CORPORATE welfare comes in a variety of forms. The very definition of the term is elastic. It usually turns on how valuable you believe a particular form of government spending is.
If residents of the 405 area code are forced to get a new phone number sooner than expected, they might think one form of corporate welfare isn't so valuable. What we're talking about is subsidized phone service for low-income residents. Customers and taxpayers foot the bill. Phone companies reap the benefits.
In years past we complained about the “Gore tax,” an add-on to telephone bills prompted by then Vice President Al Gore. Like the subsidized phone service, the “Gore tax” was a program with good intentions but wasn't necessarily a good deal for the customers paying extra to cover telecom services for others.
The Wall Street Journal reported Tuesday that Oklahoma is at the center of a developing controversy over a subsidized phone service that's characterized by explosive growth. The customer base is expanding so rapidly that the 405 area code might have to be split into two area codes sooner than expected.
Of course this split is inevitable; only the timing is in question. We have less concern about the split than we do with the probity of the program's subsidy system.
“Waste and fraud in this vital program are simply unacceptable,” a Federal Communications Commission spokeswoman told the Journal. We're not sure how vital this program is, but it's clear that well-intentioned federal programs can sometimes degenerate into misuse, abuse and outright fraud.
The Oklahoma Corporation Commission is investigating suspicious use of Lifeline funds by small phone companies. One small provider in Oklahoma got about $46 million under the program in 2012, according to a “show-cause” letter sent by the commission to the provider. As with any form of subsidized behavior, people and companies respond by taking advantage of a situation. Providers are accused of sleazy and unorthodox practices such as signing up customers in hospital emergency rooms, the Journal reported. Some providers are apparently mailing cell phones to customers who didn't ask for them.
The FCC describes the program thusly: “Lifeline provides discounts on monthly telephone service (wireline or wireless) for eligible consumers. These discounts average $9.25 per month, and may be more depending on the state.” What's crucial to remember is that this discount is paid by customers who aren't getting the discount, using money from the Universal Service Fund, which is financed by fees added to telephone bills.
Oklahoma is ripe for the plucking because Lifeline offers “enhanced” benefits to low-income residents living on tribal lands or lands that were formerly part of an Indian reservation. Telecom providers actually make the Universal Service Fund payments, but they're allowed to pass the amount on to customers. Which of course they have a responsibility (to shareholders) to do.
Beginning in January 1998, the “Gore tax” added a fee to long-distance bills to help pay, first, for the $200,000 annual salary of the head of the Schools and Libraries Corporation. The rest of the money was used by that entity to pay for Internet service at schools and libraries.
Other federal subsidies have covered the cost of high-speed Internet for individual customers, even in locations where no help was needed. The FCC suspects that 40 percent of Lifeline subscribers served by the top carriers were either ineligible for the program or failed to establish their eligibility.
This is a mess, but it's not atypical of government programs stuffed with good intentions but empty of good sense.