Virgin Mobile forced to ditch 1.62m ‘Lifeline’ users after regulatory re-hash

13 Feb 2013

Sprint Nextel’s Virgin Mobile subsidiary has been forced to reduce the number of subscribers to its state-backed ‘Lifeline’ programme by 44%, according to the results of a Wall Street Journal (WSJ) investigation into changes in the Federal Communications Commission’s (FCC’s) scheme which provides low-income Americans with discounted telecoms services. Until last year the FCC allowed would-be participants to self-certify, without requiring documentation that they met federal poverty guidelines. Further, subscribers did not have to re-certify once they were enrolled in the scheme, and there were few checks on whether households had signed up for more than one Lifeline cellphone. By way of an explanation, FCC chairman Julius Genachowski commented: ‘The programme rules we inherited were designed for the age of the rotary phone and failed to protect the programme from abuse’.

Although Virgin shed the largest number of subscribers – losing 1.60 million of its 3.69 million Lifeline users, it was not alone; according to the WSJ the likes of AT&T Mobility (47%, 611,000), Verizon Wireless (44%, 101,200), Telrite (20%, 130,000), Tag Mobile (33%, 102,300) and TracFone (no figure given) have all seen their Lifeline user base decimated. In recent years Lifeline users offered a consistent source of subscriber growth in the otherwise saturated US wireless market, and one of the key beneficiaries has been America Movil (AM)-owned mobile virtual network operator (MVNO) TracFone, which now claims the fifth largest subscriber base in the US.

According to the WSJ, two years ago General Communication paid more than USD1.5 million to settle allegations that its subsidiary Alaska DigiTel submitted false claims to the FCC for more than four years. General Communication said the alleged misuse occurred before the company took day-to-day control of the unit.



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