Senators criticize fraud in U.S. low-income phone program

[September 15, 2017]  By David Shepardson

WASHINGTON (Reuters) - A top U.S. Senate Republican said on Thursday Congress should considering ending the three-decade old federal subsidy for telephones and internet access for low-income Americans after a government audit found significant fraud.

Senator Ron Johnson, who chairs the Homeland Security and Government Affairs Committee, said at a hearing Congress should consider ending the program, known as "Lifeline," which spends about $1.5 billion annually to help 12.3 million U.S. households afford landline and mobile phones.

"The Lifeline program has been plagued by waste, fraud and abuse," Johnson said. "This is a real head shaker."

Senator Claire McCaskill, the top Democrat on the panel, said "the combination of ineffective oversight and the greed of some private carriers has led to hundreds of millions in wasted taxpayer dollars."

She questioned why the Federal Communications Commission, which manages the program, had been unable to halt fraud and continued to pay funds to companies that have defrauded the program.

A Government Accountability Office audit this year found significant fraud in the program and investigators could not confirm whether more than 1.2 million individuals sampled actually qualified. They also could not confirm how many of the 12.3 million participants enrolled received phones.

Undercover investigators could typically enroll without proper credentials, the report found.

Senator Ron Johnson (R-WI) speaks with reporters on Capitol Hill in Washington, U.S., July 28, 2017. REUTERS/Aaron P. Bernstein

The program, in place since 1985, gives participants a $9.25 monthly mobile phone subsidy and in 2016 the FCC expanded the program to include broadband internet access. The program is funded by the Universal Service Fee paid by telecommunications providers and typically added to monthly bills.

FCC Chairman Ajit Pai said the commission is taking steps to crack down on fraud. "It is a top priority," Pai said.

Senator Gary Peters, a Democrat, said he was angered by "scammers" that endangered a program that provides "vital services" to people who struggle to afford phone or internet service.

The FCC has estimated that some 95 percent of U.S. households with incomes of at least $150,000 have access to high-speed Internet, while less than half of households with incomes lower than $25,000 have Internet access at home.

The GAO report found that just a third of the nearly 39 million eligible U.S. households are enrolled in the program. Since 1998, about $20.2 billion has been allocated to the Lifeline program.

(Reporting by David Shepardson; Editing by Steve Orlofsky)

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