Corporation Commission Okays Capture Of Private Information

The suspected fraud has resulted in an investigation into the federal Lifeline program by the Federal Communications Commission, which has ultimate responsibility for the program.

The Commissioners last week approved the agreements for ICON and TerraCom Inc. while Commissioner Bob Anthony dissented, saying in the hearing, “This concerns me. I don’t want to be a part of an investigation that captures private information.”

He called it an investigation while Brandy Wreath, the Director of the Commission’s Public Utilities Division, suggested it was not a formal investigation but rather a review of the millions being made by a handful of mostly-cell phone related companies, some that literally have operated out of the back of pickup trucks parked on street corners.

Others have set up tents at various locations and given away the cell phones to those who filled out forms and swore they were impoverished.  The federal government, using fees collected from phone customers nationwide under the Federal Universal Service Fee, reimburses the phone companies under a so-called Lifeline program run in each state.

The money collected by ICON, TerraCom and a few others are staggering—tens of millions of dollars a year for each. Last year, the Oklahoma-based TerraCom hauled in nearly $36 million, averaging $3 million a month.  ICON made $25 million in federal reimbursement money

At least three others are high priority under the Commission review. But they were not identified by a Commission official with the Public Utilities Division during the hearing.  However it’s believed True Wireless is targeted after it raked in nearly $46 million in 2012 as payment for Oklahoma low-income customers, including $7.5 million in October.  Its lowest monthly income from was $2.8 million in January of last year.

Another company, Assist Wireless, received nearly $29 million from the federal government last year. One other company believed to be raising doubts among Corporation Commission officials is Easy Wireless after it jumped from $466,000 in May of last year to more than a million dollars a month from July through November. All sought and received agreements from the Corporation Commission to protect not only their customer lists but other ‘highly-sensitive confidential information and documents.’  The Commission also agreed in two other previous agreements with some of the other firms being reviewed, not to introduce some of the proprietary and confidential material as evidence in any commission hearings.

 To protect its own liability in the review, the Commission is also seeking information from rural telephone companies that also receive Lifeline funding from the federal government. But their yearly revenue through the Lifeline program is miniscule compared to the five firms in question. For instance, Chickasaw Telecom averages $12,000-$15,000 a month. EPIC Touch averages $22 to $60 a month. Pine Cellular receives anywhere from $132,000 to $197,000 a month.

What concerned Anthony in Thursday’s hearing was the social security numbers provided in such lists of customers and whether the Commission had adequate security to protect them. And in questioning Public Utility Division officials, he was told the “review” as they prefer to call it rather an investigation, focuses mainly on five companies and their 410,000 customers of the federally-funded Lifeline program.

But Corporation Commissioner Patrice Douglas made it clear in the hearing, “We’re not going after individuals, just the phone companies.” And a PUD official stated, “We have no plans to contact individual customers—that’s up to the federal government.”

   Still, Commissioner Anthony expressed concern as he questioned the PUD director and and his officials about amassing private information on hundreds of thousands of Oklahomans. “We’re engaged in a whole different form of regulation—reminds me of the Cash for Clunkers which was poorly designed and easily defrauded.”

   Staffers told him in the cases where full social security numbers were provided they were mistakenly given by the targeted phone companies and destroyed. The staff is accepting only the last 4 digits of the customers’ social security numbers.

   The companies are making their millions by recruiting customers who fill out the paperwork, sometimes doing so from the back of the pickup trucks or tents on street corners. Then the federal government reimburses those firms. In the case of phone service for those residents of tribal land in Oklahoma, the companies are paid $34.25 a month. That adds up when the list of customers totals into the hundreds of thousands, and the firms have very little overhead costs because they don’t have massive headquarters. They might not have headquarters at all.

One Commission source indicated the program initially took hold for landline customers then some firms quickly realized a fortune could be made by providing cellular phones. Plus, because of the way the tribal provision was included in the 1997 Federal law, it covered nearly 98% of Oklahoma and thus expanded the virtual gold mine for the companies.

Some have referred to the program as‘Obamaphones’ because of a nationally seen video last year showing a woman who said she would vote for President Obama because he gave her a free phones. But President Obama had nothing to do with the creation of the program. However, the President has given active support to it.

Police in Tulsa have long suspected the program aided drug pushers. And one such drug dealer openly admitted the program allowed him to have several cell phones for his illegal operations. In Thursday’s hearing, an attorney for the Commission’s PUD explained, “We’re not jumping to conclusions because we found in one case 30 people using the same address with only 9 social security numbers.” The same attorney stated the review already discovered some 20,000 customers have multiple phones from the same addresses.  Under Lifeline, only one such ‘free’ phone is provided per household.

   Should the commission review of the five companies and others result in any questionable findings, a show cause motion could be filed to remove the company’s eligibility for payment from the Lifeline program.

  Under the Universal Service Fund, the Lifeline assistance was intended for low income consumers.  The Lifeline help offered a $10 a month service for the subscribers. If the subscriber lived on Native American Land, another $25 a month would be offered. The program is funded by long distance and other telecommunications companies who have passed the cost on to—their customers.

Under the plan, there is a federal Lifeline operation and an Oklahoma Lifeline. But because of more restrictive regulations created by the state, the five firms under review aren’t participating in the Oklahoma Lifeline program.

”We’ll get back to you on that,” was the standard answer when state officials pressed the FCC about the matter. And it went on for months and months. Not until U.S. Senator Tom Coburn, (R) Oklahoma,  included the Lifeline program in his 2012“Wastebook” report, did the growing cries of fraud finally get the attention of the Federal Communications System. Coburn said the phone subsidy program was ‘ballooning out of control’ and claimed it had ‘morphed into a massive entitlement.’ Entitlement—a word that was part and parcel of the Presidential campaign by Mitt Romney in his unsuccessful bid to unseat President Obama.

Adding to the skepticism among some state officials is the existence of the Universal Service Administration Company, referred often as USAC.  It was designated by the FCC to manage the contributed revenues and to distribute the funds to the participating telecoms. And now, as questions are being raised about the lack of accountability and enforcement on USAC’s part (FCC), the FCC has ordered USAC to carry out the investigation.

The Lifeline payouts to the Oklahoma telecoms, as well as others nationally, can be reviewed at: http://www.usac.org/li/tools/disbursements/default.aspx.