To Preserve Lifeline, TracFone Lobbies Congress Hard as Some Members Balk

"We take every threat as a doom-and-gloom scenario,” said TracFone lobbyist Jose Fuentes, Miami-based but in Washington every week to lobby. “In this kind of space, we don’t want to lose. We don’t want this to be problematic coming out of the House or in the Senate or in subcommittee. We want to make sure it’s taken care of well before.”

In the last six months, several members of Congress attacked Lifeline, citing the program’s rising cost due to wireless company participation and other alleged shortfalls. Sen. Claire McCaskill, D-Mo., threatened to introduce legislation to kill Lifeline if the FCC did not up its enforcement actions. Rep. Marsha Blackburn, R-Tenn., drafted an October letter to the FCC signed by more than 40 House Republicans arguing it’s too late to win back trust for what they called a “failed welfare program.” Sen. Jeff Sessions, R-Ala., in his own letter to the agency, slammed FCC updates to the program as apparently “insufficient.” Rep. Tim Griffin, R-Ark., fought earlier this year to legislatively kill the wireless portion of Lifeline Griffin has said he’s not running for re-election next year. The FCC updated Lifeline rules in 2012 to curb waste, fraud and abuse and save money.

"Congress’ role is to protect taxpayer dollars, and that’s why I'll keep fighting to end the Lifeline cellphone program and preserve landline assistance for those who need it,” Griffin told us in a statement. “That’s a far more appropriate role for government than providing millions of people with any item deemed essential for work, like a car -- or a hammer, as one TracFone ad recently featured. Where do we draw the line?” Griffin’s bill, HR-176, has 64 cosponsors, said an aide.

The Senate Budget Committee has jurisdiction over Lifeline and will be digging into the program, a committee spokesman told us. Sessions is ranking member. The staff is still in the early stages of an investigation, the spokesman said. Sessions is not ready to sign onto any legislation that would end any part of Lifeline and wants more data and due diligence, but there are legitimate questions, the spokesman said, arguing that Lifeline is probably a moneymaker for TracFone. Lifeline was originally only for wireline, and the incentives to cheat the government were less before mobile phones became part of it, he said. The FCC has new accountability measures but the committee spokesman questioned any agency in Washington claiming a “miracle fix” is on the way. The spokesman also questioned the pride the FCC has seemed to take in enforcement, citing a meeting where officials touted more than 300 disciplinary letters sent out. But the program has millions of subscribers and a number like 300 shouldn’t be viewed favorably, he said. The spokesman also contended that it’s definitely taxpayer money going to Lifeline, a position that Fuentes disputed. Fuentes said the program is “paid by end users and by companies on their cellphone bills.”

The FCC defended its work to improve the program. “We are working hard to implement our many reforms to eliminate waste, fraud and abuse from Lifeline and continue to consider potential further initiatives that will enable us to best carry out our statutory mission of ensuring that all Americans have access to affordable communications services,” an FCC spokesman told us when asked about concerns in Congress.

TracFone decided to fight back, its “aggressive” approach “surgical” and in “baby steps,” Fuentes said. The company has advertised in The Hill, Roll Call, Communications Daily, Politico and elsewhere emphasizing Lifeline’s benefits to vulnerable populations such as veterans and senior citizens. It declined comment on advertising expenses. “Drudge Report wants to talk about it? Fine,” Fuentes said. “We're going to place an ad on your website. National Review wants to hit us? We'll put it on the National Review as well.” That ad campaign started after an April House Communications Subcommittee hearing on Lifeline but has slowly ramped up since, as have Fuentes’ lobbying activities. TracFone created LifelineFacts.com (http://bit.ly/1baxIXD), a site registered on May 20 to public affairs firm Revolution Agency. The site gives educational information and directs people to contact Congress members to support Lifeline. Fuentes rejects the “Obamaphone” label applied during the 2012 presidential election and said it more appropriately merits “Reaganphone” or “Bushphone” due to Lifeline’s history. Congress members have told TracFone they hear Lifeline was an Obama campaign tool, which is nonsense, he said. Other members mention billionaire Carlos Slim, who has a controlling stake in TracFone but “is not involved in our day-to-day activities,” Fuentes said.

TracFone hired firms to assist in Fuentes’ lobbying, starting in January, he said. It pays monthly $25,000 to Navigators Global, $16,000 to SC Partners, $15,000 to Appo-G, $10,000 to Upstream Consulting and $25,000 to Roberti & White. “They're my eyes and ears,” Fuentes said. “They give me a good sense and a pulse of what Congress is going through ... I tell them all the time to set up meetings.” Fuentes is TracFone’s prime point of contact with Congress. TracFone’s total lobbying expenses through Q3 of this year are $589,000, with $50,000 going to Upstream, $135,000 to Appo-G, $144,000 to SC Partners, $180,000 to Navigators and $80,000 to Roberti & White, said Fuentes.

"Companies like TracFone are spending so much money lobbying Washington to save their corporate welfare because they're making big bucks through the waste, fraud and abuse made easy in this program,” Griffin said. “The FCC’s actions are too little too late, and with no real changes to the program and Obamacare’s expansion of Medicaid, these problems will continue.”

Sen. David Vitter, R-La., provided 2013’s greatest challenge, according to Fuentes. “I've never met a senator or a member that rude,” Fuentes said, calling Vitter “disingenuous” and someone TracFone has given up on. He recounted a meeting between TracFone CEO Frederick Pollak and Vitter, arranged by TracFone, in which Vitter took a photo and tweeted that he was giving the TracFone CEO an earful. Vitter “made it personal, and that’s really what angered us,” Fuentes said. “It personally angered me. He took a shot at the CEO’s wife. ... Now you're attacking the company and you're attacking the CEO’s wife because she fundraises for Democrats? What bearing does this have at all?” Fuentes is a Republican who once advised former Vice President Dick Cheney, and Pollak has contributed to both parties, Fuentes said. Political donations and fundraising shouldn’t influence policy discussions, he said. “If you want to use us as rhetoric, we're not going to stand for it,” Fuentes said, describing TracFone’s intention “to make clear to members that you can criticize all you want about the program but the minute that you start lying about it, unintentionally or intentionally, we will call you on it. And if you keep doing it, we will push. ... My instinct as a lobbyist is I don’t want those fights.”

Vitter’s spokesman pointed to allegations of “well-documented” fraud and TracFone’s motives. “They have a lot of financial incentive to give out as many phones as possible,” the spokesman said. “It makes sense that they're lobbying to keep the program.” Vitter had introduced legislation to kill the wireless component of the program, which was voted down in March as an amendment, the spokesman said. Vitter introduced standalone legislation in May. He criticized TracFone’s “attack ads” on Vitter (http://1.usa.gov/17HpPfu) from earlier this year, which said modern Lifeline was born out of Hurricane Katrina. The spokesman judged those ads “sort of just odd” since Katrina predated the introduction of wireless Lifeline by several years. He defended Vitter’s references to Pollak’s wife’s fundraising for Democrats: “It’s grown exponentially under this administration.”

"Negativity toward the Lifeline program has drowned out all of [its] positive benefits,” Bennet & Bennet attorney Tony Veach told us, attributing TracFone’s lobbying choices to that climate. Veach’s firm represents small, rural telcos that offer Lifeline but don’t build their businesses around it. He also pointed to other groups filing FCC ex parte documents and sending letters to Congress in support of the program. Veach judges Lifeline an “easy target” but doubts Congress would ever really end it. But Congress “can keep pressure on the FCC to adopt more reforms and hand out more fines,” he said, describing the agency’s leeway to regulate Lifeline.

TracFone is lobbying Congress to fund a national Lifeline database, “still the best way to curtail waste, fraud and abuse,” according to Fuentes. TracFone has told Congress to enact legislation funding the Public Assistance Reporting Information System database -- currently operated out of the U.S. Department of Health and Human Services and hosting major Lifeline qualifiers -- for Lifeline purposes. The FCC has assembled stakeholders to discuss this database, but it will take an Act of Congress to stir real action, Fuentes said. He dismissed members’ privacy concerns and said TracFone only wants a simple yes or no answer on whether database users qualify for the phone subsidy.

No Congress member’s office has turned TracFone away, and most have been easier to deal with than Vitter’s, Fuentes said. Blackburn is “even keel” despite extreme rhetoric, Fuentes said. He said her recent letter to the FCC “made no sense” and “the way that she’s acting right now, I would lump her right now” with Vitter, an association he doubts she wants. Privately Blackburn says she wants to work with TracFone, he said, questioning the private and public disparity. Griffin “and I worked in the White House together,” Fuentes added. “We kept it very civil. He gave me an hour.” TracFone has met with the offices of Senate Commerce Committee Chairman Jay Rockefeller, D-W.Va., ranking member John Thune, R-S.D., House Commerce Committee Chairman Fred Upton, R-Mich., and Communications Subcommittee Chairman Greg Walden, R-Ore., Fuentes said, all with an “open ear” and “great.” Yet “they also feel the pressures of their caucuses coming down wanting to reform and change things,” despite being “on a right track to really figuring out what the problems are and trying to get past the rhetoric,” he said.

TracFone representatives, including Fuentes, have met with McCaskill. “She’s an auditor at heart,” Fuentes said. “She loves the numbers and she wants to see always if things work. While she may want to kill the program, she’s not entirely dismissive of the fact of having a reform in place.” McCaskill sees low-income families’ need but believes that need is potentially “superseded” by alleged waste, fraud and abuse, he said. But “it’s not about affordability,” he countered, framing the subsidy as a tradeoff in which a poor family that can afford the phone can use the money for other vital purposes.

Fuentes contrasted those offices with members embracing soundbites and Lifeline as a political tool. Some lack a holistic view of the FCC’s Universal Service Fund and don’t target the much bigger high-cost fund, Fuentes added. “I don’t understand why Republicans want to be labeled as killing a program that helps poor people,” he said. “What’s the victory here?”

"The congressional rhetoric from a few members has been unfortunate, to say the least,” said Free Press Policy Director Matt Wood, calling Lifeline “essential support for families, seniors, veterans” and others.

Hill pressure is fueling stronger FCC penalties against TracFone and other Lifeline providers, Fuentes said. TracFone plans to challenge the latest fines of $4.5 million levied on Sept. 30 -- “a knee-jerk reaction by the FCC to show that they mean business,” Fuentes said. Yet former acting Chairwoman Mignon Clyburn is a big Lifeline advocate and new Chairman Tom Wheeler has “deep understanding of wireless,” he said, believing the agency to be largely friendly to Lifeline’s mission. TracFone had been serving ineligible consumers between September 2012 and February 2013, the FCC said. Free Press’s Wood backs “reforms that continue to increase efficiency and reduce fraud by the providers in the middle,” with a focus on funding recipients in need. Such national measures “could be a game-changer” for Lifeline in fixing these waste, fraud and abuse problems, Veach said. But cost “could be a whole other story” if broadband access is integrated into Lifeline, as the FCC has considered, Veach countered. Fuentes slammed other “fly-by-night” Lifeline providers that don’t operate with the Lifeline controls TracFone has embraced.

Lifeline has become TracFone’s “800-pound gorilla in the room,” disrupting the prepaid phone seller’s other lobbying priorities, Fuentes added. TracFone backs “a federal solution” in lobbying Congress to enact a point-of-sale mechanism to assess phone fees at the retail level, which TracFone has pushed successfully in dozens of state legislatures but not all, he said.

Fuentes suspects Lifeline is safe at least in coming months. House Commerce may hold a Lifeline hearing in April, and he doesn’t expect legislation before then. “I think we'll be fine unless we get someone like Sen. Vitter start on his rampage again, which makes absolutely no sense, but ...,” he said, acknowledging the possibility.