Merger 'Synergies' Force T-Mobile To Pay $200 Million Fine For Sprint Falsehoods

Failures

from the synergies dept

T-Mobile has been forced to pay $200 million because Sprint took taxpayer money it didn’t deserve to “service” customers that apparently don’t exist.

In an announcement this week from the FCC, T-Mobile will pay a $200 million penalty to the U.S. Treasury to resolve an investigation into Sprint, a company T-Mobile acquired (against the recommendations of most antitrust experts) for $26 billion earlier this year. According to the FCC, Sprint was taking taxpayer money to serve 885,000 Lifeline subscribers that apparently didn’t exist. The Lifeline program, started under Reagan and expanded by Bush Jr., provides a modest $9.25 subsidy users can use for broadband, phone, or wireless service. It’s worth noting Trump’s FCC has repeatedly tried to undermine the program.

When there are instances of fraud discovered by others, and too obvious to ignore, the FCC sometimes acts. This latest fine, the biggest in FCC history for this sort of inquiry (not that this is saying much for a historically timid agency), was the end result of an investigation started by the Oregon Public Utility Commission. From the FCC:

“The Bureau?s investigation concerned Sprint?s compliance with Commission Lifeline rules, including the ?non-usage? rule. Under this rule, providers of ?free? service may only be reimbursed for a Lifeline subscriber if that subscriber has used the service at least once in the past 30 days, and such providers must de-enroll subscribers who don?t use their phones after giving them 15 days? notice.”

Fairly consistently however, carriers are allowed to game the system for years, taking taxpayer money for customers that may not even exist. AT&T was dinged by the FCC five years or so ago for “forgetting” to audit its Lifeline subscriber rolls and purge them of non-existent or no-longer-eligible customers, allowing it to continue taking taxpayer money from a fund intended to aid the poor. As with other instances of dodgy telecom behavior, the fines doled out quite often don’t quite line up with the money lost. And quite often they can be negotiated down over time, sometimes to nothing.

Technically, the settlement also closes the FCC’s inquiry without any official confirmation of wrongdoing, even though Sprint admitted taking FCC reimbursements for subscribers no longer on the Lifeline program. Sprint claims the error was due to a “software bug” (whoops-a-daisy), though a major one: the impacted customers accounted for 30 percent of Sprint’s total Lifeline subscriber base, and around 10 percent of the entire Lifeline program’s subscriber count. Surely Sprint, which no longer technically even exists, has learned its lesson.

Filed Under: fcc, fines, lifeline, oregon, puc, subsidies, synergies