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Sprint Overcounted Low-Income Customers for Years

The Wall Street Journal. logo The Wall Street Journal. 12/3/2019 Sarah Krouse

Sprint Corp. has for years failed to accurately measure how many of the low-income Americans it serves through the federal Lifeline program actually use their phones, according to regulatory documents reviewed by The Wall Street Journal.

The No. 4 U.S. wireless carrier by subscribers is facing a potential settlement with the Federal Communications Commission after the regulator in September said Sprint improperly collected “tens of millions” of dollars in federal subsidies for 885,000 Lifeline customers who weren’t using the service. The carrier said its error was caused by a 2017 inadvertent coding issue in the system it used to measure customer usage.

But Sprint also made mistakes in tallying how many subscribers were using their Lifeline service in 2013 and 2014, documents obtained by the Journal through a public information request show.

Because of an error in how it counted usage at the time, spam texts could keep dormant accounts live and allow Sprint to continue to collect subsidies for those customers, the documents show. In one case, the phone of an Oregon woman who died months earlier was still deemed active.

In Oregon alone, correcting that mistake at the time triggered the loss of more than 4,600 Lifeline subscribers for the company, according to the documents. “The failure was systemic and not confined to Oregon,” a then-senior counsel at Sprint wrote in a September 2014 email to officials at the state Public Utility Commission who asked about the matter.

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It couldn’t be determined how many customers Sprint shed nationally after the problem was discovered. Sprint declined to comment on the scope of the subscriber loss at the time.

Sprint, which provides Lifeline service through its Assurance Wireless brand, was never fined by the FCC for that mistake. The company declined to comment on whether government subsidies it had improperly collected for that mistake were returned.

“While the facts make clear that Sprint did make a mistake, it is also clear that Sprint corrected that mistake and cooperated with regulators,” a Sprint spokesman said. The two incidents are separate and unrelated, he said.

FCC Chairman Ajit Pai in September asked the agency’s enforcement bureau to investigate the full extent of Sprint’s Lifeline problem, an FCC spokesman said. “That investigation is underway, and we do not comment on pending investigations,” the spokesman added.

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The Lifeline program was started in the 1980s to give low-income people better access to emergency services but has been revamped several times to address abuses. Lifeline typically offers carriers a $9.25-a-month subsidy per user to provide phone or internet service. The program was used by 9 million households in 2018, according to the latest annual report from the nonprofit that administers it on a federal level.

The Lifeline errors are among several challenges Sprint faces as its merger with rival T-Mobile US Inc. hangs in limbo. The deal has regulatory approval from the FCC and federal antitrust officials, but it faces a legal challenge from a coalition of state attorneys general that is scheduled to go to court Dec. 9.

Oregon’s Public Utility Commission, which administers the Lifeline program in that state, discovered both usage-related issues, according to the documents.

This summer, Sprint reported the 2017 coding error to the FCC and state regulators, the carrier’s spokesman said. The company is committed to repaying any funds that were improperly collected and is working with regulators to quantify the repayment and cooperate with their investigations, he said.

“Sprint takes its Lifeline obligations seriously and is committed to strengthening trust in its Lifeline program,” the spokesman said.

Many providers shed Lifeline subscribers in 2013 after an FCC rule change required them to certify that subscribers were eligible for the program, rather than allowing consumers to do so themselves. Sprint said at the time that it lost more than 1 million Lifeline subscribers in early 2013 as a result.

Lifeline customers must use their service at least once every 30 days to make an outbound call, answer an incoming call, buy minutes for their plan, send a text message, use data or respond to queries from the service provider about whether or not they want to use the service. If none of those things happen, providers must give them 15 days’ notice that if they don’t use the service it will end.

Starting in April 2013, Sprint erroneously counted incoming text messages as subscriber usage, the carrier told Oregon officials in 2014, according to the documents reviewed by the Journal. The ability to count such text messages as usage was built into the system in anticipation of potential changes to the federal Lifeline standards but was wrongly applied, Sprint told Oregon regulators when the problem was discovered in 2014.

“This was the result of miscommunication that occurred over time and in connection with a series of contemporaneous regulatory changes and IT-related initiatives,” the Sprint senior counsel wrote at the time, the documents show.

Sprint again made changes to its IT platform following further Lifeline program changes in 2016. After those system changes were made in 2017, its Assurance Wireless brand in some cases recorded incoming calls to voicemail as outgoing calls, which kept the line active, Sprint told Oregon state officials this August, the emails seen by the Journal show.

Oregon Public Utility Commission staff discovered the recent usage issue after receiving complaints from customers whose phones were defective or not in use, the emails show. The agency kept one such consumer’s cellphone to test. After three months of inactivity, Sprint still considered the line active, according to the documents.

In the most recent quarter, Sprint swung to a loss as a result of its plans to reimburse the government for Lifeline subsidies it wrongly collected.

There are signs that some of Sprint’s practices still raise red flags for some regulators.

For example, a marketing manager at Assurance told an Oregon official in an Oct. 4 email that the company doesn’t always suspend an account when customers report a phone missing because the device may be found.

The Oregon official notified the FCC about that practice, the documents show. “Staff has concerns with the company’s policy and will be looking into the matter,” he wrote.

Sprint© Mark Lennihan / AP



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