GAO: FCC Should Better Monitor Fraud in High-Cost Program

A report from the Government Accountability Office concludes that the FCC could do more to fight fraud from small and midsized (so-called "rate-of-return") carriers participating in its $4.5 billion Universal Service Fund (USF) broadband High-Cost subsidy program. 

That is the subsidy program that subsidized broadband deployment to rural and other costly-to-deploy areas of the country so they can have access to advanced communications services on relative par--in quality and cost--with urban areas. 

The report, whose title is a recommendation ("FCC Should Take Additional Action to Manage Fraud Risks in Its Program to Support Broadband Service in High-Cost Areas") concludes that the FCC has not done enough to prevent rate-of-return carrier misconduct and compensating those for " improper, ineligible, or inflated costs."

The FCC does review the program for fraud, and in August launched a new Fraud Division to investigate Universal Service Fund abuses generally.  

FCC chair Ajit Pai has made combating waste, fraud and abuse in broadband subsidies an avowed priority, including launching an investigation of Sprint in September over alleged "outrageous" abuses of the Lifeline broadband subsidy, also part of the USF program.  

But GAO said that the FCC still was not planning fraud assessments tailored to the high-cost program. "[D]esigning and implementing an antifraud strategy that conforms to leading practices would help FCC effectively manage and respond to the fraud risks identified during the fraud-risk assessments," GAO concluded. "Without regular fraud-risk assessments of the high-cost program, FCC has no assurance that it has fully considered important fraud risks, determined its tolerance for risks that could be lower priorities, or made sound decisions on how to allocate resources to respond to fraud risks," the report said. 

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The FCC said it will take that recommendation into account, act on some for the suggestions and review others. "We remain committed to our statutory obligation to close the digital divide, while preventing waste, fraud and abuse of universal service funding," said FCC Managing Director Mark Stephens and Wireline Bureau Chief Kris Anne Montieth in a response to the GAO included in the report. 

House Energy & Commerce Committee chairman Frank Pallone (D-N.J.), who requested the report, called for a new FCC anti-fraud strategy ASAP: “I requested this report because it was clear FCC was failing to adequately protect the high-cost program against flagrant waste, fraud and abuse of federal funds by some rate-of-return carriers," said Pallone. "After more than a year of investigating, GAO agrees. The high-cost program provides federal funding that is integral to promoting broadband buildout in rural America. Chairman Pai must heed GAO’s recommendations and implement an antifraud strategy for the program," he said.” 


John Eggerton

Contributing editor John Eggerton has been an editor and/or writer on media regulation, legislation and policy for over four decades, including covering the FCC, FTC, Congress, the major media trade associations, and the federal courts. In addition to Multichannel News and Broadcasting + Cable, his work has appeared in Radio World, TV Technology, TV Fax, This Week in Consumer Electronics, Variety and the Encyclopedia Britannica.