A utility regulator in Georgia wants to charge low-income residents $5 a month to get government-funded telephone service, a step that he says will deter fraud.
Critics worry it will effectively gut the program.
The U.S. government now pays companies $9.25 a month per customer to offer phone service to low-income residents. Public Service Commissioner H. Doug Everett, a Republican, wants Lifeline users — many of whom now pay nothing for cell service — to pay a $5 monthly fee for their service, essentially a 54 percent tax on their subsidy.
Companies that don’t charge the fee would have to offer at least 500 minutes of calling time, potentially making it unprofitable to stay in the market.
The rules are designed to affect firms offering cellphones, not landlines. People getting subsidies for landline phones typically pay more than $5 out of pocket now since that service costs more than the government subsidy.
After taking an early vote in January, Everett said he expects the commission to refine the plan in the next few weeks.
“This to me is a luxury item, it’s not a necessity,” he said. “They have family, most of them. They have the church. I believe they can put a little skin in the game.”
Cellphone companies now offer phones and calling plans that cost less than the government subsidy, meaning the firms can earn a profit. Advocates for low-income residents say forcing low-income people to pay $5 will discourage them from using the program. Even though telephone companies would keep the fee, most don’t want it and have filed a lawsuit challenging the plan. Company officials say the cost of the collecting the payments exceeds what they would get in extra revenue.
“Those who qualify for Lifeline are already facing economic hardship,” said George Korn, who represents the Rainbow PUSH Coalition, which opposes the rule. “In most cases, they are surviving on a meager monthly income that leaves them little room for extras.”
Rainbow PUSH Coalition partners with a cellphone provider.
The dispute centers on the Lifeline program, which started in 1984 under President Ronald Reagan’s administration and expanded under presidents George H.W. Bush, Bill Clinton, George W. Bush, and Barack Obama.
Originally, the program subsidized wire telephones in poor households. As household income dropped and more telephone carriers entered the program, spending increased sharply. The program, which cost roughly $582 million in 1998, cost about $2.2 billion in 2012.
Prior to recent changes, the Federal Communications Commission estimated that up to 15 percent of Lifeline subscribers may be ineligible for the assistance, costing the government as much as $360 million annually. Those findings prompted the FCC to issue new rules — for example, making clear that users can get just one phone per household. Federal officials are forcing a state-by-state check of customer rolls, searching for people who receive more than one phone and requiring users to re-certify that they remain eligible for the assistance.
By the end of the year, FCC officials expect to have a national database that will allow cellphone companies to check whether someone already is enrolled in the program before signing him or her up for service.
While considering changes to curtail spending, FCC officials rejected a proposal to charge customers. The commission said it worried that many poor people lacked access to bank accounts and would be discouraged from enrolling, and that there was little evidence the move would discourage fraud.
Everett said the federal rule-tightening does not go far enough.
“A lot of people are giving fictitious names and fictitious addresses, and no one was checking it,” he said.
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The AP contributed to this report. Featured image Getty Images.