FCC Removes Two Providers from ACP or Successor Program

WASHINGTON, May 14, 2024 – The Federal Communications Commission removed two broadband providers from its main broadband affordability program and began the process for removing a third last week for lying about their eligible subscribers in an effort to receive more subsidy dollars.

The agency on Thursday removed Tone Communications and City Communications from the Affordable Connectivity Program. The move will stay in effect if Congress extends the program or sets up a successor program.

The FCC proposed in January a $14-million fine against Tone and a $16-million fine against City. The companies had one month from that notice to respond justifying why they should continue to be allowed to participate in the ACP, but the agency was not convinced.

Households can qualify for ACP benefits on the basis of a member of the household participating in other low-income benefit programs like free and reduced-price school lunch programs, food stamps, and Medicaid. Agency investigators found that in the summer of 2022 Tone reused the information of three such qualifying persons to enroll 154 subscriber households, and that the company enrolled dozens of households using the address of one single-family home.

“By enrolling numerous people in ACP who lived at the same address or numerous people using the same non-subscriber BQP, Tone apparently took advantage of the program by either failing to verify that a member of a subscribing person’s household was not already being claimed by another household that was receiving program benefits or by committing outright fraud in order to increase the Company’s profits,” the agency wrote.

In the case of City, the FCC found the company used four qualifying persons to enroll more than 1,800 households from late 2021 through mid 2022.

The two companies appear to be affiliated, according to the commission, exchanging sums of money between them, citing the same or related people as owners and officers, and producing identical documents when asked for their ACP enrollment procedures.

Both companies committed wire fraud by requesting ACP reimbursement for the improperly enrolled households, the agency wrote. 

The agency wrote that neither company contested the findings of its investigations, but both argued the individual agents who improperly enrolled households in the ACP should be held liable rather than the company.

Neither company responded to a request for comment.

Last week’s sanctions are the first such bans on ACP participation the agency has issued, and the FCC may not be done.

FCC eyes another carrier for removal

The FCC also proposed Friday an $8-million fine against K20 Wireless and began the process of removing the company from the ACP.

A majority of K20’s ACP subscribers, about 85 percent, according to the FCC, are transferred to the company, meaning they already received ACP benefits from another provider and switched to K20. The agency said K20 consistently changed the addresses for about half of its transferred ACP households to false addresses on Tribal lands without informing subscribers.

The company did this for thousands of subscribers over the course of 2023 and changed the Tribal land addresses back to the original when those subscribers switched ISPs, according to the commission. By designating households as being on Tribal lands while they were subscribed to K20, the company was able to claim $75 monthly benefits per subscriber rather than the baseline $30.

The Tribal addresses “were typically not residential but were instead locations such as empty lots, Tribal office buildings, libraries, and restaurants,” the FCC wrote. “K20 would transfer tens to hundreds of ACP subscribers to the same false address on Tribal lands, sometimes adding apartment numbers to the street address, or altering the street address slightly with additional numbers or a prefix.”

K20 did not respond to agency requests for supporting evidence of the subscribers’ eligibility, the commisison said. Like Tone and City, the agency said K20's fraudulent reimbursement requests constituted wire fraud.

The company will have 30 days to respond with an argument for why it should not be removed from the ACP or a successor program.

K20 could not be reached for comment.

The FCC’s Office of the Inspector General has been tracking provider abuses of the ACP since 2021, when it was first stood up as a pandemic response known as the Emergency Broadband Benefit program.

The OIG has issued multiple advisories warning of ISPs using a single qualifying person to enroll hundreds of unaffiliated households, continuing to collect subsidies for households that no longer use their service, and other violations.

The ACP provides 23 million low-income households with a $30 monthly discount on their internet bills, or $75 for subscribers on tribal lands. The program’s cash is running out and April was the last month in which participants received that full benefit, with the last of its funds set to be exhausted on smaller benefits in May. 

Lawmakers have been scrambling to prevent the ACP from shutting down as June approaches, without success so far. 

GOP leaders have sought changes to curb what they see as wasteful spending before extending the program, either through more restrictive eligibility requirements or fraud prevention measures – both of which were included in a failed bid last week that had support from some top Senate Republicans. Proponents of the program have pushed for stopgap funding to prevent disruption while lawmakers hammer out reforms.