Notebook > Technology
Obama: Nati Harnik • TracFone: Handout • Pollak: Andrew H. Walker/Getty Images for Vogue • Slim: Yuri Cortez/AFP/Getty Images

Bad connections

Technology | One mobile service provider made it big thanks to government handouts

Issue: "Moneymaker," March 23, 2013

A fast-growing cellphone company has for several years demonstrated an uncanny ability to wring profit from government programs for the poor. Coincidentally, its chief executive is a top Democratic donor and Obama fundraiser.

The company, Miami-based TracFone Wireless, is the largest provider of mobile phone plans supported by Lifeline, a $2.2 billion program offering free phone service for the impoverished. Thanks in part to Lifeline, TracFone has 22 million customers today, up from 1.6 million in 2001. To boost subscribers, the company advertised Lifeline aggressively, going door to door and offering free cellphones to low-income customers if they simply signed up for Lifeline’s monthly $9.25 subsidy.

It turns out TracFone has a history of lobbying for program changes that eventually work in its favor. In 2004, TracFone asked the Federal Communications Commission (FCC) to expand Lifeline to include wireless “resellers” like itself (which the agency later did). Lifeline originally covered only landlines when it started in 1984, and has been troubled by widespread fraud in recent years.

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In 2008 TracFone petitioned the FCC to provide internet service under Lifeline as well. This year, the agency is doing just that—in the belief that offering broadband to poor Americans will increase their chances of finding a job. To test the expansion, the FCC is giving $13.8 million in pilot contracts to 14 companies. The companies will primarily offer subsidized discounts for desktop computer broadband. Except for TracFone, which won a contract for its own unique proposal: Giving away free smartphones so people can get online anywhere.

Critics are skeptical that a smartphone would help anyone get a job or write a resume, given slower browsing speeds and a tiny, touch-screen keyboard.

TracFone’s success in garnering business through Lifeline—derided as the “Obama phone” program even though it was in place when the president took office—has drawn scrutiny to Frederick “F.J.” Pollak, the CEO. Pollak has visited the White House several times, and along with his wife Abigail has donated over $250 million to Democratic candidates since 2011. Abigail Pollak bundled at least $1.56 million for President Obama’s election campaigns.

TracFone is a subsidiary of América Móvil, a Mexican telecommunications giant owned by Carlos Slim, the world’s richest man. América Móvil spokesman Jose Fuentes denied any connection between Pollak’s fundraising activities and TracFone’s success. “There’s been no pay-for-play—or even favors. What he does in his private time is his,” he told The Washington Times.

TracFone itself spent over $600,000 last year in lobbying efforts. The company knows when the government provides free minutes, free customers follow.

Magazine printing

Defense Distributed

While lawmakers attempt to restrict guns by outlawing high-capacity magazines, rifle enthusiasts are pushing back with do-it-yourself technology. Texas nonprofit Defense Distributed has posted blueprints online for a 30-round AR-15 magazine that can be created on a 3-D printer, a device that builds objects with threads of melted plastic. The magazine is capable of firing hundreds of rounds without wearing out. The creators named it the “Cuomo” clip after New York Gov. Andrew Cuomo, who signed a law in January banning magazines that hold more than seven rounds. Hundreds of thousands of people have downloaded the blueprint file. —D.J.D.

Daniel James Devine
Daniel James Devine

Daniel is a reporter for WORLD who covers science, technology, and other topics in the Midwest from his home base in Indiana. Follow Daniel on Twitter @DanJamDevine.

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