The new federal broadband subsidy program is already plagued by fraud
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The new federal broadband subsidy program is already plagued by fraud

Report says providers and providers’ sales agents are driving improper enrollments in federal broadband subsidy program.

In May, the federal government launched the Emergency Broadband Benefit Program (EBB) to provide broadband service subsidies for eligible households across the United States. Less than a year after its inception, the program is set to be replaced with the Affordable Connectivity Program (ACP), which passed as part of the $1.2 trillion bipartisan infrastructure plan. The Affordable Connectivity Program will retain many elements of the Emergency Broadband Benefit Program but is set to have nearly 450% of the original $3.2 billion EBB budget, topping out at $14.2 billion for its first year. 

Determining eligibility for the Affordable Connectivity Program has been a struggle, and some government officials appear concerned that the Affordable Connectivity Program might suffer from the same fraud and mismanagement the program has experienced so far.

The Federal Communications Commission (FCC) recently requested comments on the inclusion of the National School Lunch Program’s Community Eligibility Program (CEP) as an eligibility option for participation in the EBB. The school lunch program registers households and school districts in certain low-income areas in a federally subsidized lunch program. Currently, any family with a student attending a CEP school district is automatically eligible for participation in the Emergency Broadband Benefit subsidy program.

The FCC seems skeptical that the school lunch program will be an effective way to determine eligibility for larger participation in the broadband program. A November FCC memo regarding fraudulent activity within the EBB outlined some of these concerns and highlighted the fact that telecommunications employees have exploited the broadband program for personal gain by misrepresenting their customers’ eligibility.  

This is partially due to the fact that schools with over 40% of families under 130% of the federal poverty line mark all of their students as being eligible for the school lunch program. Because of this, if a household has a child attending a school participating in the CEP, then that household is automatically able to apply for subsidized internet access regardless of their actual income.

When the FCC began running the numbers on EBB participants, patterns of fraud became shockingly clear.

The number of households claiming that they qualified for the EBB by having a child go to a CEP school was actually greater than the number of students enrolled in these schools. For example, GovTech reported:

The FCC’s Office of Inspector General (OIG) shared the news Monday. Households whose children qualify for free or reduced lunch may enroll in EBB, but OIG indicated that certain schools are “grossly overrepresented in EBB household enrollments.”

For example, one Florida school only has 200 students, but the same school accounts for 1,884 EBB enrollments. OIG also shared examples of fraud in Arizona, California, Colorado and Alaska schools.

OIG’s evidence shows that these and other instances of fraud aren’t merely the plots of consumers.

“Sales agents who work for just a handful of EBB providers are responsible for the majority of this fraudulent enrollment activity,” the OIG advisory said.

The FCC claimed over-enrollment in the broadband subsidy has occurred in dozens of school districts across the country already even though the program has only been up and running for six months. The EBB’s eligibility criteria that a household must sign up through a telecommunication provider encourages fraudulent behavior. Betting on the likelihood that the FCC would not check if a household actually lived in a school district with a CEP school, many telecommunications representatives signed households up for the broadband subsidy by claiming that the customer had a child who attended a CEP school. As a result, these employees received monetary bonuses from increasing the number of EBB participants and service subscribers on the whole. Essentially, the CEP eligibility allowance creates an incentive where telecommunications workers were paid when they inaccurately registered households in the broadband subsidy program.

An Inspector General report showed this fraud was being perpetrated, not by subscribers but rather among the broadband providers’ employees. The report suggests that the monetary incentives that broadband providers offer to encourage employees to increase subscriber numbers may encourage this dishonest behavior.

The FCC noted that many households in over-enrolled areas had clear indicators that it was a broadband representative fraudulently filling out the application, not the household. For instance, many applications have the broadband provider’s office listed as the homeowner’s address.

The patterns of fraud among technology benefit programs that prioritize incentives to providers over customers are, unfortunately, not new. In requiring applicants to submit proposals for benefits through providers and their employees, EBB administrators provide an unnecessary barrier for individuals seeking help. 

Although costs associated with broadban fraud appear to be a drop in the bucket compared to the program’s overall budget, the waste suggests the program could be following in the footsteps of previously problematic federal telecommunication subsidy operations, like the Lifeline cell phone subsidy program. During the peak of the Lifeline program’s fraud, a government audit estimated that over one-third of participants did not actually qualify for assistance, meaning that as much as $500 million went to ineligible beneficiaries.

Again, much of this program’s waste was largely driven by telecommunications employees, rather than citizens themselves. Representatives were signing up individuals multiple times or even enrolling people who did not exist, in order to gain the commissions from setting up these new lines. One major avenue to exploit this program involved employees incorrectly claiming that clients were eligible via previous participation in other government programs, which would be approved because of the low likelihood that anyone actually reviewed an individual’s application. 

This behavior occurred for reasons largely similar to those associated with broadband fraud. Cell phone companies were continuing to pay employees bonuses for new sign-ups, regardless of whether individuals were paying for phones out of pocket or via the Lifeline program. FCC investigations even showed that carriers knew about and encouraged this behavior from employees, even finding evidence that some telecommunications companies had requested benefits kickbacks for cell phone lines that never even enrolled in the program. 

While well-intentioned, the inclusion of school lunch program eligibility as an option for automatic acceptance into the federal broadband subsidy has led to problematic patterns of fraud and waste. Should the FCC want to crack down on overspending and misrepresentation among program participants, it should act to remove the CEP co-eligibility offering for participation in the broadband program. And it should do so before the problems experienced by the EBB and Lifeline programs repeat themselves.