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Sprint under FCC investigation for ‘outrageous’ misuse of millions of dollars

Sprint under FCC investigation for ‘outrageous’ misuse of millions of dollars

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Illustration by Alex Castro / The Verge

Sprint took millions of dollars meant to subsidize phone and internet service for low-income consumers, even while those consumers were not using the service, according to the Federal Communications Commission. FCC chairman Ajit Pai called it a “careless disregard” for taxpayers and commission rules and called on the agency’s enforcement arm to conduct a full investigation.

“It’s outrageous that a company would claim millions of taxpayer dollars for doing nothing,” Pai said.

Sprint called accepting the payments an “error” said it is “committed to reimbursing federal and state governments” for any subsidies it should not have taken.

Sprint’s absent subscribers represented 10 percent of Lifeline, the FCC says

The FCC’s Lifeline program offers a $9.25-per-month subsidy for low-income consumers on either a phone or broadband plan. But in 2016, under former FCC chairman Tom Wheeler, the commission added a key limit to prevent misuse of funds: if customers don’t use their service for 30 days, providers must begin the process of removing them from the subsidy program.

Sprint failed to do that for 885,000 subscribers, the FCC says. This represents nearly 30 percent of Sprint’s Lifeline customers and nearly 10 percent of all Lifeline subscribers. The commission doesn’t say how long Sprint had failed to remove customers from its rolls.

The issue began in July 2017, Sprint says, when “an error occurred” as it tried to implement the 30-day de-enrollment requirement. Sprint says that, after the error was noticed, it “immediately investigated” and informed the FCC and state regulators. The FCC says the issue was discovered during an investigation by the Oregon Public Utility Commission.

One of Pai’s first acts as chairman was to begin scaling back the Lifeline program. He’s criticized the program as rife with fraud and abuse; the commission’s inspector general said that 18.5 percent of payments have been improper.

The 30-day rule is meant to prevent companies from signing up subscribers who won’t use their service, then collecting the $9.25 monthly subsidy anyway.

Sprint is in the middle of a merger with T-Mobile, which would see T-Mobile absorb the company. It’s been approved by the Department of Justice, but the deal still faces review from a number of states. The FCC also still needs to vote to approve the deal — while it’s looked like a sure thing at the commission since Pai came out in support back in May, a vote hasn’t happened yet.

Update September 24th, 1:17PM ET: This story has been updated with comments from Sprint.

Correction September 24th, 1:32PM ET: This story initially stated the FCC had approved the T-Mobile/Sprint merger. Approval has been proposed, but not yet voted on.