Millions Improperly Claimed U.S. Phone Subsidies
The Lifeline program—begun in 1984 to ensure that poor people aren't cut off from jobs, families and emergency services—is funded by charges that appear on the monthly bills of every landline and wireless-phone customer. Payouts under the program have shot up from $819 million in 2008, as more wireless carriers have persuaded regulators to let them offer the service.
Suspecting that many of the new subscribers were ineligible, the Federal Communications Commission tightened the rules last year and required carriers to verify that existing subscribers were eligible. The agency estimated 15% of users would be weeded out, but far more were dropped.
A review of five top recipients of Lifeline support conducted by the FCC for the Journal showed that 41% of their more than six million subscribers either couldn't demonstrate their eligibility or didn't respond to requests for certification.
The carriers—AT&T T +0.39%Inc.; Telrite Corp.; Tag Mobile USA; Verizon Communications VZ -0.16%Inc.; and the Virgin Mobile USA unit of Sprint Nextel Corp. S +0.52%—accounted for 34% of total Lifeline subscribers last May. Two of the other largest providers, TracFone Wireless Inc. and Nexus Communications Inc., asked the FCC to keep their counts confidential. Results for the full program weren't available.
The program is open to people who meet federal poverty guidelines or are on food stamps, Medicaid or other assistance programs, and only one Lifeline subscriber is allowed per household.
The program, which is administered by the nonprofit Universal Service Administrative Co., has grown rapidly as wireless carriers persuaded regulators to let people use the program for cellphone service. It pays carriers $9.25 a customer per month toward free or discounted wireless service.
Americans pay an average of $2.50 a month per household to fund a number of subsidized communications programs, including Lifeline...