After a fifteen-year slumber, regulators have apparently decided it might be a good idea to start cracking down on rampant fraud in the telecom market. Not long ago, we noted how AT&T was finally fined for abusing the IP Relay network for the hearing impaired, intentionally turning a blind eye to scammers on the network just to haul in the $1.50 per minute subsidies tied to the network. AT&T strung regulators along for years, implementing “solutions” that it knew wouldn’t work but technically met flimsy FCC requirements. As a result, simply stopping AT&T from profiting off of defrauding the deaf (it’s estimated that 95% of AT&T’s IP Relay traffic at one point was credit card or other scammers) only took regulators the better part of two decades.
Last year, regulators finally cracked down on AT&T for helping scammers of a different sort: crammers. Crammers had been gouging AT&T customers for most of the last decade, charging them $10 a month for garbage “premium” text messaging, horoscopes and other un-asked-for detritus. There again, AT&T intentionally turned a blind eye to the criminal behavior, in large part because the company was netting around 35% of the proceeds from the scams. Worse perhaps, regulators found AT&T was actively making its bills harder to understand so the fraud would be more difficult to detect.
This month, the FCC has announced that it has struck a settlement with AT&T and former subsidiary SNET, over charges the companies were collecting undeserved subsidies under the agency’s “Lifeline” program, a low-income community subsidy effort created by the Reagan administration in 1985 and expanded by Bush in 2005. According to the FCC’s findings, AT&T apparently “forgot” to audit its Lifeline subscriber rolls and purge them of non-existent or no-longer-eligible customers, allowing it to continue taking taxpayer money from a fund intended to aid the poor:
“AT&T and SNET’s failure to remove ineligible Lifeline customers from their rolls was discovered in 2013 during an FCC audit of two AT&T Lifeline affiliates. The audit found that a number of Lifeline subscribers who no longer qualified for the program had not been de-enrolled following the annual recertification process for 2012 and 2013, a process in which consumers are required to certify their continued eligibility for Lifeline. These subscribers were given one extra month of Lifeline support, and AT&T improperly claimed reimbursement from the government for this extra month. Additionally, the Enforcement Bureau found other de-enrollment and recordkeeping violations.”
The FCC announcement goes well out of its way to avoid calling this fraud, but unless you believe AT&T honestly forgot to purge its rolls (pretty difficult to do in full context of AT&T’s historical behavior), it’s hard to call it anything but. The FCC doesn’t specify how great the discrepancy was, but given the speed at which AT&T has been backing away from unwanted DSL and phone markets, the revised differences likely aren’t modest. This latest fine comes as AT&T is busy trying to convince the government that there’s an endless parade of amazing benefits to be had by letting AT&T acquire DirecTV, effectively eliminating a competitor from the pay TV space.
Historically, telecom regulators love slam dunk cases against small scammers, but were willfully oblivious or too timid to acknowledge the larger players’ culpability. With regulators no longer napping in regards to obvious fraud by bigger telecom players like AT&T, companies have unsurprisingly started grumbling that Travis LeBlanc, Chief of the FCC’s Enforcement Bureau, is being too hard on industry and therefore not actually curbing bad behavior:
“Two telecom-industry advocates complained that LeBlanc has been successful at grabbing headlines, but less effective at actually curbing bad behavior. By not being lenient on companies that self-report violations, he is discouraging future companies from coming forward, they said. “The FCC’s new approach will discourage cooperation and self-disclosure, and it’s going to force regulatees to beef up on litigation instead of compliance with the rules,” one industry lobbyist said. “Ultimately, that’s a poor use of resources for taxpayers, and it will lead to a worse result for consumers.”
Yes, doing the bare minimum to prevent AT&T from ripping off taxpayers and consumers is just an atrocious affront to taxpayers and consumers.
While overreach is certainly possible, most of the stuff LeBlanc is cracking down on is either outright fraud, or the kind of enforcement that’s hard to seriously cry foul about (like fining companies for failing to report 911 outages or airing porn during prime time). By and large, LeBlanc appears to be following the lead of FCC boss Tom Wheeler, breaking FCC tradition and actually standing up to large telecom companies. If there’s a place LeBlanc (former aide to California AG Kamala Harris) may overreach, it’s as the FCC begins using newfound Title II authority to re-examine broadband privacy rules.
For the moment, however, it’s just interesting to see the FCC no longer turning a blind eye to scams and fraud when the country’s biggest telecom campaign contributors are involved, even if the fines being levied are likely a small fraction of the total money AT&T has made off of a decade of very shady behavior.