In a ruling certain to cause major metaphorical earthquakes in Oklahoma, the Federal Communications Commission has slashed subsidies paid to Lifeline Assistance companies in the Sooner State. Those subsides will end on June 9, 2016. We anticipate that the state’s generous unlimited talk and text and 1000 minutes and text plans will come to a screeching halt soon thereafter.
Here’s what the subsidy scenario is all about:
Obama Phone companies across the nation have always earned $9.25 per customer per month on regular customers, but $34.25 per month on Native American customers living on current or former tribal lands. This special subsidy was instituted in recognition of Native Americans unique history and the stark poverty that afflicts their tribal lands.
What the architects of the Obama Phone program failed to realize was that virtually all of Oklahoma was once Native American tribal land. And that meant Oklahoma Obama Phone companies received the much larger subsidy for every customer they enrolled, not just those who were Native Americans living on tribal lands.
Even if your father was an Albanian albino and your mother was a melanin-deprived Melanesian, Obama Phone companies got $34.25 per month if they signed you up in Oklahoma.
An expensive oversight
The loophole was big enough to drive a truck through: A shocking 99.89% of all low-income Oklahoma residents — including those with no Native American DNA — were eligible for these huge subsidies.
As soon as the first enterprising, but unknown Obama Phone executive figured out that his company could earn $34.25 per customer per month in Oklahoma instead of $9.25 per customer per month they earned in surrounding states, the floodgates opened. Companies large and small immediately began offering Obama Phones across the state.
Thanks to those generous subsidies, Oklahoma, with just 1.2% of the nation’s population suddenly accounted for 6.7% of Obama Phone spending. In other words, Oklahoma Obama Phone companies made 5.6 times more per customer than in other states.
The FCC finally steps in
The Federal Communications Commission finally recognized the subsidy absurdity and acted to bring Oklahoma subsidies in line with the subsidies offered in the rest of the nation.
Ajit Pai, often called “the renegade FCC Commissioner” by his ideological opponents, issued a press release commending the changes:
… the Lifeline program has been giving carriers in Oklahoma six times the national average of support, and about ten times the amount that carriers in neighboring Kansas receive.
Last June, the Commission recognized the absurdity of this situation and declared that those living in much of Oklahoma—including Oklahoma City—would no longer be eligible for tribal subsidies starting February 9. There’s no good reason to subsidize all Oklahoma City residents as if they were tribal members living on tribal lands. As I pointed out then, if Oklahoma’s Lifeline spending per person were only twice the national average, American taxpayers would save over $89 million a year.
The deadline has now been extended from February 9 to June, but it is unlikely that it will be extended again.
The future of Obama Phones in Oklahoma
Simply stated, some smaller, undercapitalized Obama Phone companies and some larger, less efficient ones will no longer be able to make a profit in Oklahoma. Some will undoubtedly close their doors and go out of business. Others will cut back their generous Obama Phone benefits.
For example, Assist Wireless has already announced that it will reduce benefits on its most popular Obama Phone plans. Instead of offering 1000 minutes or texts per month, it will now begin offering 250 Minutes of talk and 250 texts for free, or 300 minutes, 300 texts and 30 Mb of data for just one dollar. The company also offers additional plans with more talk, texts and data for customers who are able and willing to pay more.
Consider this an omen: If you have an Obama Phone in Oklahoma, get ready. The cutbacks are coming.