'Obamaphone' firm on the defensive

The Hill:

Sen. David Vitter (R-La.) and TracFone Wireless, a pre-paid cellphone carrier, are hurling accusations at each other over a federal phone subsidy program for the poor.

The company has claimed that Vitter is trying to gut a program that was "born out of" Hurricane Katrina, while Vitter has accused TracFone of profiting from a wasteful government hand-out.

The program, called "Lifeline," has been pejoratively referred to as the "Obama phone" program, although it began long before Obama took office. It had its genesis as a subsidy for landline phones in 1985 and expanded to cover cellphones in 2008, during the George W. Bush administration.

The spat began when Vitter and other GOP senators introduced a bill earlier this month to end a provision that relates to the cellphones portion of the fund.

“This phone program has expanded far beyond its original intent, and as so many middle class Americans struggle underneath this economy, it is really offensive for Washington to make taxpayers pay for free cellphones for others,” Vitter said in a statement when he offered the bill.

The program, which is managed by the Federal Communications Commission, subsidizes phone service, not the phones themselves. But many companies that receive funding through the program offer free and low-cost phones to their subscribers. The program is funded through fees that the telephone companies pass on to consumers on their monthly bills, not taxes.

The program accounts for about $.40 in fees on every monthly phone bill, according to TracFone.
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It is absurd to argue that fee is not a tax on phone companies.  Just because it has dedicated funding rather than funding from the general fund does not make it less of a tax and it is certainly of no benefit to those paying the fee.   This is a wasteful program that was put in place three years after Katrina and not because of it.  I agree with Sen. Vitter on this.