Does anyone really believe that things are “free?” Especially when the “free” good or service is being offered as part of a government program? Well that is exactly what the Federal Communications Commission (FCC) and Tracfone Wireless, Inc. would have you believe. See, the FCC created this great new program called Safelink where income-eligible consumers can receive a free cell phone and 64 minutes of free airtime per month! No, I am not making this up. Evidently, having access to a cellphone is now a right, a necessity for daily modern life.
Allow me to explain how a seemingly reasonable government program combined with a few years of bureaucracy and a solid dose of lobbying became yet another out of control entitlement program. In 1984, the FCC created the Lifeline Assistance Program to ensure that affordable telephone service was available to low income households. Initially the program was funded by long distance carriers through contributions to the Universal Service Fund (USF) and only included fixed line telephone services. The program was permanently established when Congress passed the Telecommunications Act of 1996 requiring that “[e]very telecommunications carrier that provides interstate telecommunications services shall contribute to the USF (emphasis added)”. Note that the FCC had levied a tax on long distance carriers long before the enactment of this law and received congressional approval to do so 12 years later (it is Congress’s duty under the Constitution to lay and collect taxes, not the FCC’s). This FCC required “contribution” is nothing more than a tax on telephone companies that they pass on to you and me. You have probably seen the Universal Service Fund line item on your phone bill. Those of us that pay for a landline or cell phone are required to “donate” to this fund each month as part of the fees our telephone service provider passes on to us compliments of the federal government. But remember, this is a contribution, not a tax. Where have we heard that before… a penalty not a tax, a contribution not a tax, mind-boggling???
As with all government programs, let’s not forget the layers of inefficiency… Since the FCC lacked the expertise to manage the USF and Lifeline program, it created the Universal Service Administrative Company (USAC) to collect the taxes and implement the program. Last year the USAC collected $7.1 billion dollars through the USF and spent about $170 Million in operating costs. Presently it’s CEO and other executive officers’ pay is capped at a hefty $190,000 per year but a request for a merit based increase in pay is in the works. Interesting that the folks who want an increase in pay are the same ones who determine how much money the telecommunications companies (telecoms) have to contribute to the USF every year. Basically, if I want to boost my performance as measured by total dollars coming in, I just have to require the telecoms to pay more taxes… brilliant!
So how do we get Safelink out of all of this? Well, that is the name Tracfone calls its government subsidized program to provide free cell phones and airtime to its customers. Tracfone has a posh arrangement with the FCC, through USAC, and funded by the USF that allows it to give away cell phones and a few minutes of airtime to income-eligible consumers. Once a user burns through their airtime they can purchase more minutes through Tracfone. Having worked with a number of wireless carriers, I know that many of them use their own money to offer these types of incentives to attract new customers. Tracfone, however found an ingenious, or should we say insidious, way to pass this investment cost onto the American tax payer. You may also find it interesting that Tracfone is owned by America Movil, a Mexican corporation. A subsidy is bad enough, but to a foreign company! Ouch!
At this point, you might be asking yourself, “Can the FCC really take our money and use it to give away cell phones and airtime?” Well, based on decisions coming out of Washington, you should not be surprised that this is happening and it will cost American tax payers nearly $1.6 billion dollars this year. When it comes to the federal government, taking our money and giving it away to our neighbors has become the rule, not the exception.
I sincerely hope Americans will think twice before applying for this program and remember that “free” comes at a very high cost, not just monetarily, but to our own individual liberty. Now onto “free” Health Care…
Note: I wrote this back in 2009 and the program has continued to grow even though we are running up massive deficits and suffering through one of the worst economies in our history.