Georgia will become the only state to charge poor people $5 a month for federally subsidized phone service, a move some believe will deter fraud but others, including a local Covington phone provider, think will only penalize honest customers.
The Georgia Public Service Commission — which regulates utilities and communications — voted 3-2 Tuesday to require phone companies participating in the federal Lifeline program to either charge a $5 fee or offer at least 500 minutes of monthly calling time — double the current 250-minute plans offered now.
Phone companies, including Covington-based Telrite, say it’s not economically feasible to offer a 500-minute plan, and that charging the fee will hurt needy citizens, possibly cutting the customer base by 50 percent.
"Because of this decision, thousands of low-income Georgians will lose the phone service they need to take care of medical needs, apply for jobs, stay in touch with loved ones and contact emergency services," said Telrite President Brian Lisle. "We estimate that the $5 fee would cause our customer base to drop by 50 percent.
"Many of our customers simply can’t afford a $5 monthly fee. Many are also ‘unbanked’ and have no way of paying a bill other than spending an additional $5 or $10 to purchase a money order."
Companies that participate in the Lifeline program receive a $9.25 federal reimbursement per phone line they offer to low-income customers, which is enough to cover costs for a 250-minute plan and provide free service. A Telrite spokesperson said the 250-minute plan is designed to be bare bones and said it was unclear why offering a 500-minute plan would help prevent fraud.
The charge is being instituted because of previous findings of fraud in the Lifeline program; however, companies say most of the ineligible customers have already been weeded out by a new requirement from the Federal Communications Commission (FCC).
"There’s no evidence that the $5 fee will do anything to prevent fraud," Lisle said. "In fact, the FCC, which oversees Lifeline, has successfully implemented reforms that have tightened the program. The FCC is also developing a customer database that will virtually eliminate the possibility of a customer obtaining Lifeline service from more than one provider."
According to a Wall Street Journal article from February, after the FCC required phone carriers to verify that existing subscribers were eligible, the five companies with the most recipients saw their subscribers drop by 41 percent because customers "either couldn’t demonstrate their eligibility or didn’t respond to requests for certification." Only one Lifeline subscriber is allowed per household.
Georgia Public Service Commissioner H. Doug Everett, a Republican who supported the change, said the fee was necessary because phone companies cannot be trusted to regulate themselves. The rules take effect Jan. 31.
"It’s almost like what’s happening now, the fox (is) guarding the henhouse," he said. ".... Nobody is stepping up to say, ‘I’m going to make sure the telephone companies are doing right.’"
PSC Chairman Chuck Eaton, also a Republican said, "Personally, I have yet to be convinced that the $5 charge will do anything to reduce the fraud."
Companies that would collect the $5 fee say they do not want it. To charge customers, phone providers would have to spend money on billing and customer service systems. The FCC declined to impose minimum charges while reviewing the program last year.
"The Lifeline program is serving the truly neediest of the population in the most dire economic circumstances and for whom even a routine charge is an excessive financial burden," the FCC said in its January 2012 order.
The issue will probably be decided in federal court. An association of wireless phone companies filed a lawsuit in February seeking to block the move by Georgia regulators, saying it was unlawful. A judge decided in June to delay the case until the new rules were formally approved.
Life Wireless, the arm of Telrite that oversees the Lifeline program, has 800,000 customers nationwide, including in Puerto Rico, and 115,000 customers in Georgia. Virgin Mobile, AT&T, Tag Mobile and Verizon were the other four largest Lifeline providers, according to the Wall Street Journal.
The program was first instituted in 1984 and expanded to cover cellphones in 2005.
The Associated Press contributed significantly to this story.