms millions in profits by ripping off consumers.

It is amazing what the government can do when they get impatient when the amount of free stuff that is being offered isn’t consumed in large enough quantities to make bureaucrats feel good.

That is why talk of providing universal access to the Internet should scare you. The proposal involves - you guessed it - charging customers that pay full freight to subsidize poorer consumers.

It is akin to Applebee’s slapping a surcharge on your bill so diners that can only afford McDonald’s can also eat at Applebee’s.

If the government is going to partake in the transfer of wealth at the consumer level, then they should enforce the rules.

We all can find better uses for the $14.16 a year the government takes from us for Lifeline service than subsidizing those who don’t qualify for it and sending truckloads of our money to companies that conduct wholesale fraud.



This column is the opinion of executive editor, Dennis Wyatt, and does not necessarily represent the opinion of The Bulletin or Morris Newspaper Corp. of CA.  He can be contacted at dwyatt@mantecabulletin.com or 209-249-3519.

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