Sprint caught, taking millions of dollars in government subsidies to "service" to 885,000 low-income Americans who did not use the Sprint service, the Federal Communications Commission said today. Sprint violates the Lifeline non-use rule, which requires providers of free subsidized plans to deny subscribers who have not used their phones recently, the FCC said.
"It is exceptional that a company will ask millions of dollars in taxpayers for doing nothing. This shows a negligent disregard for program rules and US taxpayers," said FCC Chairman Aith Pai. "I asked our Enforcement Bureau to investigate this issue to determine the full scope of the problem and to propose an appropriate remedy."
Sprint acknowledged the mistake and said he would pay the money back. Like other FCC universal service programs, Lifeline is paid by Americans through fees charged on telephone bills.
The FCC stated that the Sprint violation "originally arose as a result of an investigation by the Oregon Public Utilities Commission." Because of this investigation, the FCC said it "learned that Sprint Corp. requests monthly subsidies to service approximately 885,000 Lifeline subscribers, even though those subscribers do not use the service. " The 885,000 non-Sprint subscribers do not actually "represent nearly 30% of Sprint's Lifeline subscriber base and almost 1
Sprint failed to deactivate inactive users  Providers in the low-income program receive a monthly subsidy of $ 9.25 for most Lifeline subscribers and have to pass the savings along with consumers. "For most consumers served by the Lifeline mobile product sold by Sprint and many other providers, the subsidy makes the service free to the consumer," says FCC.
The FCC stated that under its non-use rule, "free service providers can only be reimbursed to a Lifeline subscriber if that subscriber has used the service at least once in the last 30 days." The Commission added that the providers "should deactivate inactive subscribers after 15 days' notice. "
The FCC did not say exactly how much money Sprint received through its violation of the no-use rule. The one-month payments of $ 9.25 for 885,000 subscribers will total $ 8.2 million. FCC Commissioner Jeffrey Starks issued a statement saying that "Sprint appears to have illegally received at least tens of millions of dollars that should have gone to our lowest income communities."
Non-use rule is "designed to protect Lifeline from losing payments for services that have not been provided," the FCC said. Previous investigations "have shown that companies provide free and indiscriminate free Lifeline service, knowing they will receive every month even if users do not use their phones. And because the user was paying nothing, he or she had no incentive to unsubscribe, "says FCC.
The 30-day requirement and 15-day notice were imposed by the FCC in 2016 under then-chairman Tom Wheeler . Prior to that, the non-use period was 60 days and the notice requirement was 30 days.
When contacting Ars, Sprint stated that it had an "error" in July 2017 when implementing the changes imposed by the FCC, in the method for calculating the usage and eligibility of Lifeline subscribers. Sprint said it was reporting an error with
When the error was discovered, we immediately investigated and proactively raised the issue with the FCC and relevant state regulators, and we also engaged an independent third party to review the results of our review and the effectiveness of our operational
Although irrelevant to Sprint's financial results, we are committed to recovering federal and state governments for any subsidy payments that have been collected as a result by mistake.
The Sprint investigation will begin while FCC commissioners are still considering whether to approve the acquisition of Sprint by T-Mobile. Pie announced his support for the merger in May, and last month asked his fellow commissioners to approve the merger. Attorneys general from the 17 states and the District of Columbia are challenging the merger in court.
Commissioner Starks, who is part of the FCC's Democratic minority, stated that the FCC should suspend the merger process. He said:
The draft order (to approve the merger) relies heavily on information provided by Sprint, a company that is alleged to have excessively collected Lifeline support, and inaccurately reports nearly 1 million inactive accounts on Lifeline … How the merger parties would handle Lifeline was a prominent part of their merger step, so I'm worried and worried about such massive inaccuracy in a major part of the transaction.
"There is no reliable way in which the merger before us can continue until this Lifeline investigation is resolved and the parties responsible will be held accountable," Starks said.
We asked Pie's office if the Sprint news would have any impact on the merger process and would update this story if we received a response.