Phone company lays off hundreds amid inquiry

Back to TopCommentsE-mailPrintBookmark and Share

A subsidized phone service provider under scrutiny from Indiana regulators is laying off hundreds of salespeople across the country amid inquiries into its sales tactics.

Oklahoma City-based TerraCom Inc., which began operating in Indiana in June 2012, and affiliate YourTel America Inc. have started the process of cutting about 700 salespeople in TerraCom's 23-state service area, the company announced late last week. The process began July 1.

A company representative declined on Monday to release information about employees affected in Indiana.

The move was triggered by a Federal Communications Commission warning issued June 25, reminding providers of the discount phone service program Lifeline that they are liable for any conduct by salespeople that violated FCC rules.

TerraCom and YourTel America began the termination process and are "considering the best business path forward in light of the [FCC's] recent enforcement advisory," said Dale Schmick, chief operating officer of the two firms.

TerraCom and YourTel draw subsidies from the Lifeline program to provide cheap phone plans to low-income customers.

Lifeline provides discounts on basic monthly telephone service to qualifying low-income customers. Applicants must report household incomes at or below 135 percent of the federal poverty level ($32,000 for a family of four), or they need to qualify for food stamps, Medicaid or other federal welfare programs.

All phone customers pay an average of $2.50 per month to the Universal Service Fund, which funnels the money back to the phone providers to reimburse them for offering discounted service.

TerraCom receives $250,000 to $300,000 per month in Lifeline reimbursements for Indiana customers, the Universal Service Fund’s records indicate.

Federal and state regulators have been scrutinizing Lifeline to target waste and fraud.

TerraCom and YourTel America settled for $1 million in February with the Federal Communications Commission, after the FCC claimed they set up multiple Lifeline accounts for individual customers in Oklahoma.

As IBJ reported in May, Indiana utility regulators began asking questions soon after the settlement about how the phone company managed to sign up a massive 30,000 customers in its first six months of business in the state.

At an Indiana Utility Regulatory Commission conference on July 3, TerraCom's Schmick defended the company’s sales methods in Indiana, saying the company recruited so many customers because it has perfected its sales techniques.

Typically, TerraCom’s sales reps set up booths or tents at charity events to hand out marketing material and sign up customers, Schmick told commissioners. Commissioners questioned whether TerraCom was properly screening out all the unqualified applicants before filing the paperwork.

Schmick explained that he is required to sign legal documents for the reimbursements. He would face criminal fraud charges if he knowingly submitted an unqualified Lifeline application, he said.

The FCC issued an enforcement advisory on June 25 regarding the conduct of salespeople and the rules for signing up customers.

"The Enforcement Bureau ... is particularly concerned that some eligible telecommunications carriers are failing to ensure that their agents, contractors and representatives adhere to Lifeline rules," according to the advisory.

Among those regulations, companies must confirm an applicant’s eligibility before activating a Lifeline account, and applicants need to acknowledge that their households do not already have Lifeline accounts.

Companies face up to $1.5 million in fines each time they fail to comply.

In a prepared statement, Schmick said the layoffs beginning July 1 were intended “to ensure continued compliance while we transition to a new business model.”


Post a comment to this story

We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
You are legally responsible for what you post and your anonymity is not guaranteed.
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
Subscribe to IBJ
  1. How can any company that has the cash and other assets be allowed to simply foreclose and not pay the debt? Simon, pay the debt and sell the property yourself. Don't just stiff the bank with the loan and require them to find a buyer.

  2. If you only knew....

  3. The proposal is structured in such a way that a private company (who has competitors in the marketplace) has struck a deal to get "financing" through utility ratepayers via IPL. Competitors to BlueIndy are at disadvantage now. The story isn't "how green can we be" but how creative "financing" through captive ratepayers benefits a company whose proposal should sink or float in the competitive marketplace without customer funding. If it was a great idea there would be financing available. IBJ needs to be doing a story on the utility ratemaking piece of this (which is pretty complicated) but instead it suggests that folks are whining about paying for being green.

  4. The facts contained in your post make your position so much more credible than those based on sheer emotion. Thanks for enlightening us.

  5. Please consider a couple of economic realities: First, retail is more consolidated now than it was when malls like this were built. There used to be many department stores. Now, in essence, there is one--Macy's. Right off, you've eliminated the need for multiple anchor stores in malls. And in-line retailers have consolidated or folded or have stopped building new stores because so much of their business is now online. The Limited, for example, Next, malls are closing all over the country, even some of the former gems are now derelict.Times change. And finally, as the income level of any particular area declines, so do the retail offerings. Sad, but true.