Lifeline cheating at Sprint will cost T-Mobile $200 million

T-Mobile will pay federal regulator $200 million to settle claims that its subsidiary operation Sprint swindled cash from the government in connection with a low-income subsidy program.

The investigation began last year when regulators at the Oregon Public Utilities Commission and the Federal Communications Commission began probing compensation made to Sprint through the federal Lifeline program.

The Lifeline program allows telecoms like Sprint to collect a federal subsidy in exchange for providing cheaper landline and wireless phone and Internet connections to low-income households.

In some areas, the service is offered for as little as $10 a month, but in many cases, eligible Lifeline participants receive service for free. The government then covers the service cost by compensating program participators, which at one time included Sprint under its Assurance Wireless brand.

Under terms of the deal, Lifeline providers like Sprint are expected to de-activate service to customers who don’t use their service at least once every 30 days and must provide a minimum of 15 days notice before they terminate connections.

But Sprint didn’t do this and continued to collect subsidies for as many as 885,000 inactive Lifeline subscribers, regulators said. Sprint did not dispute the allegation, attributing the issue to a clerical error that was the result of changing Lifeline rules in 2016 that the company tried to implement one year later.

Sprint became aware of the investigation last year as it was moving forward with plans to combine with once-rival T-Mobile. The merger was finalized earlier this year.

With the merger done, T-Mobile is now on the hook for a $200 million penalty — the biggest ever imposed against a company by the FCC in American history.

“Lifeline is key to our commitment to bringing digital opportunity to low-income Americans, and it is especially critical that we make the best use of taxpayer dollars for this vital program,” Ajit Pai, the chairman of the FCC, said in a statement this week. “I’m pleased that we were able to resolve this investigation in a manner that sends a strong message about the importance of complying with rules designed to prevent waste, fraud, and abuse in the Lifeline program.”