Gov't spends billions on free cellphone service

By Joy Purdy - 5:30, 6:30 & 11 p.m. anchor
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JACKSONVILLE, Fla. - If you have a phone, you're likely paying an extra fee each month to help give free cellphone service to low-income families.

The service can be a lifesaver for those who need it, but widespread abuse of the system over the years has wasted billions of your money.

The free phone service is issued through the Federal Lifeline Assistance Program.

One Jacksonville couple told us their family qualified for the program because they already receive federal help through food stamps.

Natalie and Anthony Alaniz both work in retail, and only bring home about $26,000 a year.  Most months they say they're forced to pick which bills are most important.

"It's really hard to make the phone bill," Natalie explains, "it's our least important bill so it's the one that gets dropped first."

When the couple needed emergency medical help for their 2-year-old son, they realized how important phone service was for their family.

The Alaniz' phones had been turned off when they says they couldn't pay the bill, forcing them to use a neighbor's phone to call for help.

That's why they didn't hesitate to sign up when they say a local Safelink Wireless representative was knocking on doors, offering free cellphone service, courtesy of the federal government.

The Alaniz' said the "Lifeline Assistance Program" allows their family 250 free minutes and 1000 text messages a month.

Phone companies offer free phones with the service, which many people commonly to be called "Obama phones." However, this service actually started back in 1985 as a discounted landline service when Ronald Regan was President. Then under the younger President Bush, cellphone service was included.

The purpose of the program is to make sure everyone has access to emergency phone service.

The money used to fund the Lifeline program, comes from paying telephone customers; about $2.00 for a universal federal service charge on your phone bill.

After receiving complaints for years that people were abusing the Lifeline program, the Federal Communications Commission recently fined Safelink's parent company TracFone and others, accusing them of collecting extra funds by allowing people to sign up for the service more than once.

In all, 13 completed investigations have yielded more than $90 million in proposed fines.

Also, just last month, the FCC activated a nationwide database of Lifeline users, preventing duplication and bolstering other relatively new Lifeline requirements.

The FCC said it has eliminated more than $2 million duplicate subscriptions since starting the reforms three years ago.

The FCC also said all of these changes it's made to the Lifeline Assistance Program, will save paying phone customers $2 billion by the end of this year.

Many government watchdog groups we spoke with like the idea of tighter regulations, but the thought of a national database makes a little wary.

"My big concern and only concern would be privacy," Jamie Court told Channel 4 via Skype from the group's headquarters based in California.

"I think if we're starting to talk about people's social security numbers, their public assistant status," Court continued. "We've got to make sure that this is a secure database and doesn't have one big list that is a big huge target for cyber thieves."

Mark Wigfield with the FCC has responded, saying in an email:

"There are many different methods built into the NLAD (National Lifeline Accountability Database) to protect subscriber information. Subscriber information is protected by the use of secure internet protocols, encrypted data transfer requirements, and real-time monitoring of the database. Only authorized users have access to the NLAD. Authorized users in each company only have access to their own subscribers and cannot see information of other companies."

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