TracFone to pay $23.5 million to settle FCC investigation

A Verizon unit has agreed to pay nearly $20 million in penalties to settle an investigation into allegations that it may have violated two federal connectivity programs, one aimed at low-income customers and one that lowered costs during the pandemic.

Verizon disclosed the potential program violations after it acquired TracFone in 2021, the Federal Communications Commission (FCC) announced Wednesday, resulting in a $23.5 million settlement, including $17.5 million in fines, for “certain instances” related to the low-income Lifeline subsidy program and the Emergency Broadband Benefit (EBB) program.

TracFone’s systems counted users outside of the FCC’s qualifications, inflating subscriber metrics, the agency said. In some cases, TracFone’s systems allowed inactive customers to remain enrolled in both Lifeline and the EBB. Under program rules, carriers are supposed to begin closing subsidized accounts that are unused after 30 days.

TracFone additionally agreed to pay $6 million to resolve allegations that some of its associates inflated subscriber rolls for the Lifeline program and enrolled ineligible or fake customers in Texas, while also “manipulating data to create fake accounts” in Florida. Aside from the settlement, the FCC said TracFone has already paid back some $39 million.

The agency noted that robust checks and balances are “critical for ensuring public funds are not subsidizing unused connections.”

“We will vigorously pursue allegations of misconduct that harms critical FCC programs designed to help those most in need of communications-related services,” FCC Enforcement Bureau Chief Loyaan A. Egal said in a statement. “This settlement sends a strong message that we are determined to protect the integrity of these programs.”

The EBB program came to life as a reaction to Covid-19 in 2021, at a time when many Americans were adjusting to a new reality of working and learning from home. Its successor, the Affordable Connectivity Program (ACP), still offers $30 monthly subsidies for households already receiving benefits like WIC, SNAP, and Medicaid. Those benefits dovetail with the FCC’s older Lifeline program, which offers a $9.25 per month discount on mobile and broadband plans to qualifying low-income households in a narrower slice of the population.

Now that the ACP faces an uncertain future, allegations of subsidy abuse—a longtime talking point for conservatives—could fuel arguments that the program should be significantly pared back.

Congress is currently under pressure to allocate more funding for the ACP, which is on track to run out of money by the spring, but it remains to be seen whether lawmakers will make it a priority. Jeffrey Westling, director of technology and innovation policy at center-right group American Action Forum, previously told Tech Brew that Republicans could likely get on board with reupping the ACP as long as it builds in more safeguards and covers fewer beneficiaries.

“If we could see some negotiations down the line where maybe we lower that eligibility criteria, we maybe decrease the benefit a little bit, maybe take more steps to address fraud in the program,” he said. “Those kinds of things, I think, could get more of that bipartisan support.”