I left off yesterday on how the Universal Service Fund works, how it’s funded and why…
We learned the ObamaPhone actually had its roots in legislation passed by FDR in a deal between telecommunications companies and President Wilson, modified by Reagan and Bush.
Now let’s dig a little deeper.
USF/Lifeline doesn’t physically give away telephones to qualified candidates; they fund the companies who do to the tune of about $9.25 a month for the basic customer. Today, 38 states participate in the Lifeline program offering a free cell phone with 250 minutes per month and limited texts.
To qualify for a phone, you have to be at 125-135% of the poverty level and close to 20 million people have signed up; an increase of about 7 million from 4 years ago.
The cost of adding cell phones drove reimbursements from $819 million in 2008 to $2.2 billion in 2012. As a side note, the problem began its slow roll to disaster and scandal during the George W. Bush administration. That’s when the FCC allowed wireless carrier Tracfone to join the program’s list of approved providers.
More on them tomorrow.
Per capita, Ohio is number one in users, fraud and abuse. Why Ohio?
Was the ObamaPhone Lady’s video that effective? Did it go viral in her neighborhood first? Did it get promoted there more heavily than anywhere else? Is Ohio – a notorious “battleground state” – more effective at getting programs to the street?
It’s hard to say, but the program cost Ohio $26.9 million in the first quarter of 2012 versus $15.6 million for the same timeframe in 2011. During that time the number of users nearly doubled to more than a million.
Ohio is bad, but phone fraud is virtually everywhere.
According to the Wall Street Journal, a review of the top five carriers, conducted by the FCC, showed that 41% of the six million subscribers either couldn’t demonstrate their eligibility or didn’t respond to requests for certification.”
That’s 41 percent, people.
As a result, the FCC claimed in 2012 they had begun to require that customers provide documentation and cell companies check their eligibility on a social-service database. The FCC claims those reforms have saved $43 million since January 2012 and are expected to save $200 million by year’s end 2013. According to the FCC, the program was now locked down tight with these safeguards
Madoff
But just how effective have those new procedures been? I suspect that the FFC’s math was done from prison by investment advisor Bernie Madoff; that’s all I can figure.
Democrat Senator Claire McCaskill got a flyer in the mail inviting her to come get her free cell phone. McCaskill’s Senate salary is $174,000. I didn’t get a flyer, but after reading hers, it took me about three minutes to find SafeLink online and start the process to get my own “ObamaPhone.”
SafeLink is a division of Tracfone.
I’ll dig deep into their underwear in tomorrow’s final installment where the dial tone really hits the fan.
I went to SafeLink, answered five multiple choice questions and had my free cell phone on its way. I clicked all the boxes; total people living in my home, total income for myself, all wildly false and intentionally inaccurate.
I needed NO documentation; I qualified on the spot.
So what’s carrier’s motivation to be in this game? First, they sign up new customers. New customer acquisition is expensive and churn is your enemy. Customers have to come in the front door faster than they go out the back or you have negative growth.
By getting the phone in a user’s hand the “real” revenue stream starts. The carrier knows with near certainty the customer will not exhibit control and is going to blow the minute and text limits from the start.
What happens then?
The “low income” customer pays big time for the extra minutes and texts each month or the carrier converts them to a plan they pay for on their own. New customer acquisition costs can be several hundred dollars.
So it’s a case of the government subsidizing cellphone marketing at its finest.
Republicans or Democrats aside, the phone isn’t an “ObamaPhone” nor has President Obama as much as made a modification to the program that now bears his name. It was last changed under George W. Bush.
The political genius is the fact that the President’s not done anything to dispel the term “ObamaPhone.”
So we have ObamaCare and ObamaPhones.
One Obama designed, one he had nothing to do with – he just hasn’t stepped up to the teleprompter and said so. Like I said yesterday, there’s no way to calculate the benefit “ObamaPhones have been to his image and re-election efforts with the entitlement crowd; you know, the 47 percent.
Carlos Slim
What if George W Bush would have come to office after President Clinton’s car buyback program started using the term BushCars?
Tomorrow, I’ll show you who the real ObamaPhone winner is behind the scenes.
Hint: it’s Mexican billionaire, TracFone honcho, Obama close pal and supporter, Carlos Slim.
You think Obama has gotten mileage out of this, wait till you get to know Carlos “el Dial Tone” Slim.
