Congratulations, You’re Paying Your Neighbor’s Phone Bill

by Charles C. W. Cooke

“Government’s programs, once launched, never disappear,” said Ronald Reagan in his 1964 “Time for Choosing” speech. “Actually, a government bureau is the nearest thing to eternal life we’ll ever see on this earth.” And a finer example of the immortal nature of taxes and other government initiatives than the telephone tax you will never find. It was passed in 1898 to fund the Spanish-American war and stayed on the books in different forms until 2006, despite that conflict having ended in the same year it started. Added to this in 1996 was the Universal Service Fund fee, which was introduced in the Telecommunications Act of that year. And I bet you don’t know what it pays for.

Among the typically vague justifications for the levying of the Universal Service Fund fee — the best of which is to “promote the availability of quality services at just, reasonable, and affordable rates” — is that it pays for a program called “Lifeline,” which is not remotely as urgent or necessary as its name suggests. Bottom line: You are paying for millions of other people’s phone service with every call you make.

There are currently 12.5 million wireless accounts registered under the scheme, which is administered by the FCC. Any American citizen who is on food stamps, Medicaid, or who earns up to 135 percent of the federal poverty line can apply. If an application is successful — and, given that the FCC actually advertises it by direct mail, who are we kidding here — the $1.6 billion program will pay for either a cell phone (up to the value of $30, of which there are many available) or a landline installation, and then pay your bill to the tune of $10 a month, which is roughly equivalent to about 250 minutes talk-time on an entry-level handset. To paraphrase Rick Santelli, Congratulations! You are now paying your neighbors’ phone bill.

The Lifeline program has become increasingly popular in the last few years, and spending on it has more than doubled, from $772 million in 2008 to $1.6 billion in 2011. It is now so popular, in fact, that many people have registered multiple times; an FCC audit conducted in 2011 showed that up to 269,000 wireless subscribers had free phones and cell service from at least two carriers. (And people who don’t qualify appear to like it, too.) These abuses have caught the attention of Democratic senator Claire McCaskill, who has called for an investigation.

The FCC will be hard-pressed to do much about the abuse, however, as until it was investigated, it had not considered it necessary to build a database to keep track of its handouts. It has now rectified this and claims to have saved $33 million since the audit. Greater efficiency is always laudable; but nobody seems to have stopped and asked a basic question: Why is the federal government running a semi-secret program to equip 12.5 million Americans with phones and pay $10 of their bills each month?

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