Providing Cellphones for the Poor
John Cobb, 59, a former commercial fisherman who is disabled with cirrhosis of the liver and emphysema, lives in a studio apartment in Greensboro, N.C., on a fixed monthly income of $674. He has been hoping to receive more government assistance, and in February, he did.
Leon Simmons, 52, of the Bronx, N.Y., is disabled with emphysema. He received his free cellphone from Tracfone in April.
It came in the form of a free cellphone and free service.
Mr. Cobb became one of a small but rapidly growing number of low-income Americans benefiting from a new wrinkle to a decades-old federal law that provided them with subsidized landline telephone service.
In a twist, wireless carriers are receiving subsidies to provide people like Mr. Cobb with a phone and typically 68 minutes of talk time each month. It is a form of wireless welfare that puts a societal stamp on the central role played by the mobile device.
Mr. Cobb’s cellphone is a Motorola 175. “I feel so much safer when I drive. If I get sick, I can call someone. If I break down, I can call someone,” Mr. Cobb said. “It’s a necessity.”
The users are not the only ones receiving government assistance. Telecommunications industry analysts said the program, while in its infancy, could benefit mobile phone carriers, who face a steep challenge of their own: most Americans already own a cellphone, so the poor represent a last untapped market.
“The low hanging fruit is gone, and the wireless companies are going after the nooks and crannies,” said Roger Entner, a wireless industry analyst with Nielsen. “Oh, the poor: How can we sign them up?”
Carriers can receive up to $10 a month in government subsidies, sufficient to cover what amounts to about $3 in service, Mr. Entner said.
Since November, the number of customers receiving free or subsidized wireless service has doubled to 1.4 million, he said. To be eligible for the program, known as Lifeline, a person must meet federal low-income guidelines or qualify for one of a handful of social service programs, including food stamps or Medicaid.
The opportunity has prompted interest from the nation’s biggest carriers, including Sprint Nextel and AT&T. But at the forefront is a much smaller company, Tracfone, a Florida provider of prepaid mobile service that has become the face of the fledgling subsidized cellphone.
Tracfone began providing its service, called SafeLink, in Tennessee in August and now does so in 16 states, including New York, North Carolina and Pennsylvania, and the District of Columbia, according to its Web site. Each time it enters a market — which generally requires state approval — it runs television ads telling people how easy it is to get a free Motorola phone, like Mr. Cobb’s.
The company says the economy makes the audience particularly receptive. “We’ll read that more people are signing up for food stamps and look at our numbers and see volume rising,” said Jose Fuentes, director of government relations for Tracfone. “It’s not scientific proof,” he added. “But we know times are tough.”
He declined to say how many subscribers have signed up. But he said Tracfone, whose paid service has 10 million subscribers, sees the Lifeline service as an opportunity to make some money but, more pointedly, to eventually convert the subsidized customers into paying ones if their fortunes turn around and they no longer qualify for a free phone.
“It could make for a good business,” Mr. Fuentes said.
According to Nielsen, 90 percent of Americans have at least one cellphone. That leaves 32 million, including the infirm, still up for grabs. “And the race is on to get them,” Mr. Entner said.
He said the overwhelming majority of Americans with subsidized wireless service receive it through Tracfone.
One of them is Leon Simmons, 52, of the Bronx, N.Y., who did stints in the Navy, at the Post Office and as a security guard before becoming disabled with emphysema. His wife, who works a minimum wage job at a laundry, heard about the Tracfone service and he got a phone in April.
The free phone is not, as it is for some others in the program, their sole form of telecommunications. Out of the roughly $1,600 they make each month after taxes, they pay $159 for a landline telephone, high-speed Internet and cable television. But the cellphone, Mr. Simmons says, gives him the flexibility to tell his wife or daughter his comings and goings or to stay in touch when he is at the doctor.
According to the Federal Communications Commission, Lifeline service was started in 1984 to ensure that everyone had telephone service for emergencies. The Telecommunications Act of 1996 opened competition to new wireline and wireless providers.
More recently, companies, particularly Tracfone, have started pursuing the wireless opportunity. Still, most of the $800 million in subsidies last year went for landline service even as more Americans cut the cord in favor of exclusively using a mobile phone.
The subsidy money comes from a tax applied to phone bills. Carriers seeking eligibility for it apply to state utility commissions, though several states have ceded their jurisdiction in the matter to the F.C.C.
The issue has created controversy in some states over how and even whether to subsidize wireless service. In California, for example, the public utilities commission plans to debate on Thursday a proposal to extend Lifeline services to wireless — a matter backed by companies like AT&T and Sprint and T-Mobile.
The Greenlining Coalition, a nonprofit advocacy group for low-income residents, has lobbied the state to “move the California Lifeline program into the 21st century,” according to public documents provided for the hearing on Thursday.
But State Assemblyman Felipe Fuentes, who represents a district in Los Angeles, says the California legislature should ask some tough questions before moving ahead — particularly if people contemplate making wireless their only form of communication. Chiefly, he wants to know whether wireless service satisfies crucial aspects needed in lifeline, like reliability in an emergency.
“What if the phone isn’t charged, or junior doesn’t know how to use it?” Mr. Fuentes asked.
Across the country, Mr. Simmons from the Bronx says he likes being able to communicate when he is on the go. And he does not see what all the fuss is about when it comes to cellphones.
“People walk around with their head stuck into these things, not paying attention to what’s going on around them,” he said. Even though he thinks these people look silly, he said, he is going to use his cellphone.
Why not? he said. “It’s free.”