Gravy train comes to the end of the line in Oklahoma: FCC to end $25 per month subsidies for non-Native Americans

The Federal Communications Commission has ruled that the huge subsidies paid to Lifeline Assistance companies in Oklahoma will end on June 9, 2016. This action will undoubtedly force many free government companies to scale back the generous unlimited talk and text plans they’ve offered only in the Sooner State.

Native Americans in certain parts of the state will continue to qualify for those generous subsidies, but non-Native Americans in most of the state will not.

Chalk it up as another example of the Law of Unintended Consequences. When the Lifeline Assistance program began, its creators decided that it would be a good idea to offer an additional subsidy to residents of current and former Native American lands. Free government cell phone companies were given a subsidy of $9.25 per month per customer elsewhere, but residents of tribal lands in every state were given an additional subsidy of $25 per customer per month ($34.25 total) in recognition of those Americans’ special circumstances.

Well-meaning as those bureaucrats were, they were clearly not students of history. None of them realized that virtually all of Oklahoma was at one time designated as Native American homelands. In fact, look at a map from the mid-to-late 1800s and what we now call Oklahoma will probably be labeled “Indian Territory.”

As a result, 99.89% of all low-income Oklahoma residents, even those who have zero Native American heritage, immediately became eligible for these huge subsidies. The result was predictable. As soon as the Lifeline Assistance companies realized they could get those bonus subsidies by signing up low-income Swedish-Americans from Tulsa, German-Americans from Oklahoma City, or Japanese-Americans from Norman. Lifeline Assistance companies rushed into the Sooner State in a stampede reminiscent of the Oklahoma Land Rush of 1889. The state quickly became the epicenter of the free government cell phone business.

Here’s an illuminating comparison: Lifeline companies in California, with nearly 40 million people and 1/3 of the nation’s welfare recipients, accounted for $116,957,622 in Lifeline subsidies in 2015. Oklahoma, with just 10% of California’s population, sucked up $69,703,136 in subsidies.

The FCC finally saw the inherent unfairness of this situation and acted to end the bonus subsidies and bring Oklahoma law into line with the Lifeline laws in the other 49 states, District of Columbia, and Puerto Rico.

Here’s how renegade FCC Commission Ajit Pai described the Oklahoma action in a press release:

… 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.

Pai wanted the extra Oklahoma subsidy to end on February 9, when it was originally scheduled to be scuppered. But he was overruled by a shadowy government agency called The Wireless Competition Bureau, which voted to extend it to June.

What will it mean to Oklahoma residents?

Because they were paid those bonus subsidies for every free government cell phone customer, Lifeline Assistance companies were able to offered extremely generous plans in Oklahoma — plans that were only matched or exceeded by plans offered in California (to find out why California Lifeline plans are so generous, read this article.)

We expect some inefficient Lifeline Assistance companies to end service in Oklahoma. They’ve been fat and happy and the money’s been rolling in and they haven’t had to be efficient. They will no longer be able to compete, so they’ll just pack their bags and leave the state.

We expect others (and already have seen some) to cut back their generous Lifeline plans and no longer offer unlimited talk and text nor even 1000 minutes or texts per month. The new economic reality will force them to offer plans similar to those found in other states — 250 or 500 minutes per month.

It’s possible that some of the more efficient Lifeline Assistance companies will be able to continue offering the same generous benefits they currently offer, but those companies will be few and far between, if any of them actually exist.

In other words, I f you have a free government cell phone in Oklahoma, get ready. The future we predict will be here before you know it.

Our two cents

This will be a huge loss for low-income residents of Oklahoma, but an equally huge win for low-income residents of other states.

We have long editorialized against these bonus subsidies for non-Native Americans in historically Native American lands. There’s no reason that Oklahoma Lifeline Assistance companies should get an extra subsidy designed for Native Americans when they enroll a refugee from Afghanistan or an immigrant from El Salvador or a third generation Irish-American from Oklahoma City.

Instead of giving these unnecessary subsidies to those who do not deserve them, the money saved can be spent to give more free government cell phones to deserving low-income Americans across the nation.

It’s fair. And it makes economic sense.

Note: We’ll be updating the various Oklahoma plans on our pages, as the new information comes in.