FCC Proposes $6M Fine Against TracFone for Violating Lifeline Rules

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The FCC proposed a more than $6 million fine against TracFone Wireless, saying the company apparently claimed Lifeline funding for thousands of ineligible customers. TracFone is a prepaid wireless provider offering Lifeline service under the SafeLink Wireless brand and a subsidiary of Mexico’s largest telecommunications company, América Móvil. Lifeline subsidizes communications services for low-income consumers. 

An FCC Enforcement Bureau investigation found that, in 2018, TracFone apparently sought reimbursement for thousands of ineligible subscribers in Texas and hundreds in Florida. TracFone claimed more Lifeline support than was authorized by the Public Utility Commission of Texas, which makes subscriber eligibility determinations in that state. 

In Florida, the FCC said TracFone sales agents—who were apparently compensated via commissions for new enrollments—apparently manipulated the eligibility information of existing subscribers to create and enroll fictitious subscribers. For example, TracFone claimed support for seven customers in Florida at different addresses using the same name, all seven of whom had birth dates in July 1978, and shared the same last four Social Security Number digits, according to the Commission.  

The proposed fine is based on the 5,738 apparently improper claims for funding that TracFone made in June 2018, and includes an upward adjustment because of what the FCC said was “the company’s egregious conduct” in Florida. TracFone will be given an opportunity to respond to the agency’s Notice of Apparent Liability for Forfeiture. The FCC will consider the response before acting further to resolve the case.

“Every dollar misdirected from the Lifeline program to a carrier that violates our rules is a dollar that won’t go toward providing more affordable connectivity to low-income Americans,” said FCC Chairman Ajit Pai. “Ensuring that this program works for those who need it most is especially important now, during the ongoing coronavirus (COVID-19) pandemic. We make clear that we will not sit idly by and let Lifeline carriers fabricate enrollment data to generate more sales. And I’m hopeful that our new rule prohibiting carriers from paying commissions to employees or sales agents based on the number of Lifeline customers they sign up will help deter the kind of apparent fraud we’ve seen in this case.”

Lifeline provides a monthly discount of up to $9.25 on broadband and phone service for qualifying low-income consumers. Carriers participating in the program receive funds for each eligible subscriber and must pass the savings on to those subscribers. Lifeline is paid for using Universal Service Fund dollars, and that money comes from fees assessed on the phone bills of consumers and businesses.

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