A move to charge low-income Georgians a $5 monthly fee to receive federally subsidized cellphones is illegal, a national wireless phone group says.
State utility regulators decided last month that low-income Georgians should pay a monthly fee as a way to curb fraud and abuse in a longtime federal benefit program known as Lifeline. But CTIA, a national association of wireless companies, said the decision is illegal because state government agencies cannot regulate what wireless companies charge customers.
The federal government says there could be fraud in as many as one in six Lifeline cases. The Georgia Public Service Commission voted last month to set the new fee after one of its members, Doug Everett, suggested that a small charge would cause many to who were using the phones fraudulently to drop them. Everett said that he had received anecdotal reports that “a lot of people were getting two, three (phones).”
The fee goes to the phone provider and does not reduce the amount that taxpayers pay in their monthly phone bills to help subsidize the federal program.
Georgia is the only state to pass and put in place such a fee. Other states have suggested doing so in written comments to the federal government.
CTIA filed suit Feb. 5 in U.S. District Court against each of the five members of the PSC. The commission is scheduled to vote on additional changes to the program at a meeting Tuesday.
“We obviously believe that (the $5) fee is within our jurisdiction,” PSC Chairman Chuck Eaton said.
CTIA did not comment beyond the lawsuit.
More than 972,000 Georgians have received land-line service or cellphones from Lifeline, according to January figures supplied by the PSC. If wireless phone companies start charging a monthly fee, many consumers said they would not be able to pay it, and phone companies would have to do business elsewhere.
“That $5 is a big difference,” said Tim Hollobaugh, an Athens resident and disabled veteran who relies on home health aides. Hollobaugh, 57, has a fixed income of about $800 a month. “If you turn around and charge the people getting the phone,” he said, “those are the people you’re going to hurt.”
Lifeline dates to 1984 and is funded through the Universal Service Fund, levying a monthly surcharge on nearly everyone’s land-line and wireless phone bills. 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 federal subsidy. The companies use that subsidy to buy bare-bones cellphones and 250 minutes of service a month, which goes to qualified consumers for free.
At Tuesday’s meeting, the PSC will consider giving phone companies the option of charging $5 for wireless Lifeline phones or doubling the amount of free minutes a month to 500. Giving away more cellphone minutes would be costly to the phone companies, one telecommunications attorney said.
“You are forcing carriers to provide (free cellphone) minutes at a loss,” said John Heitmann, a Washington-based lawyer with Kelly, Drye & Warren. Heitmann represents Telrite Corp., a Covington-based Lifeline phone provider. “You would lose money on customers, and you’re going to leave the state.”
Lifeline has grown quickly in recent years amid the down economy and heavy marketing by certain cellphone operators. In Georgia alone, the number of Lifeline subscribers went from more than 408,000 in 2010 to more than 728,000 in 2011 to nearly 1.04 million in 2012 before dropping early this year, according to PSC figures, which are estimates.
As the program grew, 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 Lifeline, according to the FCC.
The agency overhauled Lifeline last year, requiring all program subscribers to re-enroll. States are allowed to impose additional requirements, with exceptions. Charging a minimum fee for cellphones is one of those exceptions, CTIA said, because states are not allowed to set rates for wireless phone companies.
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