Obama crony wins contract to give phones to jobless
Feb 05, 2013 (The Washington Times - McClatchy-Tribune Information Services via COMTEX) --
A cellphone company whose top executive has close ties to President Obama lobbied for and won a piece of a major new government push to provide Internet service to low-income job-seekers, even though critics say the company's smartphones are poorly suited to the task of helping those in the program find work.
The program's supporters tout it as a way for the unemployed to learn technical skills, to prepare resumes and to search for jobs, but one of the 14 pilot contracts that the FCC awarded went to Miami-based TracFone Wireless Inc.
TracFone CEO F.J. Pollak has been a frequent White House visitor and his wife Abigail has raised hundreds of thousands of dollars for both Mr. Obama's 2008 and 2012 campaigns.
And although TracFone had originally lobbied for the program, critics say its contract would not provide recipients with skills-boosting computers and services, but would supply high-end Android phones, ready to play games and browse Facebook but doing little in the way of getting a job.
Other companies selected to provide Internet service noted that merely allowing viewers to use apps such as Twitter and run simple Google searches on a small phone screen didn't meet the spirit of the program's intent, which included goals of "increasing digital literacy and use of the Internet [to] help bridge the skills gap [and] reduce job search discouragement."
"The small screen, keyboard and perhaps connectivity issues make it harder for smartphone-only users to engage as deeply with the Internet as home broadband users," wrote John B. Horrigan of the Partnership for Connected Illinois, which will provide DSL hookups and computer hardware for the poor in that state.
Rep. Tim Griffin, Arkansas Republican, said the cellphone spectrum is poorly suited to be a user's primary Internet portal and that any resume tapped out with two fingers on a cellphone screen would be sure to be sloppy.
Mr. Griffin opposes the expansion, but TracFone's proposal to meet the requirements in the form of a high-end cellphone rather than a workhorse desktop connection is an "outrage," he said.
TracFone is a subsidiary of Mexico's American Movil, part of the corporate empire of billionaire entrepreneur Carlos Slim, often listed as the world's richest man. The company denies that it engaged in improper lobbying or exploiting the Pollaks' political and social connections to Mr. Obama.
Mrs. Pollak is listed as one of 230 fundraisers to have brought in the better part of $1 million for the president's 2012 campaign, and did the same in 2008.
Mr. Pollak has visited the White House numerous times, including for public gatherings such as the Easter Egg Roll and a Cinco de Mayo party, said Jose Fuentes, a spokesman for America Movil.
"That has absolutely nothing to do with business. There's been no pay-for-play -- or even favors. What he does in his private time is his," he said.
"Broadband is critical these days to have access to online tools for jobs. The old days of mailing your resumes are over," Mr. Fuentes said.
Asked whether a smartphone is the best way to compose and send a professional resume, he pointed to the exploratory nature of the program.
"It's a pilot program. The FCC's trying to see what works better, and the direction the FCC wants to take after that is entirely up to them."
Federal pilot contracts for the Internet program were awarded in December and are an expansion of the $2.4 billion-a-year Lifeline phone program, which is funded by a "universal service" charge of about $2.50 per household added to customers' monthly bills. The decades-old program was used to subsidize landlines and attracted little scrutiny, but since 2008, when it began paying for cellphones, demand has exploded, largely because of the efforts of TracFone, which has cornered the market on the subsidized distribution of phones without Internet data plans.
"TracFone currently has over 4 million Lifeline subscribers. Furthermore, in every state in which TracFone provides Lifeline service it has increased the Lifeline participation rate by a substantial percentage," TracFone wrote in its proposal for the broadband pilot.
TracFone, the nation's largest provider of prepaid cellphone services, provides far more subsided service than any other telecommunications company, with more than three times as many recipients as Verizon.
America Movil's Mr. Fuentes acknowledged that growth in the program was a result of its marketing, including canvassing, promoting "free camera phones" with 250 minutes of talk time.
"We do a very aggressive advertising, grass-roots campaigns to alert the people that this government program is available," he said.
Last year, the FCC announced its intention to expand the program to provide broadband Internet, envisioning cable companies providing wired hookups to home computers. In December, it selected proposals from 14 companies for a $25 million pilot program, the vast majority of which provide DSL hookups for desktop or laptop computers, and many of which also require digital literacy training.
But TracFone's proposal was different. There would be no computers in sight, no opportunities to practice typing, read extensively or polish a resume. The company proposed instead simply offering fancier phones with Internet plans included, something it knows appeals to the poor.
"As proposed by TracFone, 500,000 to 1,000,000 low-income households would participate in the trial. In the pilot program, TracFone will offer its customers handsets that have an Android operating system. In addition, all plans will include the following bundled services each month: unlimited voice, unlimited texts, and 2GB of data," billing the government at up to $45 per person per month, the successful proposal says.
The company later significantly scaled back its pilot proposal to a $1 million plan that would require the largest group of customers to pay $10 a month, with the company filing for reimbursements for up to $25 per customer monthly.
But if the pilot program goes full scale and TracFone achieves the same number of customers as its current phone service, it would be billing the fund $100 million per month.
Unlike others' proposals, even those who already are paying for Internet service would be eligible for the service under TracFone, and for five out of six test groups, no digital literacy training would be required.
The entire idea of subsidizing Internet access for the poor came from TracFone, the company said. "In October 2008, TracFone filed with the [FCC] a petition in which it proposed that the commission establish a pilot program for a broadband support mechanism based on the Lifeline and Link Up low-income support programs," it wrote.
In addition to the Pollaks' connections to Mr. Obama, the company has doubled its lobbying in the past five years, spending more than $600,000 last year on lobbying the government.
A spokesman for the FCC did not say whether the fund had a large surplus or how the full-scale broadband program would be financed, except that it would not be by adding a charge to consumers' Internet bills.
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