Regulators looking into the burgeoning federal program to provide subsidized phone service for the poor are finding growing cause for concern.
Last year, the government spent an estimated $2.2 billion on the Lifeline program, up from $819 million four years earlier, as dozens of small companies were authorized to start providing the service.
The good news is that Wisconsin’s regulators have been ahead of the curve.
The FCC crackdown follows others at the state level. In December 2011, the Wisconsin Public Service Commission provisionally revoked carrier Midwestern Telecommunications Inc.'s ability to receive Lifeline funding after a staff investigation found several alleged improprieties, including applications that came from children and several that lacked required signatures.
In early 2011, the commission learned of two instances in which MTI applied for Lifeline funds for wireless phones that the commission said were mailed unsolicited to people who didn't qualify for the program. One recipient was a former employee of the Wisconsin agency, the commission said.
According to documents in the case, the FCC also had grown concerned by a spike in Lifeline payments to MTI, which had gone from receiving 1% of Lifeline reimbursements in the state in the second quarter of 2010 to 33% of disbursements in the same quarter in 2011.
A memo from one of the regulators explains how Wisconsin has avoided more widespread fraud in the program. Jeffrey J. Richter, USF Director for the Public Service Commission writes:
Wisconsin has avoided a lot of the problems with the national Lifeline program because the PSCW has required verification of eligibility of all customers for over 15 years. We understood the fraud risks and required all providers to verify all Lifeline recipients initially, and annually thereafter, so the fraud spoken of in the WSJ article is not as serious of a problem here. The PSCW's electronic interface allows companies to verify eligibility while protecting customer privacy. It was among the first such interfaces in the nation. The FCC is now working to create a nationwide system similar to the WI model.
The PSCW taking the time to address potential fraud up front did slow down entry of the less reputable wireless providers. Another mitigating factor for Wisconsin is that the PSCW has taken action against companies for failing to properly verify customers. Wisconsin blew the whistle to the FCC on a few providers who began providing prepaid wireless Lifeline phones in WI without verifying qualifications. In the most egregious case (MTI) the Commission revoked the company's authority to do business, stopped lifeline reimbursement, and referred the company for prosecution.