State to grill TerraCom officials amid investigation

June 27, 2013

A phone company receiving heavy federal subsidies must explain to state officials how it set up a questionable number of government-funded accounts and leaked personal information on some of its customers.

The Indiana Utility Regulatory Commission has scheduled a day-long conference July 3 in which Oklahoma City-based TerraCom LLC will be asked 29 formal questions as part of a state investigation.

As IBJ first reported in May, the IURC began investigating the phone service provider after it set up 30,000 Indiana accounts in just a few months for a federal program.

TerraCom started operating in Indiana in June 2012 and has received $250,000 to $300,000 per month from the federal Lifeline program. The service carrier draws subsidies from the program to provide cheap phone plans to low-income customers.

Regulators are worried TerraCom and its affiliate, YourTel America Inc., may have repeated what they did in their home state of Oklahoma, where they received duplicate reimbursements for individual customers. TerraCom and YourTel ended up settling with the Federal Communications Commission for about $1 million.

Dale Schmick, TerraCom’s chief operating officer, said in an email to IBJ that the company intends to make sure it is in full compliance with federal and state regulations.

“We have comprehensive policies and protocols in place to help ensure compliance under the program, and we are committed to making adjustments and further improvements to our marketing and outreach efforts, as well as our systems to maintain the security and privacy of applicant data," Schmick wrote.

An investigation by Scripps News in May added another layer to the IURC’s probe.

Scripps uncovered more than 170,000 records posted online listing sensitive information such as Social Security numbers, home addresses and financial accounts of TerraCom and YourTel customers. Such a data breach could open the customers to identity theft.

A company attorney, soon after the report, accused Scripps of accessing the information illegally, which the news service denied.

TerraCom has since apologized for allowing the data breach.

“We deeply regret this breach occurred and the inconvenience it has caused,” Schmick wrote. “We immediately took steps to protect the information and prevent such a breach from happening again. We have an open line of communications with applicants and customers who continue to have questions about the breach."

IURC officials’ questions over the two issues cover topics such as marketing methods, Lifeline account setup processes, employee training, and protection methods for personal information, according to IURC records.

“Our expectation is that the company will come prepared to answer all those questions,” said agency spokeswoman Danielle McGrath.

Separately, the Indiana Attorney General office is looking into if and how TerraCom leaked information about its Indiana customers.

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