T-Mobile to pay $200 million for Sprint’s Lifeline program misuse

T-Mobile will pay $200 million to resolve an investigation of Sprint’s compliance with the Federal Communications Commission’s rules for the Lifeline program for low-income consumers. 

The payment is the largest settlement the FCC has ever levied to resolve an investigation. 

The FCC’s Enforcement Bureau investigated reports that Sprint, prior to its merger with T-Mobile, was claiming monthly subsidies for serving about 885,000 Lifeline subscribers even though those subscribers weren’t using the service.

The fraud was discovered during an investigation by the Oregon Public Utility Commission. 

In addition to paying $200 million, Sprint agreed to enter into a plan to help ensure future compliance with FCC’s rules for the Lifeline program.

“Lifeline is key to our commitment to bringing digital opportunity to low-income Americans, and it is especially critical that we make the best use of taxpayer dollars for this vital program,” said FCC Chairman Ajit Pai.

The Lifeline program helps make phone and broadband service more affordable for low-income consumers. Providers participating receive a $9.25 monthly subsidy for most Lifeline subscribers, which they’re required to pass along to consumers as a discount.

For most mobile Lifeline consumers served by Sprint and many other providers, the subsidy makes the service free to consumers.

The FCC investigated Sprint’s compliance with its Lifeline rules, including the “non-usage” rule. 

Under this rule, providers of “free” service may only be reimbursed for a Lifeline subscriber if that subscriber has used the service at least once in the past 30 days. In addition, providers are required to de-enroll subscribers who don’t use their phones after giving them 15 days’ notice. 

The rule protects Lifeline from wasting taxpayer funds on service that isn’t used by consumers.  

Pai said the FCC developed this and other rules after investigations showed that companies were aggressively selling free Lifeline service, knowing that they’d get paid each month even if consumers didn’t use their phones. 

Since there wasn’t a bill, consumers had no incentive to relinquish the subscription, he said.