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But take comfort in knowing that your work ferreting out waste, fraud, and abuse has made a real difference. I'm sure you've heard the adage popularized by former Senate Minority Leader
You might have noticed that those charges have been going up in recent years. In
Where do all those dollars go? The USF spends money on four different programs. One subsidizes phone service in areas of our country that are costly to serve, and is called the "high-cost program." Another subsidizes Internet access for schools and libraries, and is known as "E-Rate." A third subsidizes rural health care providers. And the fourth program is known as "Lifeline." It's this last program that I'd like to focus on this morning.
The single largest driver of the increase in the USF--and hence, consumers' phone bills--has been the Lifeline program. Since
What exactly is the Lifeline program? Well, if you type "the Lifeline program" into
The Lifeline program that is part of the
And for about a couple of decades after its inception in 1985, the program was generally free of substantial controversy. During the last Administration, for example, Lifeline grew at an annual rate of just 2.1 percent in real terms. Unfortunately, things quickly changed thereafter. From the end of 2008 to 2012, the size of the program exploded from
Consider the case of
The number of customers the company fabricated was astounding. In
Or take the case of Associated Telecommunications Management Services. The
Unfortunately, these stories are not isolated incidents. Lifeline has been laced with fraud.
And that's only the fraud on the corporate side. On the consumer side, there's substantial evidence that some people are signing up with every Lifeline company around. Contestants on "Who Wants To Be a Millionaire?" might get multiple lifelines, but the
After hearing all of this, you're probably asking yourself: How could such rampant fraud occur? There are a number of reasons. First, the size of the Lifeline program has been on autopilot. Each of the other three USF programs--high-cost, E-Rate, and rural health care--has been placed on a budget. So it would be impossible for any of these programs to have doubled in size in three years without a vote among the
Second, Lifeline expanded beyond landlines to cellphones provided by wireless resellers--companies that use others' networks because they don't have their own. This happened because the
Third, the Lifeline program shifted from providing discounted phone service to free phone service. When Lifeline customers had to contribute towards their own phone bills, there was a strong incentive for them not to sign up more than once for the program. But when the program expanded to include wireless resellers, carriers began to give away phones and minutes for free. Needless to say, this made it much more enticing for people to sign up many times for the program.
And fourth, the
Fortunately, there is some good news to report. In 2012, the
The Commission has also started to beef up its enforcement efforts. Between
These initiatives have begun to bear fruit. From 2012 to 2013, Lifeline spending fell by almost 18%. So when it comes to combatting fraud, we are at least starting to move in the right direction.
But there's much more work to be done. Even in 2013, Lifeline spending was more than double what it had been only five short years before. So here are four simple steps that we should take to further reduce waste, fraud, and abuse in the Lifeline program.
First, the time has come to put the Lifeline program on a budget. It's as true for a federal program as it is for a family: A budget induces careful spending. A Lifeline budget will increase incentives to eliminate fraud and improve accountability within the program. And placing a cap on Lifeline spending will prevent any future explosion in spending without direct Commission accountability.
Now, some might complain that Lifeline is too important to have a spending cap. But the other three components of the
A third option would be to review the size of the current Lifeline subsidy--
Reform here shouldn't be hard. Requiring carriers to maintain customers' proof of eligibility is common sense. And prohibiting the free-phone events that show up on
And fourth, the
Now is the time to take that step with respect to Lifeline fraud. Spotting violations only to let cases languish--all while providers continue to participate in the program--is not the way to combat abuse. As Yoda put it in The Empire Strikes Back, "Try not. Do . . . or do not. There is no try." Now is the time for the Commission to hold up-and-down votes. If we don't, we will invite more fraud by sending the signal that the
Taking such action will also help us move aggressively to kick out of the Lifeline programthose who perpetrate fraud. Take, for example, the case of
Taken together, I am confident that these four proposals--imposing a budget, properly aligning financial incentives, filling gaps in our rules, and stepping up enforcement--would help to further reduce the waste, fraud, and abuse that have run rampant in the Lifeline program. At the same time, they would allow low-income consumers who are genuinely in need to get a discount on phone service.
I am under no illusion that it will be easy to get these things done. You know far better than most how difficult it can be to eliminate government waste. But we owe it to all Americans who fund the Lifeline program through their monthly phone bills. We should do whatever we can to ensure that their hard-earned money isn't wasted and doesn't end up in a fraudster's bank account or automobile garage.
Thanks once again for letting me speak with you this morning. And to borrow from former Senator
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