Amid merger bid, FCC blasts Sprint for improperly claiming millions in subsidies
Federal regulators are blasting Sprint for improperly claiming millions in federal subsidies from a program aimed at helping low-income Americans pay their phone bills.
The Federal Communications Commission says the Overland Park-based company raked in Lifeline subsidies for 855,000 customers who were not using the program. Lifeline, which dates back to President Ronald Reagan, lowers the cost of phone and broadband service for low-income consumers. Providers like Sprint receive $9.25 per month for most Lifeline subscribers and must pass that amount along as a discount.
“It’s outrageous that a company would claim millions of taxpayer dollars for doing nothing,” FCC Chairman Ajit Pai said in a news release this week. “This shows a careless disregard for program rules and American taxpayers.”
Pai said he’s asked the agency’s enforcement bureau to investigate and propose “an appropriate remedy.”
The problem came to light during a recent investigation from the Oregon Public Utility Commission.
Sprint leaders said the problem arose after the FCC made changes to its program in 2016. Those required the company to update how it calculates usage and eligibility for the program, said Sprint spokeswoman Lisa Belot. The error occurred when those new requirements were implemented in July of 2017, she said.
When the problem was discovered, Belot said, the company immediately investigated and notified state and federal regulators.
“We also engaged an independent third party to review the results of our review and the effectiveness of our operational changes,” Belot said in a statement. “While immaterial to Sprint’s financial results, we are committed to reimbursing federal and state governments for any subsidy payments that were collected as a result of the error.”
The FCC says Sprint broke a rule specifically designed to prevent waste, fraud and abuse in the Lifeline program. That rule requires companies to unenroll inactive subscribers and therefore end the subsidy payments.
The news comes in the middle of T-Mobile’s $26.5 billion bid to merge with Sprint.
The U.S. Justice Department blessed the union in July and three of the FCC’s five commissioners have previously voiced support. The last remaining hurdle is an antitrust lawsuit waged by attorneys general in 16 states and the District of Columbia.
That suit it set for an early December trial in New York.
FCC officials declined to comment on whether the recently revealed overpayments would affect the merger’s prospects.
In a Tuesday statement, FCC Commissioner Geoffrey Starks described Sprint’s alleged actions, if true, as “corporate malfeasance.” He said the FCC should pause its merger review while the issue is investigated.
Starks is one of two Democrats on the five-member commission.
“There is no credible way that the merger before us can proceed until this Lifeline investigation is resolved and responsible parties are held accountable,” his statement read. “...I call for our staff to conduct a thorough review during this pause — the integrity of our merger review process is at stake.”
This story was originally published September 25, 2019 at 3:56 PM.
