Taxpayers funding more than $1B in free cellphones

ANCHOR: There are new questions tonight about a government program that's given away millions of free cell phones and service to people with low incomes and those in rural areas. The cost and demand are skyrocketing. Who pays? Chances are you do.

ANCHOR: ABC7's Ben Bradley is joining us tonight with what it’s costing you.

REPORTER: The money comes from the Federal Universal Service Charge on your phone bill. It has its roots all the way back in the 1930s. The goal was make sure people in rural areas and the poor had access to telephone service. In the 1980s and 90’s it expanded to include wireless phones. Since then the numbers have exploded. The cost of the program is now more than a billion dollars a year. The FCC, along with some democrats and republicans, are trying to rein it in.

REPORTER: On an abandoned West Side lot, a sign on a bright green tent advertises a deal too good for many to resist.

CITIZEN: My daughter told me about it.

REPORTER: What did she say?

CITIZEN: It's a government phone.

REPORTER: So, you don't have to pay anything for it?


REPORTER: She's right. This is one case where free really means free, at least for the people receiving the phones.

REPORTER: Who pays for it?

CITIZEN: The government, the taxpayers, I don't pay for it. Like I said, I can’t afford it, so it helps me.

REPORTER: The money actually comes from the extra dollar or two we all pay every month on our phone bills. To receive the "free phones" plus 100 minutes a month of talk time, people simply need to show a driver's license and proof they live at the poverty line. A food assistance card will do. In 2008, 107,715 people in Illinois received the free wireless phones. Last year, the numbers soared to 569,000, a 429 percent increase. Nationally 13 million people signed up for the free cell phone program at a cost of $1.2 billion.

REP. JOE WALSH: There’s no need or no reason for the government to be doing this, and it just teaches the wrong lesson to folks that they don't have to be responsible for things like this.

REPORTER: In recent months the FCC has started cracking down after the agency found 400,000 people received multiple phones. Now subscribers have to re-qualify every year. An FCC spokesperson said –

FCC SPOKESPERSON: Since 1985, [the wireless service program] has helped low-income consumers find jobs, contact friends and family, and call 911 in emergencies, and we will not allow fraud and abuse to destroy this valuable program for the nation’s most vulnerable citizens.

REPORTER: You have a phone around your neck. Why do you need a phone that I pay for?

CITIZEN: I can stop paying for it.

REPORTER: Wireless companies receive $9.25 per phone per month. Some people use their own money to add more minutes to the phone, so that's the private company's incentive to sign people up. An FCC spokesman says overhauling this program is a major focus of his agency. It's also caught the attention of Congress.

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