Georgia to charge for ‘free’ phone program

Low-income Georgians must start paying a $5 monthly fee to get a cell phone through a federal program that’s been hit by accusations of fraud and abuse, state utility regulators decided Tuesday in a 3-2 vote.

The charge for what has until now been a free phone is a byproduct of nationwide debate over the program, called Lifeline. Staff members at the Georgia Public Service Commission said similar monthly fees were approved in California and Indiana.

About 10 percent of Georgians have phones through Lifeline. Charges could start this winter, though the PSC said billing details have to be worked out.

The program, designed to make sure the neediest have access to basic phone service, has grown quickly in recent years amid the down economy and heavy marketing by certain cellphone operators.

That has spawned reports of fraud and, in the view of some critics, turned the program into an example of the welfare state run amok.

“The people in the state of Georgia having to pay for this program are getting ripped off by not only consumers but even by some of the companies,” said PSC commissioner Doug Everett, who pushed for the fee.

In an interview after Tuesday’s meeting, Everett — who as recently as 2009 praised Lifeline as a needed service — said he does not want the Lifeline program to go away. But he said he considers cell phones a luxury.

The issue split the all-Republican PSC.

“If you start to monkey with the program for the appearance of stopping fraud, then you are beginning to harm somebody else, and then you may or may not stop the fraud,” said commissioner Stan Wise, who joined Chuck Eaton in opposing the measure.

In addition to Everett, commissioners Tim Echols and Bubba McDonald voted for the changes.

The program dates to 1984, when AT&T was broken up into regional Bell companies, as a way to protect low-income consumers in a newly competitive telephone industry.

Lifeline is funded through the Universal Service Fund, a surcharge on nearly everyone’s landline and wireless phone bill each month. The PSC’s new $5 fee will not reduce the amount consumers pay however. Rather, it will go to the phone provider.

A spokesman for Tracfone, a pre-paid phone company, said a monthly charge poses problems. The company, along with other pre-paid cell providers, has no system for billing.

“We have no collection method,” said Jose Fuentes, government relations director for Tracfone, a major Lifeline phone provider.

The Federal Communications Commission expanded Lifeline in 2005 to let mobile phone companies participate. Many pre-paid phone companies created a business model around receiving the monthly government subsidy. The companies use that subsidy to buy bare-bones cellphones and 250 minutes of talk time a month, which they give to qualified consumers for free.

Atlantan Patricia Stroud, a senior citizen who is blind and receives food stamps, said a mobile phone is an emergency link when she is out of the house. Stroud said Tuesday a $5 monthly fee would have a “big impact” on her.

“I’m praying that I don’t have to give (the phone) up,” she said.

As the program grew since 2008, lack of oversight led to phones being issued to people who didn’t need them and money not being spent on those who could have used it, according to the FCC.

A U.S. Government Accountabiltiy Office report in October 2010 found evidence of waste, fraud or abuse in as many as one in six cases nationwide. The FCC has already changed program rules to combat fraud. States are allowed to implement their own rules beyond that.

Everett said that doesn’t go far enough.

“This fraud and abuse, I’m waging a war on it. I don’t want to take any weapon out of my arsenal to fight this war,” said Everett, who lives in north Georgia and added he’s received widespread support for stricter rules.

Nationwide, about $1.75 billion in Universal Service Fund charges helped pay for 13.7 million landline and wireless phones in 2011, according to according to the Universal Service Administrative Co., a third-party organization set up to manage the fund.

Consumers can get a Lifeline-subsidized phone if they make less than 135 percent of the federal poverty guidelines, for instance $31,117.50 for a family of four. They would also qualify if they receive benefits from federal programs such as Low-Income Energy Assistance, National School Lunch or Low-Income Housing Assistance.

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