Lifeline usage became an issue last September when the FCC learned that Sprint received tens of millions of dollars in Lifeline subsidies without providing any actual service to those customers. Specifically, the company claimed monthly subsidies for serving approximately 885,000 Lifeline subscribers, even though those subscribers were not using its service. The 885,000 subscribers represented nearly 30 percent of Sprint’s Lifeline subscriber base and nearly 10 percent of the entire Lifeline program’s subscriber base. This was a clear violation of the FCC’s “non-usage” rule. A rule designed to prevent waste, fraud, and abuse in the Lifeline program.

The non-usage rule states that Eligible Telephone Companies (ETCs) in a state shall only receive universal service support reimbursement for Lifeline service provided to subscribers who have used the service within the last 30 days, or who have cured their non-usage in accordance with the Commission’s rules. ETCs must remove such non-usage subscribers from the Lifeline program after providing 15 days-notice.

In a September 24, 2019 News Release, the agency noted:

The non-usage rule requires Lifeline providers of “free” service to de-enroll subscribers who don’t use their phones—a rule meant to protect Lifeline from wasting payments on service not provided. The FCC developed this and other rules after investigations showed that companies hawked free Lifeline service aggressively and indiscriminately, knowing that they would get paid each month even if consumer didn’t use their phones. And because the consumer paid nothing, he or she had no incentive to relinquish the subscription.

When the Sprint data was released, FCC Chairman Ajit Pai stated that “[i]t’s outrageous that a company would claim millions of taxpayer dollars for doing nothing. This shows a careless disregard for program rules and American taxpayers. I have asked our Enforcement Bureau to investigate this matter to determine the full extent of the problem and to propose an appropriate remedy.”

But according to the FCC’s Office of Inspector General (OIG), this appears to be a problem that is not restricted to a single company.

For those unfamiliar with it, the OIG provides objective, independent investigations, audits and reviews of FCC programs, including Universal Service Fund (USF) programs administered by the Universal Service Administrative Company (USAC). Its goal is to combat waste, fraud and abuse in these programs. Sadly, the OIG believes the non-usage rule in the Lifeline program is often ignored. And in a rare Memorandum to the industry, issued the following statement:

OIG issues this advisory letter to alert ETCs, consumers and the public regarding carrier failures to comply with the program’s usage rule. Chairman Pai recently announced that Sprint sought tens of millions of dollars in Lifeline subsidies for consumers who should have been de-enrolled from the program for non-usage. Sprint is not alone. OIG is currently investigating other ETCs regarding significant potential violations of the Lifeline usage rule. As a result, OIG suspects non-compliance with the usage rule by both large and small carriers may be more widespread. (OIG, Memorandum, released January 28, 2020).

Stunningly, OIG not only found evidence that some ETCs received Lifeline subsidies for customers with no qualifying usage within the timeframe required by the rule, but also found that some ETCs sought reimbursement for providing service to accounts that never had any usage! Moreover, some companies incorrectly treated the following as acceptable Lifeline usage:

Incoming texts to subscribers;

Incoming voicemails to subscribers;

Data use not generated by the subscriber.

According to the OIG:

These examples are not exhaustive. While some usage rule violations may be the result of willful conduct by ETC management, other violations may reflect the failure of ETC management to establish appropriate policies and procedures, properly train and supervise employees or adequately test usage mechanisms. Neither willful violations nor failed management practices are acceptable. (Id.).

The OIG Memorandum should serve as a warning to companies. The Commission is very serious about eliminating non-usage payments from the Lifeline program. ETCs that engage in this practice will face large fines from the Enforcement Bureau that are likely to more than wipe out any unlawful payments from Lifeline they may have received.