The Real Cost of Free Government Phones

In 2011, the Federal Lifeline assistance program provided over $1.6 billion dollars in an effort to offset the costs of cell phones and monthly service fees for roughly 12 million low-income Americans. This program, credted by an FCC mandate is popular for what should be obvious reasons. Many citizens, however, are unhappy that the program is not more stringent with eligibility requirements. The program has not been closely managed, and as a result, many people who shouldn’t qualify for  free government cell phones are getting one, or sometimes even two phones…all at the expense of taxpayers.

Of course, one of the compelling arguments for the benefit is the rapid decline of payphones. Twenty years ago, there was a payphone at almost every major intersection, and certainly at almost every sizable gas station. Fast forward to today, and you could drive around for hours trying to find one. Some argue that the program should provide only home phones, but it’s debatable whether that would actually reduce the cost of the program, as home phones require a person to manually do an installation.

The Lifeline program is a specific benefit outlined in the Telecommunications Act of 1996, where the FCC established the Universal Service Fund. The purpose of the Universal Service Fund is to ensure the availability of reliable phone service at a reasonable cost for low-income beneficiaries. Every telecommunications company is required to pay into this fund…most of them choose to pass this on to their customers as a separately labelled fee. Check your own phone bill, and you’ll see that you, as a taxpayer, are billed every month to fund the program.

The Program itself, despite the marketing language used by the carriers that offer it, isn’t entirely free for low-income customers. The Universal Service Fund provides a discounts in most cases, of around $10 a month. It does, in some cases, offer free, but limited service. Limited service generally equates to somewhere in the 250 to 300 minutes per month range. Those in the program can opt for either a normal landline phone or a mobile phone. In addition to the monthly benefit, there’s also discounted or waived fees of up to $30 for installation charges, or the charge for a mobile handset. This particular part of the benefit is what drives the “free cell phone” tagline, as there are many inexpensive phones that the $30 benefit covers completely.