T-Mobile will pay a $200 million penalty to the U.S. Treasury to resolve an FCC investigation of its subsidiary Sprint’s compliance with rules concerning waste, fraud, and abuse in the Lifeline program for low-income customers. The Enforcement Bureau called it the “largest fixed-amount settlement the Commission has ever secured” to settle an investigation.
The deal comes after a bureau probe into reports that before Sprint merged with T-Mobile, it claimed monthly subsidies for serving about 885,000 Lifeline subscribers even though they weren’t using the service. The agency called that a potential violation of its “non-usage” rule.
Initially, the matter came to light during an investigation by the Oregon Public Utility Commission. In addition to paying a $200 million civil penalty, Sprint agreed to develop a compliance plan to help ensure the mistakes won’t happen again.
Sprint provides wireless Lifeline service under the Assurance Wireless brand to millions of low-income households. T-Mobile acquired Sprint earlier this year; Sprint now continues to do business as a wholly-owned subsidiary of T-Mobile.
FCC Chairman Ajit Pai was pleased the investigation was solved “in a manner that sends a strong message about the importance of complying with rules designed to prevent waste, fraud, and abuse in the Lifeline program.” He called Lifeline “key to our commitment to bringing digital opportunity to low-income Americans.” Pai said “it’s critical to make the best use of taxpayer dollars for Lifeline.” He praised the Oregon Public Utility Commission for its efforts in the case, saying: “States play an important role in helping low-income consumers get access to affordable communications through Lifeline and making sure the program is run efficiently.”
The Lifeline program helps make phone and broadband service more affordable for low-income consumers. Providers participating in the program receive a $9.25 monthly subsidy for most Lifeline subscribers, which they must pass along to consumers as a discount. For most mobile Lifeline consumers served by Sprint and many other providers, the subsidy makes the service free to the consumer, according to the agency.
Under the FCC’s “non-usage” rule, providers of “free” service may only be reimbursed for a Lifeline subscriber if that customer has used the service at least once in the past 30 days. Providers must drop subscribers who don’t use their phones after giving them 15 days’ notice. The FCC said it developed this and other rules after investigations showed that companies were aggressively selling free Lifeline service, knowing that they would get paid each month even if consumers didn’t use their phones. Since there was no bill, consumers had no incentive to relinquish the subscription.