T-Mobile will pay a $200 million fine to clear Sprint’s bad conduct off of the Federal Communication Commission’s books, but the deal doesn’t include repayment of state subsidies that the company took for low income “lifeline” customers who weren’t actually using the service. T-Mobile assumed responsibility for Sprint’s lifeline service – Assurance Mobile – when it took over Sprint earlier this year. The violations of the subsidy rules and improper collection of “tens of millions of dollars” from the FCC’s lifeline piggy bank happened before the merger but came to light while the FCC and the California Public Utilities Commission were reviewing it. A “consent decree” squares T-Mobile with the FCC but leaves repayment questions unanswered.
The money from the federal settlement will go directly into the “United States treasury” and no mention is made of reimbursing states, such as California, that supplement the FCC’s program with state funds. In a press release, FCC chair Ajit Pai thanked the Oregon Public Utility Commission, which uncovered Sprint’s malfeasance and said that “states play an important role in helping low-income consumers get access to affordable communications through Lifeline and making sure the program is run efficiently”.
Gratitude and flattery appear to be the extent of the FCC’s concern. Sprint admits no wrongdoing, and both it and the FCC agreed that the settlement “shall not be used as evidence or precedent in any action or proceeding, except an action to enforce this consent decree”. State regulators, as well as federal officials charged with managing lifeline subsidies, will have to proceed with their own collection efforts.
California’s hit from Sprint’s false billing is undetermined, but a back of the envelope estimate that I did last year puts it something on the order of $2 million a month, and Sprint admitted that what it calls an “error” had been its practice for at least three years. Before the merger closed, Sprint’s chief financial officer claimed that the company is “committed to reimbursing federal and state governments for any subsidy payments that were collected incorrectly”. Presumably, T-Mobile is obligated to make good on that promise, but how it intends to do so remains to be seen.