The Obama Phone: Fact and Fiction

With the so-called Obama Phone back in the news, the chain emails have ramped up once more. Nearly everyone has heard about the free cell phones, often reported to be the result of an initiative by President Obama, though few people can tell you anything more specific. In today's column, I'll explain the program, where it came from and who pays for it. The answers might surprise you.

The program actually goes all the way back to the Clinton era. Something called the Universal Service Fund was created by the FCC in 1997 to help meet universal service goals that were mandated by the Telecommunications Act of 1996, a massive piece of legislation that deregulated much of the communication industry. Telecommunication companies pay a quarterly fee on interstate end user revenues that is then used toward helping make sure that everyone has access to communication devices. The fee is typically passed on to customers and can be seen on your cell phone statement.

The specific programs covered by USF fees related to subsidized phones are Lifeline Assistance and Lifeline Link-Up. The first subsidizes monthly payments, while the second helps to cover initial costs and installation. When the program began, it covered only landlines, covering a portion of set up costs for a new phone and subsidizing the monthly bill. The government continues to subsidize such land-line phones for low-income Americans, with eligibility determined at the state level and current maximum incomes ranging from 135-150 percent of federal poverty guidelines.

As cell phone technology continued to advance, the program became cost-effective for cellular devices and beginning in 2008, with Safelink Wireless service by discount cellular company Tracfone, the government began subsidizing cell phones in the same fashion. However, the change occurred several months before President Obama was even elected, while President Bush was still in office – though again, it's an FCC program required by Congressional legislation, not a presidential directive.

Once President Obama was elected, a number of spurious emails claiming he was redistributing wealth by spending tax money to give welfare recipients free cell phones quickly went viral, aided by a now-famous Youtube video. So, yes the government subsidizes phone access and it has for over a decade and a half, and yes taxpayers support it (through the USF fee on their phone bill), but no President Obama didn't have anything to do with the program. It was created and maintained by both parties in Congress, and three presidents have now held office while the program was in place, none of whom attempted to shut it down.   

The USF fund raises about $4 billion annually and funds many initiatives in addition to indigent telephone access, including telecommunications for libraries and schools. There is also talk of broadening the use of its funds to extend high-speed internet to regions of the country that currently lack access. For qualifying cell phone recipients in the 39 states that participate in Safelink, a low-end $10 phone is provided for free, along with 250 minutes a month, for which the carriers are paid $10 per contract. The phone recipients are charged according to the terms set by the carrier for any minutes beyond the subsidized limit.

The Safelink program and the Universal Service Fund are not without criticism. Congressional Democrats recently called for hearings on the Safelink program over accusations that service providers were not adequately determining eligibility and that many recipients of the subsidized phones may not have met eligibility criteria. Lack of consistency from state to state on ground rules regarding proving eligibility, along with the absence of a national database of program participants are often cited as fraud enabling flaws in the system.

Dennis Maley's column appears every Thursday and Sunday in The Bradenton Times. He can be reached at dennis.maley@thebradentontimes.com. Click here to visit his column archive. Click here to go to his bio page. You can also follow Dennis on Facebook.