Oklahoma Corporation Commission officials have opened investigations into five phone companies to see if those firms failed to oversee a federal program properly that provides subsidized cellphones or landlines to low-income residents.
Phone company reimbursements from the federal Lifeline program quadrupled in Oklahoma from 2008 to 2012. More than $218 million was paid to companies last year, according to an analysis of reimbursement data by The Oklahoman.
The commission's public utility division this month filed “show-cause” applications for hearings into Easy Wireless of Florida; Assist Wireless of Texas; True Wireless of Tennessee; Icon Telecom of Idaho; and Terracom Wireless in Oklahoma City. The applications are the first step in possible enforcement proceedings.
Launched in 1985
The federal Lifeline program provides telephone service subsidies for low-income households. The program started in the 1985 for landlines and expanded in 2008 to include cellphone service. Money for the program comes from Universal Service Fund fees, which are typically passed on to customers by phone companies.
Corporation Commission staff are concerned that some companies have signed up low-income customers without verifying their eligibility. Only one Lifeline service is allowed for each household with income at or below 135 percent of federal poverty guidelines. An applicant also can be on food stamps, have children in free- or reduced-lunch programs or be a participant in several other types of low-income assistance.
In a January hearing, Maribeth Snapp, the utility division's telecommunications policy director, told commissioners the review so far had found 20,000 customers with multiple phones from the same addresses.
Oklahoma has an enhanced version of the federal Lifeline reimbursement to phone companies because of a provision for former Indian lands. The federal Lifeline program offers more than $34 in subsidies per household in most of Oklahoma, compared with about $9 in subsidies per household in other states.
Lifeline reimbursements for Oklahoma totaled $55 million in 2008. That rose to almost $67 million in 2010 and $90 million in 2011. Last year, Oklahoma Lifeline reimbursements ballooned to $218 million, according to an analysis of data from the Universal Service Administrative Co., a nonprofit that administers the fund.
The five phone companies under review by Oklahoma Corporation Commission staff represented about two-thirds of the state's total Lifeline reimbursements in 2012. They were led by True Wireless, with $46 million, and Terracom Wireless, with $36.6 million.
Dale Schmick, chief operating officer for Terracom, said the company was confident it would be able to demonstrate it is in compliance with the program. Terracom, which operates in 16 states, has been providing Lifeline service in Oklahoma since 2004, he said.
“Even though the phrase ‘show cause' sounds disconcerting and is not to be taken lightly, we feel very confident that ultimately the commission will concur that we are in full compliance,” Schmick said.
Customers may suffer because of a few bad companies operating in the Lifeline program, he said.
“In any industry, there's going to be people that don't run their business the right way,” Schmick said. “No matter what business you're in, those people are always a problem; they're always a concern. It's the same case in this situation. I fully applaud the commission investigating, figuring out if it's a problem, and doing something about it.”
Review in August
The state has 41 phone companies eligible to receive Lifeline funds, said Corporation Commission Spokesman Matt Skinner. Twenty companies offer wireless Lifeline service, 14 offer landline service and seven companies offer both.
Corporation Commission staff began a review in August of Oklahoma telecom providers taking part in the federal Universal Service Fund.
The review covers Lifeline and other Universal Service Fund programs to help subsidize telephone and Internet service to rural areas, schools, libraries and hospitals.
The Federal Communications Commission last year adopted several reforms to cut down on waste and abuse in the Lifeline program. The FCC said 92 percent of low-income households had phone service last year, up from 80 percent when the Lifeline program began in 1985.
“But the program faces real challenges, including rules that have failed to keep pace as consumers increasingly choose wireless phone service, and that creates perverse incentives for some carriers,” the FCC said as it announced the package of reforms.
Among the reforms are a national eligibility database to allow verification of customer eligibility and a separate database for companies that would prevent multiple phone companies from receiving reimbursements from the same subscriber.