On Wednesday, the Federal Communications Commission (FCC) announced that it reached a $200 million penalty settlement with T-Mobile, concluding an investigation into Sprint’s alleged non-compliance with the FCC’s rules about waste, fraud, and abuse in its Lifeline program for low-income consumers.
As a result, T-Mobile, which recently purchased Sprint, will pay the civil penalty for its subsidiary’s conduct. Sprint has also agreed to enter into a compliance plan to ensure it adheres to the FCC’s rules for the Lifeline program. The FCC noted that this is “the largest fixed-amount settlement the Commission has ever secured to resolve an investigation.”
Sprint provides Lifeline service under the Assurance Wireless brand to low-income consumers. The Lifeline program was designed to help low-income Americans have affordable phone and broadband service. Service providers that participate in the Lifeline program “receive a $9.25 monthly subsidy for most Lifeline subscribers, which they must pass along to consumers as a discount.” Accordingly, the FCC stated that this subsidy allows customers, in most cases, to receive service at no cost.
The FCC averred that before the T-Mobile – Sprint merger, the Enforcement Bureau began an investigation into reports that Sprint was “claiming monthly subsidies for serving approximately 885,000 Lifeline subscribers even though those subscribers were not using the service, in potential violation of the Commission’s ‘non-usage’ rule.” The settlement remedies this purported violation.
“Lifeline is key to our commitment to bringing digital opportunity to low-income Americans, and it is especially critical that we make the best use of taxpayer dollars for this vital program,” FCC Chairman Ajit Pai said. “I’m pleased that we were able to resolve this investigation in a manner that sends a strong message about the importance of complying with rules designed to prevent waste, fraud, and abuse in the Lifeline program.”
The Enforcement Bureau investigated Sprint’s compliance with FCC Lifeline rules, including its ‘non-usage’ rule, which specifies that “providers of ‘free’ service may only be reimbursed for a Lifeline subscriber if that subscriber has used the service at least once on the past 30 days, and such providers must de-enroll subscribers who don’t use their phones after giving them 15 days’ notice.” The Commission stated that this rule was created so the program does not waste taxpayer money on service that is not being used. The FCC claimed that it created the ‘non-usage’ and other rules after investigations revealed that companies participating in the program sold “free” service, “knowing that they would get paid each month even if consumers didn’t use their phones.” Additionally, since there were no bills consumers were not incentivized to unsubscribe from the program.