McCaskill Urges Top Telecom Regulator to ‘clean up’ Programs

Senator demands action from FCC Commissioners to boost confidence in telecom programs by cracking down on abuse in Lifeline and Designated Entity Programs

WASHINGTON – If Americans are to have more confidence in federal telecom programs, then the nation’s top telecom regulator has to crack down on fraud and abuse in those programs, U.S. Senator Claire McCaskill said today.

McCaskill used a Senate Commerce Committee hearing to urge the Federal Communications Commission (FCC) to take action to prevent fraud in Lifeline, a program that provides subsidized telephone service to low-income Americans—and Designated Entity, a program designed to help small businesses, rural telephone companies, and businesses owned by minorities and women compete in spectrum auctions. Both programs, McCaskill said, have been targets for abuse.

“[Lifeline] was a subsidy, it morphed into a program without any kind of controls, without any kind of regulation, and it was a mess,” McCaskill said. “We had some enforcement, there hasn’t been much in a year…doesn’t it make sense to institute structural reforms as we transition this from a program where no one has skin in the game and we have allowed the carriers to commit massive fraud in this country? Doesn’t it make sense to convert this whole program over to broadband?”

In 2012, McCaskill sent a letter to the FCC calling on the agency to refer possible criminal violators in the Lifeline program to the Justice Department for criminal investigation. McCaskill has also asked the Government Accountability Office to conduct a forensic audit of the Lifeline program to evaluate the efficacy of reforms approved in 2012 and suggest additional reforms to reduce waste, fraud and abuse in the program.

Last spring, McCaskill applauded the Justice Department's indictment of three men charged with defrauding the little-scrutinized Lifeline program of approximately $32 million, after calling on the FCC to refer possible criminal violations in the Lifeline program to federal prosecutors. In 2013, the FCC announced a series of fines totaling $90 million against multiple carriers found to be receiving subsidies for duplicate customers.

McCaskill also today pressured the Commissioners to revise the rules governing the Designated Entity program.

“Dish used small businesses to get a $3 billion advantage,” McCaskill said. “One of the entities that was used was an Alaska Native Corporation, which…are multi-billion dollar multi-national corporations that get special deals under our law, they don’t have to compete, they don’t ever age out of the program, they never get too old for the program, they never get too big for the program, and you can front, legally. So this is really I think outrageous and I hope we can figure out a way to get to the bottom of it.”

Earlier this year, the program’s flawed rules resulted in a record-setting auction for Dish which claimed over $3 billion in discounts by partnering with two Designated Entities it created solely to participate in the auction.

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