FCC Reaches $200 Million Settlement in Sprint Lifeline Investigation

The Federal Communications Commission announced that T-Mobile will pay a $200 million penalty to the US Treasury to resolve an investigation of its subsidiary Sprint’s compliance with the FCC’s rules regarding waste, fraud, and abuse in the Lifeline program for low-income consumers. The payment is the largest fixed-amount settlement the FCC has ever secured to resolve an investigation. The settlement comes after an Enforcement Bureau investigation into reports that Sprint, prior to its merger with T-Mobile, was claiming monthly subsidies for serving approximately 885,000 Lifeline subscribers even though those subscribers were not using the service, in potential violation of the FCC’s “non-usage” rule. The matter initially came to light as a result of an investigation by the Oregon Public Utility Commission. In addition to paying a $200 million civil penalty, Sprint agreed to enter into a compliance plan to help ensure future adherence to the FCC’s rules for the Lifeline program.

The Bureau’s investigation concerned Sprint’s compliance with FCC 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, and such providers must de-enroll subscribers who don’t use their phones after giving them 15 days’ notice. The rule is meant to protect Lifeline from wasting taxpayer funds  on service that isn’t used to benefit individual consumers. The FCC developed this and other rules after investigations showed that companies were aggressively selling free Lifeline service, knowing that they would get paid each month even if consumers didn’t use their phones. Since there was no bill, consumers had no incentive to relinquish the subscription.