Sprint found itself in hot water with the Federal Communications Commission (FCC), which accused the company of illegally collecting millions of dollars from a subsidy programme intended to fund mobile service for low-income users.
The FCC alleged Sprint claimed funds for 885,000 inactive Lifeline customers, violating a rule requiring operators to remove subscribers who don’t use the service at least once a month. The figure represents about 30 per cent of Sprint’s total Lifeline subscriber base and around 10 per cent of the programme’s total.
State regulators in Oregon were the first to flag Sprint’s alleged violation. FCC chief Ajit Pai subsequently asked the regulator’s Enforcement Bureau to “determine the full extent of the problem and propose an appropriate remedy”.
While the FCC didn’t disclose the duration of the alleged violation or the total amount illegally claimed, Pai said in a statement the latter figure was in the millions.
“It’s outrageous that a company would claim millions of taxpayer dollars for doing nothing,” he said, adding the alleged violation “shows a careless disregard for program rules”.
Lifeline providers receive an average subsidy of $9.25 per month per eligible subscriber. If Sprint received that amount for all 885,000 inactive users, the amount claimed would have been more than $8.1 million per month.
Commissioner Geoffrey Starks called for the FCC to pause its review of Sprint’s proposed merger with T-Mobile US until an investigation is completed: “How the merging parties were going to handle Lifeline was a prominent part of their merger pitch, so I am alarmed and concerned about such a massive inaccuracy in a core part of the transaction.”
In a statement to Mobile World Live, a Sprint representative attributed the issue to an error the operator made when updating how it calculates monthly usage to meet new Lifeline standards implemented in July 2017.
Once the mistake was discovered, Sprint brought it to the attention of the FCC and state officials, the representative said.
The representative added the funds were “immaterial” to Sprint’s financial results and it has committed to repay any money collected in error.