6 Investigates Goes One-On-One With Free Cell Phone Provider

Putting the government program of providing cell phones to the poor under the microscope, 6 Investigates gets unprecedented access behind the scenes of a multi-state cell phone operation based out of Oklahoma City.

That includes an exclusive interview with a top executive of two companies that combined received $92 million from the federal Lifeline program last year alone.

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Dale Schmick is the chief operating officer of Terra Com and YourTel. The two companies work together, providing government subsidized cell phone service in 26 states under the federal program called Lifeline.

Jennifer Loren, 6 Investigates: "Is this a 24-hour operation?"
Dale Schmick, TerraCom/YourTel COO: "Pretty much, yeah."

I asked Schmick what he thinks about critics of that program - people who say companies like his are bilking taxpayers to provide an unnecessary service.

Jennifer Loren: "What would you say to those people who are going to be reacting that way to this story?"
Dale Schmick, TerraCom/YourTel: "It's a very good question. It's done a lot for people. It really has. I think you have to sort of be mindful that this is a government program that really facilitates them improving their economic life. This is a program that facilitates them getting a job, and so it's kind of more of an investment in fixing the low-income status versus perpetuating the low income status."

Although his companies have grown tremendously since cell phones were included in the program, Schmick claims it's not the gold rush everyone thinks it is.

7/1/2013 Related Story: Oklahoma Company Makes Millions Off Government Cell Phones Despite Red Flags

The federal government pays his companies $35 a month for each customer they sign up. He says that's half what non-subsidized providers get, but refused tell us his profit margins.

"I mean obviously our cost margins are confidential, but I can certainly tell you that my margins are not the kind of margins that wireless companies are accustomed to," said Dale Schmick, TerraCom/YourTel COO.

But, Schmick admits the program has gotten out of hand. He says people have good reason to be concerned about the lack of federal oversight and some companies that don't play by the rules.

That lack of oversight made it easy for customers to get multiple phones, when they're only allowed one.

"You know I think people have that concern about a lot of government programs, and you know that's really why the FCC has had to reform this," Schmick said.

"I can tell you having been in this business a long time, it was time for reform."

Reforms that hit even his companies hard. According to federal documents both TerraCom and YourTel were forced to drop about 30 percent of their Lifeline subscribers for breaking the rules which he says is actually not bad.

"I've been told by a lot of people that we really did a great job," said Dale Schmick, COO of Terra Com and Your Tel.