FCC Cracks Down on Provider Accused of Fraud in ‘Obama Phone’ Program

A company that has received hundreds of millions of dollars from a federal program to provide discounted phone and internet service to low-income customers is being sanctioned over fraud allegations.The Federal Communications Commission is blocking IM Telecom, one of the nation’s largest recipients of federal Lifeline subsidies, from enrolling new subscribers as an investigation continues.IM Telecom has received more than $262 million in federal funds since 2024 to provide phone and internet services to qualifying low-income Americans. The FCC says it is looking into allegations that IM Telecom violated numerous program rules.Among the claims is that IM Telecom transferred thousands of former subscribers back to the provider without their consent after they decided to switch providers away from them. The company is also accused of creating a payment scheme to evade FCC rules designed to ensure that legitimate customers are using the service.IM Telecom is also accused of failing to obtain affirmative consent from subscribers before enrolling or transferring them, changing corporate control without obtaining required federal approvals, and using bots to evade limits previously imposed on the provider’s suspicious application, enrollment, and customer transfer activity.Federal agents, this month, executed search warrants on multiple individuals associated with IM Telecom as part of the investigation.“Today’s step helps protect the program and makes clear that abuse and evasion of program rules will not be tolerated. Existing and legitimate IM Telecom customers can switch to another Lifeline provider,” the FCC’s chairman, Brendan Carr, said in a statement.The FCC says it is considering additional actions beyond barring new enrollments but did not detail what those potential punishments could entail. Mr. Carr says California and Oregon previously issued cease-and-desist letters limiting IM Telecom’s ability to operate in those states based on similar concerns.A representative of IM Telecom told The New York Sun that no one was available for comment.The Lifeline program was started in 1985 in order to provide landlines to people who couldn’t afford to pay for monthly phone service. The program has evolved to cover mobile phones and internet service. The program earned the nickname “Obama phones” during President Obama’s administration after a viral video featured a woman telling people to reelect Mr. Obama because she said he gave her and her friends free phones.About eight million people are enrolled in the Lifeline program. It is funded by a charge that telecommunications providers pass along to subscribers. Americans contribute more than $8 billion a year into the fund.The FCC, in February, initiated a crackdown on fraud in the Lifeline program including investigations into possible violations of program rules.The Justice Department, in May, released an opinion that noncitizens are typically ineligible to enroll in the Lifeline program unless they have been in America for at least five years with qualified status. The FCC was ordered to impose safeguards to verify eligibility for Lifeline benefits beyond simply collecting subscribers’ Social Security numbers before enrolling them into the program.

FCC Cracks Down on Provider Accused of Fraud in ‘Obama Phone’ Program

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