Tracfone Defends New 'Obama Phone' Broadband Subsidy

Tracfone Wireless, Inc. issued its own "fact sheet" yesterday following a report by Fox News and The Washington Times that Tracfone CEO F.J. Pollak, a major fundraiser for Obama, used his Obama connections to land a contract in a federal pilot program that would provide government-subsidized broadband internet access to Lifeline participants.  Although the Lifeline program originated and expanded during prior Presidential Administrations, the free cell phones for low-income Americans is commonly referred to as the 'Obama Phone.'

While the fact sheet did not address fundraising for Obama or donations to Democratic candidates,  it did say that "In a competitive process, the FCC chose TracFone Wireless as one of a number of companies to carry out wireless broadband pilot projects for the FCC."

The stated goal of the federal government's broadband pilot program is "increasing broadband adoption and retention by low-income consumers..." [because the FCC] "...has recognized the importance of digital literacy and access to equipment in encouraging broadband adoption and in providing the tools consumers need to exploit the benefits of broadband."  

The FCC authorized up to $25 million to be disbursed directly to eligible telecommunications carriers for up to 12 months of subsidized broadband service for this pilot program.  Tracfone, which is the only carrier selected for a pilot program in Florida, said in its fact sheet that Federal Lifeline support for the TracFone pilot project is capped at $915,000.  Tracfone also maintains that:

"Taxpayers do not pay a penny for wireless Lifeline, including pilot projects.  Cutting the Lifeline program or removing funds for broadband pilot programs will not reduce the federal deficit by one cent.   That is because federal funds do not pay for Lifeline.  The program is not funded with tax dollars.  Instead, this program is funded by contributions from telecommunications companies, which can elect to share the costs of those contributions with their subscribers.  Companies that offer free wireless cell phone services pay for the phone themselves. Far from imposing a burden on taxpayers, wireless Lifeline has been documented to help low-income people find and keep jobs, which ultimately reduces spending on public assistance programs."

It is true that general revenue federal funds are not used for these programs.  Instead, they are funded by the Universal Service Fund which is charged, either directly or indirectly, to all phone carriers' paying customers.  In the 14 selected projects, the subsidy amount from the Universal Service Fund (USF) ranges from $5 per month to as much as $39.95 per month, although this upper limit is reached by just one project serving Tribal lands. 

According to the FCC, the projects will test a range of monthly end-user charges, such as $40, $35, or $20, with some projects testing lower charges and others testing higher charges.  All projects include some end-user charge.  

The FCC says that "the choices that pilot program subscribers make in determining the monthly cost of service and speeds, when given an option, will provide helpful data on the amount low income consumers are willing to pay for different speeds and levels of service."

Image credit: Tracfone


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