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Verizon’s TracFone to pay $23.5M in Lifeline, EBB settlement

Verizon’s TracFone Wireless subsidiary reached a settlement with the FCC’s Enforcement Bureau to resolve an investigation into whether it violated the agency’s rules for its Lifeline and/or Emergency Broadband Benefit (EBB) programs.

Following its 2021 acquisition by Verizon, TracFone self-identified and reported to the commission and the Universal Service Administrative Company certain instances in which it may have violated the Lifeline and/or EBB rules, the FCC announced Wednesday.

TracFone has agreed to compliance measures, as well as a $17,487,000 civil penalty in addition to $6,013,000 to resolve a 2020 Notice of Apparent Liability for other apparent Lifeline violations, the FCC said.

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

The Lifeline program provides a monthly discount of up to $9.25 on broadband and phone service for qualifying low-income consumers. The separately funded EBB program helped lower the cost of high-speed internet and connected devices for eligible households during the pandemic in 2021.

TracFone disclosed that its internal processes resulted in Lifeline claims for customers who had not used the service in the prior 30 days, contrary to the commission’s rules. According to the FCC, TracFone’s internal systems: 1) improperly considered a subscriber’s receipt of an inbound text message to constitute qualifying Lifeline usage; and 2) improperly claimed support for a group of customers who were enrolled jointly in both the Lifeline and EBB programs, but did not use one of the services in the prior 30-day period.

Lifeline, which is part of the Universal Service Fund (USF), has been plagued by fraud and mismanagement for years.

Last year, TracFone reached a $13.4 million settlement with the FCC and the Department of Justice over allegations that TracFone violated the False Claims Act by signing up more than 175,000 ineligible customers for the Lifeline program during 2012-2015 and that the false claims resulted from TracFone’s “lax oversight and monitoring” of its Lifeline program.

In 2020, T-Mobile agreed to pay a $200 million penalty to resolve an investigation into Sprint’s compliance with the commission’s rules for the Lifeline program. That payment was the largest fixed-amount settlement the commission had ever secured to resolve an investigation.

The T-Mobile settlement revolved around reports that Sprint, prior to its merger with T-Mobile, was claiming monthly subsidies for serving about 885,000 Lifeline subscribers even though those subscribers were not using the service, in potential violation of the commission’s “non-usage” rule.

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