The Corner

Lifeline: A Corporate Boon

Per Politico:

TracFone, a prepaid service provider led by one of the world’s richest men, longs to cut the “Obama phone” line of attacks to save a program for the poor — and its bottom line.

The company, controlled by Mexican billionaire Carlos Slim, has launched a lobbying ground war to promote the controversial phone subsidy initiative known as Lifeline. And in the wake of congressional blasts, the program’s largest participant has found backhanded support from an unlikely coalition of rights groups and industry advocates pushing for the same goal: to spare it.

It is nice to see somebody finally acknowleding that this program — which is not called “Obamaphone” and long predates this president in a much smaller form — is a huge corporate boon. Senator Vitter has been among the strongest critics:

The Louisiana Republican has turned into one of Lifeline’s most adamant critics, aiming to kill the program through amendments in the Senate’s budget resolution and farm bill. He also has introduced separate legislation.

“TracFone is upset because I’m fighting to end this program, which would also end their corporate welfare,” Vitter told POLITICO in an email. Lifeline, he said, has grown too bloated. “Now it’s an out-of-control, fraud-ridden entitlement program that spoils what should be a worthwhile helping hand.”

That is precisely what it is. Whatever it once was is long gone. Now, as my colleague Kevin Williamson notes, it has become a disastrous slush fund designed to keep government employees in jobs and private companies rolling in easy money:

The problem is a telecom-subsidy model that relies on a cost-plus model of pricing, which gives rural telephone companies an incentive to keep their costs as high as possible. The result is what the result always is when private-sector rapacity encounters public-sector incompetence. When critics began circulating those mind-blowing per-line cost estimates a few years back, the FCC responded with a series of “reforms” that locked in the worst elements of the program.

And that’s just the landline element. I wrote a piece on this in NR a few months back in which I observed that:

Cell-phone companies are as much the villain as is the FCC. Sensing an easy opportunity to expand their profits (providers are paid at retail rates), a number of businesses have jumped avariciously on the bandwagon. The Internet is chock-full of job opportunities for phone distributors. “Get Paid To Pass Out Free Government Cellphones,” says one advertisement, placed by TerraCom Wireless/Treble Enterprises. “Field Agents are paid up to $5.00 for each active phone given to a valid customer. . . . Average monthly commissions are around $2,000.” SafeLink (owned by Carlos Slim, one of the world’s richest men), Assurance Wireless (owned by the Virgin group), and ReachOut Wireless (owned by Nexus) run identical schemes. In total, 14 private companies have got into the game, many sending vans around the poorer areas of America’s cities and encouraging their employees to sign up as many people as possible. A whole industry has sprung up around Lifeline, supported by a host of private websites that provide information about the program. “There are no monthly bills, no long-term contracts, no activation fees, no recurring fees and no surcharges!” one site,, excitedly explains. “Lifelinerates are the same for all calls no matter where you are!” it continues. Would that paying customers could get such deals at such prices.

As Politico shows, what you’re now going to see a baptists-and-bootleggers alliance teaming up to protect the program at all costs.

[TracFone], which spent $640,000 on lobbying efforts last year, just brought on a fourth outside lobbyist. It has created a website to debunk myths about the program’s inception and started running weekly ads in Washington publications. TracFone cheered the recent reforms and even requested the FCC lessen the potential for fraud by banning in-person distribution of phones.

“It hasn’t changed me one bit,” Rep. Tim Griffin (R-Ark.) said in an interview despite meetings with the company and calls made at its behest. “Their cash cow is under scrutiny and is at risk.”

A bill by Griffin that would virtually gut Lifeline has amassed 60 co-sponsors.

Read the rest here.


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