Friday, June 18, 2010

TracFone Lifeline Phones Sold on Craigslist

NASUCA, the National Association of State Utility Consumer Advocates, of which PULP is a member, distributed a consumer alert on June 16th to inform customers that some TracFone SafeLink Lifeline telephones have been placed for sale on Craigslist. The ads are extremely problematic because the SafeLink phones are to be only used by Lifeline-eligible low-income customers, the reduced cost of the phones and service is made possible by all telephone users contributing to the federal Universal Service Fund (“USF”), and there is no way to know whether a second purchaser of a phone from Craislist is eligible for Lifeline.

TracFone offers its SafeLink New York customers a free telephone and 68 minutes a month for incoming and outgoing usage. There is a premium when additional minutes are added . As PULP has reported, TracFone is now the largest Lifeline provider in New York State, with approximately 400,000 customers. This translates to about $4 million a month in revenue for the company – just for New York – from the federal USF. By comparison, Virgin Mobile’s Assurance Wireless product offers Lifeline customers in NY a free phone and 200 minutes a month, with the same reimbursement dollars from the federal USF .

According to NASUCA,
The unauthorized sale of TracFone’s SafeLink equipment and minutes through Craigslist means services may be transferred to ineligible consumers that should raise red flags for federal and state regulators. Telephone consumers need to be assured that TracFone’s products are only being utilized by low-income consumers authorized and eligible to receive federal Lifeline benefits.
When contacted by NASUCA, Rick Brecher, counsel for TracFone, stated that "TracFone is aware of the attempts to sell SafeLink phones on Craigslist and eBay. The company is working with the FCC, state commissions, and with Craigslist and eBay to stop this. Phones are terminated when it is learned that they have been listed for sale, and at our insistence, they are delisted from the sites. Please be assured that TracFone takes these situations very seriously and is doing all it can to stop this practice."

It is unclear how any company could keep track of all the listings on Craigslist and eBay regarding the re-sale of their product. While Craigslist and eBay could be asked to “keep an eye out” for sales of the SafeLink phones, there is no requirement for them to do so and, if they agree, they could be held liable if the phones continue to be sold. On top of this, regular TracFone phones (which look just like SafeLink phones) that are sold on either site would not be subject to these restrictions because there are no eligibility requirements to use them and the phone and usage are not subsidized through the federal USF. It is therefore asking a lot of Craigslist and eBay to police the sale of SafeLink phones on their own.

Today, less than half of the eligible Lifeline customers in New York subscribe to the service, even taking into account the SafeLink and Assurance customers. What impact will increased vigilance on the re-sale of Lifeline phones have on Lifeline enrollment? We do not want to scare people away from enjoying the service if they are eligible, but people who are not eligible should not be able to bypass eligibility requirements because they pick up the phone on Craigslist. Too many millions of dollars are at stake and too many people who need Lifeline are going without.

Lou Manuta

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