ATLANTA Oct 15 (Reuters) - Georgia on Tuesday became the first U.S. state that will begin charging low-income residents $5 per month for cell phone service now provided for free by federal taxpayers.
The new fee is already under court challenge by the cell phone industry trade association, which filed suit against Georgia months ago even before the measure received final approval on Tuesday.
The fee is designed to reduce fraud in the federally subsidized Lifeline program, state Public Service Commissioner Doug Everett said. Each household that qualifies gets 250 minutes per month of free air time.
Funding for the program, which was launched in 1985 to expand phone service for the poor, comes from the Universal Service Fee charged to land line and cell phone customers.
However, some telephone companies providing the free service are failing to adequately check household income and are not enforcing the one-per-household limit, Everett said.
He said the number of Lifeline customers in Georgia jumped from around 100,000 a decade ago to more than a million in 2011, but is now back down to around 740,000.
The $5 monthly fee, scheduled to start Jan. 31, will require that telephone companies send customers a bill each month. Telephone companies will keep the $5 monthly fee, but it will not fully cover the administrative costs of sending out bills, the commissioner added.
"They will look at their customer base more seriously than they have in the past," said Everett.
However, the lawsuit filed against Georgia by the cell phone industry association called CTIA, claims that by adding the $5 fee, the state is setting cell phone rates, which it does not have the legal power to do.
"CTIA will continue to challenge the Georgia Public Service Commission's decision to set rates on wireless service, which would make Georgia's consumers pay more than they do today," Michael Altschul, senior vice president and general counsel for CTIA, said in a statement.
The fee will hurt poor customers who are not abusing the program, said Liz Coyle, spokeswoman for the non-profit group Georgia Watch.
"While we certainly recognize there are instances of fraud and abuse, we believe measures taken on the federal level to crack down on that are working," she said.
Nationally, about 14 million households participate in the Lifeline program at a cost in 2012 of about $2.1 billion, said Eric Iversen, spokesman for Universal Service Administrative Co, the nonprofit organization that administers the program. He did not know the number of individual Lifeline beneficiaries.
Although some critics of the Obama administration have said the Lifeline program gives the poor free "Obama phones," Iverson said tax money only pays for the phone service, not the actual phones.
The cost of the program in 2013 is expected to decline because of stricter enforcement of the program's rules and requiring more documentation for eligibility, Iverson said. (Editing by Tom Brown and Lisa Shumaker)