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Georgia Targets Obamaphone Fraud
The Peach State’s reform attempt should earn national attention.


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The telltale signs of fraud and abuse lurk unseen in many a spreadsheet, and it takes a skeptic to hunt them down and bring them to light. In Georgia, the numbers for the Lifeline subsidized-phone program weren’t adding up, so one state official decided to act.

“We had 125 percent more [subsidized] phones out there than we had people who could qualify. By my estimates, at least 300,000 to 400,000 of the phones [distributed in Georgia] were fraudulent,” says Georgia public-service commissioner Doug Everett. “Since the FCC was not doing anything about it, I figured maybe we could do something on the state level.”

In a 3–2 vote last month, Georgia’s Public Service Commission passed Everett’s proposed measure, so beginning in January, the state will require phone companies to charge Lifeline beneficiaries $5 a month. For a cell phone with 250 minutes and 250 texts a month, that’s still a pretty good deal — unless, of course, you’re accustomed to getting the same for nothing at all.

Everett’s plan is an attempt to discourage fraud on the part of both Lifeline users and phone vendors. The Federal Communications Commission, which oversees the subsidized-phone program, neither imposes such customer payments nor prohibits states from requiring them.

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An FCC spokesman tells National Review Online: “We will be following closely what happens in Georgia as we continue to aggressively enforce our rules and consider whether any further reforms are needed to protect the program from waste, fraud, and abuse.”

The Lifeline program began in 1984, an attempt to ensure that America’s poorest had access to landline phone service to call 911, work, or family members. But in 2008, the FCC expanded the service to include mobile phones, and under the Obama administration, as welfare rolls swelled, more people became eligible for a subsidized phone — part of the reason they’re often known as “Obamaphones.”

By 2012, the cost of the Lifeline program had risen to $2.189 billion a year, up from $822 million before cell phones were included. In Georgia, after Lifeline expanded from landlines to mobile phones, the number of users shot from 150,000 to almost 1.1 million, Everett says.

Fraud and abuse abound because the Lifeline program is predicated on perverse incentives. Essentially, phone companies find themselves running a welfare program, but the more it grows, the more they profit. Street-level vendors usually work on commission, earning around $3 for each person they enroll. Likewise, phone companies get $9.25 a month from the taxpayers for each phone they distribute.



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