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A push to stop handing out free phones gains steam

Efforts to reduce fraud and waste in a program that provides free phone service to the poor have reduced enrollment from a high of more than 1 million Ohioans last year to roughly 760,000 today, a Dayton Daily News analysis found.

National enrollment in the subsidized program has dropped by more than 3 million, but problems persist, especially in the part of the program that provides free cellphones to those who qualify.

A steady stream of people lined up at a tent emblazoned with “FREE CELL PHONES” and “FREE MINUTES” outside the Montgomery County Job Center on a recent weekday afternoon, food stamp cards at the ready.

The phones are provided through a program called Lifeline that is paid for with fees on cellphone and home phone bills.

To qualify for the program, someone must be on a government program such as food stamps or Medicaid, or must make below 150 percent of the federal poverty level: currently $35,325 for a family of four.

“I have a lot of doctors’ appointments myself, and I have a 1-year-old that I have to call and make appointments for her and I don’t have a house phone, or any type of phone,” said Ashley Reedy of Dayton while waiting in line.

Some others in line, however, had phones in their hands.

The total cost of the program in Ohio was $21.8 million in the first quarter of this year, compared to $26.9 million in the same time period last year. The statewide cost in 2012 totaled $111.2 million.

Though the program providing discounted home phone service to the poor debuted in 1985, its growth skyrocketed in 2008 when cellphone companies got the go-ahead to distribute phones. It entered popular culture during the 2012 presidential election when people started calling the devices “Obamaphones,” though Lifeline pre-dated President Barack Obama.

Some say stopping the practice of giving away cellphones in person would tamp down abuse in the program. A rule being considered by the Federal Communications Commission would require the phones to go out by mail after a thorough eligibility check.

“We believe that ending same-day distribution of Lifeline wireless cellphones will go a long way to eliminating the incentive for some carriers to ‘game the system,’ ” said Donald Mathis, president of the anti-poverty group Community Action Partnership, in a press conference last week with consumer advocacy groups.

“This common-sense reform would be a significant step to quieting concerns about this vitally important program.”

The Public Utilities Commission of Ohio last week endorsed this rule change, along with other counter-measures including a more thorough enrollment process put forward by companies that want to keep in-person distribution of phones.

“While we have taken positive steps in Ohio to curtail and contain waste, fraud and abuse within the Lifeline program, as has the FCC at the federal level, the potential for waste, fraud and abuse still remains,” said PUCO Chairman Todd Snitchler at the commission’s May meeting.

Three more companies were certified to provide Lifeline service at the May meeting, including Life Wireless, which operates the booth at the Job Center. Fifteen companies have entered the Ohio market since 2009, and three more are pending.

Enrollment down

Program rules allow only one Lifeline phone per household. But a national database that lists who already has a phone isn’t expected until later this year. Until then, Life Wireless officials say before they hand over a phone they check to make sure someone doesn’t have a phone through them or two dozen companies with which they voluntarily share enrollment data — but there’s no way to be sure someone doesn’t have a phone with another company.

People are told they can only have one Lifeline phone, but those in line were confused by the different companies, not realizing the various phones — Life Wireless, SafeLink, Assurance, etc. — were part of the same program.

In 2011, the Daily News reported that 26,000 Ohioans had more than one free phone through the Lifeline program. Since then, the Universal Services Administrative Company has identifed many more cases and has eliminated nearly 1.7 million duplicate subscriptions nationwide, including roughly 300,000 in Ohio.

FCC officials say this and other measures saved the program $200 million last year and could save $2 billion by the end of 2014.

National enrollment in the program has dropped from 16.5 million in the first quarter of 2012 to 13.3 million this year, federal records show.

But this follows several years of unbridled growth as cellphone companies advertised heavily and scrambled to saturate the market with phones.

TracFone, the first company to enter the Ohio market in 2009 with its SafeLink phone, saw its montly Lifeline payments in Ohio dipped from a high of $5.9 million in October 2012 to $2.1 million in July.

Bill would end free cells

Since it was approved to operate in May, Life Wireless — which operates under the parent company Telrite — has yet to report monthly disbursements.

The program is paid for with fees mandated by the government and tacked on to most cellphone and home phone bills, often listed as the Universal Service Fee.

Companies receive up to $10 a month for every person they enroll. Plans vary, but Life Wireless subscribers get up to 250 free minutes each month.

Some federal lawmakers say recent reforms don’t go far enough. A bill sponsored by U.S. Rep. Tim Griffin, R-Arkansas, would allow Lifeline subsidies only for landlines.

Bill co-sponsors include Republican Reps. Jim Jordan of Urbana and Brad Wenstrup of Cincinnati.

“My bill returns the Lifeline program back to its original structure by ending federal subsidies for free cellphone services,” Griffin said when the bill was introduced. “This growing government cellphone program is costing American consumers and taxpayers, and my bill puts an end to it.”

Others, including the consumer advocacy group Consumer Action, say that landlines are a thing of the past and that cellphones benefit people in terms of safety, health, employability and family strength.

“The Lifeline program — including the portion of it focused on wireless service — is of vital importance to millions of America’s low-income seniors, veterans, and people of color,” Linda Sherry, director of Consumer Action, said last week in calling for an end to in-person distribution of phones.

“It is unfortunate that certain carriers are violating at least the spirit of the existing rules that govern the Lifeline program,” she said. “We believe that the FCC can take reasonable additional steps to crack down on these ‘bad actors’ and effectively curb the abuses.”

Handouts defended

Life Wireless officials say their business model is to bring the phones to where people live.

“Some other companies may advertise on cable TV or on the Internet, and there are people who are in need of the phones who have neither of these things, so this is a way to reach them,” said company spokesman Paul Donsky.

Indeed, everyone interviewed at the Job Center last week told reporters it was the sign advertising “FREE PHONES” that pulled them in.

“I just came and saw the sign and went to the job center and came back and now I’m here,” said Yolanda Twitty, Dayton. “I need a phone because I don’t have one.”

When asked about the cellphone in her hand, Twitty said it only sent and received text messages. “You can’t actually call.”

Reedy of Dayton also stopped by because she saw the sign.

“I drove by. It said ‘free minutes, free phones.’ I need a free phone and free minutes,” she said. “I have to go down the street to use somebody else’s phone.”

She said cellphones can run $40 or more a month, plus another $40 to buy the phone. “It’s a very helpful, good deed.”

Jim Carpenter, senior vice president of Life Wireless, could not say how many people the company has on the ground in Ohio and would not say whether they are paid commission for signing up customers.

“There is no evidence to support the contention that in-person Lifeline enrollment is in any way more susceptible to fraudulent actors than any other method,” he said. “In fact, we believe that checking a customer’s identification and other program qualifications in person is one of the best ways of preventing fraud from occurring.”

He said they support “demanding that bad actors be policed out of the Lifeline system,” and they go to great lengths to make sure program rules are followed, including checking identification and eligibility paperwork in person, checking against other company enrollment data and doing back-end audits to catch duplication.

When asked about fraud or abuse of the program, the people in line for their Life Wireless phones at the Job Center said they didn’t have time to judge other people or trifle with politics.

“I’m just worried about the here and now,” said Dale Beckham of Dayton. “I need it. It’s a help. It’s a plus.”

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