Paul Wilson: Is the ObamaPhone Really Obama’s Phone? Conclusion

We all now know that the “ObamaPhone” has nothing to do with President Obama…

All the man has done is enjoy a wave of branding popularity, while not bothering to step forward and clarify that it’s not his program. Who would?

Like Obama or not, it’s been marketing genius.

I concluded yesterday by saying that if you think it’s had positive impact on Obama, it doesn’t hold a candle to what it’s done for TracFone/SafeLink telecom mogul Carlos Slim’s wallet (not to be confused with Carlos Danger).

It was George W. Bush‘s administration that allowed TracFone in the game to begin with, in 2008.

So who is TracFone?

Unless you’re a “prepaid” user, and I doubt many KCC readers are, it’s the biggest wireless company you never heard of and it’s helped make Obama “vato,” Slim become the richest man in the world until this past May, when Bill Gates regained the designation.

Fact; Carlos Slim represents 5 percent of Mexico’s total economic output.

Carlos Slim & Obama

Tracfone has been the most aggressive firm targeting the Lifeline customer. It runs TV ads exactly where you would suspect; during The Maury Baby Daddy Show and Jerry Springer time slots, among others. To back the guerrilla marketing tactics; street teams set up tents and canvas low income neighborhoods.

Effective?  In less than 4 years, TracFone garnered 4 million customers through Lifeline, representing $452 million last year in program subsidies alone. That’s 100 percent growth in two years, eclipsing Sprint and AT&T’s market share of around $270 million each.

Lifeline users don’t produce the same margin as traditional customers, but they are virtually free customer acquisitions, some convert to traditional plans – but more importantly – it’s a guaranteed, subsidized revenue stream that adds to top line revenue.

It’s the Section 8 of cell phones.

As the subsidies increase at the rate they have, the program has come under extreme scrutiny. TracFone, afraid of losing its “marketing department” spent $640,000 lobbying Congress last year.

In addition to that, The Washington Free Beacon reports that “TracFone Wireless CEO F.J. Pollak has donated at least $156,500 to Democratic candidates and committees, including at least $50,000 to Obama,” while his wife Abigail has bundled over $632,000 in Obama donations and hosted a $40,000-per-plate fundraiser in Miami Beach. She also received an appointment to the presidential “Commission to Study the Potential Creation of a National Museum of the American Latino.”

You can overlook all this and choose to think of it as just another benevolent program, but it’s pretty dirty.

Save your breath pointing out dirty Republican programs, my message is dirty is dirty.

Rep. Tim Griffin, Republican of Arkansas, introduced legislation to restore the program to its original intended purpose, providing landline phones only. Landline phones are becoming today’s dinosaur, that’s a little extreme, but the program needs massive repair.

However be forewarned; anyone who tries to modify this behemoth in any way will have the push back of 8 million users – something like 100 percent of the 47 percent – more than willing to trample anyone under foot to keep their free ObamaPhone.

And when the program’s scrutiny reached a crescendo, guess who came to the rescue to save TracFone’s image?

That’s right…..TracFone.

In late 2012 they ran six months of print ads stating, “Lifeline isn’t breaking the bank,” “It doesn’t add one penny to the deficit. If you’re looking to cut the deficit, Lifeline is the wrong place to start.”

Deficit?

Squirrel!

This isn’t a “deficit” discussion.

Besides the Lifeline windfall, Slim was also successful lobbying his pals in Congress, winning a major program to provide internet to low income job seekers, helping them learn technical trades and find a job via their free smart phone. The first 14 pilot trials went to TracFone in Miami. Developers of the program insisted it should involve computers, not phones. TracFone proposed offering its customers Android phones instead; including the bundling of unlimited voice, unlimited texts, and 2GB of data, billing the government at up to $45 per person per month. They won the phone vs. computer debate after scaling it back to something closer to $25 a month.

The entire idea of adding Internet to the Lifeline program came from TracFone to begin with.

Critics said, absent computers, “TracFone’s plan would only supply high-end Android phones, ready to play games and browse Facebook, doing little in the way of getting a job.”

Guess what? It also supplies TracFone even more minutes.

Lifeline’s rapidly increasing costs have attracted the attention of Republicans and Democrats alike, including our own Sen. Claire McCaskill.

“I remain troubled by the expansive potential for the program to be abused, especially since Americans contribute to the program through their monthly phone bills,” McCaskill says.

Good point. The FCC identified $214 million in duplicate subscriptions in 2012. TracFone is facing more than $4 million in fines by the FCC for signing up customers multiple times.

And don’t forget, when I applied for an ObamaPhone I checked boxes stating I had six people in my home, earned less than $23,000 a year and my ObamaPhone was on its merry way.

“We’re a company, we’re for-profit, absolutely we make money, yes,” said TracFone’s Fuente. “I think anybody who says, ‘No, absolutely not, we don’t want to make money,’ is crazy.

“But it’s not about the profitability here,” Fuente added. “The FCC a few years ago felt that there was a need to improve Lifeline. We came in and created a business model that worked.”

Worked?

You’re such a Good Samaritan, Mr. Fuente.

Your well-coiffed Scribes conclusion?

• Mr. Fuente, you want to make money; but it’s not about profitability?
• Mr. Obama, nicely played, the ObamaPhone is one of the smartest things you never did.
• Republicans = BAD / Democrats = BAD
• TracFone represents MORE U.S. dollars headed to Mexico than Price Chopper in Olathe on a Friday afternoon via Western Union.
• It’s Bush’s fault.