Here are two news articles (The New York Times and The News & Observer) on the federal government subsidy that enables the poor to obtain free cellphones and free service.
Many people who qualify for this service, do not even know that it exists. In fact, this service has been around for the last 25 years, but, the free cellphone, and the free non-911 calls, are new.
Since November, the number of customers receiving free or subsidized wireless service has doubled to 1.4 million. To be eligible for the program, known as Lifeline, a person must meet federal low-income guidelines or qualify for one of a handful of social service programs, including food stamps or Medicare. To apply for this program, those who are eligible can click on the Safelink site here for more information.
PROVIDING CELLPHONES FOR THE POOR
By MATT RICHTEL
Published: June 14, 2009
John Cobb, 59, a former commercial fisherman who is disabled with cirrhosis of the liver and emphysema, lives in a studio apartment in Greensboro, N.C., on a fixed monthly income of $674. He has been hoping to receive more government assistance, and in February, he did.
It came in the form of a free cellphone and free service.
Mr. Cobb became one of a small but rapidly growing number of low-income Americans benefiting from a new wrinkle to a decades-old federal law that provided them with subsidized landline telephone service.
In a twist, wireless carriers are receiving subsidies to provide people like Mr. Cobb with a phone and typically 68 minutes of talk time each month. It is a form of wireless welfare that puts a societal stamp on the central role played by the mobile device.
Mr. Cobb’s cellphone is a Motorola 175. “I feel so much safer when I drive. If I get sick, I can call someone. If I break down, I can call someone,” Mr. Cobb said. “It’s a necessity.”
The users are not the only ones receiving government assistance. Telecommunications industry analysts said the program, while in its infancy, could benefit mobile phone carriers, who face a steep challenge of their own: most Americans already own a cellphone, so the poor represent a last untapped market.
“The low hanging fruit is gone, and the wireless companies are going after the nooks and crannies,” said Roger Entner, a wireless industry analyst with Nielsen. “Oh, the poor: How can we sign them up?”
Carriers can receive up to $10 a month in government subsidies, sufficient to cover what amounts to about $3 in service, Mr. Entner said.
Since November, the number of customers receiving free or subsidized wireless service has doubled to 1.4 million, he said. To be eligible for the program, known as Lifeline, a person must meet federal low-income guidelines or qualify for one of a handful of social service programs, including food stamps or Medicare.
The opportunity has prompted interest from the nation’s biggest carriers, including Sprint Nextel and AT&T. But at the forefront is a much smaller company, Tracfone, a Florida provider of prepaid mobile service that has become the face of the fledgling subsidized cellphone.
Tracfone began providing its service, called SafeLink, in Tennessee in August and now does so in 16 states, including New York, North Carolina and Pennsylvania, and the District of Columbia, according to its Web site. Each time it enters a market — which generally requires state approval — it runs television ads telling people how easy it is to get a free Motorola phone, like Mr. Cobb’s.
The company says the economy makes the audience particularly receptive. “We’ll read that more people are signing up for food stamps and look at our numbers and see volume rising,” said Jose Fuentes, director of government relations for Tracfone. “It’s not scientific proof,” he added. “But we know times are tough.”
He declined to say how many subscribers have signed up. But he said Tracfone, whose paid service has 10 million subscribers, sees the Lifeline service as an opportunity to make some money but, more pointedly, to eventually convert the subsidized customers into paying ones if their fortunes turn around and they no longer qualify for a free phone.
“It could make for a good business,” Mr. Fuentes said.
According to Nielsen, 90 percent of Americans have at least one cellphone. That leaves 32 million, including the infirm, still up for grabs. “And the race is on to get them,” Mr. Entner said.
He said the overwhelming majority of Americans with subsidized wireless service receive it through Tracfone.
One of them is Leon Simmons, 52, of the Bronx, N.Y., who did stints in the Navy, at the Post Office and as a security guard before becoming disabled with emphysema. His wife, who works a minimum wage job at a laundry, heard about the Tracfone service and he got a phone in April.
The free phone is not, as it is for some others in the program, their sole form of telecommunications. Out of the roughly $1,600 they make each month after taxes, they pay $159 for a landline telephone, high-speed Internet and cable television. But the cellphone, Mr. Simmons says, gives him the flexibility to tell his wife or daughter his comings and goings or to stay in touch when he is at the doctor.
According to the Federal Communications Commission, Lifeline service was started in 1984 to ensure that everyone had telephone service for emergencies. The Telecommunications Act of 1996 opened competition to new wireline and wireless providers.
More recently, companies, particularly Tracfone, have started pursuing the wireless opportunity. Still, most of the $800 million in subsidies last year went for landline service even as more Americans cut the cord in favor of exclusively using a mobile phone.
The subsidy money comes from a tax applied to phone bills. Carriers seeking eligibility for it apply to state utility commissions, though several states have ceded their jurisdiction in the matter to the F.C.C.
The issue has created controversy in some states over how and even whether to subsidize wireless service. In California, for example, the public utilities commission plans to debate on Thursday a proposal to extend Lifeline services to wireless — a matter backed by companies like AT&T and Sprint and T-Mobile.
The Greenlining Coalition, a nonprofit advocacy group for low-income residents, has lobbied the state to “move the California Lifeline program into the 21st century,” according to public documents provided for the hearing on Thursday.
But State Assemblyman Felipe Fuentes, who represents a district in Los Angeles, says the California legislature should ask some tough questions before moving ahead — particularly if people contemplate making wireless their only form of communication. Chiefly, he wants to know whether wireless service satisfies crucial aspects needed in lifeline, like reliability in an emergency.
“What if the phone isn’t charged, or junior doesn’t know how to use it?” Mr. Fuentes asked.
Across the country, Mr. Simmons from the Bronx says he likes being able to communicate when he is on the go. And he does not see what all the fuss is about when it comes to cellphones.
“People walk around with their head stuck into these things, not paying attention to what’s going on around them,” he said. Even though he thinks these people look silly, he said, he is going to use his cellphone.
Why not? he said. “It’s free.”
FOR NEEDY, CELL PHONES CAN BE FREE
A federal program will pay for service
By John Murawski – Staff Writer
Published: Tue, Apr. 14, 2009 04:47AM
Modified Tue, Apr. 14, 2009 04:49am
An obscure federal program that helps poor people pay for phone service is entering the wireless era. Cell phone companies are offering the needy a bargain that the rest of us can only dream about: free service.
TracFone, a national wireless phone service company, this month began offering its no-cost service to the nearly half a million low-income families in the state that are estimated to qualify. Its competitor in the prepaid market, Virgin Mobile, plans to offer a similar service this summer.
Both services are subsidized by the federal government’s Lifeline program, created 25 years ago to ensure that poor people had phone service. People who qualify usually pay about half of the monthly cost for phone service. Despite the discount, only a third of households eligible for the program use it. In this state, fewer than 126,000 customers are signed up.
Getting a Lifeline
TracFone is a prepaid wireless provider and offers SafeLink in 10 states and the District of Columbia.
To qualify for the program, a household must be participating in at least one of the following programs:
Supplemental Security Income
Federal Public Housing Assistance (Section 8
Low-Income Home Energy Assistance Program
Work First Family Assistance
Temporary Assistance to Needy Families
Crisis Intervention Program
Under the rules of the Lifeline program, a low-income household can have just one phone subsidized by Lifeline. But the program does not prevent a household from having a landline phone and a wireless phone, as long as only one is subsidized.
Details of Virgin’s plan aren’t yet available, but TracFone’s program, called SafeLink, provides unlimited free 911 emergency calls, as well as 68 minutes of free calling time every month, with a free Motorola cell phone that normally costs $9.99. SafeLink also comes with voice mail, caller ID, call waiting, voice mail, long distance and text messaging.
“If they can offer a phone service for free and make a profit doing it, I’m all for it,” said John Garrison, director of the communications division of the Public Staff, the state agency that represents consumers in utility matters. “Any way we can get more people onto Lifeline service, who qualify for it, I think it’s good.”
José Fuentes, TracFone’s director of government relations, won’t say how many people in the state have signed up, or how it can make a profit off the $10 per household federal subsidy it receives to provide the Lifeline service. But Fuentes says the company sees a potential market of 26 million households nationwide.
Wireless companies like Florida-based TracFone and New Jersey-based Virgin Mobile operate by buying access on other carriers’ networks and typically get volume discounts as their customers gab and text their way through more minutes.
TracFone’s customers aren’t limited to their free 68 minutes a month. Customers can buy additional calling time — for 5 cents a minute — if they want to exceed their monthly allotment.
Only four minutes left
April Crudup of Raleigh has been a TracFone SafeLink customer for the past month, and already, with half the month left, she says she is down to four minutes on her account. She has a regular AT&T home at phone but lost her previous wireless account several months ago when she wasn’t able to pay the bill. She’s on food stamps and has six kids, ages 1 to 10.
She said she needs a cell phone “for when I’m out and something happens.”
To qualify for a Lifeline phone and service in this state, a customer must participate in at least one federal or state income assistance program, such as Medicaid, food stamps or Section 8 Public Housing. Most of the households with Lifeline phones in North Carolina are customers of AT&T and Embarq, the state’s two biggest phone companies. The landline phone accounts subsidized by Lifeline and offered by AT&T, Embarq and other phone companies don’t impose monthly calling limits and allow unlimited local calls.
My kid made me do it
Ester Lennon of Raleigh received her TracFone account last week, at her daughter’s insistence. The 70-year-old retired nurse moved to the area in 2005 after living four decades in Florida, and she returns to the Sunshine State by train every year to see her neurosurgeon and her eye doctor. The overnight Amtrak train has arrived as many as eight hours late, Lennon said, requiring travelers to carry a cell phone or borrow one from a fellow traveler.
Lennon, who’s on Medicaid and has four adult children living in Florida, has a landline phone at home but says she needs a cell phone.
“Even when I take my garbage out, I take my cell phone in my pocket just in case if I were to fall or something happens,” she said.