Lifeline phone company TerraCom slashes sales force

An Oklahoma-based company facing questions about its aggressive enrollment of low-income subscribers in the federal Lifeline phone program is eliminating its sales force of approximately 700 people in 23 states, it announced this week. 

Dale Schmick, chief operating officer of TerraCom Inc., said in a statement emailed to Scripps Thursday that the company began terminating its field agents July 1 -- at least in part to guard against violating Lifeline rules. The federal program, which last year cost $2.2 billion to operate, provides subsidized phone service to low-income households.

Lifeline has drawn criticism following reports of customers wrongly receiving multiple phones, instead of one per household, and of phone companies double-counting customers to increase reimbursements. Phone companies receive at least $9.25 a month for each Lifeline cellphone or landline subscription.

TerraCom and its affiliate, YourTel America Inc., drew scrutiny after Scripps News this spring found sensitive customer information -- including full Social Security numbers, bank account numbers and other sensitive details -- posted on an unprotected site online. (See http://www.shns.com/privacy-on-the-line.)

TerraCom's field agents, typically paid on commission, solicit many of the company's customers while operating out of temporary booths at venues such as soup kitchens and flea markets.

In Thursday's statement about the mass firing, Schmick called it "the best business path forward" for TerraCom following a June 25 advisory from the Federal Communications Commission. The FCC warned that companies participating in Lifeline "are liable for any conduct by their agents, contractors or representatives" and must ensure that agents "scrupulously adhere to the Lifeline rules." Phone companies can be fined up to $1.5 million for each violation.

Schmick, in his statement, said the FCC expressed concerns that some agents might have misled prospective customers about the status of their Lifeline phone applications.

Last year, the FCC began investigating TerraCom and its affiliate, YourTel America, after finding duplicate claims of customers. In February, TerraCom paid $1 million in reimbursements and "voluntary" payments to close the investigation.

TerraCom faces ongoing inquiries about business practices from regulators in Oklahoma and Indiana. Also, attorneys general in Indiana and Illinois are investigating TerraCom's data security practices following Scripps' investigation. 

TerraCom's decision to end its agent program this week is an abrupt change. Called before the Indiana Utility Regulatory Commission last week to explain the company's rapid growth in the state, Schmick defended TerraCom's oversight of field workers. He outlined the company's procedures, including verifying applicants' identifies and auditing agents' work. Those safeguards were designed "to make sure nothing is happening that's not supposed to be happening," Schmick said.

At the hearing, Schmick pointed to the FCC's June warning to suggest that TerraCom's oversight was on track. "The FCC just did an enforcement advisory late last week, and their process is exactly what we have here," he told Indiana regulators. 

Asked about the company policy change, Schmick said in a follow-up statement to Scripps that TerraCom had been considering ending the field agent program "for several months."

(If you have tips about the Lifeline program, email Scripps national reporter Isaac Wolf at wolfi@shns.com. Distributed by Scripps Howard News Service, www.shns.com.)

(Distributed by Scripps Howard News Service, www.shns.com)

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