The Obama administration Thursday announced a plan to expand the troubled Lifeline program, which subsidizes phone service, to also include broadband coverage. Despite the enormous potential for even more waste, fraud, and abuse in a program already famous for such fiscal irresponsibility, the Democrat-controlled Federal Communications Commission is nonetheless likely to approve this proposal.
I know from personal experience that this is a terrible idea. That’s because in 2013, I received three so-called Obamaphones myself — when I wasn’t even eligible for one. As I wrote for National Review, my income was high enough that I could have supported a family of eight and still remained ineligible; and even though eligible beneficiaries may receive only one phone, I received three “free” phones in the mail. Most incredibly, I got these phones without lying, truthfully answering every question Lifeline representatives asked me.
My phones arrived in 2013 — a year after the FCC adopted reforms that were supposed to cut back on waste, fraud, and abuse. Nevertheless, the FCC touted those same proposals Thursday, claiming it would build on them as it expanded the subsidized-phone program to include Internet. The problem is that the Lifeline program is premised upon perverse incentives — so it’s no surprise that superficial reforms haven’t worked. And this faulty incentive structure reaches from boardrooms to the streets where Obamaphones are hawked.
The street-level vendors signing people up for Obamaphones often work on commission, so they have every reason to skimp on due diligence. These Obamaphone hawkers didn’t want to ask me rigorous questions to determine whether I actually qualified for the program. They wanted to sign me up fast, ring up their commission, and move on to the next person.
Such corner-cutting is common. The Scripps National Investigative Team found that at least 50 TerraCom workers had forged signatures to sign people up; other applications led to abandoned buildings and homeless shelters. “Part of the problem is that we were taught, go, go, go, go, go, as many clients — like 25 to 45 people a day,” one Obamaphone rep told me. “You gotta get that money. . . . Basically, we were rushing through the process.” Expect to see the same commission-based model duplicated for Internet service, with the same results.
The federal government’s corporate partners also profit significantly from encouraging fraudulent Obamaphone sign-ups. The federal government gives phone providers $9.25 per enrollee per month — a sum that adds up fast. Wholly contrary to the spirit of the Lifeline program, which is to provide phone service to those too needy to afford even the most basic service, the federal government has also permitted these companies to offer upgrades. Phone companies have been repeatedly caught abusing the Lifeline program — but the federal government has slapped them with fines dwarfed by the huge profits they reap. TracFone Wireless, owned by Mexican billionaire (and Clinton Foundation supporter) Carlos Slim, pulled in more than $430 million from the Lifeline program in 2013 alone, the latest year with statistics on record.
Internet companies and their salesmen will have the same perverse incentives to approve sign-ups regardless of households’ eligibility. The inevitable result: Higher Internet prices for households that actually pay their own Wi-Fi bills. Already, the federal government tacks a “Universal Service Fund” fee on phone bills. Paying broadband customers will similarly have to subsidize Web service for others. Supporters of the president have pushed back against the Lifeline moniker “Obamaphones,” correctly pointing out that the program began under the Reagan administration. Obama himself even riffed off this sentiment recently, saying: “If you watch Fox News on a regular basis, they will find folks who make me mad. I don’t know where they find them! They’ll find folks who say, ‘I don’t want to work, I just want a free Obamaphone’!”
But it’s indisputable that the Lifeline program has ballooned under the Obama administration. If the FCC adds broadband to Lifeline, it would further cement the president’s handout legacy. The pervasive waste, fraud, and abuse of Obamaphones proves that this isn’t a program that can be adequately reformed. It’s an exercise in foolishness, then, to expand it. The only appropriate solution would be to eliminate Lifeline altogether.
— Jillian Kay Melchior writes for National Review as a Thomas L. Rhodes Fellow for the Franklin Center. She is also a senior fellow at the Independent Women’s Forum.