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T-Mobile will pay $200 million to settle FCC investigation into misuse of phone subsidies

Blame it on Sprint

Illustration by Alex Castro / The Verge

T-Mobile will pay $200 million to end an investigation by the Federal Communications Commission into misuse of funds from its low-income phone and internet subsidy program. The commission says the payment represents the “largest fixed-amount settlement” it’s ever secured to resolve an investigation.

The subsidy issues stem from Sprint before the company was acquired by T-Mobile. The commission says that more than 1 million Sprint customers on subsidized plans should have had their service cut off for non-usage. Instead, Sprint continued collecting subsidies for service it wasn’t providing for “an extended period of time.” Service providers are supposed to begin removing customers who stop using subsidized phone and internet plans after 30 days if they aren’t otherwise paying for it.

“It’s outrageous that a company would claim millions of taxpayer dollars for doing nothing,” FCC chairman Ajit Pai said when the investigation was announced last year. Sprint told the FCC the issue arose due to a “software programming issue.”

“While we inherited this issue with our merger, we are glad that it is now resolved,” a T-Mobile spokesperson told The Verge. “We look forward to continuing to deliver reliable and affordable network connectivity to consumers across the country who depend on it.”

The FCC’s subsidy program, Lifeline, provides $9.25 per month for people with lower incomes to pay for phone or internet service. In 2016, the commission adopted a policy requiring service providers to proactively remove customers who weren’t using the service over concerns that some providers would sign up people for free then collect the subsidy payments even when the service wasn’t being used.

Update November 4th, 1:28PM ET: This story has been updated with comment from T-Mobile.