Ajit Pai, Chairman, FCC. Photo credit: Gage Skidmore, licensed under CC BY-SA 2.0

The U.S. Federal Communications Commission (FCC) has announced that telecoms giant T-Mobile will pay a penalty of $200 million to the US government to settle an investigation concerning misuse of government phone subsidies by its subsidiary Sprint. The penalty is the largest-ever fixed amount settlement secured by the FCC.

It’s alleged that Sprint, prior to its merger with T-Mobile, was claiming monthly government subsidies for serving 885,000 subscribers under a government-run program to cater to access to phone services for low-income people even though those subscribers were not using the service. The program of concern is the ‘Lifeline’ program through which participating telecom providers receive $9.25 monthly for each participating subscriber given that they pass on the amount to consumers in the form of discounts.

Under stipulated rules of the program, telecom providers must prove that the subsidized phone services has been used by each participating subscriber at least once in the past 30 days and de-enroll subscribers who don’t use their phones for the period after giving 15 days’ notice in order to receive subsidies. It’s alleged that Sprint offered the subsidized phone service to customers who didn’t make use of their phones in order to receive subsidies despite non-usage. 

As to that, Sprint, which became a subsidiary of T-Mobile earlier this year, has agreed to pay a $200 million civil penalty and commit to a compliance plan with the FCC’s rules. 

“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,” FCC’s Chairman, Ajit Pai, said in a statement.

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