Guess Who Paid for Study Advocating Free Prepaid Cell Phones for the Poor?

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A "first of its kind" study by the New Millennium Research Council (NMRC) concludes $4 billion in income could be generated for the poor by simply giving such folks free prepaid cell phones.

"Subsidized Cell Phones Provide Significant Economic Gains for Poor and Near-Poor Americans" singles out cash-strapped states such as California, which currently does not participate in the Federal Communications Commission's Lifeline Assistance program.

But before you say, "Eureka, I have discovered the answer to reducing the Golden State's safety net!" you need to consider who else would make out from taxpayers buying cell phones for the poor. Here's a hint: It's the industry that funds the NMRC.

Based on the high volume of identical e-mails that hit my inbox last week, the NMRC really wants you to know how giving the poor free prepaid cell phones will help them find jobs and reduce the burden on governments to assist them.

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"[T]he subsidized cell phone has been an important economic tool, which generates an average of $259 (per participant) per year," reads the report written by Nicholas P. Sullivan, a fellow at the Center for Emerging Market Enterprises at the Fletcher School and co-chairman of the Fletcher School Leadership Program for Financial Inclusion.

"If all 28.5 million adults eligible for [the FCC's] Lifeline Assistance were to take advantage of the program and earn at the same rate and level as our sample, it would result in $3.7 billion in fresh income for the poor and near- poor.  In large states, such as New York, Florida and California, the gains would exceed $250 million. By this measure, the program is already paying for itself."

The e-mail trumpeting the study--which you can read at http://www.thenmrc.org--also includes the views of consumer advocate Samuel A. Simon, an NMRC senior fellow:

"Lifeline-supported wireless cell phone service for poor Americans appears from this study to be exactly what advocates of universal access to telecommunications services had in mind when the Universal Service Fund (USF) was created.  Unlike other USF programs that have been criticized for lining the pockets of telecommunications companies with unnecessary subsidies, wireless Lifeline aid is highly targeted and, at very low cost, goes right into the hands of the American consumers who most need this assistance in finding work or keeping their existing job." 

Speaking of pocket-lining and the telecommunications industry, here is what Common Cause says about the New Millennium Research Council:

At first glance, the New Millennium Research Council appears to be a think tank. But the details don't add up. It lists no staff on its website--only a stable of "contributing scholars and experts," several of whom are Verizon employees. Guidestar.org, which maintains a database of nonprofit organizations, has no listing for the New Millennium Research Council, nor is NMRC listed in the Internal Revenue Service's Cumulative List of Charitable Organizations.

It turns out that New Millennium Research Council is not a nonprofit group, but a "project" of Issue Dynamics Inc., a for-profit public- affairs consulting firm. Issue Dynamics lists a number of telecommunications companies on its client list--including Verizon, Comcast, BellSouth, SBC Communications (now AT&T), as well as the United States Telecom Association--the trade association for the telecom industry.

Anyone think those companies might be salivating at the idea of California taxpayers buying free cell phones for the poor?

Speaking of the poor and the telecommunications industry, if the NMRC is so hellbent on helping the less fortunate, why has it released a different report that concludes municipal Wi-Fi networks are "not in the public interest."

Having access to free Wi-Fi would help the poor find jobs every bit as much as free prepaid cell phones would.

Can you hear me now?

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6 comments
Mike Smith
Mike Smith

very interesting article. I am a prepaid customer, using Straight Talk because of its affordability and lack of commitment. Although I wouldnt consider myself "low-income enough" to be offered a free phone, other middle class folks living pay check to paycheck should consider prepaid becuse of the savings and lack of credit checks, contracts, etc.

Bernice
Bernice

Okay, let's just for a second acknowledge that many of us are truly blessed with what we have in life, and that there are folk out there who have nothing...and sometimes, it is not due to anything they have -or haven't-done, but circumstances beyond their control-cancer, abusive relationships, recession, death of a spouse, etc. What we give out (graciously) will always come back to us in some form. Is it really all that bad to help someone less privileged? Consider this; help the less fortunate, and if there's any truth in it helping the poor find jobs and generating income, you will no longer have to provide that individual with the service...if it's a prepaid phone, they can easily continue with it at their own cost. The helped person at this stage will have an idea of how easy and affordable their Tracfone was to operate, doesn't have to splurge on a new phone, and only has to keep paying their minimal monthly minutes.I do see some of the other points made here wrt research done, some being lazy, etc but don't let all suffer under some's under-qualification for this program. Oh, and perhaps consider how many minutes are allocated to them-I read somewhere that it is in the vicinity of 250 mins/month (unconfirmed), which I will agree is possibly an over generous amount -my daughter is in tough financial times and restricts herself to Net10's 200 minutes for $15- these minutes could be spread further if cut down somewhat.

Mr Bill
Mr Bill

It appears there are flaws in their findings:

1) The study did not compare SafeLink users to non-Safelink users of the same demographic and income. The statement “The average amount of money earned in the last year by SafeLink users was $249, according to the survey results” makes the assumption that the subsidized phone was responsible for the additional income, but without any evidence. To then make the assertion that $4 billion in revenue can be created by subsidizing phones to the poor becomes a specious argument.

2) The study failed to take into account the transfer of income from non-subsidized phone users to subsidized phone users in the form of taxation (Universal Service Fund.) These funds would have been used to stimulate the economy by purchasing goods and services, without the need to redistribute income.

3) Given the latest Census data, the poor have more material wealth than in previous generations, many own their own houses, cars and appliances (particularly for those near the 135% of the federal poverty guidelines, and who would qualify under the U.S.F.) This would suggest many already have the ability to privately purchase a no-frills, prepaid phone.

4) This study also makes the assertion that owning a cell phone will lead to a greater chance of employment. If this statement were true, it runs contrary to the observation that there is already a saturated market for cell phones, yet the unemployment index is over 9% nationally (U3 index, over 16% nationally U6 index.)

Lombardo
Lombardo

You telling me that not a single one of this reported 28.5 million fiscally challenged individuals, can afford a sub $10 tracfone?! Either I'm in denial about the realities of how badly off these people are, or I'm going to assume that they're either also mentally challenged, or just downright lazy. I'm leaning towards them being lazy.

20ftJesus
20ftJesus

Just what we need--more handouts--to encourage illegals to come our land.

Faurliken
Faurliken

Just a little pointer; whilst net10's rates might make more sense to an average user, their phones are more expensive than said tracfone's. Not that those handsets are expensive at all, it's just compared to tracfone phones, they're more expensive. The whole point to liberating the masses of poor is to offer them the very basic ability to own a phone, in this case tracfone is the cheapest, most basic. The torrid thing is, that tracfone sometimes offers free phones with the purchase of either minutes, or their double minutes feature, so IOW; the affordability is definitely there for ANYBODY (however not blessed) to get a phone. For those that cannot even afford the very basic, they can get tracfones, and minutes for free - that institution has been around for a couple of years now. Why the government wants to get involved I suspect, has got nothing immediatley to do with bettering the lot of a few, but to do with improving the macroeconomic climate, and also thereby lining the pockets of those responsible for the improvements, as well as creating a larger market by 'unsaturating' the wireless market...everybody would invariably benefit, but a select few will flourish amidst the justifications of bridging digital devides.

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