FCC commissioner says T-Mobile-Sprint merger must be paused due to Lifeline investigation

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Sprint has come under fire this week for an issue related to Lifeline subsidies, and it could have an effect on the carrier’s merger with T-Mobile.

The FCC has learned that Sprint claimed monthly subsidies for 885,000 Lifeline subscribers, but those subscribers weren’t actually using the Lifeline service. This resulted in Sprint receiving tens of millions of dollars for customers who weren’t actually using any of Sprint’s service.

“It’s outrageous that a company would claim millions of taxpayer dollars for doing nothing. This shows a careless disregard for program rules and American taxpayers,” said FCC Chairman Ajit Pai. “I have asked our Enforcement Bureau to investigate this matter to determine the full extent of the problem and to propose an appropriate remedy.”

Providers taking part in the Lifeline program receive a monthly subsidy of $9.25 that they pass along to consumers as a discount, which makes the service free for most people. However, there’s a non-usage rule that requires Lifeline providers that give “free” service to un-enroll customers who don’t use their phones, which is meant to help these subsidies not go to waste.

The 885,000 Lifeline subscribers that Sprint took money for represents nearly 30 percent of Sprint’s Lifeline subscriber base and nearly 10 percent of the entire Lifeline program’s subscriber base.

Sprint has said that it made an error adjusting to the new rules regarding the Lifeline program. “We are committed to reimbursing federal and state governments for any subsidy payments that were collected as a result of the error,” a Sprint spokesperson told Bloomberg.

After news of this situation came out, FCC Commissioner Geoffrey Starks has argued that there is “no credible way” that the T-Mobile-Sprint merger can continue until the issue with Lifeline is resolved.

“Given the enormity of the apparent wrongdoing committed here, we must pause our Commission review,” said Starks in a statement. “The draft order relies heavily on information submitted by Sprint, a company alleged to have over-collected Lifeline support, and inaccurately accounted for nearly 1 million inactive Lifeline accounts. 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.”

T-Mobile and Sprint’s merger has been approved by the Department of Justice, but while FCC Chairman Ajit Pai has recommended that the FCC approve it too, an official approval hasn’t been issued by the FCC quite yet. The merger is also facing a lawsuit from more than 15 state attorneys general who argue that the deal should be blocked because it will harm competition and raise prices. The trial for that lawsuit is scheduled to begin on December 9.

Sources: FCC (1), (2)

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  • Brenden Morris

    T-Mobile Employees are pushing for this merger so hard. Because there paychecks will increase and so will there bonus checks each month.

    Customers are saying no because there will be a massive price hike on everything… accessories, phone plans, cancellation fees will be added. The UN-Carrier will go away if the merger takes place.

    • marque2

      I, as a customer, am saying yes. There won’t be price hikes on anything for existing users and the service costs will go up with inflation for others. Of TMobile charges too much for phones it is easy to buy unlocked ones and bring them onboard. And of course with the 2.5ghz spectrum my service will get better and with three true 5g competitors instead of two there will be real competition in 5g. Also Sprint won’t go bankrupt.

      It is win for everybody. What in blazes are you talking about?

      • The Swami

        i don’t necessarily disagree, but thinking that your rate is locked in perpetuity via a grandfather clause as the main argument, that’s not very likely. there will come a time when any company (new, merged, or old) will phase that out. I’m sitting on a 4 line $100 unlimited everything plan from years ago as well like many others. WAY before that I was on a Sprint plan that was grandfathered thru time forever until it was glaringly obvious it didn’t work for the company any longer, and they started restricting what new phones you could activate on said plan. So in theory I could keep the plan, but with phones that barely worked, if at all. That’s just one way around the existing user. There are many others. I have other reasons I’m in favor of the merger, but I am under no belief (merger or not) that they are going to just let me keep this plan forever when it’s not remotely profitable down the road for the company.

        • Acdc1a

          That’s what will happen merger or not. I don’t see Sprint as a viable number 4 but I also don’t believe this merger is the best option to make a viable number 4. Dish or any of the cable companies could absorb Sprint, get a guy like Legere to hype it, and really make a push to take down Verizon and AT&T.

    • James Symmonds

      The only reason I’d say no to this as a customer is that I really don’t want to share bandwidth with all of the Sprint customers who would be incoming. (I live in KC, btw, and so there’s a lot of Sprint customers here which ends up choking their network and they’d end up choking the Tmo network here. Currently it’s pretty speedy but Tmo isn’t as popular here as Sprint.)

    • Francisco Peña

      I’m a customer and I say yes. I pay $85 for 3 lines unlimited with 6GB hotspot. I don’t mind paying, let’s say $10-20 more for better coverage in the more rural areas in FL (like 10 miles out of the city/burbs), my house, and in the area behind the mall which is in our town. i can’t go into Costco and text my wife which size of jumbo shrimp we need, the 40-60 count or the 20-30. :D Even the parking lot I consistently get less than 1mb upload speeds.

      I’d like the Sprint spectrum to enhance areas that are lacking.

    • Linx

      “there bonus checks” it’s “their” not “there”

    • SteveD

      Interesting opinion.

      Exactly how do you come by any of this? Why would the sales staf see an increase in salary or commission because of the deal?

      Why would there be a price hike on anything? Exactly where are you coming up with any of this?

      • Brenden Morris

        I was employed for T-Mobile from 2016 to 2017. So I have a few insights because I was employed. So basically, the more customers a company has, the better they look to investors. Which more investors means more money for T-Mobile. So if T-Mobile gained more customers from Sprint….T-Mobile would increase in Value. Because T-Mobile is worth more money…it has more money to push out to it’s Employees for a raise. So T-Mobile sells reps make commission on everything they sell. If TMo is worth more, they have more money to play with for commission for it’s Employees.

        On bonus checks… Mangers and Assistant Managers get bonuses based on how well there store sells each month. Well if TMo gained more customers…more customers would be coming to stores to buy more products than normal. Meaning…more customers…more sales…bigger bonus checks.

        Price hike…. Sprint is the cheapest of the major wireless carriers. Meaning people choose Sprint because it’s extremely cheap. But remember. You get what you pay for in the U.S. market. Well because TMo has those customers basically trapped because there is no other cheaper options. Because Sprint is gone. TMo has the authority to raise prices….”due to higher demand at retail stores”…TMo would justify the price hike because there Employees are working more to help way more TMo Customers now. So TMo can basically say…”We are working more to handle all the new customers so you can pay us more per month”.

  • Ver

    Im so sick of this whole thing.

    • kanakamaoli

      It dosent bother me at all as long as I’m still getting great coverage, 140+MBs speed, and while still keeping my simple choice 4+1 unlimited lines, HD streaming at no extra cost, 14 GB Hotspot with 18% corporate discount for 128.00 before taxes a month.

  • mjfadaway

    This is getting so damn old.

    And another thing, everyone keeps saying customers are against this merger. Where are these customers that are so against it??? The only people that don’t want it to go through are Democrats, Verizon, AT&T and a few union workers. I’ve never in my life seen a merger take so long to get approved.

    • David

      CVS and Aetna just got approved after 2 years. The merger was just proposed last year. So stop will the hyperbole and you would see this is a normal process. M&A’s take awhile and have a long road of due diligence. Also, I am a customer who opposes the deal. I use to have Sprint before switching to T-Mobile. The merger will lead to less competition. T-Mobile has the assets it needs to build a 5G network even without Sprint. Sure spectrum is great and all but adding 30-40 Million more customers will negate the addition of the spectrum IMHO. I am already getting well over 100 Mbps, and happy with my coverage.

      • mjfadaway

        You’ve gotta be kidding me. Sprint and T-Mobile have been trying to merge since at least 2014. Sure it just became official last year, but that’s only due to the fact that the two companies were sensing that the deal wouldn’t be approved if they announced it back then. Anyone who’s been following this closely knows it has been going on for years. If any two companies should be allowed to merge, it’s these two. Both companies are mediocre to be honest (especially Sprint). They need each other.

        • David

          I mean your comment was you have never seen a merger take so long to get approved in your life. The merger can’t seek regulatory approval until it is finalized. I understand rumors of mergers happen all the time, my point is simply that a 2-3 year regulatory approval process for a merger of this size, is not unheard of, see CVS. (I’m an attorney and have done coursework with International Mergers & Acquisitions)

        • marque2

          This is actually the second official attempt – not just back door. First one fell through over pricing and the feeling it couldn’t get through the Obama administration.

    • mike

      I breathed a sigh of relief a little over 11 years ago when I switched to T-Mobile; or at least I did once I’d officially severed all ties with Sprint. The quality of service (and customer service) that I received in my two years with Sprint was so atrocious and off-putting that if this merger actually does succeed in going through, I will regretably be jumping ship once again and finding myself a new carrier that has nothing to do with Sprint…I should also note that 1) this was before the advent of smartphones, and 2) 16 of those 24 months I didn’t even have to deal with Sprint, as I was deployed in support of OIF & had my service suspended (for free) for the duration of that deployment. Honestly, if I was forced to choose between A) going back to Sprint or B) something grossly disproportionate, such as losing a limb, the ability to see or hear, the use of my legs, etc…I would, at the very least, strongly consider option B. I’m sure you think I’m exaggerating or that nobody could actually have such a strong dislike for Sprint, which simply tells me that you haven’t had a similarly atrocious and abhorrent experience with them as I did. If you had, you’d probably share my sentiments.

  • riverhorse

    I know for a fact this used to be out of control at 4-6 years ago, people went around with a phone in each pocket.
    Now they verify ssn. The best someone can do is sign up with a different Lifeline carrier, but before the first month is up it catches up in the system – the oldest line(s) in service get a message service ist kaput as of the end of the month while the newest line remains untouched and in service. Should someone then call to rescind canceling of the older line, then the new one gets kaput.
    I’m talking about the completely free service. If you elect to pay few bucks monthly, that’s another story.

    Now, about the old billing scam shenanigans, where they were busted twice by the Feds plus multiple times by assorted states, that’s really old news from the early 90’s thru 00’s. Sprint was really lucky it didn’t get shut down or any exec did time.

  • JG

    I’m curious as to why Pai is so outraged by this…

    Earlier this year (maybe last year?) we found out an ISP had over-represented itself to the FCC… While it actually only provided service to a small area in one (maybe two) states, they told the FCC they provided service to every single household in the nation…

    Personally, I’d imagine that would be a slightly bigger issue than “accidentally” forgetting to remove inactive users from your roster…

    I don’t know if the ISP itself profited any from this “mistake”… But like Sprint, they submitted obviously false information to the FCC in official reports, showing “a careless disregard for [the FCC’s] rules”. And said “mistake” resulted in millions – possibly billions – of tax payer funds being misappropriated…

    But when the “mistake” was brought to light, Pai simply announces “There was a small problem with data submitted on the report, no biggie, it’s been corrected and guess what, ISPs are deploying more now than ever before, all thanks to me! I RULZ!”

    If this ISP didn’t even get a slap on the wrist for suggesting they serve billions more than they really do… Why is it such a big deal Sprint over reported less than a million?

  • steveb944

    Come on Sprint! We could see the light at the end of the tunnel!

    • Acdc1a

      Turns out it was a train.

      • Linx

        Well played!

  • Acdc1a

    This is great news that it’s coming out now and not post merger. Imagine being held responsible for the other company’s fraud. It also gives T-Mobile a chance to pause and consider everything they’ve given up so far to push this merger through.

  • Pak T

    Wow, Sprint was pulling in over $8 MILLION a month on this “oversight”.

  • fentonr

    I really don’t understand why people are so against this merger, Sprint is not a good company, they’re not good to consumers and they’re not a long term viable company on their own…how is blocking the merger better?

    • Acdc1a

      Me personally? I don’t want that toxic culture mixing in.

      • fentonr

        Okay, well, that’s a good point. I should rephrase that, I don’t understand the arguments against the merger aside from the fact that Sprint is a mess and shouldn’t be touched with a 10 foot pole.

  • Limeybastard

    Scum, hope the merger fails.

  • Kevin

    They should give up merging. Sell Sprint to another player who has money and vision to expand the network. I wonder if the cable companies would be interested since they have internet backbone.