T-Mobile to pay $200 million fine to resolve FCC subsidy investigation

FILE PHOTO: A T-Mobile logo is seen on the storefront door of a store in Manhattan, New York, U.S., April 30, 2018. REUTERS/Shannon Stapleton

(Reuters) – T-Mobile US Inc will pay a $200 million penalty to resolve a Federal Communications Commission (FCC) investigation into its Sprint unit over allegations it failed to comply with rules on a low-income subsidy program, the government said Wednesday.

The FCC settlement said Sprint may have received government subsidies for more than 1 million customers that did not receive service under the Lifeline program.

T-Mobile said in a statement it was glad the issue it inherited “is now resolved. We look forward to continuing to deliver reliable and affordable network connectivity to consumers.”

Sprint’s voluntary disclosure said “due to a software programming issue, its systems failed to detect that over a million Lifeline subscribers nationwide lacked usage over an extended period of time,” the FCC said

That represented about a third of Sprint’s more than 3 million Lifeline customers.

Sprint also disclosed “it potentially claimed Lifeline subsidies for subscribers that Sprint otherwise would not have submitted… under its policies and procedures.”

The FCC disclosed earlier in 2019 it was investigating reports that Sprint, prior to its merger with T-Mobile, was improperly claiming monthly subsidies for serving about 885,000 Lifeline subscribers not using the service.

T-Mobile’s Sprint also agreed to enter into a compliance plan to help ensure adherence to FCC rules.

FCC Chairman Ajit Pai said the settlement “sends a strong message about the importance of complying with rules designed to prevent waste, fraud, and abuse in the Lifeline program.”

Participating providers receive a $9.25 monthly subsidy for most Lifeline subscribers, which they must pass along to consumers. Most mobile Lifeline consumers served by Sprint and others makes the service free.

As a result, most do not get bills. The FCC earlier adopted rules to require use after prior investigations showed companies were aggressively selling free Lifeline service, knowing they would get paid even if consumers did not use phones.