645,000 Maryland residents had so-called Obamaphones in 2012 — one hundred times as many people as there were in 2009, and double the number in that state who are supposed to be eligible for the program based on their income.
The program, officially called Lifeline, is run by the Federal Communications Commission and imposes hefty fees on every paying phone company to give free phone service to low-income Americans.
The profits to telecom companies from the free, government-provided phone service are so great that in Nebraska alone, 51 corporations, many of them who are not even traditional phone companies building infrastructure and attracting paying subscribers, fought for a piece of the pie.
That structure allows advocates to argue that it’s not a tax and doesn’t affect the budget, and lessens the extent to which the FCC is beholden to Congress.
Officials admitted Maryland's 10,000 percent increase over three years in a little-noticed hearing before the House's Subcommittee on Communications and Technology in April last year.
"By the third quarter of 2012, the number of Lifeline subscribers in Maryland had risen almost 100 fold to 645,000" compared to three years prior, industry consultant Billy Jack Gregg told Congress.
"Moreover, the current number of Lifeline subscribers in Maryland is almost double the number of low income households in the state" who are eligible.
The FCC says it has since instituted some reforms to put a damper on fraud. Until recently, applicants could self-certify their eligibility, and the FCC found millions of dollars of abuse when it finally checked.
But it only sent letters saying “don’t do it again, or you might be fined” to people who lied on their forms to obtain multiple phones or obtain them even though they had high incomes, it said at the hearing.
And it used the money recovered not to shrink program costs or refund fee-payers, but as free bonus funds that were reinvested to provide free Internet for the poor, with no authorization from Congress.