Report Recommends Expanding Free Cell Phone Service for the Poor

 A study says that giving poor people free cell phones would provide “significant economic gains” and result in economic gains of $3.7 billion.

“The subsidized cell phone has been an important economic tool, which generates an average of $259 (per participant) per year,” said the report's author,Nicholas P. Sullivan. “If all 28.5 million adults eligible for 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.”

(Read consumer complaints about cell phone companies).

In large states, such as New York, Florida, and California, the gains would exceed $250 million, Sullivan said. “By this measure, the program is already paying for itself.”

The Sullivan report is based on survey data collected by Opinion Research Corporation (ORC) International, which polled 5,541 TracFone SafeLink Wireless customers in 22 states.  The analysis is a “bookend” to an earlier study by Sullivan on the economic benefits of cell phones for the roughly one third of poor Americans without them.

Wireless Lifeline support for prepaid wireless is now available to low-income Americans in 35 states, as well as the District of Columbia and Puerto Rico.  

The 15 so-far non-participating states – which include California, Colorado, Hawaii, Montana, Nebraska, North Dakota, Oklahoma, South Dakota, Vermont and Wyoming – are missing out on a total of about $650 million in potential income for their poorest residents, according to the new study.

Sullivan, a Fellow at the Center for Emerging Market Enterprises at The Fletcher School, said:   “To date, only 35 states have allowed Lifeline Assistance for prepaid cell phones, which means that the remaining 15 states are both limiting the ability of their poorest to earn money — and also adding to their own state-funded liabilities for social programs.   At a time when states are strapped and suffering from a range of deficit liabilities, new income on this level should be a welcome outcome.”

Other key findings from the Sullivan report include:

• About half of SafeLink users (49 percent) said the cell phone had “improved their financial situation by helping them find or keep work.”

• The average amount of money earned in the last year by SafeLink users was $259, according to the survey results.

• Given the expected increase in eligible subscribers, based on the recent revamped numbers in poverty, and assuming the increased pay with increased usage and minutes, the actual potential benefits are more likely in the $5 billion range.

• In 10 of the 15 states currently without access to Lifeline-supported prepaid wireless, low-income individuals are missing out on an estimated $489.1 million in potential income: California ($307.6 million); Colorado ($40.1 million); Hawaii ($9.3 million); Montana ($13.1 million); Nebraska ($21.5 million); North Dakota ($10.4 million); Oklahoma ($60.7 million);  South Dakota ($11.6 million); Vermont ($7.5 million); and Wyoming ($7.3 million).

• An estimated 30 percent of the annual $1.2 billion in Lifeline spending subsidies to low-income Americans is now allocated to wireless phones.  That means Lifeline’s $360 million “investment” in information and communications technology (ICT) for the poor and a segment of the near poor generates a “return” of $388 million.