The Federal Communications Commission (“FCC”) has proposed nearly $44 million in fines against three companies that appear to have violated FCC rules protecting its Lifeline program against waste, fraud and abuse.  When added to the eight Lifeline enforcement actions brought by the FCC in the past 90 days, these three fines bring the total amount of proposed fines against wireless Lifeline providers to over $90 million.

The enforcement actions flow directly from the FCC’s comprehensive reforms to the Lifeline program, adopted last year.  Those reforms provided clear, enforceable rules to prevent and combat waste, fraud and abuse, and empower the FCC’s Enforcement Bureau to crack down on violations.

To help low-income consumers afford phone service, Lifeline provides a discount on service, channeled through providers. However, to focus the program on those who truly need it, the FCC’s rules limit Lifeline subscriptions to one per household. Carriers are expressly barred from seeking Lifeline support for duplicative accounts.

The Notices of Apparent Liability were issued against three companies that appear to have requested and/or received Lifeline support payments for individual customers who appeared on the companies’ Lifeline subscriber lists more than once. The companies and proposed fines are as follows:

• Cintex Wireless ($9,461,978)
• Telrite Corporation ($22,399,761)
• Global Connection ($11,702,695)

In these cases, according to the FCC, the carriers knew or should have known based on their own internal data that they were not entitled to support for these duplicates under Lifeline program rules. The penalties proposed in the NALs are in addition to recovery of universal service funds paid to the carriers for duplicative Lifeline service. The companies have 30 days to pay or contest the proposed fines.

Lifeline is part of the USF and helps qualifying consumers have the opportunities and security that phone service brings, including being able to connect to jobs, family members, and emergency services. Lifeline service is provided by Eligible Telecommunications Carriers (ETCs) designated pursuant to the Communications Act of 1934, as amended (Act). An ETC may seek and receive reimbursement from the USF for revenues it forgoes in providing the discounted services to eligible customers in accordance with the rules. Section 54.403(a) of the Commission’s rules specifies that an ETC may receive $9.25 per month for each qualifying low-income consumer receiving Lifeline service and up to an additional $25 per month if the qualifying low-income consumer resides on Tribal lands.  ETCs are required to pass these discounts along to eligible low-income consumers.

The Commission’s Lifeline rules establish explicit requirements that ETCs must meet to receive federal Lifeline support.  Section 54.407(a) of the rules requires that Lifeline support “shall be provided directly to an eligible telecommunications carrier, based on the number of actual qualifying low-income consumers it serves.”  Pursuant to Section 54.407(b) of the rules, an ETC may receive Lifeline support only for qualifying low-income consumers.  A “qualifying low-income consumer” must meet the eligibility criteria set forth in Section 54.409 of the rules, including the requirement that he or she “must not already be receiving a Lifeline service,” and must, pursuant to Section 54.410(d) of the rules, certify his/her eligibility to receive Lifeline service.

Section 54.410(a) of the Commission’s rules requires further that ETCs have procedures in place “to ensure that their Lifeline subscribers are eligible to receive Lifeline services.” Such eligibility requires that a consumer seeking Lifeline service may not already be receiving Lifeline service.  This obligation therefore requires, among other steps, that an ETC search its own internal records to ensure that the ETC does not provide duplicate Lifeline service to any subscriber (an “intra-company duplicate”).

The Commission’s rules further prohibit an ETC from seeking reimbursement for providing Lifeline service to a subscriber unless the ETC has confirmed the subscriber’s eligibility to receive Lifeline service.  In accordance with Section 54.410, before an ETC may seek reimbursement, it must receive a certification of eligibility from the prospective subscriber that demonstrates that the subscriber meets the income-based and program-based eligibility criteria for receiving Lifeline service, and that the subscriber is not already receiving Lifeline service.  As the foregoing discussion reveals, when an ETC seeks Lifeline service support reimbursement for a low-income consumer who already receives Lifeline service from that same ETC, that ETC has violated its obligation under the Commission’s rules to confirm the subscriber’s eligibility for Lifeline service.

If you have questions about this advisory or require guidance regarding the FCC’s Lifeline program and associated rules, please contact Michael P. Donahue at mpd@commlawgroup.com.