In Battle Against Fraud in Free Phone Service, the Poor Might Pay the Price

From The New York Times:

From her trailer with a rusting roof on Lot 54, Donna James uses the free Samsung cellphone provided by a federal program to speak with friends who give her rides, clerks at medical offices, a caseworker, emergency dispatchers and, of course, bill collectors.

“If it weren’t for my free phone, there were a few times I wouldn’t have made it to the hospital,” said Ms. James, who is unemployed because of chronic health problems and has no other telephone or Internet connection in her home. She is among the 15.3 million people in the United States who receive the Lifeline telephone service because they meet income guidelines or are enrolled in programs like Medicaid or food stamps.
      

But the fundamental feature of the program on which Ms. James relies — 250 minutes of free wireless service a month — is at the center of a legal battle linked to a new tactic to reduce fraud in the program. The outcome could have far-reaching consequences for the telecommunications industry and for millions of impoverished Americans.

      

Alarmed by accounts of households that have more than one subsidized phone — a breach of federal guidelines — and other allegations of fraud, the Georgia Public Service Commission voted this year to make this state the first to require phone companies to collect a fee of at least $5 a month from Lifeline users.

      

As an alternative, in an effort to force the service providers to better police phone usage, the commission also said that the companies could, for the same compensation they already receive from the government, offer participants 500 minutes a month. But the companies denounced that option.

Georgia regulators made their move about three years after the Government Accountability Office reported that officials from 21 states “indicated that they were somewhat or very concerned about consumer fraud in the Lifeline program.”

      

Georgia’s mandate, which had been scheduled to take effect in January before a judge in Atlanta granted an injunction last week, prompted outrage from some advocates for the poor, and a legal challenge from a trade group that represents cellphone companies. The group argued that Georgia was circumventing federal law to set rates.

      

But the author of the regulation has argued that the fee’s benefits outweigh the risks, and that it would do much to reduce Georgia’s share of fraud in the Lifeline program, which began in 1985 and was expanded to include wireless coverage two decades later.

      

“There’s always going to be collateral damage when you’re having a war, and we’re having a war with fraud and abuse,” Commissioner H. Doug Everett told WABE Radio in October.

      

Stan Wise, one of two public service commissioners who voted against the new regulation, conceded that the Lifeline program has been rife with misconduct, but warned that the fee would be ineffective and damaging.

      

“What it really does is harm those in the most need and the ones that the program was designed to help,” Mr. Wise said. “If you have three Lifelines and it’s important to you to have the three phones, what’s $15 to you if you’re promoting fraud?”

      

The program’s troubles have received widespread attention. Aware of the criticisms, the Federal Communications Commission, which cited the potential for “a significant burden on some classes of Lifeline consumers” when it turned back a plan in 2012 to impose monthly fees across the country, has started a campaign to clean up the program, including the introduction of new national databases tracking eligibility and participation.

      

But if Georgia’s new policy can survive in court, it could be replicated elsewhere by anxious state regulators.

      

“These sorts of cases are relatively unusual,” said James B. Speta, a professor at Northwestern University who specializes in telecommunications law. “So in a second state or a third state, they will certainly look at what happened in Georgia.”

      

As the legal battle plays out, Georgia residents who have Lifeline phones are beginning to contemplate what they will do if the fee is put in effect.

      

Ms. James, who has a monthly budget of about $350, said she was likely to have to choose between her phone and one of the six prescription medications she takes every day.

      

“I’ve got medicines I’ve got to buy with $5,” said Ms. James, 47, who lives just northwest of Atlanta and said she has medical debts well into six figures after numerous hospitalizations and health issues that include chronic bronchitis and gastrointestinal ailments.

      

Others who have the Lifeline phones, including Brenda Florence, said they would immediately return them.
      

“They’re supposed to be free,” said Ms. Florence, 60, who pays for a home landline and cell service but also participates in Lifeline because she receives Medicaid benefits. “I’m going to put it in the box and mail it back.”

      

In Georgia, where nearly 721,000 people use Lifeline, the debate has also exposed a fissure among those who work to aid people in poverty.

      

At the Christian Aid Mission Partnership, which provides food and clothing to the region’s poor and sometimes hosts phone providers offering their wares, officials said they endorsed the state’s new effort to stem fraud.

      

“I think there should be some skin in the game,” said Linda Oviatt, the organization’s outreach director. But she added that she generally supported the Lifeline program because it was “a godsend” for many of her clients.

      

Other advocates for the poor, though, have been sharply critical of Georgia’s plan.

      

“The proposed fee simply serves as a penalty on the poor,” the Rainbow PUSH Coalition wrote in an October letter to commissioners. “It is, in essence, a tax being arbitrarily applied to those who can least afford it and an incursion by the P.S.C. on the free market business practices of private companies.”

      

Back on Lot 54, Ms. James, whose kitchen on a recent day was cluttered with boxed and canned foods, said she thought the debate should focus less on complex legal arguments. She merely wants to keep her aging flip phone.

      

“It’s so hard on someone who is on a fixed, fixed income,” she said. “It was just an honor to get something that is going to help me.”